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Jason & Scot Show Episode 303 Amazon, Walmart and E-com Q4 Results

Jason & Scot Show Episode 303 Amazon, Walmart and E-com Q4 Results

A weekly podcast with the latest e-commerce news and events. Episode 303 is an recap of Amazon and Walmart’s Q4 earning reports, USDC Q4 E-commerce data, and other news items.


In this episode we cover:

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Episode 303 of the Jason & Scot show was recorded on Thursday, February 23rd 2023.


[0:23] Welcome to the Jason and Scot show this is episode 303 being recorded on Thursday February 23rd 20:23 that’s a lot of three Scott I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:40] Hey Jason welcome back Jason Scott sure listeners it could have been worse we could have done it on 22 to 23 so there’ll be a lot of tooth so we broke up the to smooth some threes.

[0:52] I believe that was episode 223 was on that yeah.

[0:56] I had I am not a big sports ball person but I watched the Super Bowl every year for the commercials and I had, I know you’re the grand poobah of all things advertising and I had an ad question for you.

[1:12] Yeah awesome you’ve come to the right place hit me.

[1:15] What is to EMU and why is it not the same thing as

[1:22] That’s a great question I can only partially answer so Teemu is a e-commerce site.
In as far as I know at this point only in the United States of America it’s owned by pin duo duo in China which often is called a PDD and depending on how you count PD is the second or third largest e-commerce site in China in China it’s a super interesting gamified model where like you get your friends to go in on the deal with you and it drives your deal cost.
Down so everybody saves more when you all by together kind of thing so it’s a.

[1:58] Okay group buying used to be called back in the day.

[2:00] Social shopping exactly and so it’s super interesting and they’re doing really well so they launched an e-commerce site in the u.s. it appears that it’s primarily a catalog they built by aggregating a wide variety of different.
Producers in China and it does have very much of a wish Vibe like it’s a lot of.
Extraordinarily inexpensive apparel and you know inexpensive tchotchkes that you probably didn’t know you need but like if you start browsing the side it for a.m. on a Friday night you’re.
You’re gonna end up making some ill-advised purchases and then it seems like everything drop ships from factories.
In China via u.s. post so they if you remember back in the day wish was like very slow shipping like to 26 weeks.
T mood typically quote six to eight days they launched in November I ordered a couple shirts and they promised me like a delivery and they actually arrived in like five days to the United States.

[3:07] Wow.

[3:08] Yeah so it was reason via US Post Office in the u.s. portion at least and you know there’s this.
International postal treaty that probably meant it was super inexpensive for Teemu to ship it via US Post Office to the US.
But what was interesting to me is I give you an idea of how cheap this stuff is the I ordered a dollar shirt that was forty percent off with free shipping so.
I literally have 60 Cent shirt delivered from China and five days.

[3:40] Cool is it like wish were eighty percent of the businesses hair extensions.

[3:44] Yeah so I don’t have a break it is a lot of that like it’s a lot of like USB accessories and stuff I do think it’s more heavy on apparel and I have talked to people that are more hip and in the know than me that think there’s like, that you know it’s very short-term apparel it’s kind of disposable apparel so they’re all the usual caveats about being an ecological disaster probably apply.
But I have been told that they have that they like have some interesting on-trend Styles and things on that that like for some demographics it’s the, the apparel selection is appealing but what I do know is they launched in November and when I looked at the year in and it’s mostly on a mobile app when I looked at the year in app downloads, it was the eighth most downloaded shopping app.
On iTunes so more downloads than eBay for example over the year and Timmy was only in there for two months and and so it’s kind of funny I’m a little embarrassed I.

[4:52] Posted some stats on LinkedIn about mobile apps and I said and don’t sleep on Teemu it looks like they’re running fast and then a week later they ran that Super Bowl ad that you saw which is certainly going to Goose their downloads more and literally right before the game I found out that my company publicist actually produced that Super Bowl at so, it may have seemed like I was promoting a client but In fairness to me I didn’t know they were to client when I when I mentioned it.

[5:20] Cool shouldn’t you know who your clients are as a chief digital retail strategy officer.

[5:25] I should as a first a first world problem in your business is when you have too many clients to know.

[5:33] You’re forgiven.

[5:34] Or maybe that’s just a sign of a bad a bed, employing my case but yeah you know holding company like publicist were a Federation of agencies and most of the agencies do their own thing so this is you know a cool creative agency that we have Saatchi & Saatchi out of Los Angeles, um and sure enough they did reach out to me to say hey we have a Commerce client and we’d love for you to come talk to them.
Check out their Super Bowl hour and the next they’re Super Bowl add in the next hour and so that’s how I how I found out there are client thank you guys.

[6:05] You’re like you’re like I totally predicted these guys would shoot up the charts.

[6:09] I did I did I tried to take credit but seemed like shockingly not everyone in my company follows me on LinkedIn I know.

[6:16] Should be over should be like part of the onboarding.

[6:21] Sometimes I think it should but then other times I think of how many times has probably saved my career that like important people at work Dan see something I like I said I’m going to so I think on the aggregate I’m going to stick with it how it is.

[6:31] Call any other trip reports or anything to go into before we jump into some news I know you’re chomping at the bit to talk about some data.

[6:39] Yeah so it is obviously well I guess it’s always trade show season but this feels like a special version of trade show season next week is e tell West, in Palm Springs which is usually a good Joe but for sure a good boondoggle if you’re trying to get out of the Chicago winter in February Palm Springs is a good, a good place to go so I’ll be going there and I have a lined up a couple guests for folks to listen to in the in the subsequent weeks and then the end so that’s the end of February the end of March is shop talked and so I’ll be giving a talk at shop talk and.
And talking to some folks there too so so a couple cool industry events on the on the horizon.

[7:25] Cops are gonna have a little Gap and then we’ll have some a lot of show reports to go over I guess.
Cooper one of the things we wanted to start today was finally got the last piece of data from 2022 from the US Department of Commerce walk us through what your magic Tableau Data machine is Tanya.

[7:47] Yeah so mid-February US Department of Commerce publishes this quarterly report on e-commerce and so the Q4 data from last year came out in mid-February and so now that we have qu for we can see a whole year so in 2022 us e-commerce sales were 1 trillion, 33 billion in sales so the first time we’ve officially exceeded a trillion dollars so that’s kind of cool.

[8:20] What’s I guess slightly less cool depending on where you stand is the growth rate so that trillion dollars is 7.4% more than 20 21 largely because 2021.
Was a like pretty astronomical year but but to put things in perspective.
Over the last 10 years than normal growth rate for e-commerce is 16.4% so 7.4 percent is less than half of what our traditional growth would be.
And it’s actually the slowest rate of growth.
Basically since e-commerce happened so so 2022 is not a, a stellar year for e-commerce growth, now when you look at that three-year stack you say how much did e-commerce grow since before covid it’s up a lot it’s up 81 percent.

[9:17] And you know a trillion dollars total retail sales are about 7 trillion so e-commerce ends up being 14.6 percent of all retail sales, a lot of people like to talk about what percentage of course sales it is because like people don’t tend to buy gas.
Via e-commerce and Tull spiffy start selling gas and until recently people really weren’t buying cars online so a lot of, we could debate the merits of this but a lot of people still have this definition of core retail which doesn’t have Auto or gas in it and so if you take Auto and gas out and you say that trillion dollars is 21.5 percent of core retail which.
Makes the us about the third or fourth highest e-commerce penetration country in the world.

[10:07] Obviously I get a lot of these e-commerce Spike during covid and then kind of regress to the mean but.
You know if you look at the e-commerce dollars growth.
Were 36 percent above what we would have forecasted.
Before covid started and we’ve sold like 275 billion a year more than we would have expected to sell this year so over the three years e-commerce has, has grown quite a bit and remained high but what is true and worrisome about 20 22 it’s the lowest rate of growth we’ve ever seen and for the first time since e-commerce started.
Retail actually grew faster than e-commerce so that the total retail growth number for last year was 8.2 percent versus the e-commerce rate of 7.4 percent so that’s an interesting backdrop as we start to get all these.
Q4 earnings reports flowing in.

[11:09] Yeah and that’s really just you know it’s a reversion to the mean right so we had a surge in e-commerce so you Commerce is more coming down more so than retail surgeon is that if we charted that out is that what would see.

[11:23] Ecommerce has not surged as I mean retail is not surged as much as e-commerce has come down so.
Yeah so like on the whole the three years of the pandemic were very good to retail and very good to e-commerce the, when they happen with slightly different e-commerce is biggest year was the first year of the pandemic and retails biggest year was 20 was the second year of the pandemic so when you’re looking at year over year sales Ecommerce is comping against a big number on the numerator while the denominator suddenly got a lot bigger, for retail and so when you look at it as a percentage of retail it definitely looks like it regress to the mean but when you just look at, net dollars people spend an e-commerce before and after the pandemic.
We both we spend a lot more money at retail than we used to and we spend a lot more money on e-commerce than we used to and so the spoiler where the fear is.
Is that the new normal or did we just pull in a bunch of demand and that bodes poorly for 2023.

[12:31] Yes go for some tea leaves to help us kind of parse through that we had some interesting earnings first of all we wanted to chat about Amazon’s fourth quarter the way I would kind of we didn’t do a show on this one because it was really not that much to talk about to be honest with you so they came in just their dramatically lowered over the last couple quarters they have dramatically lowered the the back half of 22 so they the Q4 of this slightly beat that that new Lowered Expectations, and then their q1 guidance was in line with a little bit lower than what Wall Street was expecting but not enough to be super material one thing I thought you would find interesting is they took about a 3 billion dollar charge on restructuring there was they announced they laid off 18,000 people I think most people saw that, and that was 640 million but part of the charge was 720 million to impairment at fresh and go stores I thought you would find that interesting and I guess they had I guess those are the ones they must have planned a bunch of openings and now they’ve got all this kind of like you know they’re kind of half pregnant with this bunch of real estate bunch of stores they want to launch and then they pause that.

[13:44] And then one that was interesting to me is we work a lot with these Amazon DSP companies and I’ve often wondered who insures them because they bang the heck out of them and Amazon increase their reserves for Self Insurance in their transportation Network by 1.3 billion which I thought was interesting given that we see these things just 90% chance if you see an Amazon Prime van it’s got a fair number of Dents & Dings on the side of it.

[14:12] Yeah that’s yeah that’s a hard gig for a van although there probably are no easy gigs for van.

[14:19] Yeah would you think about the freshen go.

[14:21] Yeah so the grocery story is interesting right longtime listeners will remember Amazon kind of retreated from most of their non grocery, retail Concepts I want to say a quarter ago so they kind of they closed all the bookstores they closed the five-star stores and and they kind of said hey we’re we’re we’re revisiting our brick and mortar strategy the one, aspect of brick-and-mortar that they continue to operate where these grocery stores that are called Fresh and these.

[14:53] Convenience stores or grab-and-go food stores that are the Amazon go stores that just walk out technology and, you know grocery super important I talk about it all the time it’s like the second biggest category of consumer spending and Retail and it’s one category where Amazon hasn’t done very well arguably Whole Foods hasn’t done very well since Amazon bought them, and you know the magic question was where they going to invent a more successful grocery Concept in Amazon Fresh and then this quarter they answered that question no now essentially said we haven’t found anything differentiated enough in the Amazon Fresh stores to make us want to scale them, rapidly we haven’t given up on Grocery and we’re going to continue to work on it and roll something new out but we’re for sure pulling back on, growth strategy for this current fresh concept, and so so you know it sounds like hey they definitely don’t think they’ve got brick-and-mortar figured out between fresh and Whole Foods and on delivery, last year, you know they started charging even for Prime members they started charging for delivery at Whole Foods and.

[16:06] That way I have a hypothesis that that dramatically put a crimp in there, they’re grocery e-commerce sales although in a lot of places in the country groceries are delivered by fresh not by Whole Foods so this quarter they also announced that they’re adding a delivery fee even if you’re a Prime member.
For fresh grocery delivery so there is no free grocery delivery option at Amazon, um you know which in my mind puts them at a pretty significant disadvantage vis-à-vis, instacart Walmart and Kroger that are all aggressively acquiring customers with offers right now.

[16:44] Yep Anderson tough category.

[16:45] So grocery seems like a place where like Amazon has put some serious effort in and it has not won yet has not figured it out.

[16:56] One of the other things that’s weighing heavily on the minds of Amazon shareholders is the AWS Computing platform saw its growth really dip below 20% all the cloud providers are feeling this Google Microsoft I think Google has laid off a bunch of the people leading their Cloud effort Microsoft Azure is under a bunch of pressure as well and what’s happening is as we hit some economic headwinds the users of these Cloud infrastructures are lots of startups that have venture capital and VC rounds are getting few and far between so they are reducing their loads and their trading down you know one of the things you can do on these platforms is have a machine with a certain computer, horsepower you can kind of say you know maybe I’ll go down a couple rungs on the ladder of compute horsepower there and save a little bit and.
So it’s an area where companies are looking to save money very quickly because you’re not locked into certainty or anything like that like you would, be with some software as a service platforms.

[17:58] Yeah I think I’m not to give you credit but I think you were one of the first people I saw, talking about that phenomenon and then it became a big thing I think I like Twitter announced that they were slashing 75% of their seats and it just seemed like in the same way that like, you know Middle America when when budgets get tight you know everybody looks at their recurring spending and cuts all these you know apps they accidentally signed up for On the App Store and in the same way it feels like every company in America is like.
Going on a SAS diet right now.

[18:31] Yeah I you know I like to coin phrases we famously coined ship again on the show I call it’s a split so when you wake up one day and you look around your company and you’ve got 200 different stats platforms that you’re paying it’s only $30 a seat a month but there’s 1,000 employees using it and you got 200 of them that I can’t do the math on that but it adds up very quickly, so a lot of companies are right-sizing, their SAS budgets one of the interesting beneficiaries of this was the Microsoft Azure platform had pressure but the the Office 365 has done amazing because what happens is people say well I’m using slack Dropbox.
And you know maybe maybe one of the Google platforms and you know and I also have Office 365 will if you start to reconcile this you can drop drop box for OneNote and.
OneNote Drive.

[19:32] Know what you’re right one drive.

[19:35] OneDrive yeah and I can drop you no slack for, they have their own teams and then Zoom for teams and then so so Microsoft because they’ve got one of the most fullest sweets and almost everyone has Microsoft because of office kind of packed in there their they’re a huge beneficiary of that SAS Bluett interestingly I think it was enough to offset the this the downgrades they saw it and measure.

[20:04] Yeah that’s super interesting.

[20:06] Yeah one of the you know one of the interesting things that when you’re in these weird Economic Times when these companies released their numbers it’s late enough into the next quarter so this all came out kind of mid-February that they can give a little color and one of the on the current color.

[20:23] Quarter, so they’re talking about Q4 results but then sometimes they will drop a little bit what we’re already we’re seeing kind of right now so they did they did talk about AWS had kind of bottomed out at a 17 percent growth rate or something like that mid-teens, so Wall Street took that positively they also said you know they said we’re seeing really improved efficiencies and the retail business which I think Wall Street took to mean they feel like they’re at this right balance now of, Transportation warehouses and all those things that they had to shed if feels the feels like they’re done based on kind of like what they’re seeing, there’s always this caveat that that’s they’ve only seen 45 days of the corridor so who knows what the back after that looks like.

[21:09] The real bright spot and this is interesting because there’s this theme going on the economy where services are are kind of growing much faster than Goods and, at Amazon DE Prime Service Group re dramatically grew 17 percent over a year and acceleration from last quarter’s 14% so so Wall Street found that really interesting and I think, you know it’s hard to it’s hard to know why people are picking Prime I think some consumers are going through a reconciliation with their streaming platforms and they’re kind of just like that Microsoft example they’re saying well if I go to Prime I get Prime video and I can get access my Yellowstone through there and some other things and that’s probably good enough maybe I’ll turn off.

[21:55] I don’t know there’s this design of these things now so in any case Wall Street was really pleased with this because there’s been a lot of talk at Windows Amazon hit Prime saturation, well you don’t hit saturation if you have an acceleration of growth like that so so that was you know a couple the positives in the quarter there but interesting enough and you probably know the ads part I think it had yet another Blockbuster business because they’re they continue to benefit from that first party you know all this, effectively the biggest retail media Network out there and I know you think a lot about these retail media networks but that was a gift from our friends at Apple to Amazon so that continues to be the gift that keeps on giving.

[22:37] Yeah yeah it the rate of growth did slow ride so they were in the like 30s and forty percent a year that it was growing and I want to say it only grew, 20% in Q4 your over here which again faster than AWS and still quite fast but for 12 months that means they sold thirty two point seven billion dollars worth of ads and if you assume, that ads are about 75 percent gross margin that means that the ad business contributed 25 billion dollars in earned income, um and ews last year contributed 22 billion dollars in earned income so, you’re you know you basically end up with.
Retail media networks contributing more to the bottom line at Amazon even than a WS which they’re both great businesses.

[23:31] You know I think the 75% is aggressive I think I don’t understand why it’s like almost not a hundred percent.

[23:39] I agree I used to use a higher number and then I saw some like industry guys the.
Like felt like there’s more overhead in there and there are a lot of salespeople you know which don’t don’t you know scale model linearly so so in, I kind of fell in line with some other analysts and dropped it down to that 75%.

[23:59] Yep.

[24:03] However you size it like I’m pretty confident it’s the most profitable business at Amazon and still like although it’s slowing down slightly it’s still still certainly growing, so that was interesting one that I haven’t got my head around yet and I feel like you used to do this math yourself but I’m working on a couple of different models for what.
Total us gmv did for Amazon and it’s not completely trivial because we know what the first party sales were we know what the, the the units were but you know you have to make some assumptions to kind of convert those units into a GM V and the and the mix of third party is different than the mix of first party.
But there but the reason that’s interesting is liked by most models you know it it was not a huge, growth year for gmv for Amazon and so again I don’t have a official estimate yet but like let’s assume.
They grew by 10% the.

[25:16] Fees that they charge third-party sellers Drew 14%.
Um so that the fees they’re being able to get out of the third party Marketplace is almost certainly growing faster.
Then the third party Marketplace and that’s because they’re able to raise a bunch of rates and our friends at Marketplace pulse did some math and they feel that on average the average 3rd party seller on Amazon when you add up all the selling cost between F ba and and advertising that the average take rate is now 50%.

[25:55] So Well I always remind I mean Amazon is a good place to sell like I’m not saying anyone that they shouldn’t use Amazon as part of their mix but I get asked all the time if I should just skip it, any other channel in just exclusively rely on Amazon and to me that’s a huge mistake because Amazons.
Rightly so going to optimize the profit for them and they’re very good at that and so they’re you know they’re taking a lot of margin out of third party selling because there’s a long line of people waiting behind every 3rd party seller that want to sell that same stuff.

[26:27] Yeah you going to have a blended approach and kind of Leverage it to sell the right thing at the right time in the right Channel someone should start a company that does that but we’ll talk about that another podcast.

[26:42] He’s busy car washing right now cool that’s the Amazon report anything any other earnings you found in arson.

[26:51] Yeah so Amazon reported pretty early this year I don’t know if that was strategic or just have a calendar fell but now we are starting to get all of the more traditional retailers and so I want to say we recording this on Thursday Tuesday Walmart and Home Depot reported tomorrow morning targets going to report so we’re starting to get all the the cue for sales data from the big retailers, a bunch of specialty Brands like a lot of the apparel Vans VF and folks have already reported and there is emerging and pretty.
Clear picture so maybe before we do the Crip picture I’ll just recap Walmart Q4 and I tried to channel my inner Scott because.

[27:36] Scot and I are the perfect yin and yang Scott is a you know former public company CEO and Savvy investor and he cares a lot about how these companies perform against expectations and what happens to their, their evaluations and I just care how much stuff they sold all right and so I feel it’s funny we both look at like all these earnings through different lenses so through your lens I feel like Walmart was mix I think you’d call it a beat and lower because earnings exceeded analysts expectations they came in at 1.71, per share and the in the analyst Target was 1.51 so that’s a pretty good beat Revenue came in and 164 billion for the quarter and the expectation was unearned 59 billion so another good, um but on the bad news I think analysts were hoping for.
Guidance of like five or six percent growth for the year and Walmart gave a two to two and a half percent guidance for the year.

[28:42] And so basically the story was, we had a solid Q4 and a solid 20 22 but we’re expecting things to get more difficult and more lean, in 2023 and they you know overtly said we saw spending slow down in the fourth quarter we saw a shift in the mix that they were consumers were trading down, to lower-cost products they were shifting from wants to needs and in Walmart’s mix those needs are a lot less profitable so they’re selling more Grocery and less, electronics and toys and home goods and stuff like that, and so the both of the guidance for revenue and especially the guidance for profit at Walmart were where lower and that, to me exactly Echoes a lot of the other earnings we heard like the Peril guys their guidance was awful and they’re starting their stocks just Tanked, Home Depot actually had like a really soft Q4 because they said spending slow down at the beginning of Q4 so they cut they missed their.
Their earnings expectations for Q4 and they had a little guidance but almost every retailer I’ve seen report earnings has reported lower than anticipated or has made a lower than hope for guidance, for 2023 so retailers are not super bullish on 2023.

[30:05] From a pure sales standpoint it’s kind of interesting I try to just to compare apples to apples Walmart’s an international company, you know with two big retail Concepts in the US and a bunch of other countries I try to pull out like just Walmart sales in the US, and their same-store sales the three years of the pandemic 20 20 21 and 22 they grew 8.6% 6.4% and 6.6%.
Average retail growth is 4.1 percent so they, significantly exceeded the industry average for all three of those years but the industry also did much better for the all three of those years so the industry grew at 7.8 14.4 and 6.9 so, basically Walmart slightly out performed the retail industry and two of the three years and underperformed retailing 2021, but solid growth across all three years and then Walmart is one of the nice retailers that breakout their e-commerce growth separately which.
I suspect it’s because it’s usually pretty robust a lot of other companies have stopped reporting e-commerce and you can.

[31:11] Speculate why that is this is they don’t report it but Walmart eCommerce growth has been very robust during the pandemic so they grew 69 percent in 2020 11 percent in, 21 and 12 percent in 22 and that is you know their 69% was against an industry growth of 42 percent.
And then you know this year they drew 12 percent against a e-commerce industry growth of 7.4 percent so.

[31:38] Like pretty good e-commerce growth all the way across on a three-year stack that means Walmart Drew or Walmart Drew 100% over those three years their e-commerce business in the US, the the e-commerce industry grew 81% so Walmart Psych the second largest e-commerce site in the United States and they outperformed, the industry on growth Amazon probably did not outperform the industry like like the the best forecast is Amazon probably Drew 56% over those three years, so Walmart not surprising they’re much more than Amazon and e-commerce but they grew much faster than Amazon, eBay ends up being the big loser over the three years they only Group 17 percent so kind of the underperformer and then just for sake of comparison Etsy grew 150 percent over the pandemic Shopify drew two hundred and twenty nine percent.
And then this apparel company I talk a lot about, is crazy Chien Drew nine hundred percent during the pandemic and some of their financial data week to last month, and their internal forecast for their us Revenue in 2025 exceeds eBay’s forecast for all revenue so that’s enough, and apparel retailer that’s going to sell more stuff online than all of eBay.

[32:54] Wow that’s crazy.

[32:56] Yeah the world changes any of that.

[32:58] Do they have infrastructure in the US like to do shipping and stuffers at all come straight from China.

[33:04] The for Sheehan.
I believe that they may have announced that they acquired some some sorting centers or some fulfillment center space in the US but I don’t think it’s come online yet so I think at the moment it’s all being shipped abroad but I’m not certain on that.

[33:21] Wow that’s crazy it’s a lot of international shipments.

[33:26] Yeah yeah but it sounds like it’s moving and then the speculation is you know she in in a lot of markets is a Marketplace and they are not a Marketplace in the US yet but a lot of people are speculating, that they’re going to launch a Marketplace this year and especially if you if you think there are bigger overall than eBay.
You know they’re the biggest apparels reseller in the u.s. online or offline like they’re on a on a tear it’s pretty interesting and what covered on a different show but like their model about what I think is most interesting about Sheehan is there no Merchants they’re literally getting their product ideas from tick-tock.

[34:05] Yeah yeah and having a Marketplace will be good will be another piece of data to feed into this kind of viral Crazy Fast fashion engine that they’ve created.

[34:15] 100% And it’s interesting you know.

[34:18] Third party seller would be scary.

[34:18] Accused of doing that in a in a non-competitive way but and they may or may not be doing that but if they are doing it they’re doing it with people like you know Sheehan is doing it with Skynet.

[34:30] Yeah cool any other news on the e-commerce front.

[34:37] Well so those are the big earnings I again there’s you know we’re going to see a bunch of the other big box retailers report over the next couple weeks so we’ll put together a more complete picture of of who the winners and losers were like it’s mapping if you look at the US Department of Commerce data and you see the categories that won and lost.
By shockingly and I would have gone these predictions wrong at the beginning of the pandemic but you know what category like was about the best specialty category to be in over the last three years it was Sporting Goods.

[35:05] Sporting Goods.

[35:07] Yeah which I would not have thought right and Dix’s you know had a like Dick’s Sporting Goods has had a particularly good run and in fact they bought Moose Jaw from from Walmart today.
The and the worst category to be in in the last three years by far is consumer electronics and so, spoiler alert Best Buy hasn’t reported this quarter yet but all indications are that it’s not going to be a Rosie.
Quarter for Best Buy.

[35:38] You know saw Home Depot had theater announcer pre-warned that things were getting kind of soft and so they’ve had a tremendous run since 2020 said some point people had to run out of money for upgrading their houses looks like we may be at a Tipping Point there too.

[35:53] Yeah and I would categorize them as kind of one of these middle ones they had a phenomenal first half of the pandemic and now it appears to be slowing down and I you know some of the furniture guys are in that same boat and so that the you know it’ll be interesting to see where they net out over the three years like I think they’re going to net out to have done better than average but not but not amazingly right and in the middle of the pandemic we were all saying like oh man these are.
You know Home Depot might be the biggest winner of the pandemic because everybody redid their backyard.
So the that’s all the earnings stuff I had the other like kind of pool of interesting news that I’m going to ask a lot about right now all centers around social commerce and what’s interesting is, there’s like news and diametrically different directions so Tik-Tok which, it’s not the biggest social network but it’s certainly the fastest growing social network and it’s it’s you know it has prodigious engagement at this point Tick-Tock launched they’ve had some native shopping before but they launched a native shops feature and it I would characterize it as the most robust.

[37:09] Feature set for shopping on a social platform that I’ve seen yet so stores can have their own shop they can aggregate their own catalog and it’s everything is not just a buy now which is normally how social networks do it they have a persistent cart and you you can add multiple items to a cart um you can change all the attributes of those items which is often a problem with other native checkouts you can get a delivery forecast you get tax calculate promo code you get all these things that like historically social networks Skip and then a feature I would have never expected, it’s a multi-vendor universal cart so you can actually buy from multiple Tik-Tok shops, in a single transaction and they take PayPal and Apple pay so I would characterize that as a surprisingly robust, native feature to get people buying on tick-tock, and so if you just saw that news you’d say oh that’s the future is you know people are discovering stuff on Tik-Tok instead of in the Shelf in the aisle at a store and now they’re just going to buy it right on Tick-Tock but in the the same month, our friends at meta turned off their shopping tab on both Facebook and Instagram and said, hey we tried it and we don’t we don’t think that’s how people want to shop and then I guess one other.

[38:37] Selfish piece of.
Of content in this whole genre a lot of the hype in the u.s. when I get clients asking me about like the Buzzy thing in social commerce it’s a live streaming Commerce then there now 100 live streaming vendors I get pitches every single day from someone that like has reinvented shopping and it’s all this wise Freeman Commerce which is huge in China but has not.

[39:04] Taking off in the US and so I got tired of repeating my same concerns so I wrote a Forbes article that got pretty popular you know talking about how I felt like live streaming Commerce in particular.
Was wildly overhyped and it got a lot of them reactions some people violently disagree most of those were live streaming vendors and a lot of, lives a lot of veterans in the space including like brands that sell abroad we’re live streaming is big and in the u.s. like chimed in and said yeah what Jason saying is exactly what we’re seeing.
And what it boils down to is there’s there some genres we’re live-streaming makes a lot of sense and I think some of those are genres you shop in a lot like Collectibles and unique items and things like that but like if there’s not huge product scarcity, the other main reason people shop in livestreams is for deep discounts and so like you can almost replace the word live stream with flash sale.
Um for kind of a similar kind of reach like all of this live stream in Commerce in China is and it’s 40% off for the next 20 minutes.
And so you know that those that kind of extreme deal-making like hasn’t, you know how to legs in the US and so it’s not surprising that live-streaming hasn’t taken off to the same level but I’d be curious our view.

[40:31] Like so when I could talk to clients it’s an open question right now like what’s the future of social commerce is it important is it not important and that is important like is it going to happen on, the social platforms like Tik-Tok their native check out like does Target need to have their own Tick-Tock shop or.
Is social a great tool for Discovery and there’s lots of ways to connect that that social discovery with traditional e-commerce experiences and you know I.
I don’t think there’s a clear answer yet in the US but it’s a super interesting question.

[41:14] Then that’s where it would be driven from like if the Kardashians you know had had some kind of a platform of some kind.
They have a big enough audience they could direct that audience to the platform and do things it just doesn’t really exist in an integrated fashion right you’re in you can’t really do it on Instagram because you don’t have the check out and it just hasn’t come together.
Amazon can’t do it it’s like kind of complicated to bring the influence over there and they may not have liked the right thing the influencer wants to sell.

[41:46] Yeah and I do think it is a different story if you’re if you’re a mega influencer that has a huge audience and you have a relatively limited catalog right so Kylie Jenner is a perfect example like, I think she could do a lot of business on Instagram and Tik-Tok but like that’s a wildly different problem than a wholesaler that has.
5 million 10 million 80 million skus in their catalog and what they should be doing on on social networks.

[42:17] I think it can work for it works for Collectibles because you have this kind of like high Affinity audience it works for beauty and apparel and I think that’s kind of it.

[42:26] Yeah what I guess and you know.
Fair enough for retailers to have broad Ambitions but if you look at China a lot of this like social commerce and e-commerce like a bunch of it happens on social networks like Dao Yuan which is Tick-Tock there and WeChat which.
I guess Loosely similar to Twitter.
But a lot of it does happen on platforms owned by the retailer right so towel live which is you know essentially a site owned by by you know the the Amazon of China.
Is a big social platform where a lot of people go just to watch short-form videos and buy a lot of stuff.
Um and so you know of course if you’re a retailer that’s what you’d want like you don’t want to be disintermediated by the social platform and have to pay a fee and not know who the customer is you you want the customer to come to you.
But it.

[43:23] It seems like recreating that model in the US would be super hard and the I would argue the retailer that stride the hardest to do it is Amazon and Amazon has all the features like they they have a.
They had Amazon live for a while now they have Amazon Inspire and they have a lot of influencers creating unique short form video content with shoppable ads in it.
On the Amazon platform but I would say the early indications are that.
It’s not organically working like you know it’s not drying a bunch of people that just want to Doom stroll on Amazon instead of tick-tock and creators aren’t going there because they’re making a bunch of money, in the normal economic model what what it seems like is happening is Amazon is paying like extra bounties to get creators to try the platform.
And they the Creator goes to that platform as long as that Bounty exist but as soon as that Bounty expires and they fall into the normal economic model the Creator’s returning to tick tock because they can make more money on Tick Tock than they can on on inspire.

[44:25] Yeah the whatnot platform is pretty fascinating because it has like yes it’s got a persistent store on one side of the screen and then you’re watching the talent and then you know they can do they can sell things like a variety of different ways that can run an auction they can they can do a limited almost like a QVC I’ve got 10 of these and when they’re gone they’re gone and on the screen it does a countdown they can do a.
Did you like a markdown I think you would probably call it a filene’s basement kind of thing you know that wear it the longer it’s there the more discount there is so it’s kind of counterintuitive lie you’re kind of like.
You’re kind of like waiting waiting and then you see it.
Jumping yet game a discount chicken and then you know it’s really fascinating how they you know they give the the.
Seller who is largely you know an influencer of so many tools to sell and they’re all integrated so once you have your your payment information in there you know you get really sucked into the game and I think that’s really what it’s going to take like that’s what you’re missing on you know any of these Tick-Tock may have it I haven’t seen their platform but you know certainly Instagram or Facebook reels or YouTube they don’t have that level of integration even the Amazon stuff I’ve seen has been kind of.
Not super Innovative from is like a Lincoln you know feels affiliate e it’s not like an integrated into the video thing.

[45:55] Yeah no I hundred percent agree I think some of those knit your experiences are a lot more interesting at the moment than any of the super mainstream ones but what not is certainly interesting to look at I do think like Network without any vowels in it is like interesting, flavor of live shopping which seems like it works in some genres so yeah I think some of those the sites are interesting one thing I would point out about all of those is, their definition of influencer is maybe a little different than like the traditional like when we say influencer I think a lot of people think of Mega influencers right in the think of these.
These superstars with millions of followers but.
Like on most of those these platforms that the influencer is someone with a much smaller following so it’s much more of a long tail influencer or a micro influencer.

[46:46] Cool.

[46:49] Yeah so I feel like this is going to be an interesting space to follow throughout all of 2023 but I do think.
It’s going to be an interesting year in retail and 2023 because I think a lot of retailers are worried at least at the first half is not going to be robust and so you’re seeing a lot of shift in investment on retailers from.
Kind of like you know mega growth and customer acquisition activities to like.
Operational efficiencies and improve our our profit and our short-term returns type activities.

[47:23] Yeah in the I guess used to continue to get pictures from the live stream guys are they on to you now.

[47:30] Yeah no so again you know you can totally pan them on in an article and you know the internet has a short memory so I still get.
Get lots of pictures and you know.
One of them will be amazing right so it’s hard like you want to listen to all these pictures because someone will there’s some entrepreneur out there that will have some amazing new idea and odds are like all get jaded and cynical and ignore him and miss it.
But the signal noise ratio is pretty tough because you you will have to list you know listen to a lot of like you know poorly articulated pitches to get to that one good one.
Sure I’m sure you get that from an investment perspective all the time.

[48:10] I do yeah it’s it’s hard to pick the if I’ve learned anything it’s very humbling trying to pick winners and losers so I have given up on them.
Everyone’s a winner everyone gets a trophy Jason.

[48:25] I love it participation that’s the modern.

[48:26] Yeah yeah.

[48:38] And I feel like it’s both overhyped and legitimate at the same time is all this generative Ai and its use cases, in Commerce right you know so obviously the most Buzzy one of the moment is chat gbt but GPT Beth.
There’s actually a lot of super interesting tools that are that retailers are starting to legitimately used to get more operationally efficient and I think that might be an interesting topic for a deep dive of Europe for.

[49:10] Yeah yeah guilty pleasure confession I am addicted to mid-journey I love playing with the generative visual a is that there are a lot of fun.

[49:20] Yeah I think they are super interesting and I will tease the Deep dive.
So the interesting thing about the she and apparel model is they identify a trend and they have a fast turn Factory that can make literally like a first run of that apparel item in a day.
So a day after they see a trend on Tick Tock they’ve got 100 up for sale and if those hundreds L then they make 10,000 right and so it’s this like super fast iteration.
You know you’re not trying to show for she and because there’s a lot of challenges with the model to but that I have heard that she and launches about 10,000 skus a day.
So a day to put that in perspective fast fashion like H&M launched 20,000 skews a year and slow fashion like the Gap launch for thousands of years a year so 10,000 a day is.
Is game changing but it’s super hard to do and so.
You know what super interesting about the generative AI for images is.
If you’re really just doing a one-day test to see if there’s demand for some new apparel like.
You can generate amazing images of apparel Styles without making the apparel you can put it up on an e-commerce site you can collect a pre-order and then you can make it tomorrow if it gets the enough demand.

[50:43] And so you’re starting to see people like skip the photography all together and use generative AI to do concept testing and for sure if you’re on a parasite in your shopping for.
An outfit that’s coming from multiple vendors you can use the generative image AI image generation.
Render all three of those apparel items from different providers on the same mannequin or increasingly, on a virtual Avatar of the Shopper right so it Walmart you can see all that apparel like on your own body which no apparel looks better on my body than it does on the mannequin so in my case it doesn’t work but.
I can see the appeal for others.

[51:25] Yeah it’s a good inventory turns to not make something and then sell it.

[51:30] Yes exactly it’s like moving One Step close yeah so, and in the apparel where they make a lot of that clothes and can never sell it and then it goes into the landfill like you know it helps with the Ecology of the industry so so super interesting stuff the progress is happening super fast so it’s exciting, but Scott that’s probably a good place to leave it for today because once again we’ve used up our allotted time as always if this show is helpful we sure would love it if you jump on iTunes and give us that five star review and you know get ready to say hi to me at a couple of these upcoming shows.

[52:18] Happy Commercing.