Episode 179
October 16, 2020

A Tale of Two Recoveries

Three years ago, Sucharita Mulpuru called it in episode 41. Marketplaces are on the rise. 10% of Americans are subscribed Walmart+. We talk marketplaces, the K shaped recovery, and more.

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In this episode, we talk about marketplaces, subscription services, the K-Shaped economy recovery, and more.

“The Future of Every Brand is a Marketplace”

  • In Future Commerce #041, Sucharita Mulpuru said that marketplaces are where businesses are going to thrive.
  • “Consumers want more in their online shopping experience and they want to be able to transact more often with the brands that they know and love in products that aren’t just the core.” - Phillip Jackson
  • Moving towards a marketplace strategy has a lot of moving factors—operations, partnerships, capabilities. “Implementing and managing a marketplace is not just about technology. It’s about strategy.” - Phillip Jackson
  • Marketplace is becoming more normalized for eCommerce brands, in the same way that AR and VR have taken time to normalize and implement.

K-Shaped Recovery

  • Marketplace shipping times haven’t been trusted recently and there’s a movement back into stores due to poor customer service in the rise in eCommerce during the spring. 
  • There’s an expectation of a 25-35% increase in eCommerce sales for the holidays, compared to 1-1.5% increase in retail. This is going to cause problems in supply/delivery chains for eCommerce and in social distancing and capacity limitations in retail. 
  • Customer service will be the most important thing for eCommerce during the holidays. With shipping delays and product supply challenges, merchants will need to proactively communicate with their shoppers.

Walmart+

  • 11% of Americans have subscribed to Walmart+, Walmart’s subscription service for free deliveries and other benefits. 
  • Walmart+ is a direct competitor to Amazon Prime and Walmart has spent a lot of time strategically trying to “catch up to” Amazon. Different services have different appeals (for example: Walmart with fuel and groceries, Amazon with Prime Video) and Walmart is trying to see what sticks.

Twilio/Segment Acquisition 

  • Twilio acquired Segment, a standalone CRM tool for eCommerce. Bundling and integrating the subscriber information from Twilio with a CRM like Segment is notable and could be powerful. 
  • Tanay Jaipuria, via Twitter: “Surprised Segment didn’t go public - could’ve been worth $5-7B in this market.” 
  • “[Segment is] doing 150-200 million in revenue… how much more powerful are [Twilio and Segment] together to have that much actual information on huge segments of the population?” - Phillip Jackson


Dollar General Launches Pop Shelf

  • Dollar General is launching a five dollar chain that’s in competition with Five Below. 
  • Target market is millennials and individuals with up to $130,000 income. This has potential to tap into a “Woke” section - like organics and fair trade.
  • Due to inflation, the buying power of a single dollar has gone down 20% over the past 10 years. Due to this and competition with eCommerce and the digital transition of retail businesses, Pop Shelf is stepping into the next tier and growing there with the current market.

Links


If you have any comments or questions about this episode, you can reach out to us at hello@futurecommerce.fm or any of our social channels. We love hearing from our listeners!

Brian: [00:00:00] Welcome to Future Commerce the podcast about cutting edge... Well, cutting edge commerce.

Phillip: [00:01:36] We've done it like three ways the past three episodes. I'm going to call it. The old intro is dead. You did one recently that I really liked, and I can't remember what it was.

Brian: [00:01:44] I think I just said cutting edge commerce.

Phillip: [00:01:46] Cutting edge? I think that was the one that I said I had a problem with. I think the last episode was jack.

Brian: [00:01:52] Generation?

Phillip: [00:01:53] I think you just said next generation commerce?

Brian: [00:01:55] I don't know what I said. I should go back and listen.

Phillip: [00:01:57] Star Trek The Next Generation was definitively the best Star Trek series that ever aired on television.

Brian: [00:02:03] That's true. That's a really good point.

Phillip: [00:02:04] And I liked Deep Space Nine. I did.

Brian: [00:02:06] I don't think I made it to Deep Space Nine.

Phillip: [00:02:09] All right. Well, we're huge nerds. Welcome to the show. If it's your first time listening, we cover a lot of ground, so buckle up. Today, we are going to talk about a lot of things. K-Shaped Recovery. Apparently also... So Deloitte's talking about the K-Shaped Recovery. We're going to talk about that. Also apparently, Brian.

Brian: [00:02:27] Apparently... What has happened?

Phillip: [00:02:29] Eleven percent of Americans have subscribed to Walmart+.

Brian: [00:02:33] Mind is exploding. Does not compute.

Phillip: [00:02:37] No. I can't even believe it. At the same time, Dollar General is launching a competitor to Five Below. Twilio acquired Segment. Lots of the crazy stuff to be talking about, but I think we're going to get into all of it in just a minute.

Brian: [00:02:51] Let's talk about marketplaces.

Phillip: [00:02:52] Oh, I said I was going to open with this as like a cold open. I didn't.

Brian: [00:02:56] Yeah. {laughter}

Phillip: [00:02:56] Bold prediction. This comes up over and over and over again. I don't think I've ever said it on the show. I wanted to get your reaction to it, Brian. I believe that it was Sucharita Kodali who said on this show not three years ago that the future of eCommerce, the future of every brand is a marketplace. Right?

Brian: [00:03:16] Yes.

Phillip: [00:03:16] And I remember when she said it, I scoffed and I was like {scoff}

Brian: [00:03:21] I think that's literally the sounds you made. It's like, {scoff}

Phillip: [00:03:21] "Oh, oh, {scoff} come again, please."

Brian: [00:03:32] {laughter}

Phillip: [00:03:32] The future of every brand is a marketplace. I just thought that that was preposterous at the time. And it seemed I mean, yeah...

Brian: [00:03:42] I mean, it kind of was at the time because we're talking about three years ago and you know, here we are three years later. And yes, the marketplaces have definitely gaining some traction, but not every brand is a marketplace yet. But I think you're about to say something equally as shocking, maybe not equally, because she said it three years ago. But go ahead. {laughter}

Phillip: [00:04:04] I actually, because we have the most incredible transcription capability on FutureCommerce.fm now, I actually found the exact place where she said it in...

Brian: [00:04:19] How did it translate the {scoff} sounds?

Phillip: [00:04:21] Yeah, it didn't actually. It's just {inaudible} . The episode is called Technology for Technology's Sake. At the thirty seven minute mark, she says "It's like the easiest thing to do is to put on..." So she was talking about all the things that you could be learning from the way that Amazon conducts its business and that retailers have all this capability at their fingertips, but they don't. And she says, "Why are you trying to integrate with Apple Pay yet?" At that point, she says, "It's not necessary. It's a pain to integrate. So why are you obsessed with Apple Pay? For instance, why not get a marketplace on your website? It's the easiest thing to do, to put on marketplace on it. And that's the exact thing that's driving Amazon's success right now." I agree with her. And so I'm making a timeline.

Brian: [00:05:06] Whoa, whoa, whoa. Hold on. There's one thing about what she said that I do not agree with, which is...

Phillip: [00:05:11] That it's easy?

Brian: [00:05:12] It's that it's easy. {laughter}

Phillip: [00:05:14] She's an analyst. {laughter}

Brian: [00:05:16] That's true. That's true.

Phillip: [00:05:18] She looks around and is like, "All around me I just see marketplaces..."

Brian: [00:05:22] "Marketplaces everywhere."

Phillip: [00:05:24] She says, "And all that is, is letting other sellers who do sell the products that people are searching for put them on your website and letting other people buy from it on your website and then send the order to somebody else, so that they can actually transact it." That is the definition of a marketplace. I think this is exactly where the market is heading. I think most brands, especially those in very large brand portfolios, let's say like the L'Oreals of the world, where they once upon a time had a mandate to keep the brands very separate for very good reasons. One would be for like the illusion of quality. And so it doesn't look like everything comes from the same factory and is put into different bottles at different prices. I think that when you're looking at category differentiation and category expansion that we're seeing from brands like Diptyque, brands like Aesop, especially in the skincare vertical where one is going into Home Goods, and the other is going into fragrance and home fragrance and environmental fragrance . I think that those category expansions signal not just product innovation, but the fact that consumers want more in their online shopping experience, and they want to be able to to transact more often with the brands that they know and love in products that aren't just the core. And so, yeah, I think by 2025, a lot of the brands that we purchase all day, like the thing that everybody will see as the modern expression of direct to consumer eCommerce will have a marketplace like component . Which in this case, Brian, makes J.Crew the standard bearer or the early entry into that. What is it? What do I use to call it? Oh, the sacrificial lamb in the space. Like those early adopters that take...

Brian: [00:07:07] Yes. Yes.

Phillip: [00:07:08] That innovate on our behalf.

Brian: [00:07:11] Yes. There's a few out there that kind of tried to step out into this a little early.

Phillip: [00:07:16] A lot of them. Yeah.

Brian: [00:07:16] But I think you're right. The one thing I will say about this is, we look at a lot of brands that feel bigger than they actually are. You know what I mean? There're a lot of brands out there that are operating...

Phillip: [00:07:28] Punching above their weight. Yeah.

Brian: [00:07:29] They're punching way above their weight. Their brand value is a lot higher than like the sort of enterprise nature behind it.

Phillip: [00:07:37] It's kind of like Walmart+. Like who? No, I'm just kidding.

Brian: [00:07:42] We'll get there.

Phillip: [00:07:43] That was not an implicit segue. I was just...

Brian: [00:07:47] Good. OK, well...

Phillip: [00:07:47] It's bigger than it seems.

Brian: [00:07:50] Yes. Now, here's my take on this. Actually implementing and managing a marketplace is not just about technology. It's about strategy.

Phillip: [00:08:01] Operations.

Brian: [00:08:03] It's about operations.

Phillip: [00:08:04] Partnerships.

Brian: [00:08:04] It's about understanding how to actually... Yeah. Exactly . What that sort of mix of products you let into your marketplace looks like, or don't let in. It is a huge undertaking. So I think the flip side of this is, yes, and there's going to be a lot of investment in this area, and there's going to need to be a lot of investment in this area. And brands that are going to step into this halfway are going to find themselves spending a lot of money and not seeing a lot of results, the kind of results that they want to see from this level of investment. So I don't think this is the sort of like, "Oh, let's casually dip or two in the water of marketplaces." This is a "We need to make a strategic investment for the future." What does that mean? How are we going to go about doing this? What technology are we going to use? Who is going to staff this? Do we have the internal capability to do this? Do we have to look to a partner to do this? There's a lot of stuff that's going to have to go into this. And so I think 2025 is a pretty good number to put on this because as brands are looking at this, it's going to take them a few years to really get their minds around it and actually implement it.

Phillip: [00:09:17] Yeah, one hundred percent agree. You know, it's really interesting around other technology we're talking about around July of 2017 when that conversation took place was AR and VR, which were things that we sort of opined as VR kind of probably being a little bit ahead of its time. AR maybe a thing that would be coming soon. Three years later, we haven't really seen much of that, but AR has actually gained more ground than I think people are giving it credit for.

Brian: [00:09:43] I agree. Yeah, I agree.

Phillip: [00:09:45] I think that that's, so like contemporary topics that probably had a longer, or get a lot of press in the early adopter space, but that long, slow, steady ramp up to being a sort of normalized and broad like mass adoption phase is the thing that I think we're actually in right now for both of those things. Marketplace is becoming more and more normalized for eCommerce brands and nouveau experiential technology also sort of tracking along with that, but not necessarily in the brands that would be like more marketplace centric. It's kind of an interesting parallel that those things are coming back around.

Brian: [00:10:24] I think that's a really good point. And actually, brands and retailers that I've talked to, AR is definitely on the road map.

Phillip: [00:10:31] Oh, for sure.

Brian: [00:10:31] A lot of them have said, this is active for 2021 or even from 2020. And we're seeing all kinds of technologies out there. Everything from Seek, to 3XR...

Phillip: [00:10:41] SeekXR.

Brian: [00:10:43] SeekXR. 3XR, which is Mike Festa who had left to get on the show at some point.

Phillip: [00:10:48] Yeah. We're like sort of friends with him. Right?

Brian: [00:10:53] Yeah. I actually had a chat with Mike just the other day.

Phillip: [00:10:55] Oh how funny.

Brian: [00:10:56] Yes, Marxian since . There's a whole host of these brands. Threekit...

Phillip: [00:11:01] No shortage.

Brian: [00:11:01] Yeah.

Phillip: [00:11:02] Threekit. Yeah. Who we've actually spoken to quite a bit as well. No shortage of businesses out there who are helping like actually take this content and putting it on and making it shoppable. And that content is not easily content to create. This is not like hiring a copywriter. You have to 3D model your products and spatially model your products. And I find that once you're clearing that hurdle... Certain categories lend themselves to this capability or this need more than others. Right? But it's an interesting time that that's happening. There's this idea... This would actually be a really nice segue into talking about holiday 2020. We have an interesting conversation that has been brewing in that COVID caused a digital consumer shift. COVID caused the rise of eCommerce back in the spring. And you could make the argument that the thing that would shut that down is poor customer experience. People not wanting to shop online because they've just had bad experiences from it. And some of those experiences could be long delayed shipping times and extended and prolonged shipping times. It was, I believe, Taylor Sicard on Twitter who was talking about being quoted from FedEx of 45 plus day guaranteed delivery times from FedEx. And that means that you're cut off for guaranteed delivery before holiday extends into the middle of November now, which means retailers have to be scrambling because the folks... So anyway, just to finish the thought the thing that I see big retailers who are probably more forward thinking than others, the thing that I see them doing is starting to promote in-store pickup more heavily.

Brian: [00:12:57] Yes. Yes.

Phillip: [00:12:58] So Nordstrom's, my local Nordstrom, has dedicated they've like taken away retail space. They've created a massive fulfillment in store capability where you can see it. You're walking in the store and you can see all the area where they're staging for pickup. Holiday 2020... The digital shift could actually push people back into stores because of bad delivery experiences, causing something that they're calling Shipageddon.

Brian: [00:13:21] Shipageddon. I think Shipageddon is real, actually. I was just talking with my wife about this. We do not trust Prime delivery results at all anymore..

Phillip: [00:13:30] Really?

Brian: [00:13:31] Yeah.

Phillip: [00:13:33] Hold on. Can you say that again?

Brian: [00:13:36] We do not trust Prime delivery results anymore.

Phillip: [00:13:39] Like the predicted delivery time.

Brian: [00:13:41] Yes.

Phillip: [00:13:41] Why? First of all, you're in Seattle.

Brian: [00:13:44] Yeah, I know. I know.

Phillip: [00:13:46] Why do you not trust Prime delivery?

Brian: [00:13:48] Because we're buying off the marketplace. There's a lot of seller fulfilled Prime happening.

Phillip: [00:13:52] You don't realize the... It's probably so harder today than it's ever been.

Brian: [00:13:57] Yeah. You're buying 1P, you're probably fine. Although I did buy something that was fulfilled by Amazon. It was not even... It was sold and fulfilled by Amazon...

Phillip: [00:14:06] And it still takes ages to...

Brian: [00:14:08] Oh no. It got lost. Straight up lost. They did a really good job with customer service. First line not so good. Second line was incredible. But yeah. No, I mean it also might have to do with my purchasing habits. I've been buying a lot of stuff for my home, which of course relates back to...

Phillip: [00:14:27] The New Formal.

Brian: [00:14:27] Your article, The New Formal. And so a lot of them are larger, bulkier purchases, and so typically there is some extended shipping times. They give you windows. Those windows are never correct. When I'm buying something small, like if I'm buying like my kids toothpaste on Amazon, it's usually pretty much on time. But if I'm going to buy something like a chair on Amazon, I'm finding that Prime is not working.

Phillip: [00:14:55] So, OK, so a growing distrust of even Amazon's capabilities of delivering. It's affecting everybody.

Brian: [00:15:01] Everybody.

Phillip: [00:15:02] And yeah, this idea of... So Deloitte had put out this report about the K-Shaped Recovery, but in specific it says, "The tale of two holiday seasons as a K-Shaped Recovery model emerges, consumer spending heavily bifurcated." The subtext here is that eCommerce holiday sales are going to go up 25-35%. But overall, retail and holiday is predicted only in about the 1.5% growth range, overall 1-1.5%. It's the 25-35% growth that no fulfillment, no supply chain or fulfillment last mile delivery, is prepared for in at least this year, in holiday 2020. Which begs me to wonder if that bad experience causes some of that digital channel shift that happened in the spring to shift back into stores or back to the major players who weathered the pandemic and further entrench them and keep and further build the moat that they were the technology innovators, they were the ones who who did well because... Well, because. Because they have the ability to.

Brian: [00:16:17] It's really going to be so interesting this year as we have most cities still have like capacity limits on stores. Right?

Phillip: [00:16:27] Many cities. Most I think is probably, I don't know if that's true or not. Many.

Brian: [00:16:32] I don't know if that's true. Good point. Many cities still have capacity limits on stores and there's also still a lot of social distancing that's in many cities. Social distancing is still a thing. So I think what's going to happen is it's going to be crazy that we actually might see lines for Black Friday of yesteryear. Because...

Phillip: [00:16:59] Oh, yeah, yeah, yeah, yeah.

Brian: [00:17:01] Because there's only so many shoppers you can put in the store, and everyone's going to have to be lined up six feet apart.

Phillip: [00:17:08] But I don't see the lines... This is a great point. Do you see the lines being for in-store shopping?

Brian: [00:17:16] Or for pickup. Does it matter, though? I mean, if you have to pick up in-store...

Phillip: [00:17:20] There are already lines. That's how it already is.

Brian: [00:17:23] Right.

Phillip: [00:17:23] Right.

Brian: [00:17:24] Exactly. Exactly. There's a line to get in my Trader Joe's.

Phillip: [00:17:28] Oh yeah. We were talking about this.

Brian: [00:17:30] Yeah.

Phillip: [00:17:31] I cannot believe this in the state of Florida where it's 94 degrees outside and 60% humidity, 70% humidity, and people are standing in line outside for 25 minutes to get into...wait, wait...Trader Joe's.

Brian: [00:17:50] Yes.

Phillip: [00:17:52] That's incredible.

Brian: [00:17:52] Yes.

Phillip: [00:17:55] What does that stem from? Why are people so patient to wait in line but impatient to wait for something to deliver? Is it just the unknown? Like is that the...

Brian: [00:18:04] Oh yeah.

Phillip: [00:18:04] The unknown. Like we have no idea if this will deliver when?

Brian: [00:18:08] Absolutely. If it misses your holiday...

Phillip: [00:18:10] Oh yeah. Yeah.

Brian: [00:18:11] Oh. Think about how devastating that would be. I've had stuff come after Christmas and it was sad. It was a sad day. {laughter}

Phillip: [00:18:21] There will be a song... Something we could do.

Brian: [00:18:27] Yes.

Phillip: [00:18:27] Something that Future Commerce uniquely is positioned to do is to commission the writing of the next great Christmas song of All I Want for Christmas is My Sellar-Fulfilled Prime."

Brian: [00:18:39] Oh my gosh. To arrive on time?

Phillip: [00:18:41] Yeah. Oh yeah. We've got it. I can hear it now. Anyway. Oh wow.

Brian: [00:18:48] I feel like you need to turn around your keyboards and start...

Phillip: [00:18:51] I could. I've got it right behind me. Just start jamming out the song. I think that... Yeah there's not really much more to say about this. Shipageddon is a thing. I think we are already experiencing...

Brian: [00:19:05] There's more I want to say about this.

Phillip: [00:19:07] Yeah, I'm sure there is. But not today. I'll give you the last word. What else would you like to say about Shipageddon?

Brian: [00:19:14] So I think that the key here is going to be making sure you do a good job with communication? That's going to be a huge part of it.

Phillip: [00:19:26] Yeah, CX.

Brian: [00:19:26] It's CX. Absolutely. Customer experience is going to be messaging from the get go, like even right now, start messaging . Whatever you're doing right now, whatever plans you have in your hopper right now, if you're going to sell stuff in holiday 2020, go start figuring out your messaging for how things are going to arrive right now. It's going to be the most important thing because the thing is you might sell out of your stuff. You might over sell your stuff this coming year. But if you leave your customers with a bad taste in their mouth this holiday season, it's going to have a lasting effect on your relationship with them, and that is in the long term more important than maxing out your sales for this year.

Phillip: [00:20:12] Yeah probably the most important thing you could do. So I found myself to be much more patient for things to be delivered. I've been waiting for a kettlebell that I ordered that said it was in stock ready to ship two and a half months ago. And the email implied that it was in stock ready to ship in the order confirmation email. And after two weeks, I sent them an email and said, "Hey, when is this coming?" And they said, "Oh, we'll let you know when it ships." And I'm like, "You dirty rat. You basically lied to me, but I'm allowing it to slip. I'm being very patient with you." Two and a half months ago. I've been just letting it happen. I would be elated because I did not expect, by the way, that this is a product that could be delivered in any timely fashion whatsoever because of our experience, knowing that fitness and...

Brian: [00:21:01] Yes. We work with fitness.

Phillip: [00:21:03] We work in that space a lot in the eCommerce vertical. And everybody is experiencing this right now since the spring. So I didn't really have high hopes to begin with. But if they had sent me an email every week saying that this is the status of your order. Right? If they had been more proactive.

Brian: [00:21:21] Yes.

Phillip: [00:21:21] Then I would be much happier with them overall and probably much more patient. Instead, I'm just angry. And I'm not doing anything to cancel the order because I'm like, who knows if it's ever like, I'll never get that kettlebell if I cancel.

Brian: [00:21:34] Oh if you cancel this, and then you go order a different one. Game over.

Phillip: [00:21:39] Back of the line, baby.

Brian: [00:21:40] Yeah. You're back of the line. {laughter}

Phillip: [00:23:04] You want to know who's at the front of the line, Brian? Walmart.

Brian: [00:24:00] Walmart is winning. Hashtag winning.

Phillip: [00:24:01] This makes no sense to me. And I can only believe that is a horrible, horrible mistake of brand confusion. What is the story about 11% of Americans?

Brian: [00:24:13] {laughter} Apparently 11% of US shoppers have signed up for Walmart+.

Phillip: [00:24:18] False. {laughter}

Brian: [00:24:18] Speechless. Speechless.

Phillip: [00:24:20] I don't believe you. {laughter} I don't believe you. This is a Piplsay Research survey that was conducted of, by the way, 20,179. This is not small.

Brian: [00:24:33] That's big.

Phillip: [00:24:33] It's not a small survey, but it's an online survey. So, you know, whatever. But they conducted an online survey of 20,179 Americans earlier this week that found that 11% of respondents, by the way, this nearly a two week old story at this point, had already subscribed to Walmart+, just two weeks after the service had launched. And an additional 27% of those surveyed said that they, "May go for it soon." I'm just realizing now that I'm reading this, this is, by the way, on The Motley Fool. This reads very much like when the sugar industry used to commissioned surveys about how good sugar was for you or how Big Tobacco commissioned surveys and studies that tobacco was good for you. Let's say Piplsay research might be a registered service mark of Walmart. {laughter}

Brian: [00:25:32] We are not making these statements right now. Just FYI, we do not know the answer to this.

Phillip: [00:25:36] I find it funny, though. So here's an interesting thing. Walmart+... Walmart+ is an Amazon Prime competitor, right? It's been compared with Prime. I don't know much more than that other than it's $98 a year, I believe.

Brian: [00:25:56] So like $12 less than Prime? Prime is like $110 now? It's just on auto pay, and I've given up on what...

Phillip: [00:26:04] These nationally representative surveys... We are guilty of this as well, like having a national representation and then saying something definitive about it. In some cases, when it's more like broad general topics, I tend to believe the numbers more. When it's something very specific, like Walmart+ and their scan and go self-checkout feature, I don't know that I believe it so much. It seems like incredible penetration into the consumer for 11% to have already...

Brian: [00:26:32] Oh, Prime is $119 now, so I'm behind a little bit.

Phillip: [00:26:35] Ok, yeah. So Walmart+. When was the last time you shopped at Walmart, Brian?

Brian: [00:26:43] Not too long ago. I'll use Wal-Mart here or there for different things. If there's a sale... I think. Oh, I know what it was. I bought the most recent generation of iPad there.

Phillip: [00:26:55] Oh, I did that as well in the last year, actually.

Brian: [00:26:58] I bought it from the same counter that you bought yours, but like a year later. With the new model.

Phillip: [00:27:03] Oh, that's so funny.

Brian: [00:27:04] Yeah.

Phillip: [00:27:05] Well, I mean, I trust your... Why did you buy it from Walmart? It was the deal.

Brian: [00:27:10] Oh, yeah, it's saved like 50 bucks officially. It was fifty dollars more everywhere else. So I thought that was a no brainer. I also have started to actually want to buy stuff from Walmart over Amazon because I like having a local Walmart that I can take stuff to if I want to return it or exchange it or good customer service or whatever it is, like it's right there. And oh my gosh, one thing that blew me away. Talk about in-store pickup. I meant to say this earlier. Walmart's in-store pickup has vastly improved. They had like this giant power... I'm sure people talked about this a lot. And they've got all these lockers, and they're all right there in the front of the store. It is incredible. It's a whole like concierge experience. It's amazing.

Phillip: [00:27:57] Yeah. Is that the Auburn store?

Brian: [00:28:01] No.

Phillip: [00:28:02] Oh, I was going to say Walmart Auburn is, according to Brian Lange, one of the scariest places that he's ever been. Is that true? OK.

Brian: [00:28:13] Yeah, I had an experience.

Phillip: [00:28:14] He had a bad experience there. Walmart Auburn is on the bottom part, the descender of the K-Shaped economy. That's what I hear. I hear it's not a great place. There's an interesting thing with Walmart, which is the way that they're reorienting themselves in sort of the eCommerce era. And I'm sure we've talked ad nauseam about this, or other eCommerce podcasts have probably talked a lot about it. But the partnerships, I think, are the differentiator recently when you look at the resale marketplace.

Brian: [00:28:56] Yeah. Thredup.

Phillip: [00:28:57] Thredup partnership.

Brian: [00:28:57] They have the Thredup relationship, the Shopify relationship.

Phillip: [00:29:00] Yeah.

Brian: [00:29:00] I mean, they went out with the acquisition model early, and acquired a whole bunch of talent. I mean, Walmart's strategy to catch up to Amazon, "catch up to Amazon," Quote/unquote...

Phillip: [00:29:11] Yeah.

Brian: [00:29:12] It's powerful. And they're throwing a lot of things against the wall to see if they stick.

Phillip: [00:29:16] Yup.

Brian: [00:29:16] I mean, I've heard stories of like different models for hiring strategies and getting ideas and implementing them, and there's still like I think a huge dissonance between sort of what Walmart was and what it's become. And that's still probably an issue. But they've done enough to apparently capture 11% of US shoppers in the first few weeks off of launch.

Phillip: [00:29:41] That's what we hear. That's the story on the street.

Brian: [00:29:43] Yes.

Phillip: [00:29:46] OK, well, I don't know that I believe it. I have to believe it. It's a story that was in the news. So 11%... Eleven percent is a lot.

Brian: [00:29:56] Mainstream media. This is mainstream media.

Phillip: [00:29:58] Is The Motley Fool mainstream? That's a good question.

Brian: [00:30:02] There was a whole bunch of publications with this.

Phillip: [00:30:06] Yeah, can you imagine that 11% of Americans spent a hundred dollars on a membership service to a place that they already shop at? I mean, there's fuel savings. There's other loyalty benefits to Walmart+.

Brian: [00:30:24] Yes. Grocery benefits... Actually, that's a really interesting point. Walmart grocery is a lot more widespread than Amazon grocery is.

Phillip: [00:30:34] True.

Brian: [00:30:34] So for those that are able to get service from that, like Walmart also serves a lot of markets that Amazon doesn't serve. And so for that one day delivery for over $35 in spending, that's a pretty big benefit for certain markets. I guess that's true for Amazon, no matter where you're at as well. But anyway, I think that there are also people that are more loyal to Walmart than they are to Amazon. Certain regions of the country.

Phillip: [00:31:07] Sure. I believe it. Yeah.

Brian: [00:31:09] Yeah, totally. But what I think Amazon does better still is they bundle so much of additional value, namely Prime video. Like Prime video is, you get it for an additional $22 or whatever it is. Twenty one dollars. And that's a lot of people pay that just for the...

Phillip: [00:31:34] I pay $17 a month for Netflix 4K. So I totally... Yeah. That seems like a no brainer on the Prime video side. Back in January, which you know, it was a long time ago, but back in January in our Vision report, the number three in our nationally representative customer survey, not conducted by Piplsay research, by the way. Our respondents said the number three feature besides free shipping and free returns of Amazon Prime membership was content. It was prime video. The number three stickiest reason as to why they found the service valuable was Prime video.

Brian: [00:32:18] Still true.

Phillip: [00:32:21] If you continue to bundle... You were talking about bundling. I've got a great segue into the Twilio/Segment acquisition. Bundling and unbundling. The bundling of features in Walmart being great at the partnerships angle, if they could find a video game bundle... So like Nintendo Switch annual membership or Xbox One game pass or whatever, you can tell I'm showing that I don't play video games anymore and that my kids do. But there are memberships on the video game side that I feel like Walmart would really well positioned itself to take advantage of.

Brian: [00:33:00] Yes. I love that idea. Walmart should be paying you just to listen to that idea, because that's actually really, really good.

Phillip: [00:33:05] I'm sure somebody... If they have not already thought of it, they're out of their minds. This makes perfect sense.

Brian: [00:33:10] It's a no brainer. That's a no brainer. And obviously, Amazon is moving that direction.

Phillip: [00:33:14] Yeah, they've already got it. They've got Twitch Premium as part of their thing. But maybe Walmart could get in with Epic Games who seems to be falling out of love with Apple at the moment. I had to install...

Brian: [00:33:27] Oh my gosh. That's good. That's really good.

Phillip: [00:33:30] Just talk about my first world dad problems. Also, I'm 40 now, so I guess I'm just old enough to be like, this drives me absolutely crazy.

Brian: [00:33:43] You're old.

Phillip: [00:33:44] My kids and I have been playing the game. What's the game? Oh, shoot.

Brian: [00:33:54] Animal Crossing?

Phillip: [00:33:55] No, no, no, no, no. What's the game where you're a bunch of cars driving around hitting a soccer ball?

Brian: [00:34:00] You lost me.

Phillip: [00:34:00] {laughter} I'm so old. Oh, my gosh. Rocket League. Holy cow.

Brian: [00:34:10] Rocket League. I don't even know this game.

Phillip: [00:34:11] I burned a couple of neurons and synapses there, just trying to remember the name. I told you I'm old. So we've been playing Rocket League. I've had Rocket League installed on my Xbox for, I don't know, five years. My kids recently discovered it, loved it, and an update rolls in recently. I don't know when. In the last month or two. And we go to play it the other day, we have to wait for a 2G download. It took forever to install. When we install it, it says you must have an Epic Games game pass to play this game now. So it requires me to sign into it as if it's like signing into HBO+ or Max or whatever. And like I have to go offline. I have to install... I have to create an Epic Games account. Then I gotta log back in...

Brian: [00:34:57] This is the kind of stuff that drives me crazy. This is the kind of friction that should not be there.

Phillip: [00:35:02] Yeah. If you can sign into that with your Walmart+ ID, game over. There it is.

Brian: [00:35:07] You know what's interesting? I think that there are a lot of gaming companies that are having this exact problem right now.

Phillip: [00:35:13] Absolutely. This is like the job of partnerships is to add value. Bundling and unbundling. So to bundle this kind of thing makes a ton of sense.

Brian: [00:35:22] Single sign-on.

Phillip: [00:35:24] Create incredible value add. And think about Walmart being able to sell Epic Games merchandise or Epic being able to sell Walmart products and marketplace products in game in Fortnite. That would be insane. OK, anyway, let's come back to the bundling. So Segment. Speaking of bundling, Segment was recently acquired for an undisclosed amount by none other than Twilio. And if you're not familiar with Twilio, it powers pretty much everything nowadays, something to the tune of ten million customers globally. Also, it's been like a complete hockey stick of a stock success story. And their acquisition of Segment, which is a popular sort of standalone CRM tool for the eCommerce era. Like this isn't Salesforce necessarily. It's a modern CRM platform. The fact that Twilio already has a ton of subscriber information because Twilio powers a ton of messaging. Twilio is like a messaging bus for SMS and voice communications. A lot of software that you use today runs on Twilio. If you get two factor authentication from almost any service, it's probably running through Twilio, or through OFFIE for SMS backbone support. And they do a ton of voice too. A lot of call center, a lot of like IVR. All of that stuff kind of runs on Twilio nowadays, especially if you're building that as a developer. They've got an incredible developer program. The fact that they just acquired a CRM is very notable.

Brian: [00:37:07] And like k ind of terrifying. Like the power that they have combined, like if they actually integrate those services properly. That's really compelling.

Phillip: [00:37:20] Yeah.

Brian: [00:37:20] Especially as we start to see more of, like, these sort of in smaller CRMs and even like ESPs and marketing automation tools get snapped up because we saw Amaris just got purchased.

Phillip: [00:37:32] By SAP.

Brian: [00:37:35] Yes. I think you're totally right. This is sort of the next frontier for certain types of technology used to add a lot of value and claim their ecosystem is the one that you want to live in. We saw that with Salesforce, kind of the reverse. So they were the dominant CRM, and they were not bought out a bunch of eCom tools. And it's obviously panned out really well for them.

Phillip: [00:38:03] There's a tweet that I don't know much about. So I actually... I'll just say right now, I don't know a ton about this space. I don't know much about the IPO market. I don't know much about SaaS stocks in general. What I will say that I do is, is I trust a few folks on Twitter who do some really interesting analysis on this. And Tanay Jaipuria is one of them. That's @tanayj on Twitter. Basically guessed that Segment might have been able to go public in this particular market. We're seeing a ton of IPOs in tech in this particular environment and said that Segment might have been able to go public with 5-7 billion with 75% gross margins and growing 50% year over year. Huge. Like they're doing about 150 to 200 million in revenue. But how much more powerful are they together to have that much like actual information on like huge segments of the population in the way that they interact with digital tools, the way they interact with voice and text. And to layer that on to an actual CRM tool where you might be able to gain insights on their audience that are already in your stack... Like here are highly engaged... It's the same thing that MailChimp was trying to do, but probably didn't execute it perfectly, which is take anonymized segmentation data and try to overlay it all on your existing audience. That is what a great digital like modern CRM should be able to do at a price. And if anyone's going to compete with Salesforce in the next 10 years, this is what the stack looks like, right? People don't love working in Salesforce. It is a massive market. It has an incredible amount of penetration into the market... And a lot of aged implemented tech that's looking to be...

Brian: [00:40:12] It's super old.

Phillip: [00:40:13] Yeah, some of it. Yeah. For sure.

Brian: [00:40:16] Some of it. Some of it. So, yeah, it's interesting.

Phillip: [00:40:22] What are the other stories that we were...?

Brian: [00:40:24] A couple of other things that... We don't really get to talk about the K-Shaped Recovery, which I think is super, super interesting. And we've talked about this kind of at length, you and I sort of personally, not on the show as much. But like how we were going to see a little bit of like the economy actually... If you look at who's doing well and who's not doing well, we're still going to see retail growth coming up here because certain groups did just fine. In fact, they did better than fine here through the pandemic. And other groups suffered significantly. And unfortunately, a lot of them are... Not all of them. But a lot of people that suffered from this were already struggling financially. And so the amount that they're going to spend, it's going to be less. How much less is a good question, because a lot of these people are buying basics to begin with. And so I think that in sort of that middle to upper range of income, most people are going to be spending as much or more because they haven't been spending as much to date. And this is an interesting point.

Phillip: [00:41:43] Yeah, go into that because I think I might have a counterpoint to that. I like this idea, though.

Brian: [00:41:48] They haven't been spending as much money on travel and lavish vacations and eating out and gas and a lot of other things that they would normally would have spent money and time on. Of course, I think spending has increased in other areas while we've seen this sort of influx of cash. You know, there's been the recovery package and...

Phillip: [00:42:17] CARES Act. Right.

Brian: [00:42:18] Yeah, the CARES Act and so on, and so there's been money to spend. How much have we spent already is a good question. Is there still money for holiday? I think the answer is yes, but we'll see.

Phillip: [00:42:33] Yeah, I wonder if that's the source of the growth is folks moving money out of non-discretionary, like basically experiential experiences and leisure and travel, et cetera, and moving it into other areas. That's probably part of it. I think that if you look at the performance of the stock market over the last six months. If you look at the economic boom in a lot of different sectors, right? Not just in the financial sector, but you look at what's happening in even in some... Just look at a few places. Look in entertainment, for instance. If you would have asked five or six years ago, could the world sustain 10 different streaming service platforms, 10 different competitive streaming services? Would people be willing to pay for all of them all at one time? You'd probably say, oh, you're crazy. It turns out three of the top streaming shows are all on Apple TV+ right now. How is that even possible? And yeah. So I think that there are some areas that are doing extremely well. The people who are working in those sectors have not seen an economic downturn of any kind. If anything, this is boom time, and those are the people who are making more money than ever before. Their portfolios are growing. Their home prices are appreciating there. They're watching their 401Ks grow. Their 529 plans are growing. Like everything is looking up for those folks. And everybody else, t hey're there on the descender of the K-Shaped Recovery.

Brian: [00:44:29] A lot of that had to do with like the service and sort of like experience economy.

Phillip: [00:44:35] Yeah, the folks who actually do those IRL, that actually make that, you know, probably work in hospitality, work in the service industry for sure. There's been an interesting conversation, too, about like big retail. I know we keep talking about malls are empty, and there's lines and just like demand. It's not really constrained only to... Like there's been a lot of conversation around restaurants... I feel very unequipped to have this conversation. So I'll just sort of find my way around the fringe. But the the restaurant industry, you might say, has been really hurt by the pandemic. But in reality, it's been the small businesses that have been hurt by the pandemic.

Brian: [00:45:18] Yes.

Phillip: [00:45:18] The large businesses were able to put things in place. So they have partnerships with the Shipt and the Instacarts and the UberEats and, in our area, Delivery Dudes or whatever.

Brian: [00:45:30] {laughter} Delivery Dudes.

Phillip: [00:45:30] So there's a lot of those that are seamless, I guess, and whatever else. So it used to be that those were the sort of lowest common denominator. Chain restaurants. It turns out they've done OK during this time because they have incredible brand recognition, and they were able to spin up things and put them into place to kind of hobble their way through the economic fallout of COVID-19. It's all the small players, the mom and pops, the ones that were barely making it, that are dying away, and we're seeing that in retail, too.

Brian: [00:46:14] Yeah, Ingrid and I had a chat about this a few episodes back.

Phillip: [00:46:18] Which had phenomenal feedback, by the way. Incredible engagement. You guys did a better job than I would have.

Brian: [00:46:24] No, that was really great. It was really, really good. The last thing I want to talk about before we...

Phillip: [00:46:30] Are you ending with the Dollar General story?

Brian: [00:46:32] Yes, I am.

Phillip: [00:46:32] Ugh.

Brian: [00:46:33] I really want to talk about this, not because it hasn't been talked about at length already, because it has. I know that. But also I just I think there's a place for this. I think there's a place for this. Now...

Phillip: [00:46:47] What is this?

Brian: [00:46:49] So Pop Shelf. Right? Pop Shelf is the very well covered new effort by Dollar General to introduce sort of a budget line...

Phillip: [00:47:05] It's a five dollar chain.

Brian: [00:47:08] Yeah. It's a five dollar chain instead of a dollar chain.

Phillip: [00:47:11] Right Five Below is probably another one that you could reference in the marketplace already.

Brian: [00:47:15] Right. And it's targeting probably up to like $130,000 in income. And it's going to have all kinds of like more interesting, I think, more like maybe even millennial type products. That's their target. I think there's a huge market for this because I actually think that this could relate back to The New DIY, because I think what's going to happen is there's going to end up being a lot of stuff that's sold in these stores that other people are going to use and do other things with. I also think that there's a huge opportunity within this store to have like a sort of a, and I'll get back to this because I'm going to reference something from earlier, an earlier show, but like a Woke section, if you will. Like an organics and like fair trade, fair labor section of the store that's going to attract a very large audience if they do this right. If they do this right, this is a billion dollar business. I think that there's a huge market for this, and I think somewhat, if they don't do it right, someone else is going to come along and do it right.

Phillip: [00:48:29] Oh, yeah, absolutely. Yeah, I don't know. I agree with you. This should absolutely exist. Yeah, I was just looking up now Five Below. It's publicly traded on the Nasdaq, and I was looking for their market cap, but I was a little slow on the uptake. So while I'm busking to find that, {laughter} I would like to say five dollars, you don't have to go back too far where the equivalent of one dollar was roughly the equivalent of today's five dollars. I feel like you have to go down back to about 1980 to see sort of a 500% inflation rate for the buying power of one dollar. So I would say that the existence of a five dollar dollar store is about five years late, for the buying power of a single dollar has gone down 20% over the last 10 years. And so for businesses to be able to sort of reset what a dollar store quality can be. Because the dollar store, I would assume, has been diminishing quality over time, while also trying to like eek every last cent of operating margin out of it, while also trying to compete with the new eCommerce and digital transformation of retail businesses... You have to jump up to the next tier and give yourself a lot of room to grow there. I think for about five dollar store makes so much sense.

Brian: [00:50:08] Yeah, I think that's a really good point, that I've got a very, like, unformed thought forming in my head right now. It's starting to come together. But there was an article I read recently by a director of eCommerce from Tapestry. Now I'm forgetting her name, which makes me feel really bad. I should probably look that up before I start getting into it. But it was about how HENRY is actually just the new middle class, which I found to be super, super interesting. And she started putting together segments. I don't think she had read about CARLY yet because there was a segment that she had on there that was like sub $120K in annual income. And she didn't have a name over that one, which is where I would kind of put CARLY. But it seems like maybe what's happening is we're seeing two different types of middle class emerge. And this is interesting because it's not fully formed yet, but there's a huge... We're seeing the middle class shrink, but maybe what we're actually seeing is the middle class split.

Phillip: [00:51:22] Webb Smith has talked about this as the Gilded Age 2.0.

Brian: [00:51:29] Oh interesting. Ok.

Phillip: [00:51:30] Yeah.

Brian: [00:51:31] Someone's already said this. Sorry, Webb.

Phillip: [00:51:33] I love that that was an original thought. Carry on.

Brian: [00:51:37] Yeah. So if this is true, then we're seeing sort of that premium mediocre brand address...

Phillip: [00:51:44] Right, the gap in the market. Right.

Brian: [00:51:46] And then things like Pop Shelf address this other segment of the middle class. So, interesting stuff.

Phillip: [00:51:52] You mentioned this Pop Shelf proving out the capability of the market being able to create a billion dollar brand out of this while it's actually far beyond that. Five Below in Q4 2019 had increased sales quarter to quarter 14% to $687 million.

Brian: [00:52:14] Wow.

Phillip: [00:52:15] And so for the fiscal year that ended February 1, 2020, they had 1.8 billion in sales, which was up 18% from their fiscal '19 to fiscal '20. And so yes, absolutely. The market probably has proven out. There's a company that is doing two to some billion in topline revenue that's already out there. And I think we'll see a ton more of the five dollars happening.

Brian: [00:52:45] Yes.

Phillip: [00:52:45] We'll see a ton of that.

Brian: [00:52:49] Addressing the CARLY market, which I think that's a big deal. Anyway.

Phillip: [00:52:55] Yeah, I agree with that.

Brian: [00:52:56] I think a good place to leave it. What do you think?

Phillip: [00:52:57] That feels good.

Brian: [00:52:58] Yeah.

Phillip: [00:52:59] That felt good. I like what we did there. This is the part where the music starts to swell up at the end.

Brian: [00:53:05] Come on, Chris, kick it in.

Phillip: [00:53:07] Thank you for listening to Future Commerce. If you'd like to support the show, and we would really like you to do that. You should and can and probably will, now that I'm telling you to, go over and leave us a review on iTunes. It costs you nothing, maybe ten seconds of your time, but it helps us tremendously to get the show into more people's pod catchers. Wow.

Brian: [00:53:27] Pod catchers. {laughter}

Phillip: [00:53:27] That is an old word that I haven't said in a long time. Man, I'm feeling my age today, Brian. So anyway, that's it. Yeah. Leave us a review and and go subscribe. Go get that new report. You know where to get both of those there at FutureCommerce.fm. And that's it. Hey, you have the power to shape the future, and we want to help you do that. All right. That's it. Thanks for listening.

Brian: [00:54:09] Bye.


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