A weekly podcast with the latest e-commerce news and events. In episode 265 we cover some Amazon news including an anti-trust suit filed against them and their acquisition of MGM, earnings reports from Ulta, Costco, Dollar General, Best Buy, Burlington, and Gap, and we answer listener questions.
- Amazon acquisition of MGM
- DC attorney general sues Amazon on antitrust grounds
- Amazon limited FBA access
- Amazon addressing review fraud
- Amazon Prime Day likely June 21 and 22
- Perch (from Episode 252) raises $775M
- Walmart testing a new livestream format
- Fedex struggling with late deliveries and adding higher surchages
Retail Q1 Earnings
- Ulta – US Comps up 65.9% (up 7% from 2YA)
- Costco – US Comps up 18.2%, e-commerce up 41.2%
- Dollar General – US Comps down 4.6%; (up 17.1% from 2YA)
- Best Buy – US Comps up 37.9%, e-commerce up 7.6% (online revenue was 33.2% versus 42.2% last year)
- Burlington – Comps up 20% (shutdown e-commerce Q1 2020)
- Gap – Comps up 28% (up 13% vs 2YA). Digital up 82% vs 2 YA. Digital now 40% of total sales.
Episode 265 of the Jason & Scot show was recorded on Thursday May 27, 2021.
[0:24] Welcome to the Jason and Scot show
this is episode 265 being recorded on Thursday May 27th 2021 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 before we jump into some juicy news and we got a couple listener questions I wanted to send a big congrats to Chris Bell if that name is familiar to listeners he is the CEO of perch one of those quote unquote
F be a Amazon Seller roll up companies and he was here on a pisode 252.
[1:07] Yeah I heard him he did a small raise this week did you you get the details of that at all.
[1:15] I did and you know in the The Venture Capital World which I am.
I guess involved in to some degree you have your seed round and you’re a around and your B and your C so they just did there are around and what’s kind of special about it is usually you’ll do something like you know maybe
couple hundred thousand to a cup small millions in a seed round and Silicon Valley they the seeds are pretty large the you’ll do an AR around maybe five to ten million and a be around 20 to 30 or 40 Etc
they are around they did 775 million so so it’s
they proclaimed their the fastest company to achieve profitable unicorn status unicorn says means you have a billion-dollar valuation and then they said they have been profitable since Inception which is interesting because,
[2:14] Keep it so that then what that means is they’re probably just going out and using all this Capital to acquire profitable companies and therefore as an entity from an ebitda perspective there
there there’s an accounting trick where they’re profitable but the the the Goodwill of those Acquisitions is kind of below the line
then it’s the largest series a Ever Raised by a consumer goods company by a factor of over four so I think the previous record was something like a hundred hundred and twenty-five so
yeah that is a crazy rays and you know I think we’ve previously talked about
I think it’s 3 billion in the US and five globally raised for these types of companies and and this obviously text
about another billion on there and then I think a song article that this cause other people to reload their War chest as well so it’s it’s a very active segment and it’s exciting to see / qu as a friend of the show really really start to scale up.
[3:13] Yeah yeah I had two immediate thoughts number one clearly it’s an advantage to get on the Jason and Scot show before doing your raised because it seems like there’s about a four x multiple you get just for being on the show.
[3:28] Yeah that was in the footnotes of the press release.
[3:30] Yeah and number two it’s going to be ugly when they show up on Shark Tank and try to do an up round because mr. wonderful is going to cream them on this valuation.
[3:40] Mr. wonderful is going to just like tap out in the first five seconds he’s the bottom feeder he’s not going to like like this one.
[3:49] Yeah they’re only going to get a royalty deal from him.
[3:52] Small loan that they pay back in 5 minutes.
With thirty percent interest compounded every every 3 seconds,
okay so this week we have some listener questions as I mentioned before we get to that there was some pretty big.
[4:17] News your margin is there opportunity.
[4:24] Yeah I like to say it wouldn’t be a Jason Scott show if we didn’t talk a little bit about Amazon and they made a really big play this week they announced that they are going they’ve entered a
negotiation or a see an agreement to by MGM for 8.45 billion
I have a theory here that Jeff wants to own the James Bond franchise so he can put himself in there I think he
fancies himself in his current situation of a single Bachelor that’s gotten pretty buff as maybe the next James Bond but maybe that’s off a little bit what did you think about this when Jason.
[5:06] Yeah well a couple of That’s So a whether Jeff realize it is it or not he could only is the bond villain in this scenario.
[5:14] It’s got a Lex Luthor vibes.
[5:17] Yeah the crazy bald super buff guy that owns his own rocket ship and then buys the company James Bond works for like I think that’s the theme for like a James Bond movies.
[5:29] Yeah and finally had a cat that he maybe he does who knows maybe has a cat that he sits there and pets while he’s planning his next moose.
[5:37] Yeah I don’t know you know people have been asking me about this in the.
To me the acquisition makes perfect sense it’s not even very surprising and pretty consistent with a lot of other tactics we’ve seen.
Amazon follow I like the open question is whether that’s a good valuation for him GM or not but.
[5:59] Yo big picture Amazon is this platform and and we’re all familiar with the flywheel but in essence.
The more reasons Amazon has for people that join Prime the more money they make on this whole ecosystem of services around Prime and it’s.
It’s one of their biggest competitive advantages versus other.
Content Publishers that are contents indicators that might have been interested in him GM is.
Amazon can sell James Bond merchandise on Amazon they can make Amazon TV shows for Amazon Prime those Amazon,
those people that join Amazon Prime in order to see the new James Bond movie will spend more money on the third-party Marketplace and will be open to more ads from,
the Amazon ad Network and all all of these Services sort of.
Lean into each other and so it means a Matata Amazon’s better able to monetize an eyeball than almost anyone else so then buying em Jim for.
P point for doesn’t even seem that surprising I think they’ve they’re spending over a billion to make the Lord of the Rings.
Series alone so like it.
[7:17] Just a license it I think I think there’s just a license.
[7:20] Oh my god well yeah so.
[7:22] Yeah there’s hundreds of millions of dollars in the licensing of the Tolkien estate.
[7:26] Yeah so and I mean the NFL was a billion dollars a year for 15 years or something so so this seems I get totally fits there are
people that are saying that in gym that this is too high evaluation and that Amazon may have like had to reach.
But I guess time will tell on that.
[7:50] A couple fun facts so this is their second biggest acquisition,
the only one bigger than this one was Whole Foods 13.7 billion in this one’s about 8.45 and it’s important to note that in today’s environment what you do is you you kind of
you get everything all your eyes dotted and your t’s crossed you
you filed to do that position and then you have to go through this process where you work with the government to see if they’re going to let it happen or not there’s what’s its I know it’s called H hart-scott-rodino hurts Scott
Regina something like that H RH s g human do better idea,
but there’s this one approval that you get there but then also increasingly you know Amazon’s under the antitrust microscope and there is a lot of senators tweeting their dislike of this deal,
and I’ll turn to you for that before we do it is interesting in the media segment you’ve got Netflix as kind of the king disruptor and they’re causing a lot of
a lot of different things to happen one of the big ones was
AT&T who thought it would be clever to buy a bunch of content to put through their pipes in the form of Time Warner they are shedding
Time Warner and what’s called Warner media and that’s going to be married with Discovery to create a try to have a mass of.
[9:14] New and Library content to kind of go up against
peacock Disney plus the 80 different new streaming services were all thinking about you know should we subscribe to those or not so it’s definitely kind of a little bit of a musical chairs thing and it makes a ton of sense for Amazon to really
build a war chest and I think they’re buying it mostly for the catalog and then when you get that IP you could come out with you know all kinds of.
James Bond merch there’s a lot of really good IP inside of that catalog so I think that’s what’s driving driving a lot of it.
[9:50] Yeah no for sure there is a fun or more silly theory about the acquisition,
MGM owns a bunch of movies that are in this catalog but they have even more rights to TV series and one of the TV series in that portfolio is a show you may be familiar with called The Apprentice.
And so there are people that are like did Jeff Bezos just by MGM so that he could like release all the the unaired you know behind the scene footage from The Apprentice to embarrass anyone that might have been on that show.
[10:29] Yeah could be.
[10:30] I doubt it but yeah.
[10:31] We’ll see I doubt it that’s a big that’s a big price to pay to bearson ex-president.
[10:36] I mean yeah it is funny to think about but yeah.
Yeah so yeah it’s going to be interesting.
Famous Last Words I’ll probably be dead wrong I doubt so anytime you do a merger or an acquisition of this size like you do have to get regulatory approval,
I kind of don’t think this is gonna be that tough because Amazon doesn’t have a lot of.
[11:09] Like meaningful Network content versus HBO or Disney or Netflix at the moment like which is how this would have to be looked at so we’ll have to see but I think the,
the claws you referring to is the hart-scott-rodino which is a law yeah so so.
Like remember most antitrust law in the United States is like a hundred years old so it’s super relevant to today’s business circumstances and I say that entirely sarcastically,
um but this.
[11:42] In 1960 76 we passed this like minor update to The Clayton Act which is one of the big antitrust laws and it was this hart-scott-rodino improved antitrust improvements Act,
in one of the things that it did is it used to be that if,
even acquisition was going to trigger some antitrust concerns the government had to notice it and had to sue you and they made it.
From sort of a opt-in to an opt-out kind of situation where if you do an acquisition over a certain size.
You have to proactively get the government’s approval before the merger can go through and so now all these big Acquisitions have to be proactively.
Approved and and this one will have to go through that process as well a minor fun fact there.
All companies have to comply with antitrust law whether the deal is big enough to trigger the the HSR or not it just did your,
over that size you have to do it proactively,
and so there’s been one antitrust action against a company that was too small for this act and it was in the e-commerce space it was bizarre Voice versus the Department of Justice when.
Bizarre voice pot power abuse.
[13:00] Yeah they didn’t file for it and then the government flipped out and said you didn’t do it and then they said we didn’t have to and then the government said you did undo undo that.
[13:08] Was so I don’t even yeah I don’t even think they said you you you had to proactively file but they said it’s still an antitrust violation and we’re going to prove it in the government won in court and broke them up.
[13:22] Yep boom and you are an expert witness.
[13:25] I was an expert witness in the case and then and I lost because I represent a bizarre voice and then fun fact,
so power reviews got split backup and power views later hired my wife to run their marketing so losing that case got my wife a job.
[13:42] Boom there you go what goes around Good Karma you put dark Good Karma into the road.
[13:46] It’s a small world and I wouldn’t want to paint it exactly.
[13:51] Cool also in the category of antitrust the the DC attorney general is going after Amazon and what’s interesting is
you know the.
Can’t put a quote here he’s alleging that not only are the fees they Amazon charges sellers responsible for higher prices across the web
then we can talk about that that kind of ties to price parity which Jason Del Rey spent a lot of time on and is Amazon podcast series but also Amazon Rewards sellers who use FBA
to the detriment of sellers who don’t but have lower prices and you know fact check,
true on how the algorithm works I’m not sure you know I think what Amazon would say on that second part we can talk about price parity next is it’s a better customer experience to get your products fast and free
and that that ties into it as well as the,
consideration not just the price so yeah so it’s gonna be interesting to see how that one comes out because I think Amazon has a good
good position there if you can’t think about the overall customer experience but the other one is a little trickier which is the price parity in your kind of a more of an expert on that one if you want to run through that one.
[15:14] Yeah well so and it’s interesting to so that the AG actually filed the suit so there’s a real lawsuit that Amazon is going to have to respond to and that,
that triggers Discovery and all kinds of other things that make all this antitrust talk a lot more real and so sort of two things there’s the outcome of this exact lawsuit and whether Amazon.
Can defend itself and win whether loses and has to take some some.
Remedy or whether they somehow settle right which often happens in these cases so that’s the outcome of this suit which we’ll talk about in just a second but there’s a bigger implication.
Um even the process of Defending themselves or settling this suit they.
Can like get some stuff on the record that then helps trigger other antitrust actions so there’s a that’s a.
Kind of a real risk here so the the specific thing that I think the DC eiji is alleging that somewhat problematic for Amazon is.
Amazon has used to have a price parity Clause with a lot of their vendors and so essentially it said you’re not allowed to sell your product.
Cheaper somewhere else than you sell it on Amazon.
[16:44] And I think Amazon would say that they stop doing that process in like 2019 but the,
the Attorney General a can sue them for behavior before 2019 so that that alone doesn’t save you,
and then I think that the Attorney General also alleged that while they may have discontinued that process in 2019.
They’re still enforcing other Clauses that essentially.
Have the same outcome so so that the hypothesis here is if you’re selling and I think this would apply to both first party and third party but and I don’t know I give if the Attorney General had a specific.
Um example in in their suit like like the whole text of the suit isn’t available yet but.
So we’ll assume it’s third party for a second I’m selling some widget on Amazon I promise Amazon I won’t sell that same widget cheaper on Walmart.
And so what the Attorney General is arguing is hey Walmart’s bigger than you like Walmart might have been able to negotiate a lower price which would be good for consumers we’re not for the fact that you artificially.
Stop that vendor from offering Walmart a lower price and that that is.
[18:07] A violation of the Sherman Act and so like you’re you’re guilty of antitrust for doing that so that’s the.
The argument Amazon’s far from the only big player out there with price parity policies not that that defends you from a lawsuit but so that’s going to be.
Interesting to see how that all plays out there some really smart antitrust people that have pointed to that as one of Amazon’s biggest vulnerabilities.
The I don’t know like.
[18:38] The it’s unlikely that that alone caught would if Amazon were to lose that case entirely that it would force Amazon to break up.
It would probably force them to pay some fine and promise not to.
Do that that business practice anymore and maybe you know they would have to agree to some kind of.
You know more careful monitoring than they would otherwise like so.
We’ll see how that all plays out but the reason this case is super interesting to me is there’s two things you have to worry about an anti trust you it’s anti doing anti-competitive things is not illegal.
Um it’s illegal to be a monopoly and then use that Monopoly to do these anti-competitive things so the Amazon enforcing the price parity thing is only,
a problem if Amazon meets the strict antitrust definition of a monopoly and.
It sounds like that should be pretty pretty easy to know there are over fifty percent of something you’re a monopoly but the problem is.
The of something which is what we call the relevant market right so if you’re the the DC attorney general what what they said in their announcement was that the relevant Market is e-commerce.
[20:00] So they’re going to say Amazon’s more is a majority of e-commerce which a is probably not true.
Um by most people’s counts there in the like 30 to 40 percent of.
Of us e-commerce sales so they’re not even majority of all e-commerce and by the way those numbers wildly undercount certain flavors of e-commerce that like are you know people like to discount but our e-commerce right so.
People like to take out ticket sales or events sales.
People like to take out restaurant sales and you know over 50 percent of all restaurant sales in the last year were e-commerce thanks to Door – and there’s huge e-commerce categories like.
Pornography that nobody puts in their numbers right so so if you’re Amazon you’re going to argue that you’re not a monopoly,
um and that you’re not over 50% of e-commerce and then they’re also going to say even if we were over 50 percent of e-commerce eCommerce isn’t a relevant Market because the definition of a relevant Market is.
The consumers can’t.
Um are stuck in a market and don’t have another alternative and so they actually use this test called the snip test which is means like.
[21:16] Could someone make a small but significant price increase,
and you know would customers be forced to pay that because they didn’t have some alternative place to go and Amazon’s going to say e-commerce is not a relevant Market doesn’t pass the snip test because if we raised our prices people would just drive to Walmart and buy stuff at the store,
and so the market is is retail right so that that’s going to be a huge fight that’s going to you know people are gonna spend millions of dollars on both sides fighting,
but the reason that’s going to be interesting is is in the process of litigating this case if a relevant Market gets defined of effective a judge rules that something’s relevant Market.
Then suddenly that’s going to open up all kinds of other.
Other doors to either Amazon being potentially vulnerable or not being vulnerable to further antitrust actions so.
It’s the first step in a long process but it’s going to be fun to watch as a non-financial Observer.
[22:16] Yeah and I’ve been following the Apple epic case and a lot of interesting things come out of the due diligence where you know the CEO of Epic could emailed Tim Cook and Tim Cook’s answer was who is this guy.
For service this string itself where the he was kind of his kind of arguing this the the Epic I was arguing with Tim Cook of why they the store is really long intricate
email and as if he intended like known each other and they’d met several times Tim’s like it’s those like his internal answer to the whole thing as class,
but the guy like six hours and you know five million dollars of lawyer fees to write that email looks like.
[23:10] Yeah yes no one wants all their emails out in the public but that’s what’s interesting about these things whoa.
[23:17] Oh my gosh yeah it’ll be a great jobs program for lawyers for the next 10 years.
[23:22] Yeah my favorite Amazon news this week is that the sum of the press has leaked the Amazon Prime day and it’s going to be June 21 and 22 or at least that’s the rumor it hasn’t been been.
Officially announced by Amazon but looks like we got a latest June Prime Day this year so that’s exciting I am actually low on some charging cords and some other things so I’m looking forward to stocking up on some,
some some accessories.
[23:51] I don’t think my wife will allow a single more additional cord to come into our home so I that could be problematic for me,
always excited for Prime day like again Amazon hasn’t confirmed this but it certainly fits everything we know,
so what has been interesting this is always a challenge out Amazon always wants to keep it kind of secret and Under Wraps,
it’s such a big deal and Amazon wants to encourage everyone to lean into it that like all the third party merchants.
I need time to prepare for Prime day so it’s always kind of a this tricky Balancing Act of Amazon not telling us when it is but wanting everyone to be ready for it.
[24:34] And what has already happened since since has been pretty obvious that Prime day is going to be in late June some time is that Merchants are starting to panic because.
A common phenomenon right now is Merchants are getting their their FBA quotas cut by Amazon and what that means is,
last quarter you were selling red widgets on Amazon via FBA and Amazon allowed you to put 35,000 units in the FBA system and and,
there now you’re getting a letter saying you’re only allowed to have 20,000 units or 10,000 units or in some cases no more units and so all of these,
these Merchants are getting their their allocation in the FBA warehouses cut,
and that’s a huge bummer leading up to Prime day because it just means you’re not going to be able to sell as much.
[25:30] Yeah and looking at Prime day over time.
Amazon selling more and more of their stuff right so it’s the things that get the biggest discounts are the echo this the Kendall dad and
and increasingly as they it’s almost become an Amazon Gadget day for Amazon’s owned Brands as you like to say so ring is in there and now they’ve got zero and so that that
seems to be the bulk of what’s going on and I imagine Amazon needs more room for that stuff and that’s kind of why there.
Clearing the floor for their own Goods to be sold on Prime day.
[26:09] Yeah I mean it’s I feel like.
It’s the flywheel in action like all these good things are happening for Amazon and then of course the pandemic you know dramatically accelerated people’s use of e-commerce which means
that everyone wants more inventory and e-commerce warehouses which also means more sellers want to come to Amazon right and now we have all these International sellers coming to Amazon as a
good way to access the US market and so if you’re an existing seller,
you’re competing for FB a space with way more other sellers than you ever were before and other products than you ever were before and while amazonite
is scaling their fulfillment capacity at you know frankly a mind-boggling rate like I feel like demand is even faster and so I think Amazon’s having to make some hard decisions about,
how much room they give everyone and it it doesn’t feel good if you’re one of the towers that feel like you could make more money if you had more room.
[27:09] Okay so then the other one that’s been in the news and kind of a lot of chatter on quote Amazon Twitter is
Amazon has really been cracking down on a bunch of these Chinese sellers that have had questionable review policies so there’s a lot of folks
you’ll see a lot of US based sellers make accusations about Chinese sellers that there
either buying reviews or you know doing some this gray hat black hat kind of review stuff and there seemed to be a pretty big cleansing if you will of a lot of this going on I saw the New York Times had an article calling it The Great Purge so a lot of the US base sellers we’re kind of celebrating the CID kind of finally seen the light of day and come home to roost
did you dig into that one.
[28:00] A little bit there’s a couple interesting things so Amazon kicked a couple of and we don’t know if it’s permanent or not but like delisted a couple of very
significant Sellers from the platform and so one
that’s very familiar in my drawers is called aqui a UK ey I think,
which is kind of a similar company to Anchor with a lot of like interesting charger Technologies and cables and things.
[28:30] And so they’ve been a very popular seller on Amazon for him primarily use the Amazon platform for a while and Amazon took them off right and and whether it’s true or not Amazon’s kind of spinning it as.
We take all of the credibility of the of the ratings and review system super seriously and anyone that violates it no matter how big are significant to us is going in the Penalty Box and so we proactively took this action,
and a lot of other people are saying.
Yeah don’t really buy it you know the Attorney General of several States like uncovered some of this in the various behavior and only after they like brought it to Amazon’s attention and insisted Amazon take action.
Um did Amazon Deal s these guys so there’s some.
Dispute over over the sequence of events and then you know there that New York Times article highlighted a lot of kind of.
They’re being kind of a to class system that if you’re a really big seller on Amazon with significant volume that you get the benefit of the doubt from all these review things and they only take action if there’s.
You know a huge violation versus if you’re a smaller cell or in your just accused of some bad behavior you get put in the Penalty Box and you have to kind of fight your way out.
[29:54] Don’t don’t know what the truth is but certainly is interesting and it certainly.
Um got a lot of traction in the new cycle last.
[30:07] There were a couple of other news items and some earnings from this week that we want to cover really quickly we’re recording this on Thursday night the 27th as I mentioned in the opening,
and earlier tonight Walmart launched a surprise event they had what they call Walmart shop along,
I’ll call it a live stream Commerce event that they hosted on Walmart.com.
So we’ve covered in the past a couple of interesting social media things Walmart’s done where they partnered with Tick Tock to do some,
some live streaming video Commerce but this time instead of doing it on Tik-Tok they did it on Walmart.com so they launched a new URL,
Walmart shop live.com,
and this first event featured this woman and Marie Ray Drummond who’s more commonly known as The Pioneer Woman and Scot will be super familiar with Hershey’s,
like the number 22 on Forbes list of top influencers and so she’s like kind of a part cook part,
you know apparel part home decor,
influencer and so she has a bunch of exclusive products that are sold through Walmart and they did a live stream event and sold a bunch of products live off of the video feed tonight.
Did you get anything.
[31:34] I actually do hook know who this is I am not a fan,
My Heart Belongs only to the Kardashian’s those are the only influencers I pay attention to so I don’t I stop at number one and two on the list and I don’t go down to the 22s,
but yeah it is it so having you know I know you’re big on live streaming,
how does it compare to what some of the Chinese folks are doing is it is it kind of in that genre where you know you can buy light right from the stream and it’s got like a little bit of a QVC feel but kind of a different energy like.
What’s it look like.
[32:11] The so so the most popular live streaming in China is our very bite-size nuggets so a it’s not so much,
this the the retail platform is doing a live stream like it’s not Ali Baba’s livestream it’s,
it’s thousands of third-party sellers that are each doing their own live streams and each live stream in China you know they tend to be these like two minute long segments about a particular product right so so think of them as kind of commercial sized livestreams.
The QVC and HSN historically do these like 30-minute programs where they have one personality,
in a particular genre selling a bunch of products over half an hour and so the Walmart livestream felt a lot more like a traditional,
Q VC style program I want to say,
tonight’s program was like 45 minutes long and it was just Ray and her two daughters.
[33:10] Talking about a wide variety of merchandise all from her that was for sale for 45 minutes but the.
There was very like seamless Commerce integration with the video so.
If you watched it on a browser like there’s a big window that has the video and she’s wearing all these items and demoing them it’s a three column interface on the left hand side was a chat box so there’s a,
like why live commentary from from Shoppers and they can interact with her and she very obviously could see all other comments because.
She responded to a lot of the comments in real time and then the third column had like product tiles for everything she was talking about so,
when she was talking about a dress she’s wearing the dress but there’s a product I’ll for the dress on this right-hand column and you could click on it and immediately add it to your cart and checkout of you wanted.
And you could scroll back to see any of the previous tile so it is.
It seemed like the Commerce interface and the chat was all pretty well done I don’t know what American consumers are going to want in terms of live streaming but this.
This did feel a lot more like the pretty traditional American version of a.
[34:26] Of a TV show infomercial than these kind of bite-sized.
Um Commerce experiences that are that are really taking off on taobao live for example which is like a platform for all these individual sellers selling stuff.
[34:42] You think they built their own platform for this for others is there like a vendor out there that’s licensing always these retailers this kind of stuff.
[34:50] A little of both so a there was some complaint about some technical problems so it sounded like and I think Walmart even,
like a Walmart moderator even said a couple times hey some of you on mobile are having a problem we’re working on it and.
It seemed like it wasn’t not everyone had a problem that it seemed like some people did it definitely seemed like.
A completely white labeled platform for Walmart a bunch of us kind of dug underneath the.
The covers and there’s a popular content management system out there for sort of codeless web development called webflow,
and it appears that this site was built on webflow,
which is interesting to me for a couple of reasons and sorry there’s a another vendor that specializes in actual video streams,
and they’re called be live and there and so it looks like they were using web flow as the.
The the rapper for all this and they were streaming the video through be wife.
[35:56] Number one these are very popular tools that I’d recommend generally to someone that needed to build something quick and prototype something but they’re not necessarily.
The scalable robust Enterprise tools that you would expect.
Walmart to be using if they thought they were going to be putting 10 billion dollars of Revenue through it and so.
That’s fine to me that says that this is kind of a pilot for them or a minimum viable product and that.
They built something to test the experience instead of something that would.
Scale to the ultimate size it could it could achieve for Walmart so that was interesting but fun fact web flow is hosted exclusively on Amazon ec2 so,
I don’t I don’t know this for a fact maybe Walmart was able to negotiate some special hosting Arrangement but the likelihood is,
that this the this thing was actually running on Amazon.
[36:53] You picture someone at Amazon with the cause of mobile problem button ready to go.
[37:00] Yeah yeah exactly don’t ya don’t don’t know about that either but I am pretty confident if this became something that that was going to be a recurring thing at Walmart that it would probably be a not hosted on an on Amazon solution.
And they are pretty robust it chops at the show at this point so I don’t know to me I actually take that as a positive sign that maybe there,
they’re doing fast agile stuff and not trying to perfectly engineer everything in order to just test whether users are going to like something or not.
[37:33] Yeah I love it I love when big companies do MVPs and kind of do the spirit of the MVP where yeah just put something together pretty quick and put it out there and get some feedback and then iterate so it would be cool to see how that goes.
[37:45] Yeah and that doesn’t that feels like the spirit of Walmart lately they’ve done the these Tick-Tock Pilots now they’re doing a pilot on their own platform so yeah props like and.
[37:57] We’ll be interested to hear what results they share with us.
Um a couple of other random things the we’re going to jump into some more earnings because there were a bunch of retail earnings calls this week and,
spoiler where they’re all across the board like for companies that did,
really well in the pandemic like they’re their comps this quarter a little soft because they’re starting to comp against how well they did in the pandemic,
and if their company that like you know traditionally wasn’t graded e-commerce then their e-commerce exploded last year which meant their e-commerce comps this year aren’t as good so,
so they’re kind of all across the board and as a result of all these earnings you’re starting to see all these articles being written about how.
Oh man you know the luster is wearing off of e-commerce and people are going back to stores and we’re starting to see store comps go up and and the rate of e-commerce growth slowed down,
and I find those articles a little annoying because they’re mostly written by people that don’t seem to understand like,
the difference between a a sales rate and a.
Change in sales rate right so they’re you know they’re they’re interpreting like hey retail sales went from up 4% to up 6% and e-commerce slow down from up a hundred percent to up 50%.
[39:22] Um therefore,
customers are stop stopping e-commerce and going in the stores and there’s like no way more people bought something online for the first time last quarter than ever before right like gets
they’re just not under fundamental it’s a fundamental misunderstanding of rates of change and one of the things I still like to remind people and inconvenient.
[39:46] Truth about the whole pandemic and Retail as well in United States things are trending in the right direction they feel good,
Pete things are opening up with gas masks retailers are rebounding all these good things are happening,
, most of the data on store traffic is still that that there are way less people in the store today than we’re in the store two years ago,
so Nationwide according to Shopper track we are still have 20% less traffic than we did in 2019,
and that’s been kind of consistently true for the last twenty four weeks so and by the way that makes the US,
more recovered than most countries like a lot of places in Europe like traffic is still down fifty percent from two years ago so it is still true a lot less people are walking in the stores,
and a lot more people are buying stuff online than ever before so,
you know interpret all these numbers listen to all these numbers but don’t don’t you know overreact to these these articles that are saying like e-commerce has kind of.
[40:57] Yeah and you were you called it you predicted a lot of folks are going to talk about the two year ago metric and it looks like it’s starting to come to fruition.
[41:04] Oh my God yeah the the if I had a dollar for every time someone said Roaring 20s or two years ago in an earnings call I would I would have raised almost as much money as perch.
So let’s jump into those those earnings real real quickly a wide variety of retailers so the first one I saw and most of these are from today so like our podcast is nothing if not Timely,
Alta which is one of the two big specialty Beauty companies reported,
and this is a perfect example so they’re their comps for stores in the United States were up 65.9% from this quarter a year ago.
So that’s you know.
A year ago the quarter would have been partly impacted by covid but so being up 65% is is a big number that,
but what that probably just means is that they took a huge hit a year ago,
and have you if you look at Ulta has comps from two years ago their up seven their sales are up 7% from where they were this quarter two years ago so so they’re up.
Um they probably you know like give if 7% over two years is like you know.
[42:22] Modest growth it’s but it’s not astronomical growth so so that was Ulta then Costco us comp and by the way Ultra does not break out there e-commerce separately,
Costco us comps were up 18.2%,
so that’s healthy but again Costco problem never had to close for the pandemic and Costco is probably a net winner in the,
um pandemic visits and so when they’re up 18% that’s pretty impressive and then their e-commerce was way up which is.
Kind of against most of the trends because last a year ago was such a good quarter for e-commerce that most companies aren’t comping that well against,
against the last year’s e-commerce numbers but Costco’s was up 41% did that surprise you at all Scott.
[43:13] It does because Costco yeah they’ve definitely super embraced e-commerce it must be it must be I’m gonna guess it’s instacart is it like some delivery thing that.
[43:26] Is partly instacart so it’s complicated so Costco have like shelf-stable products which they do sell via their own e-commerce on have for a while,
but for your point they don’t do it enthusiastically and a lot of Costco execs still like have Fame uh as much as recently as a year ago we’re saying why would we ever encourage anyone not to walk in a store.
And then the perishables you couldn’t get via e-commerce at all and Costco partnered with instacart so now you can get some of the Frozen and perishables.
E-commerce and so you’re exactly right like when someone has a big e-commerce quarter right now what I say is that they left money on the table a year ago and because Costco.
[44:10] Is a hugely successful retailer in spite of not leaning into digital they you know we’re not prepared for the spike in demand for e-commerce they didn’t have a good fresh and frozen solution for e-commerce which is a big chunk of their sales,
so flip side Dollar General comps are down 4.6 percent in this is a perfect example of a company that like.
Did pretty well in the pandemic which is interesting because you know,
they both had something going for them and something going against them like people were worried about their finances in the pandemic and so that certainly worked in favor of Dollar General,
but they were not considered essential goods and so had to close a lot of stores so being down four percent versus last year,
is interesting now I will say.
People all have slightly different definitions like most when I’m saying comps that’s comparable store sales and so.
We take out of that stores that opened and closed but it is possible that Dollar General is only comping open stores against open stores.
[45:27] I don’t know but kind of put this in a an overall perspective their comps versus two years ago are up 17% so generally.
Going in a good direction.
[45:41] And so then Best Buy which I was most interested in Best Buys in a really interesting category there’s a lot of evidence that.
Like some parts of electronics killed it in the pandemic everyone needed a laptop.
The that a lot of electronics products didn’t do that well in the pandemic and so it’s kind of like a mixed bag and then the overall Electronics category actually didn’t do phenomenally well and yet Best Buy reported good numbers every quarter,
and they did again so their comps were up 38% 37.9% which is very strong the.
Then e-commerce like was very modest up only seven percent and that’s reflective of them having a monster e-commerce growth.
[46:27] During during the pandemic that they’re now lapping and so that the interesting number to me at Best Buy is,
for this last quarter 33 percent of all their sales were online so almost a third of their sales were online and that’s down a little bit at the peak of the pandemic last year when a bunch of stores were forced to close because they were non-essential,
forty-two percent of Best Buy sales where online so there was a.
The overall consumer electronics category a lot of people are reporting that it’s fifty percent online which is mostly thanks to Amazon,
so it’s empty you know best by being at 40 last year you could have imagined that they would just build on that but it does appear that as people are going back to the stores.
The next earnings is a cautionary tale for me is that Burlington Coat Factory said they had good comps this quarter of their come swept 20% in general apparel company comps this quarter our monster because.
Apparel like nobody bought any apparel a year ago,
um and so 20% I would actually argue doesn’t feel that big and then I can’t give you an e-commerce number because Burlington Coat Factory turned off their website a month before the panda.
[47:48] Yeah which is at the time I felt like a bad decision but then in hindsight it looks like a really bad decision and then insult to injury,
um profitability was down on their 20 percent comp and you go we’ll gosh Jason why we’re was profitability down oh well they had a bunch of expenses related to closing their website.
[48:07] That’s nice.
[48:10] Can’t be fun to mention in the in the shareholder meeting and then the last earnings which.
I think was also today is the gap and they’re much more typical of what what I’m seeing in apparel companies their overall comps were up 20%,
um and they’re they’re digital was up 82 percent which that is impressive that’s.
You know we are seeing the the rate of growth of most e-commerce dip Gap was are really a good e-commerce operator with significant e-commerce sales so for them to be up 82 percent,
that to me says that a bunch of people like are are the the e-commerce habit for closes.
And to kind of put this in perspective in this quarter when people were welcome to walk into a Gap Store e-commerce still representing 40 percent of Gap sales so so you know they’re they’re almost a digital first retailer this.
[49:09] Sidebar did I see some news out it was kind of a head scratcher and it kind of was watching seen between the background and I just kind of heard it in passing that the Gap is going to be selling in Walmart.
[49:20] Yeah so that is interesting not.
[49:24] How does that work does it like a micro store thing.
[49:26] Not exactly so Walmart launched a New Home Goods line that is a gap partnership Gap designed.
Um and so you can think of this like in the past like Gap has had home good or I’m sorry Walmart is had home goods from Drew Barrymore and so you know they’ve hired influencers that have a good reputation so this time they hired the gap.
To design these products and I’m not certain of this but.
I don’t think that these products are going to be for sale in the Gap I think they might exclusively be at Walmart so this,
Gap kind of acting like a brand as opposed to a retailer and making an exclusive product line for Walmart right and you know we’ve seen a lot of Brands successfully do that with Target.
And surprise and Delight Target guest by you know having a product that traditionally you wouldn’t expect to see in Target in Target and in that feels a little bit like what this play is,
and Scott you and I have a good friend who used to run home goods for Walmart and is now at the Gap so.
It wouldn’t surprise me if she had a hand in this particular program.
[50:42] Causation or correlation we don’t know what to see if she’ll come on the shown give us all the details.
[50:47] That’s a great idea yeah so that was a lot of news for what we thought was going to be a slow news week.
[50:56] Yeah yeah thanks for covering the tail end of those results I think that ties in nicely with what we covered last time but let’s jump into listener questions.
[51:12] Question question question question their.
[51:17] Our first listener question comes from one of the longtime friends of the show Michelle Grant at the small software company called Salesforce or something like that
and her question was what has been the impact of apples IDF a update and I’m going to sneak my answer in here Jason because I know you’re more of a guru on this
I think it’s a little too early to call because this is just pretty brand-new and I think the most interesting.
Shareholder call is going to be Facebook’s Q2 results and I’m kind of,
on pins and needles to see see what they say about it because I think I think that and Shopify could be the two places where we if there’s gonna be an impact,
that we kind of hear about it and get some information about it so so those are two that I’m keeping an eye on I did see,
Revolution clothing Revolution apparel they they kind of signaled in their q1 that guidance for Q2 that,
they felt like there could be some softness in the way the way they announced it they already had some data that showed it was having an impact so those are the those are kind of my brief thoughts where you seeing out there and in retailgeek land.
[52:34] Yeah I would say like Top Line is you’re exactly right too early to tell it is the the IDF a changes are making their way into a lot of.
like Q and A sessions at this point but like it doesn’t seem like they’re most retailers are claiming they have data that they’re being impacted their just like management teams are speculating that it is having an impact.
Um pretty quickly after the the new update kicked in there was a lot of Buzz going around about these really low opt-in rates right so again,
in all the world everyone had a unique number on their mobile phone and and so advertisers could use that number to see what apps you installed on your phone,
in the new world you have to agree to let each app see your license plate if you will,
and so there’s this requester that pops up and you have to say yes they can have this data or no they can’t have this data so that’s the opt-in rate are the people that said yes and there are all these articles coming out that like.
A tiny fraction of users are opting in that like opt-in rates are like four percent for example was a common.
Stat that came out and there are you know these,
these third-party companies that track app installs and that and a lot of these numbers were coming from them and so a couple of things to know those app companies don’t actually have any way to know what the.
[54:09] Rate is like this is people like running surveys and asking consumers if they accepted the opt-ins or not,
um which customers can’t reliably answer and might not accurately answer so don’t put a lot of stock in those numbers and then as as things have progressed a few more weeks,
the numbers are now varying wildly like one company will say 4% and another company will say 38 percent.
And one thing that’s emerging is something that seems really simple like calculating an opt-in rate it turns out all these companies have found ways to too.
Mess with the numbers so we can’t even agree on what an opt-in rate is right so a lot of.
You know again in theory you have to opt into every app so so Scott like if you opted into three of the apps and out of seven of the apps.
In theory each app should have a different opt-in rate right and then you know that the average should be across all 10,
but a lot of these companies are reporting like if you opted out of anything you’re an opt-out and so that you know caused an artificially low number that you know fit in narrative that a lot of people wanted to.
I think the real thing is we don’t.
[55:24] Doesn’t it at the OS level don’t I tell isn’t there setting.
[55:28] There is also a setting that’s a global setting at the OS level that a requester did not pop up asking you to make a global preference.
So you would have to proactively go find that setting some people are finding it and again how should you count them in these numbers,
another thing that came up and I tweeted some examples of this is.
Different companies did a dip a better or worse job coding the the opt-in request,
and so you know Apple use some some pretty inflammatory language and their requester but then each app gets an opportunity to explain why it’s to a consumers benefit.
To opt-in right and so you kind of got to make your case.
And at least for me on Facebook the way Facebook coded there a.
They made a case for why I should want to give them that data,
um but the way they coded the app the the Apple window with the inflammatory language popped up on top of their tests and it was modal I had to answer before I could get it out of the way so I could never see Facebook’s.
Which is wild if you think about it that they that you know a kept company with as much at stake as Facebook wouldn’t have a perfect you know best case execution is somewhat surprising.
[56:52] I feel like behind the scenes there’s this measures countermeasures counter counter measures going on between the companies.
[56:59] Yeah all of these things are interesting what you know the most tangible thing is there definitely are some advertisers that are saying like it feels like CPAs are going up so that the.
The cost to regen audience is going up now is that like because of other market conditions or is that because some of these ads are less effective because or you know harder to measure because of the idea of a changes again.
Too early to tell you know definitely companies that aren’t performing well are mentioning that as one of the factors that might be negatively influencing them.
It might by the way also show up later in the Epic case right so.
We’ll have to like yeah so that could be a place where we get better visibility in the some of this data if it comes up.
so Michelle stay tuned we this is kind of both of our favorite topic right now so we’re going to keep our ear to the ground and keep reporting on this,
[58:00] okay our second question comes from Sean mcginnes and he asked when will supply chains return to normal lead times what’s causing the issues were experiencing today,
yeah so you want me to take her for a shot at this one or do you.
[58:14] Yeah yeah hit me Scott.
[58:16] All right so so to foundational things here so we you know.
Most of the products that we would talk about in e-commerce world have a supply chain of their manufactured
usually not in the United States so usually in China Taiwan
maybe India Singapore usually it’s coming out of Asia so that’s part of the supply chain then it frequently to be economical has to get your on a boat,
and then it has to get offloaded at a port and then transported somewhere at least once usually two or three times until it makes it into fulfillment centers or retail stores where it’s sold.
[58:59] So then so that’s the foundation number one is how the kind of links in the chain then number two is let’s think about some of the disruptions we’ve had number one covid know to we’ve had the Suez Canal number 3
we’ve got a really weird
unemployment situation in the United States right now where it is it is near impossible to hire people and we can talk about the root cause of that I don’t know where you come out on that one Jason but we’re you know I’m pretty squarely in the camp that it’s this unemployment insurance stuff is made it very hard to hire,
folks especially you know kind of at that hourly labor level but that that is a factor so if we kind of think about that
you know so covid hit and a lot of these factories shut down and then they
back up and then the demand coming into them whipsawed because we’re their biggest the United States is the biggest consumer that stuff
and you know imagine you were making I don’t know apparel and then you probably wound down the Factory and then suddenly you know I think a lot of people are surprised by how fast things have come back and how fast the vaccines came out
and now this now that factory is having spent so that that’s part of the.
[1:00:17] Problem in that part of the chain and then the canal caused it to be very a backup of boats coming over
the slow boats from China and you know there have been very long lines also at the ports because there’s so much coming in and
this huge surge of demand that that it’s hard to unload those things because it’s hard to find dockworkers now and it’s hard to find truck drivers
and it’s hard to find warehouse workers and it’s hard to find you know people at FedEx to hire and it’s so
so you know I think I think it’s probably not going to clear up
until in September is one of these unemployment benefits run out there are some,
things on the books to look to the extend that that I’m crossing my fingers don’t happen so I could see this you know being a
all the way through October problem and that’s it there’s no more shocks to the system so we’ll have to see there there’s been so many shocks to the system that it feels like there could be more coming,
what do you think Jason.
[1:01:25] Yeah no I generally so I would agree with all of that I’ll confess early on when people are talking about,
the unemployment benefits impacting labor I was a little skeptical but I feel like the evidence is pretty clear at this point that it is and especially.
You can compare some states that have more generous unemployment benefits than others and the the ability to attract low-wage labor in the states with more generous benefits as harder.
[1:01:54] And then a bunch of retailers open up and get busier and retailers are fighting tooth and nail right now to hire hourly employees and having the Rays there,
their wages and all those sorts of things so I think that those are all those factors are true the the labor shortage is definitely true odds of retailers are feeling it I would add just to other things,
The ability to deliver inventory like obviously most brands and retailers were conservative in the inventory they ordered a year ago not knowing like that vaccines would work.
And where we’d be in the pandemic and so they you know there is the inventory is low right now partly because.
Everyone was conservative in what they ordered and so a byproduct of that is.
People are having a discount less than they usually do and they’re actually making slightly more profit on their sales than they usually do,
because the discount rates are lower but I do suspect that people are kind of you know trying to Goose those orders now and and you know we’ll probably see him and Charlie levels get get higher as we get closer to Holiday.
And then one other long-term impact on this whole supply chain is the fact that.
[1:03:12] A bigger percentage of total sales is happening through e-commerce is we talked about via ship again another things on the show.
The demand for shipping Parcels was Far doubt exceeding the capacity to ship parcels and that’s happening even more now right so.
You know I think there’s some data this year that.
That FedEx is in particular like you know having degraded delivery times because and they just announced some additional surge pricing so,
you know they have a certain amount of parcels they can deliver and they want to maximize the profit for each of those Parcels so I think that problem.
Is going to be a longer term problem that’s going to be with us all through holiday that as a you know a higher percentage of all sales happen in e-commerce we’ve got to figure out the ability to fulfill all of those packages.
[1:04:07] Yeah it was interesting because I was talking to someone that all say is in the logistics kind of you know
category that has a lot of these type of hourly drivers
and they said Amazon came in and got really aggressive and offered him all $18 an hour and basically sucked up all the drivers and kind of this Raleigh-Durham area where I am so that was,
yeah that’s interesting this is this kind of like land war going on this last mile area that’s part of that supply chain that
that I’m sure the FedEx is in the UPS’s the world are starting to feel and Amazon seems to be super aggressive it’s kind of counterintuitive because you also hear all these stories about how badly the drivers are treat being treated but,
you know what what what I found is that that hourly type worker
they’re not super loyal very coin operated which I have a lot of respect for and Amazon is offering more coins and it may not be you know you don’t get as much breaks or anything like that but the hourly rate is really good and they are soaking up a lot of those
those kinds of last mile delivery people so it could also be the case that that it’s not
evenly distributed supply chain problems that may be Amazon’s in a bit of a better position.
[1:05:26] Yeah no for sure and Scott that’s going to be a good place to leave it because it’s happened again we have blown through a perfectly good hour of our listeners time so as always if you enjoyed the show we sure would appreciate that five star review on iTunes.
[1:05:43] Thanks everybody and.
[1:05:45] Until next time happy Commercing.
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