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Welcome to Unpacking the Digital Shelf where we explore brand manufacturing in the digital age.
Hey everyone, Peter Crosby coming to you from the Digital Shelf Institute studio in Boston with our weekly episode of quick takes on the industry news that you might just want to pay attention to. Joined by Rob Gonzalez who's here in our studio.
And Justin, you are in Baltimore?
Yes, I am. We call it Balmore here.
Balmore… He joins us from Balmore and everyone in Balmore and Boston and everywhere else heard the news this week that Nike has stopped selling directly on Amazon. There should be some sort of sound effect happening here that wait..
They've stopped selling directly on Amazon. You might remember about two years ago they started a pilot program. And now they've pulled the plug. The the big picture is reported by Morning Brew said: brands the size of Nike have said Amazon doesn't work hard enough to wipe out its flourishing community of counterfeit sellers that an Amazon strict price control can devalue outside brands, products. Reaction?
Yeah. This is, this is just replaying the reasons that Nike wasn't on Amazon for awhile before, right? There was, there was a ton of Nike counterfeit. People counterfeit Nike because it's a high value, high margin, high price visible desirable brand. I mean it's one of the top four recognizable brands on planet earth I believe. And so they were, they were angry about the counterfeiting and they were also from as a premier brand angry about Amazon's price matching policies where you know, a local retailer might have a promotion, a Nike footwear products and Amazon would match the price and then keep it there destroying the value of the brand as a high price desirable brand that you save up for. Right. And I think both of those things, they talked with Amazon about it. I think they hadn't, they had come to an agreement where Amazon would, would fight some of the fraud a little more directly.
Amazon has a, the project zero and they've invested a lot in the in brand equity and counterfeiting and stuff like that.
Project Zero for our listeners, just to be clear, is their automated program that's actually scanning to take down and remove suspected counterfeits? Right.
Yeah. Not just automated. I mean they have hundreds and hundreds of people that are employed at Amazon HQ that are, that are working on this problem. So the, Amazon's taking it seriously. But yeah, this, the issue is that there's just too much nefarious participation in the open marketplace for them to manage effectively in Nike's. I think from a brand perspective, I think they're doing the right move for Nike. Nike kind of doesn't need Amazon. Everyone knows Nike. People want Nike's, they've got a great consumer relationship, they've got a great consumer brand. They can, they can survive without Amazon. So I think for them, the protecting the brand equity and the brand value matters more than the incremental sales.
I think that the scale of the counterfeit stuff on Amazon. I was reading from a journal article that the journal had done covered earlier this year: 10,870 items for sale between May and August that had been declared unsafe by federal agencies are deceptively labeled, lacked federally required warnings or are banned by Federal regulators. A new product listing is uploaded to Amazon from China, every 1/50th of a second. 1/50th of a second. And then in their SEC filing, Amazon blocked more than 3 billion suspect listings in 2018. So even with a partner like Nike where it was in their interest to make sure they at least had Nike footwear locked down and protected, it's just an impossible mountain of stuff to fight against it seems like.
Yeah, I mean there's a real tension between allowing open and fast and self-service marketplace participation and also locking down the quality of the products that are in the system. You know, those are those two fundamental approaches to the business are, are in conflict and it's just hard to see them solving the problem anytime soon. So if you're a brand like Nike and you've got a great consumer audience and you've got your own Nike stores and, and you've got the, the Nike running program that people subscribe to, I believe it's called Nike plus, right? Or something like that. And they've got great consumer relationships. Go on your own!
And I think other brands could learn a lot from this. It's hard to become a Nike, but the more that you own your consumer relationship and the more that you've got shopper loyalty, the easier it is for you to play hardball in this way. I know like others like Keurig have done it before and, and one because Keurig also has that type of that brand position of brand equity and brand loyalty from its purchasers and they've got other channels they can sell through that or that can make up the volume
Yeah. And I think Nike is doing, not only leaving Amazon, but they are being much more choosy about where they decide to sell. In 2017 Nike did business with 30,000 retailers according to morning brew in the future. It'll limit itself to about 40 partners
That they're related. In that when you're trying to control your brand on Amazon, you have to control your distribution channel. So a lot of the weird stuff that happens on Amazon happens because you know, you as a brand manufacturer, you're selling to a local retail chain or you're selling through a distribution group or you're selling however you're doing it. And they are listing the products to just unload them out of the warehouse and clear up space after some period of time and they're listing them cheap and they might not be doing it with great imagery. They might not be doing it with great description. And so like if your goal is to protect MAP and protect the brand, you ha you have to clean the channel. And, and the only way to clean the channel and, and protect the brain is to cut down. Now 40 might be radical, but you know, if their goal is to really clean up Amazon, I feel feels roughly right now Nike is again Nike's a type of brand that can do this and survive it.
Did you guys see the so there's an article in the Washington Post about Amazon said how Amazon's quest for more cheaper products has resulted in a flea market of fakes are pretty harsh title. I think what was kind of funny about that as the Washington post of course is owned by Jeff Bezos. So he allows that type of headlines, accounts
The Chinese wall between editorial and billionaire owner. That's tradition.
Yeah. But on the other side, like I haven't really bought fakes. Right. So I don't have a, I think through the review process and things like that, it does expose the fakes that are out there. Do you see this as a giant problem on Amazon or just something that can be remediated through things like reviews?
Well, it's funny you bring up reviews. One of my favorite review sites that I've been subscribing to and recommend is called Review Metta. And Review Metta has been using machine learning and AI to figure out what are the reviews that are obviously solicited or actually not obviously solicited the ones that look like they're robotic in some way. The ones that look like they're just the canned reviews that every smart Chinese seller or other seller, it works to get up there by paying a reviewer and review groups and stuff like that. I think that the stat that I saw last month was that up to 75% of new reviews are not reviews from a shopper like you or me. 75% of the reviews are, have new reviews, are reviews that are in some way pay to play. So I don't know if that mechanism is as effective as it was five years ago.
People, again, because it's an open platform, people have just gotten insanely good at gaming it.
Well, and these things are actually super connected because of the counterfeit products the, the counterfeit products are getting bad reviews, but they think they bought the actual product. And so people are going to the actual product page on Amazon and leaving these horrible reviews and so they're getting dinged. And so the actual original brand with high quality products is losing business that's affecting them not only on Amazon but everywhere else people shop because Amazon reviews are so influential.
Yeah, it's interesting. I mean, there's a bunch of the political candidates in the U S and in Europe are talking about legislation to help curb this challenge some way, shape or form. But you know, fundamentally speaking, if you've got an open marketplace with millions and millions of participants, it's some amount of this is just going to happen, right?
You know, you look at any large community, anywhere on the internet that's ever happened, whether it's Twitter or Facebook, the Amazon marketplace dig back in the day,Reddit, whatever. There's just, there's a lot of mess and there's a lot of noise and there's a lot of just humans being humans.
When we think of the people that are listening to us now, you know, it's great to be a Nike. We all would love to be a Nike, but I think the vast majority of brands are somewhere in the middle where they focus on creating great products. You know, whether it's a duvet or whatever, they might be manufacturing and work hard at that product, but aren't the, you know, that don't have the direct to consumer connection of a Nike. What do they do in this instance? How do they fight this? What is the, what is the answer? Rob, tell us!
This is hard. You know, at the end of the day though, we had that interview with Sonesh from Bosch and they work really, really hard to build out the direct relationships with their end buyers, both pros and amateurs. And that's a new program for Bosch that they weren't doing 20 years ago. 20 years ago, they had to manage the channel sales relationships as their primary customer. You know, Home Depot is the customer, Lowe's is the customer. Now the verbiage is even changing, right? The customers, the, the pro that's onsite, that's using the drill. And I think any brand can take that mindset. You know, brands have got to go back to basics and building trust and building loyalty and a lot of the things that that helped a lot of these majors become what they are today. You know, I remember growing, growing, go back to the eighties go with seventies eighties nineties brands like Tide would do the Tide challenge and things like that to constantly talk about how good their product was and how much better it was than the competition and so on and so forth.
And get back to basics on, on doing that. Right. I think a lot of the big brands have, due to consolidation and owning just a lot of shelf space have sort of focused a lot more on scale optimization and focus a lot more on channel optimization versus you know, consumer brand loyalty. And if all they need to do is make that shift.
But I think, yes, it's back to basics, but it's also because there are now so many channels through which you can and need to do that. It's a whole set of new capabilities to be able to have that message be reaching your consumer across all those channels as opposed to the Tide challenge being on TV.
Sure. But if you look, if you look at us, let's look at this podcast, right? Yep. There's about a billion places that you can talk about a podcast and you can do it on Apple in and you could optimize for Apple search and promotion there. You can do it on Twitter, you can do it on, probably people are promoting podcasts and cross roading on Tik Tok and other new social media as these days. And we're not doing all of them right. You know, we're, we're, we're focusing on LinkedIn, we're focusing on Apple. Like we're just focusing on a couple of different places to get them, get the noise out. I think that that is the same type of approach. Like if you're Patagonia, you know, you're not, you're big, but you're not that big. And you're not going to try to blanket the entire universe with a pro environmental message and tie it to your brand. You're going to focus on specific channels where, where your audience is most likely to engage. So yeah, you can be everywhere, but you've got to focus your energy in specific places. Yup.
So I, I mean, I, I do believe that that Nike is one of these examples. The sort of the growing power of marketplaces is not just happening in the B2C world. It's really, it is very much happening in the B2B world. And I think Justin, you're bringing some some outside thought leadership to bear on sort of where I think Forester thinks B2B commerce is going. Do you want to sort of lead us off?
Yeah, there was a, there's a pretty interesting, it's like a five or six page white paper released by Joe Cicman and Allen Bonde from Forrester on, they call it “The 2020 predictions for B2B e-commerce and marketplaces”, which is interesting. I yet, we haven't seen a lot of that combination of what if e-commerce and marketplaces together. So it was interesting. But the basic premise of this was that buyers, they do have a preference for marketplaces right now. Consumers with buyers have a preference from marketplaces because the marketplaces are trying to remove this friction in the customer experience versus kind of the way we've always sold. And so this is really about buyer preferences and change in buyer behavior versus how companies will actually respond to it. Right. And so that's kind of my question as we go through this report is how do companies respond to this, especially at their, you know, different levels of maturity.
So here are the kind of the main points. Number one was sellers will embrace digital product management or they'll fall behind number two manufacturers. So sellers would be distributors. So manufacturers will double down on signing up non-transactional partners. Number three is mega vendors will pivot away from acquired legacy platforms toward partnerships. Number four is headless commerce will become the default. And number five is the rise of marketplaces will drive demand for tools and talent. And I think there's some interesting, there's some interesting points in there, but first of all, I love that Joe Cicman is actually talks about E-business. And I want to reclaim this word so bad. E-business, you know, it's a word from seven, eight, 10 years ago.
Rob Yeah. 1997 called and want their word back.
Joe Cicman is like wiping the dust off of that. That's awesome.
He did. We got to take a little bit of credit. This would show I had, I had breakfast with him and I said: “Joe, I want to reclaim the word E-business.” And I think we had a good conversation. I don't know if that, if I led to that, but…
Tell me, tell me why does that matter? Why does, why does that come out to you as something important to do?
Cause in B2B, E-business is such a more broader term. Like e-commerce is kind of transactional, right? It's about the actual purchase. But ebusinesses include so many different things, includes, you know: how we deal with our channels, our channel partners, how we deal with EDI, e-procurement kind of adopt part of the business and of course digital and eCommerce. And so e-business kind of wraps it all. I don't know if it's a good idea to resurrect an old word, but I kind of liked the idea of, of talking about eBusiness again from the early 2000s.
Isn't it like a, a little bit bigoted towards B2B is just being behind. I mean this feels like a 2005 IBM commercial.
That's why I love it. Rob. I love it. I love it. And we're going to resurrect something old and make it maybe not so old.
So when I was looking at this report, there are sort of three of the predictions that actually jumped out at me as being related. And I wanted to see what you guys thought about this, that, that the idea of sellers embracing digital product management or fall behin,d the mega vendors pivoting away from the acquired legacy platforms toward partnerships and then the rise of marketplaces for tools and talent. It felt like sort of people technology almost end process kind of boiled into those three things. O wanted to see if those linkages make sense. And then I think it's worth digging into each one of those particularly cause they're so related to the shift.
Yeah, absolutely. I think the first one is sellers will embrace digital product management. I think what the idea of this is the, I'm creating this role of digital product management that that, that talks about how each channel will serve the buyers. So digital product managers will actually even be per channel that's out there, you know, and they'll monitor the customer's behavior to see how those customers are gonna switch channels. So by channel is they mean, you know what marketplaces they will enter into. I understand this one. And I, and w he's talking about sellers here. I'm wondering if, I'm wondering if it's not as much sellers cause I'm not seeing as much in the distributors side of this as I'm seeing on the manufacturing side where manufacturers are starting to say, okay, we have all these channels. We need people, a digital product manager to manage all these different channels. Understand where customers, going back to that point
Of building a brand, Rob in building a brand in B2C of actually building a brand and B2B that we're actually interacting with our customers, we know what they're doing. Is this more of a manufacturing play than a seller play?
Well and before Rob answers that really good question. I think it's important to Joe and Allen describe this role that they need to, that it will emerge through this as a hybrid of retail merchandiser, B2B sales rep and consumer packaged goods captain. And I think that actually is sort of what we're talking about here, which is for a while now CPG has had people who own Amazon, who owned Walmart, who owned Kroger, who and they live, breathe, eat, get incented to drive success on those channels. And I think maybe that's a new, a new thing in the digital world for B2B.
Well the interesting thing about the CPGs though is the, the team that owns Walmart typically sits in Bentonville and a lot of them haven't seen that much turnover in the last five or six years. So it's a, it's a whole team and oftentimes they're still relying on corporate for digital imagery and stuff like that. And, and the DNA of the teams had been evolving but slowly the more interesting place, and this is where maybe the B2B industrial supply, electrical supply, HVAC, plumbing, all those guys can learn from is on the CPG side, they started experimenting with this like almost not intentionally 10 years ago by putting some 22 year old in charge of Amazon. Like: “Ah this Amazon thing, it's confusing. There are the, it's low volume. Fred, why don't you do this? We’ll give you an office and everything”
And it's like in the basement and they give him some Roach killer and five hours energy and so he's, he's crushing red bulls and doing Amazon.
And the thing about Amazon is it's, it requires you to have all of those capabilities in one person. You know, you're running the ads, you're dealing with the inventory, you're dealing with the demand forecasting, you're doing all this sort of stuff. And because the volume was so low and the risk was so low, they sort of, they could experiment and they could build up those muscles. And over time, once the volume started getting higher category by category, you saw the CPGs then creating digital centers of excellence. This is, I mean think 2011 12, 13, 14 everybody had some type of digital center of excellence that was, that was cross departmental. And then as volumes keep going up, they say, well you don't like executing on the digital shelf is a little bit differently. So let's get a chief digital officer right there. They're not a chief marketing officer or chief digital officer has all these other different types of skills and, and spans of control.
Like some of them actually own supply chain for eCommerce and whatnot. And then eventually you see everybody reverting slowly back to business as usual. But now all the different teams know how to do digital. Right.
So can B2B leapfrog this? I mean, is that part of what Joe and Alle going to, was trying to help them sort of fast forward that, that painful process of evolution.
Probably, I mean how long did it take the Brits to go industrialize in the 17th and 18th centuries, right? A long time. And then how, how long did it take the Chinese and the 20th century? So I think you can, there's probably a lot they can learn. I mean, minimally you can imagine if you're a larger manufacturer, you've got to hire somebody who knows how to do this stuff and put them in charge of the digital channels and not have to test and learn every single thing that you do. But I think, I think the, the overall pattern though is a similar pattern. The volumes is gonna be low. I think there's a stat that's like 14% of North American and EU industrial manufacturers have good digital capabilities as, as Forester measures them You know, so it's, you can, you can start small with just one person focusing on this stuff probably and make progress.
I think the next one, the next one they talk about is mega vendors will pivot away from acquired legacy platforms towards partnerships in the, and the main point of this and the article was that the costs to refactor all of these old platforms is significant, which it is, right? And, and so moving to eventually headless type technology is that as the next point that the mega vendors would pursue. Again, this, this assumes that there's a legacy platform in place, right. And the, and that they're actually seeing some level of success, which, which is why he targeted and mega vendors, which is absolutely true I think. I think it's really only the giants that are out there that are, that have this type of technology to be able to move to something you know, more advanced in modern like, like headless that's out there.
Yeah. This one feels to me the, the subtext here too was it's costly to upgrade an on premise legacy system. It requires a lot of money and time and also a certain type of technical talent and a lot of, a lot of the folks like if you're looking to to flip everything over pretty quickly it was hard enough to get the things stood up to begin with. And then you've got to basically reimplement and then two or three years from now you've got to reimplement again. And that's sort of the cadence of the on-prem systems at at some point it's easier for most of these guys to stay relevant to go to the cloud.
Well, and it goes back to the need for agility across this whole effort, right? The on prem stuff with so many customizations built in and loaded over releases over time, it, the ability to be able to shift on a dime to take advantage of an opportunity to respond to a competitor is really limited with these sort of legacy systems. And I think that ties into number four. The headless commerce will become the default because they need to achieve this level of sort of snap on agility to try new routes to market, to change pricing, etc on the fly.
I like to call out Cicman for calling out headless commerce here. Two months after he wrote that LinkedIn blog post that that made five have the phrase headless commerce, headless commerce is dead. Here we go.
I think we should get Joe on the podcast and have him defend: Which is it Joe?
We could have Joe, you know, version one Joe attack, headless commerce. And then version two, Joe defend headless commerce.
Joe if you're listening, we want this debate. Come on.
Well look, I did a workshop at BDB next you know, about headless commerce. And the first thing I had to do is define what headless commerce was, but for the audience right now for myself, for the audience, because nobody actually knew what it was.
So how did you define it?
Let me put you on the spot. Like how did you define it? Cause I think there's a lot, certainly a lot of our listeners who, who may not know what it actually means.
I actually use the analogy, it's like, it's like having an ERP system without any screens. I'm like, you know, something that you have to, you have to build all the screens. The ERP has all the API and the microservices to be able to build a screens, but it's up to you to build the screens. That's, that's, that's one. It was it was a loose analogy, but, but I think resonated, resonated pretty well and that that is the ability to be able to build what's appropriate for your company using APIs and microservices versus having kind of these all in one bundled products and platforms.
In broad strokes, the operational advantage to a lot of the headless systems for folks that are trying to understand this particular point is that traditionally you've got data that's mastered in several different places. So if you're a B to B industrial supply manufacturer, you haven't, typically ERP does the lion's share of the work. If you're a larger and a little bit more digitally mature, you've got a product information management system, a PIM system, you may have a digital asset management system, although most of these guys don't, they just use the PIM or the ERP for that or, or a shared file drive or something. And then you've got your website, which could be an eCommerce website, but often is just the WCMS. And so what ends up happening traditionally is you're kind of copying data from the, from the ERP system to the PIM system, the PIM system to the eCommerce platform. But not every one of these systems can master every little bit of information. So if a attribute on a product is searchable, that's configured in the eCommerce system, but it might be mastered in the PIM system and so on and so forth. So the, the headless systems just remove some of the mastery. So like the front end that WCMS doesn't actually store any of the data. It's just pulling it live from API is off of the PIM, which is acting as like the headless server. And so it's just one less place to manage information that and just having one less place to manage information gives you agility cause it's like fewer things can break and all that type of stuff.
So I think you know, the first one talked about this need to start managing on the start managing the digital-ness of these new channels and having a role in place that is focused on how those channels are successful. We're talking about how do you change your systems to sort of move this thing up and faster and make it responsive to the needs of those channels. But then ultimately, probably in some ways the hardest and the most important of these recommendations of these predictions are the rise of marketplaces will drive demand for tools and talent. At the end of the day, you need people that can come in and sort of be entrepreneur, entrepreneurial inside of these, you know, more established businesses to be able to get this done. Right.
I think that's gonna be hard dude. That's what everyone's struggling with is that, I remember being in a e-commerce advisory dinner in New York two years ago and Cody was, was, was there and, and they, there, they had their Chief Digital Officer and one of the topics of conversation was talent in particular. And he brought up the point that the folks that are really good at digital are just more expensive. There's, there's fewer of them. It's just a straight supply and demand thing. So if you're paying them according to your standard corporate pay bans, you can, so you can't afford the ones that actually have experienced that are good and you have to make an exception. And everybody in the room was talking about that.
And I think a lot of them are often based in cities. They're not living out where the manufacturing plant is. Is this an agency part of this?
The other part of this is, is that, you know, this is, these are not sexy businesses, right? They're not cool. And so if you're a good e-commerce person, good digital person, you're in a big agency or you're in a big or a cool brand, right?
Getting someone just getting, even if you're paying them, they write them out. Just getting someone to work for an industrial manufacturer or industrial supplier, it's not very cool and sexy. And so it's really difficult just to attract that talent regardless of compensation. So this talent side is very difficult. Yeah. And the other part of this difficult, and this is, is the marketplaces themselves. I mean, where are they? Right? So the marketplace is, I mean you have Amazon, you have Alibaba, but you don't have a ton of, you don't have a ton of other marketplaces that are out there and frankly there's not. They're the ones that are out there primarily bootstrapped and not well capitalized right now. So I think, I think 2020 is going to be about the establishment of some of those marketplaces as more startups than, than kind of established entities
Which just goes to point out even more that you need sort of agile, entrepreneurial, mature sort of startup minded people to be able to keep up, to figure these new opportunities out. And that's why I'm wondering if, if talents, the issue and the, the segment ain't sexy and the town where the manufacturing plant be might not be the first place. A lot of these people may or may not move. Is it an agency play here? Like should, should a brand manufacturers in the B2B space really be trying to find the right digital agencies to partner with on this? What does that does that work?
Absolutely, absolutely. I think partners and distributors, I think there's a small kind of nimble digital first or digital focused distributors and in agencies that I think are great partnerships. And I think that's what the article kind of concluded as well as to establish those relationships and partners to be able to do this.
That's Forrester telling all of us what to be thinking about and B2B commerce in 2020. I always love, we'll have to revisit these predictions at the end of the year and see how Joe and Alan did. But to me they feel pretty, pretty spot on.
If I have any quibble on any of this, it's just a time span. Yeah. You know, it takes a decade to move an industry from one, one thing to another. So you know, 20 I think if he, if he said 2020 to 2030, that probably makes more sense.
I guess this is the, this is a wake up call. This is the alarm bell ringing, right? And then the question is, what are you guys, listeners, doing in your 2020 plans to move in these directions? And how are you thinking of this first phase?
Great. All right. So that is our show for today. Any thoughts that you have on these trends that we're talking about? What's going on with Nike? What's happening? We'd love to hear about it. Please go to our Linkedin page. Tweeted us @WinDigitalShelf. And of course, if this content is useful, we'd love it if you'd leave a review wherever you get your podcasts. But most of all, thank you so much for being part of our community.