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Jason & Scot Show Episode 219 Live Listener Questions


A weekly podcast with the latest e-commerce news and events. Episode 219 is a live listener question show focused on issues related to Covid-19 pandemic.

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Episode 219 is a live show featuring live audience questions. Jason & Scot get to interact with listeners live. It’s also a rare chance to watch the podcast, as the episode was recorded with video, watch it on YouTube. 

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 219 of the Jason & Scot show was recorded live on Wednesday, May 7th, 2020.

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this is episode 219 being recorded live on Wednesday May 6 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-hosts God Wingo.

Scot And Guests:
[0:40] Hello cats and kittens.
Oh sorry wrong shh hey Jason and welcome back Jason Scott show us nurse about two months ago we had our first live live live listener event and it was so popular.
That we had a lot of requests to do again we had we couldn’t get to all the questions so we have a backlog of questions from that Jason before we jump in I see we’ve got some QA going on here.
One housekeeping thing is if you do want to ask a question we would love to do it live where we’ll have you your audio come in and you can ask it.
Using the audio so that when people listen to the podcast they have a little Variety in what they hear but before we do that Jason any road trips Irani report on or any news you want to go through.

Jason:
[1:24] I have done amazing road trips in the last two months I’ve been to Russia I’ve been to Europe
you know ordinarily like I booked all these gigs and I have to reserve like three or four days travel time to get to them and now I can do like three gigs in different continents in the same day so it’s a
embarrassingly more efficient and I feel like I see more credible when I’m further away on a screen than I do when people get me in person so so yeah.

Scot And Guests:
[1:57] You got in your joke timing down I found on the zoom it’s little bit harder to kind of like judge the audience with your tongue.

Jason:
[2:03] Yeah I just assume I have my own laugh track I play for my own benefit and so I just I’m just assuming that that works.

Scot And Guests:
[2:12] You had time to do a laugh track but not our theme song I’m hurt.

Jason:
[2:15] I’m prioritizing yeah I apologize to all the live listeners you didn’t get to hear the show music that ordinarily gets added in post but if I were a more diligent audio engineer I would have arranged a way to play it for all of you to get in the mood for tonight.
My bad Scott Moore.

Scot And Guests:
[2:33] One thing I want good.

Jason:
[2:34] I was just going to say like this is a three-day Streak For Me of goodness like May the force be with you Day always a super important holiday is you know I have a young son that’s.
Like completely fixated on Star Wars so he’s decided that that’s the greatest holiday ever.
And with utter fear on his face he asked me first thing in the morning on May 4th dad do Jewish people celebrate May fourth day.
And he was thrilled.
Yeah he was thrilled to find out that it’s a non-denominational holiday and then we transition seamlessly into Cinco de Mayo and I did a lot of customer gigs with margaritas.

Scot And Guests:
[3:18] The correct Star Wars holiday there is a competition is returned to the fifth.

Jason:
[3:24] Yeah I got you I did.

Scot And Guests:
[3:26] Revenge of the fifth yeah sorry.

Jason:
[3:28] I could have could have stretched it out to two days I had no no idea.

Scot And Guests:
[3:34] And then today was you get to podcast So Good Times.

Jason:
[3:39] Exactly I feel like and special honor we’re already being Zoom bombed in in the chat.

Scot And Guests:
[3:47] Yeah Olivia we got to bring Olivia into the live discussion.

Jason:
[3:53] Yeah yeah are you oh Egypt person that’s having fun with us or are you a troublemaker that I have to boot.

Scot And Guests:
[3:59] A troublemaker.

Jason:
[4:00] Seems like Olivia should get booted.

Scot And Guests:
[4:03] Yeah I vote the boot.

Jason:
[4:05] Yeah alright bye Olivia it was good knowing you.

Scot And Guests:
[4:09] Well you’re booting alyvia one of the things I want to talk about is there’s been some more earnings since our last podcast last week last week we really focused on the Amazon q1 results which were
pretty stellar and then since then we’ve had
Etsy this afternoon this morning was Shopify it was yesterday was Wayfarer and then this afternoon square and PayPal
and I would say the the overwhelming theme has been you know everyone has seen this surge of activity due to the pandemic.
The PayPal CEO said he feels like digital payments have moved three years ahead into the future square as well.
One thing I didn’t understand about square is they blew away the top line but the bottom line had a huge impact I don’t know if that’s because when they sign up new customers to get some really good rate or something
and then Etsy was interesting they they have become the go-to place for handmade masks which is there have been quite a moment so they’ve sold something like I think.

[5:08] Three to eight million mask on their platform which was an amazing you know handmade face mask and then Shopify
just kind of crushed expectations and the one analyst I follow their Collins Bastion he may be on he raised their price Target from 475 to 820 and it’s currently at 7:30
so whoever asked for stock recommendations that may be an interesting one to look at because
it’s kind of one of those you know playing the the guys selling the pickaxes and shovels versus the actual folks doing the mining so Shopify stock I think it’s going to rip pretty good.
And then you have tried it about Peloton they crushed estimates as well and after hours I saw they were trading up pretty substantially
and they haven’t even been able to launch their new treadmill because it has this white glove in-house delivery that is not social distance friendly so
those are some interesting things going on in the stock side that have an e-commerce digital time.

Jason:
[6:09] Yeah are we jumping into the stock question or were you just you were that was just kind of a pre-analysis.
Um yeah so a like I’m the world’s worst at stock advice and and what what I have learned is.
It turns out it’s not all that helpful to predict what companies are going to do well and not do well like what’s more important and is to understand.

[6:32] What sin or not in the existing price if you want to make money.

[6:37] So so with that huge caveat that I’m usually wrong I’m going all in on the pics at pickaxe and shovels and I’m going to suggest some stocks like.
Um
some of the micro fulfillment centers that that grocery stores are now buying right like so my premise is digital grocery before covid-19 was 3% of
grocery sales and there was a prediction that they might get to five percent by 2022 digital groceries at 10% right now.
So basically we’ve jumped forward at least five years in the future of digital Grocery and huge caveat and digital grocery it’s wildly unprofitable so when the retailer has to pay
for all the grocery picking and the grocery delivery grocery delivery doesn’t make any money so the way retailers are going to ultimately make money on this digital grocery is.
Get you to pick up your own groceries via curbside pickup and use a robot to pick the order instead of paying a
human being to pick the order in the store and so these
these robots for grocery stores are called micro fulfillment centers and there’s at least three of them out there that have big Pilots with Grocers right now and they all have reported more than double digit.

[7:57] Um sales growth since the beginning of the pandemic and so it was super early in their evolution and so the the fact that there.

[8:08] Already seeing this this spike in demand like bodes probably really well for them so that’s companies like alphabat and take away and I’ll think of a couple others I’ll put in the show notes tonight.

Scot And Guests:
[8:23] Should we hit the audience up for some questions.

[8:36] If anyone wants a child but I think at the little hand raised there.

Jason:
[8:40] Yeah should we start with a while we wait for some reason our hand should we start with.

Scot And Guests:
[8:48] Here’s Michelle let’s hope this isn’t a crazy Zoom bomber let’s see what we got.

Jason:
[8:52] Oh I see it hang on Michelle we’re turning you on.

[9:09] We’re we’re excited for you to be here for the rest of the listeners you are a past guest on the show when you were with your monitor and you’ve actually started a new gig recently with Salesforce.

Scot And Guests:
[9:22] Yes I am I now work at Salesforce I started in early March there’s one place to start working at during a pandemic Salesforce is definitely it’s a great company and I’m really enjoying my time here.

Jason:
[9:37] Yeah and it seems like there so go ahead Scott.

Scot And Guests:
[9:40] Have you met Marc benioff not yeah but it’s definitely on my to do list how about the top of the Salesforce Tower.
Also on top of my to-do list once it’s reopened I’m also excited about our new tower that’s coming in Chicago the top floor will be open service I hope.
Host quite a few events once it’s built in three years nice.
Yeah my question is are there any topics or themes or issues in the retail that aren’t getting enough attention.
That you think that we should be aware of.

Jason:
[10:25] Good one I have a few opinions but Scott did you have something you wanted to say.

Scot And Guests:
[10:31] I would say one of the so you go to these conferences right and there’s all the talk in the front of the house and then there’s this,
back of the house talk I would say the back of the house talk I hear the most in e-commerce it’s kind of bubbling out now
is the sustainability sustainability and scalability of this kind of direct to digital brands so does DMV be have legs can you build something over a hundred million or some of these things anomalies like Dollar Shave Club and some of those or,
you earned is this kind of giant Gold Rush of these digitally native for cool Brands going to will sustain or will it die in a big fire pit of people that don’t make it through
so so I think that’s really interesting to Think Through.
The same time whenever I’m watching TV I’m seeing a lot of ads for these things now added ad rates have come down because traditional
advertisers are kind of on pause so you’re seeing a lot of these kind of calm or direct response kind of ads on TV so it’s an interesting topic that I don’t think is getting enough probably coverage out there.

Jason:
[11:35] Yeah and again it depends on what echo-chamber you’re in and what you hear in terms of what you think might be covered or not covered but I’ll tell you in.

[11:45] In conversations with retailers I’m still somewhat shocked how unrealistic a lot of retailers seem to be about.
The likely duration of the impact of all of this so you know we like we talked to lots of retailers that have like this three stage plan or this four stage plan
but the the final stage of their plan is almost always back to normal and binormal they mean,
pre covid-19 and back to normal is almost always the end of 2020 or maybe.
The middle of 2021 and I’ll be honest both of those things somewhat surprised me like I don’t think we ever go back to,
pre covid-19 I think there’s enough things that are permanently going to change the retail and Commerce in the US are going to be wildly different.
In the future and so I think just the notion of going back is is.
Sort of quaint and you know frankly like we you know we’ve actually brought in some epidemiologists and some immunologist to sort of help us scenario plan and
it just doesn’t seem like you talk to any credible expert that really sees this ending.

[13:06] Or you know going back to the kind of things where we all get to go in person to a trade show or or you know go to these big mass group things or frankly have unlimited traffic in a retail store.

[13:21] Until we have a full-blown and widely distributed cure.
Um for the virus and realistically the fastest
of a vaccines ever been produced in the history of the world is five years so let’s imagine that with the crazy resources marshaled we do it way faster than that and we do it in 18 months
you still got to find a way to get 7 billion doses.
Out into the world and get everyone to take it and oh by the way a lot of vaccines require more than one dose like there’s all this negative news.
That makes me think that we’re going to return to a lot of our old activities but in a significantly modified way.
For probably two years and I like
don’t hear that a lot when I talk to people thinking about their plans when I talked to retailers that are forecasting their sales
like none of them are thinking that like for the foreseeable future they’re not going to be allowed to let an unlimited number of customers in their storm like that’s that you know they think of that as a very short term.
Thing and I you know I hope to be wrong but I think they’re missing it what about you Michelle his there anything that that’s that you feel like people aren’t talking about enough.

Scot And Guests:
[14:36] Well I am particularly curious about returns because we see all of these you know we see all the metrics to digital Commerce Commerce Rising
but you know obviously there’s a high return rate associated with.
It was e-commerce particularly in clothing and Footwear so I’m I haven’t seen too much around the returns issue and has return rates you know have that have they drop down because people you know are.
I’m buying what they don’t need they’re not necessarily buying three items only keep one or.
Our return retooling steady sort of a the shift in consumer behavior and then be we are seeing a little bit more around the actual Logistics.
Doing the returns how do you keep the merchandise clean and safe and audio process it but yeah I’m really curious about the return issue and.
How that’s factoring in into the situation.

Jason:
[15:37] Yeah yeah it’s a great topic and in my observation at the moment has been like the categories that are most up in e-commerce are
not the categories that traditionally had super high return rates right so all,
digital generally always has a higher return rate than in store but in a parallel for example it’s
much more acute and
you know apparel Sales Online have been pretty soft right now and so then you know then the retailers that are really booming have temporarily
sort of.
Cancel their their return policies and so so like if anything there’s a slight extra kiss right now in profitability that that a lot of these retailers are seeing lower returns because either they’re not accepting returns or
there’s extra friction on the part of the customer to do returns and so they’re just not doing it so.
Sales of the high return items seem way down but return seem way down.

[16:39] Honestly though in my mind that’s getting overwhelmed there are all these other costs of e-commerce sales that are artificially high right now that you know are more than eating up the margin
the that retailers are gaining by by this you know what I presume is a temporary
abatement of returns and so to me like the top-line story that we’ve heard in a ton of their earnings is hey good news e-commerce is up it’s not up enough to make up for all those sales we lost in the store and those sales are way less profitable than they would have been if they were in the store and so margins are super
super challenged so.

Scot And Guests:
[17:24] When I follow the startups in the return space and it’s interesting that I’ve been at this like 20 or 30 years and
you know they always fall into two categories there’s ones that have like some digital solution where they don’t touch anything at the end of the day they’re kind of like issuing an RMA and doing some tracking
look every retailer already has that so I don’t understand understand how that
it solves anything or they go super heavy and they’re like going to build a whole infrastructure and touch every product and graded and resell it in some way and I’ve never found a company that has some kind of like solution in the middle that helps
companies handle the logistics I remember in the late 90s like this kind of.
Two to four time frame there’s a company called return by
and they raised like 30 million dollars and they went and built this big returns facility and I did a tour of it was amazing and I had all these conveyor belts and things would go upstairs and go through the sorting system and I was there in the hole I was like on the 30-minute tour and I was there for.

[18:24] You know I saw five packages go by and some of them were
the little ovens like the Barbie ovens but they couldn’t resell those because the food inside had gone bad and then there was one Barbie with without a head and that I was kind of like all right I’ve been here 30 minutes I’ve seen five products that probably can’t be sold online
what how is this business sustainable at all so returns are really hard because there’s no you know there’s probably some benefit of scale
and if there is Amazon’s going to win because they’re going to have the internal in-house scale that no one else is going to be able to get to.

Jason:
[19:01] Yeah in the the related question like so like we have these kind of problems with like how do we make
stuff that gets returned safe to resell or to get some some monetization from
for the apparel guys if win at the store is ever reopen and customers are allowed back in the stores a big question is how you make dressing room safe like both
of you know how do you keep the room itself safe but what do you do with the clothes that a customer tried on and didn’t buy and so their interesting questions there
do you have to disinfect that stuff and you do it in a way that doesn’t harm or damage the products you know one one idea we’ve seen a lot in China so far is the close that customers Tryon get quarantined.
And so literally you know customer tries on a dress doesn’t buy it and they have to put that dress in a quarantined area for two days before they bring it back out.
So I think there’s going to be a lot of interesting new things that you wouldn’t necessarily think about it first blush.

Scot And Guests:
[20:06] Thanks for the question oh you’re welcome thanks for taking it good luck in your new role and Sinister softly with Marc benioff yes I will I’m gonna garfi first with Rob.

Jason:
[20:18] That I feel like the garfi is easier but I do think it’s a funny time to start a new job because like you probably haven’t seen the lower half of any of your co-workers yet.

Scot And Guests:
[20:28] I haven’t I haven’t met any of them in person since I started so.

Jason:
[20:32] Yeah that’s odd.
Awesome well thank you much Michelle I will safely remove you from participating so you don’t have to worry about making noise.

Scot And Guests:
[20:48] Anyone else have a question raise your hand don’t take Olivia or penny.

Jason:
[20:53] Yep they’re both God.

Scot And Guests:
[20:53] The Bad actors okay we do have a right one right in when here let’s tackle that Christopher ask what brick-and-mortar retailers are going to come out of this stronger and why.
Jason took a four shot at it.

Jason:
[21:08] Yeah well your friend Jim Cramer on Mad Money had a rant a couple weeks ago where he said like
we’re trending towards the world when there’s only three retailers left in the United States and in his mind they were Amazon Walmart and Costco.
I do think all of those retailers are super well situated.

[21:31] You know obviously selling Essentials is a very helpful right now having already leaned into digital and particularly omni-channel retail is super helpful right now so so those read in those particular three retailers.
Probably had the best balance sheets in retail going into.
The pandemic so so those are the kind of retailers that are going to do super well I didn’t say this to Michelle but another one of the things I don’t think is talked about enough is.
How many retailers are likely to go out of business because of this and so these healthy retailers are going to grab up that share.
The in get even bigger so we’re going to see some huge consolidation at the top but even the retailers that don’t go out of business.
Are likely going to right-size The brick-and-mortar Fleets and so I we saw the first announcement it was either today or yesterday but Nordstrom is closing 16 Mainline stores which is about 14% of its
Mainline stores and people were talking about being surprised by that I actually think that’s a light I think
a significant number of relatively healthy retailers are going to close something like 25% of their stores.

Scot And Guests:
[22:47] I didn’t see at Nordstrom’s news.

Jason:
[22:49] Yeah I’m here for you.

Scot And Guests:
[22:49] So do you think so so no one’s about apparel during this time and you know one Theory would be people you know they have all this you know
if they’ve survived this and have the means there’s going to be a big kind of bump in buying apparel items you don’t think Nordstrom benefits for that or you’re just not sure they make it through to that point.

Jason:
[23:09] No well so I can but I think there’s a bunch of headwinds against a pair of so there is this premise
there’s all this delayed gratification and and you know in China they talked about when they reopen stores they were really hoping for Revenge shopping is what they called it which I thought was pretty funny and this this notion that there was all this pent-up demand for consumerism and they hope can customers would go out and help Goose the economy by by aggressive spending
in general like whether there are some occasions of that particular in luxury like there’s some luxury retailers that set records the first day they opened up
in general we haven’t seen that kind of Revenge shopping and part of the reason is is because
there’s huge economic uncertainty almost every Market is exiting from this quarantine period of the pandemic in a.

[23:57] A super deep and sudden recession and so consumer confidence is super low.
And so in the apparel space you just have all of these problems you had a perishable inventory that’s sitting in all those Nordstrom stores that they couldn’t sell
even though Nordstrom is pretty better than most it online the majority of their inventory was locked in stores that were locked in mall so they couldn’t sell that inventory.
It was perishable so it’s not
it’s not fashionable or desirable when they can reopen those stores most of their stores are at malls and there’s a lot of evidence that customers are more afraid of going back to the mall than they are to freestanding stores.
Nordstrom didn’t know what to do and I don’t mean Nordstrom particularly apparel retailers haven’t known what to do when they could reopen when they’re beat a man for their goods again so they’ve.
Their supply chains are all screwed up and they haven’t ordered the next season stuff.
And you know a lot of occasions that people buy apparel for.

[24:58] Are now gone like you didn’t need to buy a prom dress this year you didn’t need to buy an Easter dress this year you didn’t you’re not going back to school shopping at the moment and so.
Like even if there’s a little pent-up demand and they get a little bump when they reopen stores there’s enough long-term negativity in that apparel category that I think in any apparel every retailer is really smart
maximize their liquidity right now and get their balance sheet in the best shape they can but but particularly in a parallel you.
You really need to buckle up for a pretty rough ride because it’s not going to be pleasant.

Scot And Guests:
[25:34] When the I think it’s going to do well is Apple so I’ve had like
ten instances where I wish I could go just run to the Apple store and grab a widget or something and then you had to either wait or
I know several people at work have gotten broken computers they want to take in to have fixed and and you know if the Geek Squad or whatever that is called is broken no Geniuses to be had.
How about you didn’t say grocery.
Obviously those are going to do really well and then we have I think the drug stores have done pretty well I’ve kind of wandered into a couple of drugstores and they’ve been pretty busy and one here in town got some hand sanitizer it was like.

Jason:
[26:14] No exciting.

Scot And Guests:
[26:15] Very very exciting so caused a pretty big set of demand from them.

Jason:
[26:20] That in your in Raleigh that could be a huge event even before the pandemic but yeah.

Scot And Guests:
[26:26] We get excited about little stuff.

Jason:
[26:27] Yeah yeah grocery is like obviously the shift to digital groceries really exciting so if you’re someone that’s in the digital grocery space in particular like there’s a huge Boom for you for traditional grocer it’s a mixed bag because
um the the shift to the digital channel
is hugely problematic from a profit standpoint and there’s other bad stuff that’s happening simultaneously consumers are buying bigger packs of stuff which are less profitable the the Grocer’s cost right now or
skyrocketing they’re paying employees more they have all these extra cleaning processes companies like get spiffy charge them a fortune to come in and and
Queen their facilities in the morning before they open they have restricted hours they can’t let as many people in so they’re like.
It is good there is higher demand for grocery there’s a lot of operational
challenges with profitability I think in the long term those gets solved but it’s not going to be an overnight thing and and then like really for grocery for it truly to be a win
there’s a behavior that’s happening right now that has to stick and and this is the most interesting thing to me about the pandemic as I talk about these kind of six different categories of consumer behaviors and which ones might be permanent versus which ones will regress after the
the quarantine at the moment.

[27:53] There’s an enormous shift from consuming meals in restaurants to consuming meals at home and if that if a version of that behavior sticks like it’s clearly not going to stick to the level we’re at now
but but if the new normal is more skewed towards consuming at home that that obviously is a
increases the Tam for grocery but if the consumption goes back to the exact same levels and it’s just a shift from in-store sales to digital sales that’s probably not an economic windfall for the
traditional Grocers it might be an economic windfall for the instacart sand fresh directs of the world and a big Debbie Downer for the pea pods of the world that turned off their e-commerce right before the pandemic.

Scot And Guests:
[28:38] Oops looks like a Christopher has question let’s see what he has to say.

Jason:
[28:42] Christopher let me find you here and you are on hi Christopher.

Scot And Guests:
[28:48] Hey guys you guys actually just answer my question.

Jason:
[28:51] Tell us what it was so we again take credit.

Scot And Guests:
[28:54] So it was the I was asking the question that you just answered about what brick-and-mortar retailers are going to earn a come out of this stronger I’ve got I’ve got a backup.
Yeah it’s a backup question you know are there how are retailers handling training their Frontline staff.
Specifically kind of best practices with covid and and I ask the questions obviously right like the two stores that I’ve been in.
In the last month CVS has one way aisles that their employees seem to disregard.
And and Target you know kind of has this as this buy online pick up in store option but the they haven’t made the pivot of moving their their pickup area.
From away from the cash wrap and so what it does is it sort of creates this bottleneck of people.
So I don’t know if there’s sort of any examples of companies that you guys have found that you know are really kind of thinking about sort of how to address kind of a post covid or in covid kind of environment in a better better way.
Do I take it first Jason or.

Jason:
[30:02] Sure
so both hey I was sort of quoted in the Wall Street Journal article this week with the exact same observation that like Milo’s local grocer has one way Isles and all the employees and professional Pickers in the store totally ignore it right so it and you know
training customers for new behavior in the store
requires like a significant effort and a significant amount of messaging and reinforcement none of which is happening right now so that that particular example totally agree with you inside note.
Totally controversial and not good evidence that one way aisles are safer
right like so that the notion behind One Way Isles is you don’t have to walk.
Cross someone in these narrow aisles where their droplet spray is almost certainly going to hit you if they’re not wearing a mask a the science on the on the droplet spread like
your droplets are staying in the air long enough that that you’re walking through the droplets of the person in front of you even though you’re both walking in the same direction so
that’s kind of a bummer but the bigger problem is if one way Isles make you spend thirty percent more time in the store to complete your shopping list.
You’re actually walking by more people and getting exposed to more risk and exposing more people to risk.
Because of the one-way Isles then you’re actually reducing risk because the one way also that particular ones controversial.

[31:29] Direct answer to your question to me the best retail operators in the world there are killing it right now or some of the regional grocery stores
so to me an absolute hero of this is a chibi which is a regional grocery store in Texas.
Drake backstory these guys identified the potential impact of the pandemic in January sent their whole executive team to China
to talk to the the grocers in China that were being impacted by this they came back they put a plan in place in February they totally revamped their supply chain.

[32:02] They instituted all these touchless processes in the store
and they have a great engaged employee base that they really made him bass Udders for all these changes so I going to a regional like a chibi or hi v– and Iowa
those guys are executing really well if you step up to a big National grocer
um like to me Kroger has taken an interesting leadership position because not only if they rolled out a lot of best practices
they actually published all their best practices launched a website and are giving away all of their employee training materials and assets to any other retailer that wants them.
So if you’re a smaller grocer that like need signs explaining to customers what new policies are or you need audio messages to play over the PA system or you need a new addendum near employee handbook and training for employees
Kroger is giving all that away and so like it you know there was an extra level of diligence and creating that that created the materials good enough not only for their own use but to share with the rest of the world so so prop
props to them.

Scot And Guests:
[33:14] Yeah I would say you know the 30,000 foot level there’s.
You know every consumer has fear uncertainty and doubt so it’s your job to try to give them peace of mind and everyone has different response to this there’s some people that are pretty Cavalier.
And then there’s other people that are like super freaked out right so the more options you can give people then they can kind of use the risk-taking kind of.

[33:38] Choose their own risk path if you will one of my best experiences during the pandemic was Best Buy they have curbside delivery so I did a normal boat this so I did a buy online pick up in store I needed to get some batteries for
for a nest camera kind of thing and.
Then you know in the app it kind of geo-fenced and it said hey looks like you’re near the store are you ready for your curbside delivery I said yes so it did some smart things using the app and then
I’ve done a lot of curbside delivery with some of the food and stuff this one is like almost instantaneous you know the runner came out then the runner like stayed pretty far from the car
and they went to the passenger side and they actually asked and they were wearing PPE and they asked you know can I set you know can I want me to hand this to you or just set it in the seat next to you so there was like a lot of awareness on the on their side about kind of seeing where my risk level is.
I’m pretty high risk I just kind of smile
normal mode of operation but it’s really interesting that they were really sensitive to that so that was one experience I think I think table Stakes is you got to have PPE for all your staff you can’t
that has to be.
Definitely gloves and a mask you know the the more medical the mask looks I feel better as a consumer so some of these like cloth ones just kind of like you know they have like a brand on them I appreciate the brand,
you know as an entrepreneur but like the fabric Thing is a little dodgy touchless payments you know I’ve been in a lot of these I’ve tried using a lot of them and it really.
Jason you’re like this one went to a grocery store it’s called Fresh Market.

[35:06] And I used my Apple I did touchless with Apple pay and then she said I want to see the credit card why do you have a physical Apple card but she’s looking for the digits right.

[35:16] Plus the thing generates random digits is my understanding right it generates a one use credit card I tried to explain that to her and not so then so then I had to switch to ATM and then I was like well while I’m here I’ll get some cash back.
And then you know I put in like $50 cash back she’s like well the maximums 40 but then the terminal had a fifty dollar.
Cash back button and then and then I was like you know the third time I was like well maybe this one you know maybe third time’s a charm and she was like.
She’s really even Flinch because I guess it happens all the time that have these things so so do the touchless stuff but make sure you know I would have a some of the managers go through the experience to make sure it’s really working flawlessly.
That was one other thing I have found grocery shopping is I’m like the only non instacart person in there by instacart I mean
Postmates and all the other shift and whatnot so I feel like those people need some other workflow or something like their own registers or something like that because they are you know they take a lot of time to shop because they’re kind of like looking at the app and they’re kind of like you know and then they’re scanning something.
I feel like it’d be interesting to have some other alternative way maybe there’s like one store that is designated just for them or something I don’t know the answer to that but it’s kind of weird because I’m kind of like
I’m very transactional and are clogging up the aisles there’s literally like eight of them on an aisle and I’m trying to like juggle through them to get through the store.

Jason:
[36:40] Yeah and there is the that’s that was a problem when only 3% of grocery was online and so now that we’re a 10 like there’s a lot more of those professional Shoppers in the aisle and and there are a lot more of those conflicts
like there are you know efforts around dark stores and those Choppers
shopping from the dart stores that some retailers are doing interesting things like they’re having professional hours and Shopper hours so both Costco and Whole Foods are for the most part not letting professional shoppers
shop the store at the same time as customers they’ve they’ve narrowed the hours that throw up in a customers and they have dedicated hours early in the morning and late at night for the professional Shoppers so
all of this has allocation problems like you know you can just sell less.

[37:31] Curbside orders if you’re limiting the hours that the pickers can pick but but since they all have artificial caps on their density in the store at the moment
it makes more sense to have the Shoppers in some hours in the customers in other hours so you’re seeing a lot of that
definitely touched your lips payment is way up in the thing that’s going to be interesting there is
you know there’s a lot of self-service POS in retail particular and grocery that I’ll have touch screens which are now
super icky right and so you can imagine
there’s a rush to retrofit all of those and the non-touchscreen solution for all those is going to be that your mobile phone interfaces with the terminal and use the
the interface on your own mobile phone and so that’s going to be a new Behavior we’re going to see rolled out and have to educate customers about but I think you know
going to those touch POS systems scanning go with some retailers it experimented with.
Is is definitely going to be bigger so so I guess some of those things are interesting.

Scot And Guests:
[38:36] What they wanted and they had put a thick mylar bag over the terminal and it was so thick I could hardly press the buttons I guess they must met you know they must take that off and clean it or something or it may may be just as.

Jason:
[38:46] Yeah we just want you to believe that exactly great questions thanks very much Christopher.

Scot And Guests:
[38:52] Thanks Christopher yeah thanks guys all right we got Ricardo and Scott Waiting by Let’s see we got here.

Jason:
[38:59] Okay Ricardo we are you are live hey.

Scot And Guests:
[39:05] Hey hi guys we are done here reporting to you from San Francisco they kind of a show.
Thanks for calling in what’s what’s what’s on your mind I’m curious if you can talk a little bit about like the p&l office seller obviously differentiate in the u.s. versus in China you know like a referral fees the same I was just because the same.
I think I’m really curious you know I know China is as a percentage of retail e-commerce a lot more and I think it’s maybe because they don’t have a lot of the physical stores that,
we got in the west but still when you compare with other developing nations still so much more ahead so I’m just creating your thoughts on that thanks.

Jason:
[39:44] Yeah well good question Ricardo a couple of things so the dominant
marketplaces in the u.s. tend to be different than in China so obviously Amazon’s the
the dominant Market Place in the US and Amazon has a singer Lehigh take rate so they charge like a.

[40:02] Like compared to most other marketplaces a very high commission for each transaction Ali Baba’s Team all which would be the most analogous to,
to Amazon and China has a way lower take rate so first thing is the unit economics of the actual sale are more profitable for the seller because you’re paying a lower commission but that’s a little bit of a
artificial economy because Team all is even in China is even much bigger than Amazon Marketplace is here
and so visibility and discovery of your product listings is non-existent like there’s so many listings and so many products your product just isn’t organically going to be found in China and so
Ali Baba has a really low take rate because,
they charge you extra for all of the marketing services and search visibility services so what you end up doing is having to pay a lot more to the to Ali Baba’s marketing arm which is called Ali Mama to have your stuff show up and
and if you kind of compare apples to apples like the the general economics of the business end up.
Netting out to be similar by the time you pay your Amazon marketing services in your take rate in the US or your only Mama services and your take grade in the China those are similar.
But digital Commerce is way more penetrated in China and.

[41:28] You know they’ve LeapFrog brick-and-mortar as you implied so pre covid.

[41:34] Depending on how you Define retail I’ll go with the forester definition 16% of Commerce in the US was e-commerce the rest was brick-and-mortar in China it was 38% before covid.
So u.s. today in April 16 percent goes to 25%.
In February in China at the peak of the quarantine.
38% went to north of 50% so.
Digitally you’re going to sell a lot more goods and then one other economic thing that’s wildly different in China than the US the cost of delivery is.
Way lower in China so because there’s so much inexpensive labor
you you can pay someone a very low rate to deliver anything in an hour or two a in a five-kilometer radius of your store and so it enables you to offer all kinds of
cheap delivery of goods that would the unit economics would never work in the US and frankly that driver
like those guys delivering all those things I say driver but a lot of times it’s a bike or something else those delivery guys
that’s a middle-class wage in most Tier 1 and tier 2 cities in China so it the economics all around workout much better in China because of that
Scot anything I botched there.

Scot And Guests:
[42:57] Let’s get the payments I think is a little bit lower so we’re used to kind of a two percent take right I think there’s a lot cheaper.
And then the payment is to Ally pay a lot of times and then the other thing I would say is most Chinese sellers are embedded in a factory so that they’re like.
They’re very very close to where the product is made.
And that gives them an edge where you know if you’re a saint it’s awesome when you hear that works for an auto parts company so if you’re at an Autoparts retailer there’s a distributor
there’s all these manufacturers some of them maybe there’s another layer where they took it from China and then the parts from China and then added something so you can be kind of you got seven people you know two to seven people dipping into the margin stack there whereas in China you’re typically
Factory to right into the marketplace essentially maybe through a seller so because of that also it also creates this very fast feedback loop
so you’ll see like this really interesting things happen where they can you know they’ll iterate very very quickly because they have the factory tied to the marketplace and then this this feedback loop accelerates.

[44:06] Nothing if you stacked the another challenge for the Chinese seller is the same widget if you take currency and try to normalize it is selling for thirty to forty percent less in China
so the good news is in the US for the same same item and if you looked at the currency rates you’re probably get 30 percent more for that in the United States than in China because it’s so competitive and people are.
Very value-oriented the China so you have more more P to put in more margin to kind of put into things in the u.s. so those are some of the interesting differences.
Because of that you know most Chinese sellers their strategy they actually make a lot more money selling out of China so the song to Russia they’ll sell into.
Mercado Libre Brazil South America they’ll sell what the most popular destinations is the marketplaces in Australia and then obviously the US and Europe.
That’s where pre-pandemic companies like wish and all the express were making a ton selling these kind of Hot Products coming direct from China.

Jason:
[45:08] Good points great question Ricardo thanks very much.

Scot And Guests:
[45:12] You guys have a good one thanks.

Jason:
[45:17] Should we go to Scott Landry next or do you want to take some of the typed in question Scott.

Scot And Guests:
[45:22] Let’s do let’s just got in the will hit the typed in once.

Jason:
[45:25] Awesome Scott you welcome to the show I feel outnumbered by the Scots now.

Scot And Guests:
[45:33] You are yeah I’m good treaties between us yeah exactly and I’m also here in will just outside of Raleigh I’m in Morrisville North North Carolina.

Jason:
[45:44] I heard Morrisville is much cooler than Raleigh.

Scot And Guests:
[45:47] It is much cooler it is much cooler and I’m a longtime listener first-time caller I a few weeks ago you guys had on Scott
another Scott on the show and he talked about this being with time to not sit back and cut costs but to actually invest in companies
invest for company owners to invest in their companies saying that those failing to prepare prepare to fail.
We’ve also seen a lot of non-essential Amazon Seller struggle during the first few weeks of this pandemic.
You know a lot of come back strong since then but and you know these companies had to Pivot and develop a multi-channel approach to their business
so this sets up my very fun question do you know of a software that would that you would recommend to all your listeners that would help them with managing a multi-channel approach that includes.
Maybe a single user interface to manage all their e-commerce operations such as I don’t know content inventory orders marketing advertising product content feeds.
Scot Jason do you know of anything like that John A blank over here Jason guy Nick.

Jason:
[46:51] I thought you were going to a channel advisor.

Scot And Guests:
[46:52] Scot full disclosure Scott’s an account manager over at John visor so he’s seeing up the old Channel advisor what we do there.
But all right yeah a lot of people start you know
to be fair a lot of people especially smaller sellers they’ll start with a Shopify Bigcommerce woocommerce Magento
one of those offerings and then they’ll have a little bit of an ability to sell and other marketplaces sometimes their shipping software will get them a connection to another Marketplace but then ultimately they’ll grow out of that and that’s kind of what we’ve built for.
Retail does.

Jason:
[47:28] Yeah so certainly like I think there’s different answers it different
tiers of business and maturity of businesses like I’ll be honest I don’t generally think of there being.
Complete unified Suites that are super successful for a broad range of customers there definitely are
unified Suites in particular Niche markets that really focus on a vertical so you can find a unified suite for a Furniture retail or for a
quick serve food restaurant that are that are pretty comprehensive
it like Shopify is inching towards being a unified sweet they’re adding more and more of those services and if I were a betting person I would say like they’re eventually going to get to a
pretty comprehensive unified Suite that seems to be an important part of their strategy
and hopefully they spend their money there instead of the stupid Shop app that we could talk about later the there
at certain niches there there are some interesting unified sweet so I Oracle owns a product called netsuite which actually has like a pretty comprehensive set of e-commerce order management Channel management.

[48:37] And outside of those you end up there are some some tools that cover a lot of what you just discussed so there there are Pimm’s that are expanding into.
Feed management content management and starting to you know do more of those kinds of things so I think of like a salsify you know as becoming more comprehensive
for those kinds of things but but like honestly there’s no dominant player like the Enterprise level,
the Enterprise players are mostly pretty sucky at it like bye
by far the best in terms of a unified sweet amongst the Enterprise guys now would be Salesforce so Michelle that was on earlier could talk to you about that.

Scot And Guests:
[49:28] Thanks guys appreciate it just I was just kind of tearing up the channel advisor commercial.

Jason:
[49:34] Yeah yeah yeah I can’t believe Scott didn’t send me one to play.

Scot And Guests:
[49:42] Cool alright so over in QA Kelly ask has anyone done any good research showing the correlation between retailers being owned by private equity and their subsequent and ability to react to covid.
Seems that PE ownership equals under investment in Tech equals poor ability to respond to changes in business climate but it’d be great to see some research
yeah so if you know seems like Kelly’s pretty.
Read up on this whole topic but there are this this tier of investor called private Equity firms we call him PE firms in the industry
and they essentially go do buyouts and what drives their thinking a lot of times there’s a like anything there’s a broad spectrum of PE firms they’re not all like this but a lot I would say 80 or 90 percent are in the genre
of they do some financial interest in engineering so they’ll go look at a business like a retailer they’ll see that it has a certain ibadah and cash flow
and then on the other side of the equation they have super cheap access to cash so what they’ll do is they’ll go they’ll go by that retailer they’ll use that cash flow to go by debt.

[50:44] And you know because they’ve got this cheap access to debt they can usually get a lot of debt so they can go and say this retailers making a hundred million they can put a billion dollars where the debt because the
whoever is providing this dead is just looking for
pretty small amount of cash flow to cover a large debt they do all that and then when they when they do that they effectively have extracted the future value of that retailers cash flow out and and that is what drives their
their calculations so it’s kind of like running the business through a spreadsheet based on this these kind of metrics of this current view of cash flow
the downside of that is what it does is you know it makes the company essentially a hundred percent not bulletproof so you have a recession you have something that impacts that cash flow
and then suddenly the cash flows here the debt is like 80% of cash flow cash flow dips to 30% and now the company
is essentially if it has something on its balance sheet it will burn to that relatively quickly and then go bankrupt so this is ultimately what led to the demise of
Toys R Us India Circuit City I believe had a large private Equity component here in the Southeast Belk cut by a private Equity Firm before pandemic and I’m kind of interested to see if
if they make it through pretty much most of the large retailers with the exception of Nordstrom Walmart.

[52:13] Costco the drug stores don’t have private Equity but many of the mall based retailers have except Apple
are have a big private Equity component and I think they’re at risk so I haven’t seen a study but I would say the correlations very high just because of the nature of the Beast it’s like saying how many slow
gazelle get eaten by lions beautiful pretty much all of them so I would say the correlation would be you know almost a hundred percent correlated Jason.

Jason:
[52:43] Yeah I would agree with your hypothesis I have not seen the study and it is a smart interesting question if there is a steady because
the ones you disproportionately hear about are these leveraged buyouts and they of course have you know really challenging balance sheets and therefore are super,
I’m vulnerable to covid right and you know Scott mentioned the Toys R Us in certain cities of the world like Nieman is a poster child for that situation right now
the unit I can economics at Neiman Marcus are pretty favorable it’s a totally viable retailer with a unmanageable amount of debt so
right you know sorry to my friends at Neiman covid is probably putting you out of you know into a reorganization at best.

[53:27] But I don’t actually know statistically how much of the private Equity debt in retail is.
Um leveraged buyout this we hear about the over-leveraged ones the most and there’s another kind of private Equity debt which you know tends to also under invest
like the super risky early private Equity debt which is the Venture debt like those guys you know tend to not be making huge infrastructure Investments and
and that that’s
going to tighten up at the moment but there are mezzanine level private Equity firms that do invest in retailers
they don’t tend to leverage those transactions and and as negatively impact the debt so so for sure.

[54:16] All the poster child’s we hear about about private Equity investors are going to be the negative ones that are killing retail and look at Scott with his Advanced Audio Video right there but I
like
I’ll be honest I do think there are some private Equity firms that are much more beneficial to retailers that we just don’t hear about as much and what I don’t have a good sense for is as a total percentage proportion of all retail
like is are those there’s good private Equity firms a unicorn or they 50% and we just don’t hear about them don’t know.

Scot And Guests:
[54:49] And I don’t know Kelly if you can see the screen here but I did find this article and Retail wire it’s pretty current so July of last year so you know obviously covid is going to tick this up but they found 10 out of 14 companies that filed bankruptcy had been acquired by pe companies
they actually pay get to 1.3 million workers lost their job
there’s a classic movie called Wall Street it is pretty interesting to watch it because the whole premise of Wall Street is effectively a PE lbo
and you know this one guy has to decide the moral implication of
the spreadsheet World it looks great and then he realizes like all these people I think there’s a familial relationship
his dad worked with are going to lose their jobs so It’s oddly one of those weird things that has stood the test of time because it’s been the strategy for
30 or 40 years you get to see very young Michael Douglas as well this report I have on the screen references what looks to be a more even
kind of detailed report on this so that so you know I would Google this this kind of Jim Baker private Equity stake holder project and you could probably a lot of times you’ll see this kind of
puffy article about one of these things then you go find the underlying paper and there’s a lot more really interesting data and you can see some actual data that feeds these studies.
Next question is from do we have a lost the ability to see the hand raised.

Jason:
[56:14] Yep so we have two more and we are coming up on time so we probably want to just go to speed round a little bit.

Scot And Guests:
[56:22] All right lightning round.
Um hopefully I said your name right there do you think the market for our demand for refurbished products are secondhand e-commerce go down due to the pandemic.
You know I think it definitely will you know Jason mentioned returns you know I’m not going really want use clothes and that kind of thing I think there’s you know just like I said before
I think what you could do though is if I was the seller
I would talk about how I have used you know anti microbials disinfectants sanitization I’m becoming an expert on this oddly enough I’m a computer science guy but I’ve had,
have a crash course in this so there is a there is actually an EPA website that you can go to and see which chemicals are covid effective in can bear that claim.
So imagine your seller what I would do is I would say you know I have formed these actions on this product and I know the best my knowledge it is been sanitized and disinfected and very safe for reuse so
that’s interesting we did have CEO of I always get this wrong the used person-to-person Marketplace.

Jason:
[57:32] Offer up offer up.

Scot And Guests:
[57:34] I always want to I use the apparel one yeah and he said they’ve actually seen you know a huge spikes so you know we’ve seen these macro trends of home gym home office and they saw in their kind of local platform a lot of
activity going on there.

Jason:
[57:51] Yeah I would say like like most things there’s conflicting Trends here right like people are more concerned because of the health ramifications
but we’re also people are like super economically conservative and value oriented and so previously owned is likely to have a pretty nice Spike and if I were a guessing man I would say it’s net-net going to be favorable
um to refurbished in previously owned because I actually like of all the health risks the virus spreading through
items that are several days old frankly like it is.
Probably in overestimated Risk in most people’s mind there are ways to make those things safe and even in the virus still exists on something
that’s a day old it likely isn’t very virulent and it’s less likely to infect you so
I have a few over time we’re going to find out that.
You’re probably not likely to catch it from a set of weight you bought from someone else that sat in your garage for four days before you use them.
But you know I think those things are going to sell a lot more so we’ll have to follow that one.

[59:00] And then Daniel Goldman with what probably is going to shape up to be our last question.
He referenced so just for those that didn’t know Jason intrigued by your comment in the last podcast that if someone offered you Amazon web services as a business I wouldn’t say no
but I kind of made the point that Amazon Marketplace is.

[59:26] Extremely profitable as well but since it’s not separately broken out on Amazon’s earning statements people don’t tend to realize how profitable it is and so my point
in last week’s show was everyone talks about Amazon web services being the prophet driver of Amazon I was saying
the percent the proportion of Amazon’s retail business that’s a Marketplace is probably as good or Better Business than Amazon web services so he’s asking why I said that and I may have just inadvertently explained it the that to me a market like it is hard to lose money on a Marketplace
the you lose money if you don’t make the marketplace work so if you can’t get enough sellers or buyers that’s how you lose money on a two-sided Market places you don’t get enough of
of both sides of the marketplace but if you have both sides to Amazon
there’s no economic risk on the marketplace there’s no carrying costs of goods there’s no inventory there’s no cost of returns there are none of those things and you take a commission on the successful transaction so it’s it’s.

[1:00:29] A hundred percent profit with extraordinarily low overhead and very little cash burden and so
like the unit economics of that are even better than AWS AWS is highly profitable but it’s actually pretty capital-intensive
and so in my mind the marketplace just scales even more profitably than AWS and I would argue the marketplaces
bigger than AWS so that was my Y and then he the smartest part of his whole question he left for last who cares what Jason thinks what would Scott think about that same question.

Scot And Guests:
[1:01:08] So the surprise surprise you because I was surprised Jason just chose Marketplace in the it’s hard to answer a theoretical question because.
It’s so theoretical but this scenario I’m imagining I’m I have the offer to either maybe buy or get AWS or the marketplace not actually take AWS because the marketplace in the retail business and Amazon are in next trip
young what makes it work also is the fact you have the Amazon offer interlinked there and then you can actually beat Amazon.
That’s what makes part of what makes the magic of the hybrid Marketplace at Amazon work really well Amazon keeps the marketplace honest the marketplace keeps Amazon honest.
Now you know there’s a lot of noise or there was there was a little bit of a scandal last week we talked about where there’s you know they always talked about this Chinese wall there ain’t no Chinese wall they’re actually using that data allegedly did.
Out what’s going on shocking so it would actually.
You know I’m kind of reminded of the eBay PayPal split that actually happened and it wasn’t too painful but I always still pay with PayPal and eBay so that was like you know those economically,
terrible I think for me to get rid of the whole payment system and then.
Now it’s getting all this value from other places so so you know the short answer is AWS is much more extractable and could have Amazon as a customer without any impact kind of like PayPal ended up being
the marketplace because of lives and is integrated so deeply with the retail experiences inextricable and if you if you pulled it apart I think the value would go down significantly.

Jason:
[1:02:38] There you go and if you look.

Scot And Guests:
[1:02:39] The first thing Amazon would do is buy a Marketplace in the be with you and I don’t think you want to be in that.

[1:02:54] One thing one last thing we wanted to do is do a shout-out to Jamie Dooley he could not join us tonight because it’s his birthday
happy birthday Jamie hope you’re having some delicious cake or something probably not eating out I would guess but hopefully you’re having a fun pandemic themed birthday sorry you could make it tonight.

Jason:
[1:03:12] Yeah and and happy May 4 Theta J belated me for Theta Jamie who is another big Star Wars fan.
Scot we’ve blown through our our once again our and nine minutes so super grateful for all those listeners that stuck it out with us for the whole time that was very kind of you and these are super fun and it’s great to see everyone thanks very much for supporting the show and
please be safe out there and until next time happy commercing.





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