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PODCAST - Unpacking the digital shelf

Roundtable: Amazon? JC Penney? Wha?!

This week, Molly joins Peter to tackle the news and trends of the week, including Amazon's rumored purchase of JC Penney.

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TRANSCRIPT

Peter:

Welcome to unpacking the digital shelf where we explore brand manufacturing in the digital age. Peter Crosby coming to you from the digital shelf institute’s Cape Cod office. Molly Schonthal is our special co-host this week coming to us from an undisclosed location in upstate New York. Molly, you were the only thing standing in between me and a holiday weekend. So let's make this one rock.

Molly:

You got it. You have big plans for the weekend. Huge plans. What about you?

Peter:

I am going to, well, I am in Provincetown on the Cape where where we have a little place and so I'm going to watch as the sleepy wintertime community, a province town on Memorial day weekend becomes no longer that and see what the

Molly:

A clash of cultures. Yeah, it's the hair up feels like celebration or disdain. That's what I want to know. People flood into our,

Peter:

Our little community here to hope everyone behaves themselves and has a wonderful time in the sun. That's my, that's my hope. But we shall see.

Molly:

I hope so too for your sake.

Peter:

So I thought I'd start out just with, so you know, the, the quick stats of the week, cause things just keep rolling around, especially in earnings season. Walmart, us eCommerce sales grew 74% targets average day in April was bigger than cyber Monday. Think about that. And then finally Forester always said their, their last prediction was that digitally influenced sales. In other words, what percentage of all sales offline and on are influenced by digital. They said that would reach 55% of all sales by 2023. Well guess what, in April it was 70%. And number one, God laughs at predictions. But

Molly:

One of the things that struck me about the target story was that when you look into it, the company relied on physical stores to fulfill 80% of that digital demand. So yes, it was comm e-commerce, but they were also heavily, I don't know what you call it, dark story. And in order to two, accommodate that expansion, curbside pickup and stuff like that. Yeah. And it's it's terrific. That store, there's are able to be allocate their space to accommodate an increase in digital demand. But I've also seen stories about the complexity and a hardship of doing essentially pick and pack or pick pack and curbside inside a retail environment, which is not designed two get, Mmm. Do fast fulfillment. It's designed for a shopper experience. So I think that's going to continue to challenge brands that are, and retailers that are leaning in on physical locations. Yeah. In part to fulfill e-commerce demand. They're not, yes. They're not fulfillment centers like a target. It is not built as a fulfillment center just yet. That I'm aware of.

Peter:

Yeah. Well I think in both cases, Walmart and target, you see the value that they've derive. They have not many others of course are shut down, but the retailers that have been able to stay open, you are getting substantial value from having both e-commerce and a place where shoppers can at least get to and get something quickly and you don't you buying that.

Molly:

I'm buying that and I hadn't, we hadn't planned on bridging into this story from here, but I think the Amazon JC penny speculation yes. Serves to come after what you just said.

Peter:

Yeah, there are definitely rumors that Amazon is in, is in negotiations to acquire JC penny and Andrea Chang at Ford's said the potential explanation includes Amazon wanting to expand its own apparel business and to turn some of JC Penney's properties into distribution centers. So I think it is tied into that, don't you think?

Molly:

Yes. So before this podcast, Peter and I were actually wondering whether or not this news was real because there's been so many stories about JC Penney turnaround strategies. It feels like to me over the past five years.

Peter:

Yeah. And, and it does feel, well one JC penny, you know, it's, it's sad to see any major retailer struggle the way they have, but I think they're now a fire sale. And the question is, well, anyone's snapped them up and it certainly makes sense. Amazon always looking for more distribution center real estate, getting it at fire sale prices, and then being able to experiment more with their own apparel business. It does, it all makes logical sense and they have the pockets to be able to do it. So it'd be interesting to see how that, how that goes. So Molly, let's transition now to the, one of the pretty important announcements of the week, which is the announcement of Facebook shops read an article from Sarah Fisher at Axios who wrote about their, this announcement of their new online shopping marketplace. It appears it will be free for businesses across Facebook and Instagram. It allows small businesses, I think really I'd want to discuss that with you, but seems very focused on small businesses. They can choose the products they want to feature, they can customize the look and feel. Their shop sort of feels like sort of Shopify of Facebook. And Sarah's bottom line for this was that this is their first step toward creating a competitor to more established online marketplaces like eBay or Amazon. Would love to just get your your thoughts on that, on that move.

Molly:

Yeah. I mean, I have the same reaction that you did, which is, you know, this is sort of optically aimed at small businesses, but then directionally aimed at ad sales. And what is, what is the play here? Two things that struck me that I think are worth noting. One is you still have to leave Facebook to complete the purchase. So Facebook continues to be the glass here, right? And the second thing is that they want to somehow diversify their strategy, but they're still well behind. And this concept of direct checkout they have launched a checkout app where you can, or a beta opera you can check out directly inside the platform. But Facebook as a sort of vertically integrated glass and mode of fulfillment, even an Instagram is not yet a thing. And I feel like that would have to be a thing in order for Facebook to reclaim some of the space taken by Amazon. Now, Facebook has also said, which is the biggest clue I have towards what's behind this move that they see commerce as the new community site. Like do you remember in one of the articles where we read it, someone was saying people are gathering around commerce destinations. And I think that would probably be the biggest threats. If Facebook is meant to be a common destination for gathering eyeballs and there's an increased risk that common destinations are commerce destinations, they've got to do something. But I still can't close the loop.

Peter:

Yeah. But I wonder though if, if it's commerce destinations or is it influencer destinations, whether they're macro influencers on the sort of Kylie Jenner scale or micro inf influencers around, you know, my best friends who are all cluing me into something so that, that's what, that's what I wonder. I still think at the end of the day it's going to take loyalty or engagement with the experience. And, and one of the things that they said was that in the future they will also allow businesses to sell products to customers through the chat features of WhatsApp messenger. And Instagram direct, they can tag products during live streams. So I think they are headed in that direction of enabling that sense of community, yes. Around product but, but more with the idea of, of that sort of social influence rather than necessarily I'm going to March over to Facebook and do me some commerce. Right.

Molly:

I mean I, I still wonder about those conversations we had about the China ecosystem where you can do social networking and commerce and you know, manage other parts of your life and the same kind of a destination when you think about the Alibaba or the 10 cent ecosystem and that is still really the Holy grail for an internet platform company like an Amazon or a Google or Facebook. And so if Facebook can successfully figure out how to become a commerce destination where the commerce occurs, you know, on the platform as well, at least in addition to being fulfilled through third parties, that would be a step in the right direction.

Peter:

Certainly will be interesting to watch. And also to see how the capabilities that they've developed through checkout that now are in beta and are, have least for now been sort of focused at know mid to larger global, so many global brands. Will any of that technology ultimately merge over into Facebook shops and just make this whole thing seamless.

Molly:

And they also mentioned messaging apps, which I remember three years ago everyone was talking about like, like messaging through commerce and you know, you get a little note on your messaging app that's like, would you like to buy this again or you know, would you like to refill your subscription to XYZ? And there was a lot of talk about this idea of like image list shopping so that you could just sort of text or voice command like you would to your Alexa Alexa, buy more, you know, fill in the blank that Facebook messaging could be used in much of the same way that you could, you know, interact through a bot and say, get me more of this or find me one of these, et cetera. I think some trap like travel websites or brokers have developed this sort of thing for like hunting and buying trips. But I'm also curious to see how, how does that play out as another interface? You know, cause we're so focused on like social commerce versus marketplace commerce versus D to C, what is, what does the world of messaging look like as it plays out as a commerce destination?

Peter:

Yeah. And sort of to the same theme of, you know, people have been talking about this for years. One of the things they also intend to introduce to the shopping experience in Facebook shops is, is virtual reality. And the, the thing that stood out to me in, in that was that I had also seen bank of America do this incredibly cool. I think I chart of the changes in consumer behavior during this time. They pulled together a bunch of data elements, including from their own data, kind of put this chart together. We'll throw it up on our LinkedIn page when we post this episode. So go and take a look at it. But one of the ones that stood out to me there were, was the rise of virtual reality particularly under the travel section, you know, many Intervate internet based alternatives to travel have arisen and are being adopted. Like will virtual reality replace the need to go out and actually be proximate to other people? I don't know if you've seen the

Molly:

Yeah. So this is a thing that I'm kind of obsessed with, which is the the future of retail and shopping being a virtual reality experience. And I think it sounds, it sounded so futuristic at one point in time. So I'll take you through the journey of my thoughts on this. About five years ago I visited a Cole's innovation center, which was led by a guy by the name of retina, Carla Lou at the time he is now at Nike. He's leading, he's, I think he's a CTO at Nike. And he had this laboratory that was geared towards the future of retail. And inside this laboratory there was sounds like, like white kid, you know, Mads, it wasn't like that. He's, he's a great guy. He was not, and there's no like mad scientists like come into my bubbling beaker room.

Molly:

It was like in Silicon Valley and an airy room and they had a, a misting machine. And on that misting machine they were able to project three D images of runway models doing a fashion show so you could essentially repurpose a retail floor or department store floor with these sort of like holograms of runway shows. And that was sort of my first like, Oh wait, you know, virtual real shopping. And then when I went to the Nike flagship store in New York, the one that opened on fifth Avenue and I went into sort of my Nike loyalty program on my phone and was able to super impose another image of a shoe on a shelf where the shoe didn't exist and watch it spin and take it apart and see the Springs inside of it. And cut to February timeframe when ASX announced that it was hosting it's Paris fashion week event over Oculus glasses. So Facebook's a virtual reality headset and something about them achieving, you know, 80% of their target sales from buyers based on the virtual launch of this shoe over an Oculus headset. So it's not so hard to imagine that we could turn our home environments into a quote unquote store where we're able to experience a product and a way that we previously had thought was only for physical store experiences.

Peter:

It feels like we've been talking about that for a while though. Do you feel like this moment where virtual is becoming beyond preferred? It's the safe way to

Molly:

Yeah. And we're terrified of going to stores. Yes. I think this is the moment. It's a great motivator.

Peter:

But I mean, part of the question that the bank of America chart put out was also, you know, will there be stores there to do these experiences? Cause you would think a lot of the, those kinds of experience would be happening at the specialty retailers. But they cited a stat saying going to malls and buying from overpriced specialty retailers. Their language is not, mine is a thing of the past.

Molly:

No. Welcome to your living room, the new specialty retailer store where you, you know, put on a headset and you can be an inside of a Nike shoe or you know, on a runway or browsing an aisle or picking something up with your special little gloves with the haptics built in, say goodbye to your first life, Peter.

Peter:

Yeah, I, you know, you see Neiman Marcus filed for bankruptcy, like a gap is struggling a Victoria secret though Sycamore partners backed out on that deal. There's a, you know, the carnage it will be for those that survive, it probably will be nimble, but yet investing, they need to invest, which is tough for a lot of these organizations that have over leveraged themselves. But at the same time, you know, when you talk about the specialty retailers, they're focused often on sort of more luxury items. And one of the things that, that bank of America chart posited was the decline of luxury items. And one thing really stood out to me. They said gen X and baby boomers built social currency and their status via the purchase of luxury items, they say, whereas millennials and gen Z showcase experiences via social media to earn their social currency. So they're essentially saying, you know, the, these old people, you know, bought expensive things and that made them stand out in their crowd. But today people stand out in their crowd by, by building these, these experiences in social media that draw people to them

Molly:

Or, you know, getting a 500 hour yoga certification or going to see Taj Mahal or, you know, those are the kinds of experiences I think they're talking about too.

Peter:

Yeah. But, and I get that that's what's happening right now, but this sort of presumption built into that, that that means that as they age and as they kids and you know, homes or whatever, that that those preferences are locked and that they won't change much as you know, you might think no,

Molly:

If I were channeling, yeah. If I were channeling one of my good friends, Palo Peretti, who has a studio of Montclair and basically studied luxury and digital at this moment, she would probably say something like, it depends what your definition of luxury is. And that luxury yes means scarcity, right? And yes, in the past has meant quality. But can also mean other things these days. Like uniqueness. And so maybe some of these things that we're talking about as experiences or these things that the so called millennials are moving towards his experiences are luxury by definition and that these traditional luxury goods that they're saying are so out of style are a different interpretation of luxury. And maybe we should be having the conversation, not so much about whether or not luxury is dead, but what constitutes luxury.

Peter:

I also think the part that underlies this to me is that is a shift in values. So for me it has maybe the, the thing that will make it sustainable as, as a trend is if two things, so we all know about the trend towards sustainability and I want things to be made in a way that doesn't harm the earth and thinking about climate change. And then I think there, particularly when we enter into now or recession, that this, that generation that we're talking about has experienced both sort of the, the, the last recession as experienced a lot of college debt and now in addition to wanting sort of, when they think about too much consumption and, and in some ways I, you know, I remember back to, you know, my grandparents who went through the great depression really just having a different mindset about that sort of watch your pennies and the dollars will take care of themselves both ways. People. Yes. Well, I, I, you know, I, I do, I think, I wonder if, if the combination of, of climate change and, and paying attention to how we consume and live on the earth plus the wariness that comes from living in an uncertain economic environment will actually change what matters and that, that I think it was bound to have a more lasting impact than the particular experience in social media I might point out.

Molly:

I think so too. I think there's a lot more nuance to this conversation.

Peter:

My sociology one professor in at Boden college would be very proud of me for making that up. So, and then the last thing that I wanted to bring up was they talk about now the preference for cleanliness. I have a stat saying 87% of us shoppers prefer to shop in stores with touchless or robust self-checkout options. True. you know, is it temporary or sticky?

Molly:

I believe in increase in people's awareness of cleanliness and hygiene is sticky. I believe that there are some habits and behaviors that will make their way back into our lives that are, that are reasons that are reasonable. So

Speaker 4:

W

Molly:

Let me explain this idea. Being able to have a tap and pay credit card, which was sort of taking off anyways, I guess I'm back to Rob's acceleration of trends. That makes sense. I mean, it's going to, it's going to be sticky. Like, you know, you don't have to get your credit card all germy and it's convenience. You know,

Speaker 4:

Is okay,

Molly:

Every store going to be required to wipe down their carts individually before they hand them to you for the next five years? I don't think so.

Peter:

Well, I hope you are right. But I amazon.com, the tech behemoth announced recently that it's starting to sell its technology behind it's Amazon go and Amazon go grocery concepts to other retailers. And so once again, they develop something that they use and then they're going to monetize the crap out of it. And it said, I'm already signed several deals to date. Last October, Amazon was reported that CBO express stores was utilizing its just walk out technology and airports and Regal seminars cinemas was testing it. That seems like one I'm interested in, you know, once again, Amazon doing this with its technology, but also wondering what retailers will really want Amazon technology as much as they might promise up and down, they're not capturing the data. How many retailers would,

Molly:

Yeah, I mean that was my thought too. Like, like good for him yet again. Good for Amazon. Yeah, I think we're going to see a similar China in the past, which is what's the other option? As in like, that's that's a, it's, it's what are those questions called when you don't really mean them as questions? Peter hypothetical the girl out, you know what I mean? Rhetorical, rhetorical. Oh my God, geez. I blame quarantine rhetorical question. This, you know, this idea what's, what else are they going to do, you know, spend three, five years, how many million dollars to develop the same level of convenience internally or are they going to you know, bring in some Amazon tax that's ready, you know, quote unquote ready to go so that they can start upping the, their ability to accommodate consumer expectation. I think it's going to be that the ladder.

Peter:

Yeah, I dunno, I feel like the more likely option, you know, just like in sort of the payments world is that some people will revolve around the Amazon solution because it's easy and it's trusted and they know it's going to be backed up with tech prowess and then any of the other six, you know, startups and other firms that are creating this technology will, will coalesce around some winter over there and then they'll just battle it out

Molly:

Forever. Yeah.

Peter:

Well, Molly, we're not going to battle it out forever. I think that's about it for today. Thank you so much for hopping on and, and yeah, given us some perspective from

Molly:

Any time you know, make sure to go ahead. I was going to say, make sure to give those people, you know, coming to Cape Cod now that it's nice and warm a hard time.

Peter:

I will give them a piece of my mind, but hopefully it'll all go well. Oh, Molly, I wanted to remind you and our audience that I'm on this coming Thursday, I'll be hosting a live session of the digital shelf virtual summit with Rolf van Wyck, who's the creative lead at Accenture interactive. He's going to be talking about how to refresh the digital shelf at scale and, and and brilliantly, he's an awesome speaker. You, you must remember him from last year. We had the live summit. Remember those?

Molly:

Oh, he did. He did the deep faith. That was amazing.

Peter:

Yeah, he's, he's a great speaker. You can register for it now at digital shelf, summit.salsify.com or following Thursday

Molly:

Or your money back. Love it or your money back. And if you act now, we'll include a free spatula spreader.

Peter:

Oh, I thought you were going to give away rolls of toilet paper like you do to the executive forum members.

Molly:

You know what? I'm not really that into Peter.

Peter:

Wow. You must have quite a stash. It was you, right?

Molly:

Her son to join the virtual summit session will receive a 30 day supply of toilet paper on one roll.

Peter:

Okay. We're going to have to now hold you to that because the FCC is paying attention. So with that promise and with the hope that you will join us this week, thanks Molly, and thank you to all of us. As always, if you enjoy the show, please leave a review wherever you get your podcasts. And thank you so much for being part of our community.