March 12, 2021

Shopper Discovery and the Convergence of the Meta & the Physical

Every single day, somewhere on Twitter, someone creates a thread about the Costco hot dog story, and Brian reads them all. This week, Phillip & Brian chat the Costco glow and the magic that is in-store discovery and how other online big box retailers haven't quite been able to capture brand discovery as easily as in-store. In other news, the guys chat chicken stuffed animals, the Saks Fifth eCommerce Divorce and the merging of the meta and the physical.

this episode sponsored by

Physical vs. Online Discovery

  • Costco is a good physical space for discovering items you weren’t looking for. It’s difficult to pull that off online.
  • There are ways eCommerce can lead to discovery, for example what Mixy and co-op are doing. 
  • Discovery is easier in physical spaces because of store pathways and what ends up being in your peripheral vision as you’re navigating these stores.
  • “In the DTC era, it’s very hard to distinguish a quality product, one from another, based solely on branding and marketing. It’s even harder to find what competitors might exist in the marketplace because in traditional retail, they’d all be located on the same aisle and you could compare them and their price points.” - Phillip Jackson
  • In the eCommerce world, there isn’t direct competition ‘on the shelf’, only whatever competition might be placing an ad next for you.

Saks Fifth eCommerce Divorce

  • On a negative note, the divorce of Saks Fifth from its eCommerce storefront will bring about a dissonance between the way the two stores are run because they’re being run separately.
  • “It’s hard for retailers to integrate systems when they’re the same company, let alone when they’re separate companies. This is going to result in a lot of extra work, extra money, extra strategies and people and resources and capital.” - Brian Lange on the inefficiency of the split
  • On a positive note, Saks.com could have a bright future with or without the in-store experience because of its fresh start. Saks Online is currently dependent on in-store fulfillment and is going to benefit from being independent.
  • “I think it potentially has the opportunity to build trust with a brand new consumer and maybe further distance itself from its vestigial roots with its department store era mindset and ethos.” - Phillip Jackson
  • “You have to give them independence. You have to let one succeed and one fail or the whole thing goes down.” - Phillip Jackson


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!

Phillip: [00:01:08] Hello and welcome to Future Commerce, the podcast about the next generation of commerce. I'm Phillip.

Brian: [00:01:13] And I'm Brian.

Phillip: [00:01:15] Brian and Phillip back at you. And we have an awesome episode for you today. And you know how I know? Because it's the two of us. And every episode we do is awesome. Why did we ever start doing interviews?

Brian: [00:01:27] I don't know, actually. Let's stop doing interviews. Let's not do them anymore.

Phillip: [00:01:28] Let's just stop. Let's agree right now. We're not going to do any more interviews. It's not true actually. We actually have a couple really cool interviews coming up pretty soon. We've got some guests, but I love it when it's you and me. I love it when it's you, me and Ingrid. We have an episode with Ingrid coming up.

Brian: [00:01:46] Yes, it's going to be awesome. I already know it.

Phillip: [00:01:49] It is going to be awesome. This is classic...

Brian: [00:01:51] We have not recorded it yet, but it will be awesome.

Phillip: [00:01:54] We all know it's going to be amazing. OG Future Commerce crew happening and a lot in the world that we could talk about today. But I wanted to start the show just kind of musing on some things that have been top of mind for me ever since we had was it Liyia Wu on the show not so long ago?

Brian: [00:02:24] Mm hmm.

Phillip: [00:02:24] Ever since we started talking about you going to Costco I had this... Well, that's been years.

Brian: [00:02:30] {laughter} Yeah.

Phillip: [00:02:30] But this idea of in-store shopping and sort of Costco influencers, Costcofluencers, if you will. I've had this vision like this mental picture of what discovery looks like in different contexts, and I thought maybe we could dig into that a little bit today.

Brian: [00:02:49] I love this. I was just talking about discovery. I mean, I'll date this episode. I was just at Groceryshop today and talking a bit about discovery.

Phillip: [00:03:01] Well Groceryshop online meetup.

Brian: [00:03:04] Right. Yes. Groceryshop online meetup. Not the same thing as Groceryshop. Quick aside. I really am starting to like really, really miss people. Like being at Groceryshop really made me feel... Groceryshop online meet up made me really like really, really miss people.

Phillip: [00:03:30] And miss industry events, which is strange.

Brian: [00:03:33] Yeah.

Phillip: [00:03:33] Right?

Brian: [00:03:34] Yes.

Phillip: [00:03:34] Like I loathed industry events at one point, but give me a year and here I am and I'm missing it.

Brian: [00:03:43] It's all the action. It's all the action. Anyway, let's talk about discovery.

Phillip: [00:03:48] Yeah. Brian, are you OK?

Brian: [00:03:51] I don't know, man.

Phillip: [00:03:51] Are you going to be OK?

Brian: [00:03:52] Am I going to be OK? I'm ready. I'm ready. I'm really ready for this...

Phillip: [00:03:58] The world's on fire. Am I going to be OK, Phillip? No, I'm not OK. All right? Brian, we're at the end. We're here. We're in the endgame now. Brian, we can see the light at the end of the tunnel and it's not a train coming for us. That's like we're almost there. Just hang on, dude.

Brian: [00:04:14] Oh, my gosh. Can I do it? I can do it. I'm going to be fine.

Phillip: [00:04:16] We're almost there. At least can you please just for our sake, hang on for forty three more minutes of this episode?

Brian: [00:04:22] Oh that's easy. This is my favorite part. There's no hanging on involved here.

Phillip: [00:04:27] Speaking of enduring, can I give you props for finishing your first half marathon?

Brian: [00:04:32] Yeah, I mean, it's nothing compared to the sixty two point whatever miles you put in not long ago. A couple weeks ago.

Phillip: [00:04:39] We're not trading things here. I'm just saying congratulations. That's an incredible achievement.

Brian: [00:04:49] Well, thank you.

Phillip: [00:04:49] And I love and hate running long distances, so I feel in my soul that that was a big stretch for you and congrats man. That's so cool.

Brian: [00:05:00] Thanks, man.

Phillip: [00:05:00] I can't wait to do a full with you. That would be amazing.

Brian: [00:05:03] I'm planning on it. I'm planning on doing one this year. We'll see. We'll see how it goes.

Phillip: [00:05:09] Quarantine has done a lot of weird things to a lot of people. It made Brian a runner and it might do something to you, too. But let's talk about discovery. Let's shift gears a little bit. Discovering... So like you go into a store like Costco. I was in Costco just today.

Brian: [00:05:29] No wonder you're so positive today.

Phillip: [00:05:31] Yeah. You've got the glow of Costco on you.

Brian: [00:05:35] You know how you smell a certain smell when you walk out of a Subway. It's like that. But you're walking out of Costco.

Phillip: [00:05:43] {laughter} Yeah. A Subway sandwich store?

Brian: [00:05:47] Yes. Wait, you've never noticed that?

Phillip: [00:05:49] Yes, it has this strange bread smell.

Brian: [00:05:54] It does. Yeah.

Phillip: [00:05:54] You know exactly what. It's the smell of Subway.

Brian: [00:05:57] Plastic or something.

Phillip: [00:05:57] I thought you were talking about the smell of the subway, which is not a great smell.

Brian: [00:06:01] That also is a real thing. But no. The Costco glow is actually a good thing.

Phillip: [00:06:06] It's a real thing.

Brian: [00:06:07] Yeah. Yeah. You walk out, you've had some samples. You've talked to people who are paid fairly for their work.

Phillip: [00:06:16] Yup. I love it.

Brian: [00:06:17] Yeah.

Phillip: [00:06:17] What's not to love?

Brian: [00:06:18] And there's lots of things you can find. I always find new stuff I want to buy at Costco. Every time I go in there.

Phillip: [00:06:22] You've bought things in bulk that you never intended to buy multiples of. I, for instance, have become a fan of the Multipack Biscoff cracker.

Brian: [00:06:33] Man, you've been on the Biscoff train for a while now. This is not new.

Phillip: [00:06:37] I'm just saying.

Brian: [00:06:38] This is the thing. This is a multi month thing. This is pre pandemic train.

Phillip: [00:06:43] No, it's not. It's a post pandemic thing, Brian Lange. But these are like reams of Biscoff crackers. You know, what I do? I come into the into my office here and I sit in my chair with and I have four Biscoffs. I've got four of them and I put coffee in a paper cup. I balance it precariously just on the edge here. And I work from my lap to pretend like I'm on a plane. And then I like kind of lean back just like just a hair just to pretend that I'm going somewhere and that I have things to do that are important. That are not the monotony of every day of the queue. We're living through a panoramic, OK? This Panasonic has got me down, Brian.

Brian: [00:07:31] {laughter} I mean, the ultimate travel bug happening right here.

Phillip: [00:07:37] This is it.

Brian: [00:07:38] If you  get to a point where you're emulating what it's like to sit in an airplane seat, you know you're at the end of the pandemic.

Phillip: [00:07:47] There are people I know someone who bought an airplane seat on eBay and they have it in their house. It's a thing. People love it. People like old Delta seats. There are like strange fans of brands. Let's come back to that, because I do want to talk about cults, brands and cults.

Brian: [00:08:06] Sweet.

Phillip: [00:08:06] Because that was something we wrote about in The Senses not too long ago.

Brian: [00:08:10] Yeah that was a good one.

Phillip: [00:08:10] Let's come back to it. So I'm in Costco and I'm looking around and I don't know why. It just kind of hit me because I wasn't on my path. You have a path through your Costco, don't you? Or do you meander?

Brian: [00:08:21] No, man. I'm a meanderer.

Phillip: [00:08:22] You hit every aisle, don't you?

Brian: [00:08:25] Yes.

Phillip: [00:08:26] That's ridiculous. Anyway, I have a path. And I know exactly the path. Right? Today I wasn't on the path. I was looking around and it just hit me in one spot. I'm looking around. I can buy couches, I can buy a foosball table. I can buy a fake Peloton called Echelon, which is hilarious. I can buy diamonds. I can buy an Apple TV. I can buy a water pick. I can buy Biscoff crackers. I can buy 17 varieties of breakfast bars.

Brian: [00:09:00] Cast iron.

Phillip: [00:09:00] And just within this one spot, I'm looking around and I'm like, actually for everything that Costco is, it's actually a phenomenal place to discover things that you didn't really know you were looking for.

Brian: [00:09:15] Absolutely.

Phillip: [00:09:15] And that is so hard to replicate online. You just cannot replicate that same thing online. I got an email from Saks which we'll talk about the Saks Fifth Avenue news in just a second. I got an email from Saks that says 80 percent off for the next like two hours or something. And I was like, wow, you. Saks is really hard up for cash. They're dropping the 80 percent off for two hours flash sale. Drop in to their sale page, one thousand seven hundred and thirty four items, Brian.

Brian: [00:09:55] I've been there. I can't shop online at department stores.

Phillip: [00:10:00] I can't shop like this. I can't shop like this. I have no idea. Like, I couldn't even possibly... I might buy something because it's a deal and you got me here, but I couldn't find it to save my life. So after I infinite scrolled for like three seconds I bailed.

Brian: [00:10:14] Yes.

Phillip: [00:10:14] Like, I'm done.

Brian: [00:10:15] This is what I'm talking about. Exactly what I wrote about. I was like I got dropped into, you know, I clicked on the Macy's sale because I'm a sucker, I guess. And it was like oh, there are fifty thousand items in this category. Like it's just endless pages of scrolling. Endless pages of scrolling. And there's really no good way to filter down. And you're right. Discovery is like all over the place. It's like eCommerce vomit on your screen.

Phillip: [00:10:48] Yeah.

Brian: [00:10:48] You can't wade through it. And you don't want to.

Phillip: [00:10:51] There's no tradition... In the eCommerce platform box that we have created somehow culturally in digital commerce, we have a language of digital commerce, and it's the search and browse is pretty standard from site to site. There are some tweaks. There's some variations. Right? But for the most part, you're going to see a grid based catalog. And it's going to have layered navigation for you to filter. Those are pretty standard.

Brian: [00:11:27] It's like 99.999 percent.

Phillip: [00:11:30] Sure. Maybe five nines. I don't know. It's a lot of nines.

Brian: [00:11:32] Yeah. A lot of nines.

Phillip: [00:11:33] There's a lot of nines.

Brian: [00:11:35] The rule of nines.

Phillip: [00:11:36] I like that, actually. And the rule of eCommerce platforms is like you shan't divert from the one true way, which is the search and browse experience. That is on everything. It makes that experience feel like it's impossible to discover and people do... I have the same problem on Amazon. What I need from Amazon is I land on the homepage of Amazon, and you know what they're doing? They're doing the equivalent of just throw everything at the wall. The home page of Amazon is like, well, I'm going to show you forty thousand things that are random, that have nothing to do with anything and hope one of these sticks. And maybe they've got some, you know, I'm sure they have some product people that are driving some AI recommendations that may be somewhat relevant.

Brian: [00:12:30] Maybe.

Phillip: [00:12:30] But that might even just be a better experience and replicate something close to what spinning around in a circle in Costco could give me today. It is exhausting to shop online.

Brian: [00:12:43] It is. This is why I wrote the Black Friday article. It kills me. It's actually really depressing. When you start doing it a lot, it starts to get actually depressing. It's like it's really bad. I shop online a lot. Like a lot. So I am of the opinion that we... Back to stuff that you were onto a long time ago with some updates to design trends. Just do something else, but also innovative discovery engines. I think that actually might be, you know, like we had Mixy on.

Phillip: [00:13:25] Yeah. Mixy was on. We also had a Connor Sherline from co-op Commerce. Oh my gosh, my brain almost forgot.

Brian: [00:13:42] It's late for you.

Phillip: [00:13:44] It is. Little bit. But, you know, we had Conner Sherline from co-op on, and we had Daniel from Mixy. And like there are really interesting ways of... Mixy is a marketplace that has a unique vehicle to try to get you to sample from a bunch of different brands that are all sort of themed together. Co-op is a really interesting post purchase vehicle to say, "Hey, you liked this. You may also like that," which I find really, really interesting and also works on a credit system to encourage for brands to try to cooperatively conquest a customer. And because, let's face it, you like things more when you spend more on things, because there's a part of our brains that is a defense mechanism, like we don't make stupid decisions. I'm a good consumer. And this thing that I bought, I spent a lot of money on it. I like it. I'm going to like it more. And that's whether or not I like it. I'm going to tell everybody I like it because I spent a lot of money on it. Anyway. Spend more money. Use co-op.

Brian: [00:14:51] Here's the thing that's really interesting about Costco, as well. Back to Costco really quick.

Phillip: [00:14:56] No, this is the point. I want to get back to how do you do the Costco thing? Or how do we capture the Costco magic?

Brian: [00:15:03] It's interesting.  [00:15:06]It's interesting, it's not just true for Costco, but for a lot of in-store shopping, is that the path, you mentioned your path, right? You have your path, but you also go off your path. You also have peripheral vision, and you're looking around as you walk through a store, even when you're going to where you're headed, when you have a specific destination, you're looking around at things. [00:15:30] And we do that to some degree, probably better with ad networks than anything else or some sort of related products thing or some sort, but it's not the same thing.

Phillip: [00:15:46] No, because, yeah, it's not the same thing because those things are highest bidder take all to get your attention. Right? And it doesn't always mean that it's...

Brian: [00:16:00] Even banners that are not ads that are just placed by the retailer or brand are often very limited. And it's really hard to like... My peripheral vision at Costco, or like my quick glance, I'm looking at a lot of stuff real fast.

Phillip: [00:16:17] Yeah.

Brian: [00:16:18] And so things catch you quicker. Here's another thing that I think is really important. And this has to do with Costco more than anything else.

Phillip: [00:16:29] This was not meant to be a 15 minute Costco segment, by the way. I was trying to get to Thingtesting, but let's keep going on the Costco.

Brian: [00:16:35] We'll get there.

Phillip: [00:16:35] We'll get there. All right.

Brian: [00:16:36] We have plenty of time, don't we?

Phillip: [00:16:38] We have time. It's only midnight for me and we've got all kinds of time.

Brian: [00:16:44] When I walk into Costco, I expect that I am going to like the things that I buy, and I'm going to see things that I want to buy as I walk along. In fact, I have to prepare myself not to buy things when I go into a Costco, because I'm going to see something that I do want to buy that I have never seen before. Almost every single time without fail.

Phillip: [00:17:08] You're so disciplined. That sounds like a bit of a stretch, but yes, the buyers and the merchandizers at Costco are in a completely different echelon and they really, truly have mastered something that I think very few other retailers could really capture. That said, the Costco online experience suffers from all the same problems.

Brian: [00:17:31] Oh, totally. In fact I hardly go there at all. This is actually the problem. It's still the same issue that every other retailer has. Merchandizing and discovery online are almost impossible.

Phillip: [00:17:49] Hopefully that'll be changing soon, although this is I mean, it's a discovery platform in its own right. But from a review and testing sort of point of view, you Brian Lange, I believe at least at one point you were a frequenter of Wirecutter.

Brian: [00:18:08] Yeah, I still use Wirecutter.

Phillip: [00:18:09] Yeah. And you do a lot of research when you buy something.

Brian: [00:18:13] Yes, I do. {laughter}

Phillip: [00:18:16] How often have you discovered a product via Wirecutter or like made a decision around which product to buy via Wirecutter? And could you think of what the last thing was that you bought that you were influenced by via Wirecutter? Should I... Do I have to search all of our transcripts? I'm going to go look right.

Brian: [00:18:35] Yeah, I should probably go. I mean, it's probably a mattress.

Phillip: [00:18:39] Oh, gosh. This again.

Brian: [00:18:42] No. We don't need to go back to that.

Phillip: [00:18:42] Well, we all know how well that turned out.

Brian: [00:18:45] I think it might have been outdoor gear potentially. Last year.

Phillip: [00:18:49] Oh it was. Apparently. Yeah. Apparently you've mentioned this on at least twice around outdoor gear, because you started hiking quite a bit.

Brian: [00:19:02] Yeah, totally. So camping stuff. I'm not sure if I ended up going with their recommendation or not, but I definitely used it. And I definitely saw some stuff on there. And if it wasn't Wirecutter... So I definitely, sites that are similar to Wirecutter, specific to outdoor. Let me think about who I used here. Unfortunately, it's kind of a mixed bag. I feel like.

Phillip: [00:19:29] So the reason I ask about Wirecutter is there are more brands than there ever have been. And that's, I think, one of the reasons why...

Brian: [00:19:42] OutdoorGearLab. That's who I use oftentimes.

Phillip: [00:19:46] Well, no, that's a really good example of a verticalized, like, very specific review and testing authority. You trust them because they have a lot of expertise in a particular domain. Wirecutter seems to have been able to do that and sort of branch out. There's a million brands that exist right now. They're all vying for your attention. And it seems like a bunch of them launched all in the same sort of short period of time that purport to do the same thing. Our Place. I see a lot of Our Place ads these days for a pan.

Brian: [00:20:15] Yeah.

Phillip: [00:20:23] And they launched around the same times as Nick and Emmett's brand. Help me out. What's the.

Brian: [00:20:33] Pattern brands.

Phillip: [00:20:36] Pattern brands' first brand.

Brian: [00:20:39] Oh, Equal Parts.

Phillip: [00:20:41] Equal Parts. Thank you. Gosh, it's too late. I have no recall when we do late podcasts. But I can remember the founders' names. It's so funny. A lot of cookware brands. Caraway is another one. I think. Great Jones does cookware, as well. So they're all vying for your attention. How many pans do you buy a year?

Brian: [00:21:07] I haven't bought a pan in a long time, and I know...

Phillip: [00:21:10] I bought pants from Italic recently. And Italic seems to be like a great place to discover things that I know will be of superlative quality that I kind of am going to love.

Brian: [00:21:22] That's all branded. So like it's all there.

Phillip: [00:21:29] Yeah but what's great about Italic though is they're... I'm trying to get somewhere, man. Hold on. I'm giving you breadcrumbs. The point is, Wirecutter just reviewed the Our Place pan and gave it a thumbs down and said there's like 15 other pants that are better than this pan. But here's the point [00:21:52]. The direct to consumer era, it's very hard to distinguish a quality product, one from another, based solely on the branding and the marketing. And it's even harder to find what competitors might exist in the marketplace because in traditional retail, they would all be located on the same aisle and you could compare them and you could compare price points. And part of discovery in-store is seeing relevant comparisons next to each other. The direct to consumer era has dis-intermediated competition on the shelf. There is no competition on the shelf. The only competition might be whoever is buying an Instagram ad that might come to you next.  [00:22:30]So this is why I think that we're going to see a lot more of what just happened, which is Forerunner just invested two million dollars in Thingtesting. I believe it's their Series A. Double check me on that, Brian.

Brian: [00:22:47] Okay.

Phillip: [00:22:48] Because I know that they had raised about three hundred thousand dollars last year in 2020, early in 2020, which I thought was their seed round. I might be wrong about this.

Brian: [00:22:56] I think you're right about that.

Phillip: [00:22:58] What's really interesting about this two million dollar injection is Thingtesting has been blowing it up. Their email, their newsletter is great, but their content on the site is very frequent, and they're doing more video content these days. In the before times, they were doing a lot of like in-person testing events. This thing might have legs and having more opportunity to have more domain expertise around the direct to consumer brand explosion and finding out which brands really live up to their hype or not is something that I think we all could use. But you know what the best part of this is? I've come to trust Thingtesting. I look at Thingtesting, and I think to myself, this a great way to discover new brands and to discover ones that I didn't know I was looking for, which is the experience that I'm craving right now. And Thingtesting could be a great aggregator to give me that in the aisle on the shelf comparison that I am looking for when trying to make a decision around this type of purchase.

Brian: [00:24:06] They should make a browser plug in.

Phillip: [00:24:10] They probably should. I'm sure somebody over there has thought to themselves, "We need a browser plugin."

Brian: [00:24:15] That would actually be pretty interesting.

Phillip: [00:24:19] "Pretty, pretty interesting."

Brian: [00:24:22] It was not Series A, by the way. It was seed.

Phillip: [00:24:25] Oh their seed round. So the other was pre seed, OK.

Brian: [00:24:27] Correct. Yeah.

Phillip: [00:24:29] Very cool though.

Brian: [00:24:30] I really think you're right. You're actually really on to something here about discovery in-store just being better. And that's actually what we talked about in my Groceryshop round table.

Phillip: [00:24:42] Oh, tell me more about that.

Brian: [00:24:44] No, it was just a very similar conversation, actually. We were talking about dark stores and how grocery delivery has been evolving. And then we kind of moved over and was like, well, wait a minute, actually, some people really like shopping for their groceries. Sure there's certain things that you can set it and forget or you can purchase, you know, without having to look at them more closely. But fresh food is something that is actually really fun to go purchase. And it's part of the process of cooking for many people, not for everyone. And so just how important that discovery process was in the grocery store as well, because you go in there for your fresh fruits and your vegetables and meats and so on, and then you inevitably discover other things as well. I am a huge fan of going to the grocery store. It's one of my favorite types of shopping, and I love discovering new items at a grocery store. I think it's really interesting. Doesn't always happen. I mean, it's often very ho hum, although I will often discover new wine when I'm in the grocery store if I can help it.

Phillip: [00:26:08] And Costco, I believe, is a place where you discover, or maybe not discover. I don't know if you discover wine at Costco.

Brian: [00:26:15] Oh you actually do. Oh, you absolutely do. No, no, no, no, no. Costco's amazing with wine. Number one wine cellar in the country, not just because volume.

Phillip: [00:26:25] Trying to uncork the... Ba dum cha. All right, well, discovery is tough and there's a lot of ways to get discovered. One thing that I think we have found, I have discovered brands that I have frequented now. Italic is one of them purely due to this show. So I want to ask people. I'd love you to give us some feedback. We're always looking for new ways to bring value in Future Commerce. I want to know if maybe we have already done that. If you are listening right now, and you've made it to this point in the show. Twenty five minutes in. Congratulations that you sat through 20 minutes of Costco talk. If you have discovered a brand that you love through Future Commerce or through Stairway to CEO, our sister podcast here at Future Commerce, and Lee has sat with 40 some direct to consumer founders. We have sat with, I don't know, a hundred or so brands or service or people that represent direct to consumer brands. If you've discovered something that you truly love through Future Commerce, I want to hear about it. Phillip@FutureCommerce.fm and Brian@FutureCommerce.fm. And we would love to hear about if you have discovered anything through Future Commerce. I feel like there's a lot of ways to find brands. One at a time at one X speed on a podcast might be the least efficient way to discover a new brand, but at least you'll get a story along with it. So I find that to be probably, you know, a really interesting or fascinating way to discover something. But we're all finding new things all the time.

Brian: [00:29:49] Costco Talk doesn't exist, by the way. It might be a good place to move in with a podcast about Costco.

Phillip: [00:29:54] Oh Costco Talk? Yeah maybe we just make an ancillary podcast. Yeah, that's a new podcast. We'll do a little mini series on Costco. I love it. Every single day, somewhere on Twitter, someone creates a thread about the Costco hot dog story.

Brian: [00:30:07] Every single day.

Phillip: [00:30:07] Or how their chickens are a loss leader or something. There's fascinating Costco information that abounds. We mentioned Saks Fifth Avenue just a minute ago. Can we downshift?

Brian: [00:30:19] Let's do it. Let's get out of discovery.

Phillip: [00:30:21] Well, I think actually Saks is a great place that suffers from the discovery problem on their online store as opposed to their in-store experience. When I walk into Saks Fifth Avenue, it's a very different experience to when I go online in Saks Fifth Avenue. I find their online store to be quite middling and maybe a little bit disappointing. Their in-store experience, however, is always top notch. Brian, if I recall correctly, I believe you've bought at least one thing from Saks Fifth Avenue ever via ShopRunner once.

Brian: [00:31:02] Oh yeah.

Phillip: [00:31:02] What was that?

Brian: [00:31:03] I think I've bought a few other things from Saks Fifth. But it was actually I think this one was Saks Off Fifth, but it was...

Phillip: [00:31:10] It's very Off Fifth if you ask me.

Brian: [00:31:12] Yeah.

Phillip: [00:31:12] What was the thing you bought, and the occasion you bought it for?

Brian: [00:31:17] {laughter} It was a chicken stuffed animal because my kids love stuffed animals, and they love chickens. In fact, they love chicken stuffed animals. And they're kind of hard to find.

Phillip: [00:31:32] Brian could not find a chicken stuffed animal and then found one.

Brian: [00:31:36] Well, the thing is there weren't any on Prime. And it was getting close to Christmas. And I have a ShopRunner account. And so it was like, well, guess I'm going to ShopRunner from Saks.

Phillip: [00:31:50] Here comes the ShopRunner, you know, the much maligned ShopRunner, you know, overnight chicken.

Brian: [00:32:01] {laughter}

Phillip: [00:32:01] Can I ask you how much the stuffed chicken set you back on ShopRunner? I think it was like thirty bucks.

Brian: [00:32:07] 30 bucks. All right.

Phillip: [00:32:08] That's reasonable as far as stuff chickens go. I tend to remember there was a conversation we had. I don't know. I don't remember if it was on the podcast about how you said chicken shaped things are just funny. Was that on the podcast?

Brian: [00:32:21] That was not on the podcast. But they are funny.

Phillip: [00:32:23] You have like a whole theorem about chicken shapes.

Brian: [00:32:25] Oh, they're hilarious. Yeah, totally. It's absolutely...

Phillip: [00:32:29] Anything chicken shaped is funny to Brian Lange.

Brian: [00:32:31] My kids think it's hilarious. So yeah, they love chicken shaped things. They think... It just makes them laugh every time.

Phillip: [00:32:43] {laughter} Take anything and shape it like a chicken, Brian will buy it on ShopRunner.

Brian: [00:32:46] It's probably true, I just buy a chicken shaped cutting board. That was one of my most recent purchases. {laughter}

Phillip: [00:32:52] Oh, this is the conversation that started it. OK, so apparently both Brian and I are ardent shoppers of Saks Fifth Avenue online. The news just broke that Saks is getting a divorce from its own eCommerce site. They've decided that the best way for them to move forward with their own respective lives is apart. {laughter} And so they've...

Brian: [00:33:19] Why is this good, Phillip?

Phillip: [00:33:22] No, you and I are both we're going to do a good and bad. We're going to do a you versus me perspective.

Brian: [00:33:28] Ok, well, why don't you start. You took good...

Phillip: [00:33:32] No, I want to end with the positive vibes, man. So you're taking the anti point of view. You start. Give us the reason why you think it's bad. And I feel like I know what it is because you already wrote about it in The Senses on Monday.

Brian: [00:33:48] I did. Yeah. There's a lot of reasons why this could go wrong. Think about this. When in-store is going to inevitably want to engage with digital in some way.

Phillip: [00:34:03] It already does. Right.

Brian: [00:34:05] It already does. I think I've mentioned, I might have mentioned this on the podcast before, but when I was at NRF Chapter 1, I heard someone from Ulta say that 50 percent of their shoppers engage with digital in-store, which is incredible. And I think it represents the merging of the physical and the meta, which is one of the points that we made in Vision 2021, our recent report. But I think what's interesting here, the reason why I bring this up is because [00:34:42] what's going to happen is you've got two different companies that are going to be run two different ways with two different sets of leadership, two different sets of systems. Digital, the eCommerce version of Saks, is going to have their way of doing things. The in-store way is going to have their way of doing things, and the brand is going to suffer. And it's not going to be as efficient either. It's hard for retailers to integrate systems when they're the same company, let alone when they're separate companies. This is going to result in a lot of extra work, a lot of extra money, a lot of extra strategies and people and resources and capital and all of it. It's going to be inefficient, so inefficient that it might not even work.  [00:35:30]And, you know, as the brand sort of progresses, and we see continued divergence because the eCommerce side of this Saks brand is going to say, "We should do everything one way," and the store is going to say something else. We're going to see completely different strategies around how technology will play into the brand. Because, as we mentioned, Saks is a luxury play. New luxury is all about information and speed and being in the know and technology plays a big part of that. And so as the luxury brand with disparate systems and disparate strategies for how to address digital, I just think this whole thing's going to fall apart. And in-store is going to be important to the Saks brand because as we mentioned, in-store is really important and there's a lot of pent up demand for in-store. In-store is not going away. It's going to be really, really important. How much it contracts before it starts to grow again is still a little bit up in the air. ECommerce is in an interesting place as well, because I think this is a fundamental misunderstanding of how people want to shop online, actually Ship to Store and Ship to Home and Buy Online, Pick Up In-store, Curbside Pickup. These are actually things that people do want to do and are growing in popularity.

Phillip: [00:37:12] And they're all dependent on physical in-store.

Brian: [00:37:15] Correct. So it's just like, why separate those things? I think ultimately what's going to happen is they're going to have to reemerge and there's going to be a lot of waste and restructuring as a result. Although I just saw an article on Retail Dive about why retail bankruptcies are actually really lucrative, which is terrifying to me. And I didn't actually read it. But that is an interesting concept.

Phillip: [00:37:41] Bravo on you for admitting you didn't read it, but I love the headline too. Two more seconds. Finish up because I'm freaking out. I have to say something. Go ahead.

Brian: [00:37:51] Yeah. So ultimately, the brands are going to suffer. They'll probably lose people as a result. There are a lot of other luxury options out there right now up and coming. And I see HENRYs not finding Saks all that appealing as a result of this and ultimately putting their dollars elsewhere toward brands that are building from the ground up and are doing it right.

Phillip: [00:38:17] That was an incredibly bearish take by the one and only Brian Lange. I applaud you. you almost have me. You almost have me. I'm going to tell you why you're wrong.

Brian: [00:38:28] All right. Let's hear it.

Phillip: [00:38:30] There is a very... So we've watched how many other darlings fall, even pre pandemic? Barneys. Bergdorf. Of course, Saks is the crown jewel. And it has only really, I think, been able to weather it this long because they're not under the kind of scrutiny that they would be if they were a Nordstrom, where they have to produce quarter to quarter results. Owned by HBC. I believe that the future for this business is entirely digital, and I believe that because of another business, Farfetch. Farfetch, which was mentioned in our Nine by Nine in new luxury, Farfetch was rated highly on our Nine by Nine, specifically because of the way that they were connecting over digital with a new luxury consumer. I believe that Saks.com is worth seven times what it is, apart from the retail outfit on its own. And it looks like Insight Ventures or Insight Partners agrees with me because they took a minority stake in Saks.com at five hundred million at at two billion valuation. [00:40:00] I believe that Saks.com has an incredibly bright future with or without the in-store experience. The only thing that really could tie you to the in-store experience is by name and brand only. If you were on Saks.com and the logo was different, you would never know that you were shopping Saks Fifth Avenue. It's not quite the same thing. I think it potentially has the opportunity to build trust with a brand new consumer and maybe further distance itself from its vestigial roots with its department store era mindset and ethos. [00:40:40] So when you look at the trajectory and the success of Farfetch and their acquisitions over the years and new guards and some others, I think that there is a really interesting connection to digital. And you know what? Look at other luxury direct to consumer marketplaces that have popped up. As much crap as I gave Verishop and Imran Khan, former SNAP Co-Founder who launched Verishop just a couple of years ago. Verishop seems to be hanging on and really pioneering in both building its own white label business and also connecting folks to new ways of shopping online and sort of the modern online department store. I think Saks could be more successful on its own than it could be if it were lumped in with the other sort of troubled retail, you know, physical business. So that being said, yes. Is there a challenge with bringing together a business that is now capitally independent? That has a new capital infusion that is looking to modernize? Absolutely. There's a challenge. But the experience already today is bad because a lot of the fulfillment for Saks Online is dependent on in-store to fulfill, and it needs to be independent anyway. So it needs better logistics, and it needs more inventory independence from what in-store carries today, because the in-store experience suffers due to the success of online. And you cannot have people that go out of their way to go into a store, not be able to buy anything like I did right after Christmas to buy a gift for someone. I went into a store specifically to buy, and I could not because online sales wiped them out. That is what is happening today. So they will fail together or they'll somehow one part of them will survive apart. And so I'm very bullish on this move. And I think this is the first of we went through bundling and unbundling. Right? This is the unbundling of eCommerce from legacy retailers and maybe we'll see others follow suit.

Brian: [00:43:02] So what I think I hear you saying is...

Phillip: [00:43:08] {laughter} We need like a little jingle every time you say that. Tell me what I'm saying, Brian, that I didn't already say.

Brian: [00:43:15] That all physical stores should be left in the dust because simply by extension, if you have legacy, physical retail, then why not separate your infrastructure? Why doesn't this argument just apply to everyone that has legacy physical infrastructure? That's my question.

Phillip: [00:43:42] I mean, it I'm not saying... I think there's some good measure that you would have to apply to say that whether that's true by default or not. In this particular case, Saks doesn't have the largest physical footprint in the world. OK?

Brian: [00:44:00] Does that make it more or less compelling?

Phillip: [00:44:03] I think it makes it their reach is dramatic with their digital footprint outgrowing and outpacing what their physical footprint is. Their physical stores are closing. Their digital store is growing. Which one are you going to make a bet on? And you know, this is an interesting way to raise capital and to...

Brian: [00:44:25] That's exactly what this is. {laughter}

Phillip: [00:44:27] It is an interesting way to raise capital. You're right.

Brian: [00:44:28] I think this is a great way to sort of like clean your books and take a like a business that's having trouble and give the part of the business that's doing well it's own two legs to stand on, so that you can raise money and grow it even faster. That is probably the best and most compelling argument that I can see here. This is a capital play, and I get that. I do...

Phillip: [00:44:58] But it's a troubling time. It's a very troubling time. It's you've got to do something.

Brian: [00:45:03] Sometimes you have to hold on to assets and sometimes you have to cut them loose, and I think this is really important. This is a long term...

Phillip: [00:45:14] So what you're saying is you've got to know when to hold 'em and know when to fold 'em. {laughter}

Brian: [00:45:19] Yes, that's exactly what I'm saying. I'm concerned that Saks, I genuinely am concerned that Saks is actually making a move that is going to actually tarnish their brand in the end.

Phillip: [00:45:38] Have you seen their eCommerce? And have you gotten their emails, it's already tarnished.

Brian: [00:45:42] Yes, that's true.

Phillip: [00:45:44] And Saks Off Fifth...

Brian: [00:45:44] That's a really good point. That's a really good point. You just told me about an email you got from Saks, which unfortunately, sort of doesn't play well into your point because...

Phillip: [00:45:57] No, it plays perfectly into my point and it's something I'm going to ask Ingrid about when she's on the show next week. Subscribe so you don't miss it...

Brian: [00:46:04] Oh my gosh, are we leaving this here?

Phillip: [00:46:04] We have to leave it here. Because I don't know that I know enough to make a continued argument, I certainly don't want to touch DFI with 10 minutes left. I will say this, the reason that Saks has sort of delved into the eCommerce, and they're sort of on the slippery slope of discounting in eCommerce is because they kind of have to be because the whole weight of the whole brand is resting on the only channel that can transact. Right?

Brian: [00:46:40] Right. Yes.

Phillip: [00:46:41] So you have to give them independence. You have to let one succeed and one fail or the whole thing goes down. And I believe if you can separate the two, maybe you see a little less of that. Maybe it's less promotion driven. Maybe it's more about the quality of the interaction and the online experience.

Brian: [00:46:59] I hope so.

Phillip: [00:46:59] I hope so, too.

Brian: [00:47:00] But couldn't they do that with stores, too? Isn't that like a mindset you across the board?

Phillip: [00:47:07] I'm in my house eating Biscoff crackers, you know, reclining one and a half degrees, trying to pretend like I'm on an airplane, Brian. No, they can't. They can't do that right now. That's the whole point.

Brian: [00:47:22] That's true. That's true. We are in a pandemic.

Phillip: [00:47:26] It ain't over.

Brian: [00:47:27] These desperate times. These desperate times have caused Saks Fifth Avenue to split its brand in half and have caused Phillip to pretend like he's in an airplane seat.

Phillip: [00:47:37] That's caused me to pretend like I actually like this, too, by the way. But I'll say one of us is going to be right and it's probably not going to be me, but I don't think... They might be what I would call a sacrificial lamb. They might be the first of many to do this. They may not be the successful ones, but I love to see a big swing. Oh, my gosh. I root for big moves and I'm rooting for them because I'm pretty sure they're paving the way for Neiman and Nordström. That's what's I think is going to happen. But who knows? We'll see.

Brian: [00:48:15] Those are bold predictions. Looking forward to that.

Phillip: [00:48:17] What else do you ask for on a show called Future Commerce? Do you want me to take us out?

Brian: [00:48:23] Do it.

Phillip: [00:48:24] All right. Thanks for listening. Hey, we want to hear from you. We want you to give us your feedback. You know how you could do that? Drop us a line. Hello@FutureCommerce.fm. Hey, you know what? It takes you literally zero time at all. OK, maybe three seconds. If you could, just go give us a five star on iTunes and help us get in front of other people or even leave a nice note. That would be cool, too. If you want our most recent report, it is seventy pages and ten trends of things that we believe are changing the world. Things over the next decade that will change commerce as we know it. It's called Vision 2021. You can get it at FutureCommerce.fm/Vision. And lastly, we put out an essay every week and a newsletter. One is called Insiders. The other one's called The Senses. It's Tuesday and Friday and this show comes out every Friday. Go... You can sign up for all those things and never miss a single thing we put out at FutureCommerce.fm/Subscribe. And I have to give a special shout out to Lee Greene, who is the the hostess... The host... What am I saying, Brian? Is the host of our show Stairway to CEO, and she does an amazing job. She's coming up on her one year anniversary with us. And it's just such a great time to have a an entrepreneur herself interview other entrepreneurs and get in their minds and try to figure out "What made you want to be a titan of industry?" If you like other shows, if you like other shows of that genre, like How I Built This, you're going to love Stairway to CEO. And you can find it wherever podcasts are found. All right. That's it. Thank you for listening. Hey, commerce can change the world, and we can change commerce. Let's do that together. Thanks for listening.

Brian: [00:49:01] Peace.

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