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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 studios in Boston with the stories that caught our eye this week. Rob Gonzalez is here with me fresh from his Thanksgiving gorge. Hey Rob!
So Rob, where do we start this week?
So I want to start with a personal story.
Oh, all right.
I was dropping my daughter off at preschool and I've got this routine. I drop her off, give her a big hug, open my phone to the Dunkin Donuts app, place an order for pickup. And then by the time I get to the Dunkin Donuts I'm just, I walk in, I grab my coffee. Sometimes I grab my coffee and bagel and…
You don’t have to talk to anyone.
Don't have to talk to anybody. Don't miss a stride. There's all these people. It's, it's like, you know, when easy pass came out and you had EZ Pass and like all these suckers having to get their change out and wait in line and you had EZ Pass and it's like, you know, it feels like that, right? So this morning the app works like it sets up my, my cart to checkout and then the checkout was broken. And so, you know, I could I guess have gone to Dunkin and bought the coffee, but my, my, this is kind of funny in hindsight, but my reaction was, I guess I'm not drinking coffee.
That's why if Rob's a little slow on this morning. Oh wait, no, I'm sorry. I do see a coffee cup.
Well I cheated on Dunkin. I got coffee from a competitor this morning. It was just quicker. But yeah, I think in this digital age, we're spoiled man.
I agree. I agree. I have the same thing where if there's a restaurant here called Clover, a really cool company that started out as a food truck in Boston is now growing. And I use their app, which is great. And I did the same thing the other day. I was like: “Oh, I don't want to talk to someone and then I have to wait for them to make it.” And I did exactly the same thing and I just went downstairs to the cafeteria and put together a box.
Man. It's just crazy how far this goes. This is why I'm, I mean, I know that the Nike won't sell on Amazon story's getting old at this point, but you’ve got to wonder how, if any introduction and friction between the consumer and the thing that they want to purchase it, any introduction of friction these days is dangerous. Right. Now Benedict Evans had a quote that I thought was pretty good in his newsletter. He's a general partner at Andreessen Horowitz out in San Francisco and the quote he had is:
“Nike won't sell directly to Amazon anymore. Amazon is having exactly the same push and shove with brands and suppliers that Walmart did a generation ago. Welcome to retail.”
It's the quote. It actually, it reminded me of there was a wonderful, wonderful book. I mean, this is maybe a 15 year old book at this point called The Walmart Effect, which is, and this is back when Walmart was just, you know...
Completely reshaping the industry and small towns across America
And small towns across America and all, I mean this utterly, utterly dominant, right.
And there's a chapter in the book, I think it's chapter eight, I think it was published in the New Yorker as a standalone article called The Man Who Said No to Walmart. And it was the story of the CEO of Snapper Mowers. You know, those, a bright cherry red lawn mowers. Yeah, they're high quality. They're American made meant to last a lifetime, all that type of stuff. And so Walmart was saying: “This is going to be the exclusive Walmart brand. We're not going to carry any of the other Walmart brands.” And he said:
“No, I'm not going to sell through Walmart.” And so the Nike story, I guess it's been news, it's a good reminder to, to realize that yeah, this, this push pull has been going on forever, right? It's news, but it's also the same kind of, you know, jockeying for brand power and position and, and consumer mindset that that's always been happening.
And yet retail has continued. So I, you know, I think the impact that we do see, I think is the, you know, small businesses are a struggle in this environment and again, have to differentiate on experience and, but that, that sort of trough that it takes for that realization to hit. And then the people coming online to create that, you know, coming, you know, setting up a brick and mortar stores that lean into that sort of like, where bookstores have become more resonant right now because people want that experience and they've leaned into that rather than trying to be the Superstore of books. They are catering and, and curating.
And some companies are doing a good job working through it and other companies get bought by Le Tote.
Oh my gosh. Yes. This story where sort of Rent the Runway kind of approach of Le Tote has now bought Lord & Taylor founded in 1826 bought by a seven year old eCommerce company that yeah.
Le Tote founded in 2012. For the price of less than a hundred million dollars, Lord & Taylor was purchased out of the Hudson Bay company a few weeks ago. I mean, Lord & Taylor is an iconic retail name. And Le Tote in purchasing Lord & Taylor, I think you've, you saw that day put the Le Totes employee as the Chief Merchant now…
Yeah, Le Tote’s Chief Merchandising Officer is now the head of Lord & Taylor. And so there's a few things that jumped out to me about this. On the one hand, it seems like the trend of digitally native brands sort of reaching their best possible scale and realizing we need stores particularly I think in the fashion and apparel world where people want to feel touch. Right? And then it's also of course the difficulty of department stores and how they've for have lost their way and, and uncurated… Well, I guess Lord & Taylor was never uncurated. They knew who their customer was and probably know who it is. It's just not interesting enough compared to e-commerce to bring traffic into stores.
Yeah. I mean there's at a high level, there's a lot to like about this. I mean the department store model clearly needs a little bit of a fresh look to make it more relevant to modern consumers. And the idea of renting higher end, higher quality clothing. I mean Le Tote figured that out and that could be a really interesting draw. On the other hand, it's hard not to see this a little bit as AOL buying Time Warner, right? Where is that where you know, what do you really know about, about brick and mortar retail? You're a seven year old company. I just remember even more recently than that, the JC Penny hired a CEO out of Apple, you know, the guy that was there that I had an Apple stores and it was a bit of a disaster, right? And it was a disaster because JC Penny tried to walk away from its lower and middle middle class and base and tried to go up market and sort of forgot who they were. And it's hard for a brand to transition from one thing to another thing. It's hard for a brand to, you know, Lord & Taylor has been around 193 years. It's hard for them to be both Lord & Taylor and a new thing at the same time. So I dunno, I mean there's, there's clearly risk also in this approach. It's not just Latote getting storefront, it's not just Lord & Taylor getting rentals. It's also going to be a huge cultural and operational challenge.
And, yeah, I mean a lot of the article, and we'll, we'll post a link to this on our show page, but a lot of the article talks about exactly what you're speaking of, which is the big push in these early days is going to be the systems work to make the e-commerce rental experience and combining that with how the stores then deal with that. They want people to be able to walk in and have the customer profile be known. What are they looking at creating kind of like show fields. They've sort of reinvented the department store experience to tie in more to what consumers expect from online and creating that sort of seamless experience. And that's what they want to pull off. But it's a big, big bat.
There's so many questions too that you'll, you think about a Bonobos Guide shop they call them, right? And you can't try something on and then walk out of the store with it. Everything that's in the guide shop is for you trying it on and then you place the order and they ship it to you from a warehouse somewhere. And like, I just wonder if they're going to go for really a showroom model at Lord & Taylor where it's very experiential and they're dedicating a lot less space within the store to holding inventory. And maybe they're using the Le totes, logistical network to ship the rentals and, and so on and so forth.
It looks like Lord & Taylor's still, they're still going to have stuff you can buy as well. So they're actually mixing the model. So you can come in, some stuff you can rent , and then you can also buy into your, like, what does that mean? It's a, it's a big challenge. And you know, last year Lord & Taylor did a 1.4 billion in sales, but they lost 114 million. And Le Tote is not profitable yet and now they have the debt from this acquisition. So, you know, there's a lot of headwinds in their way. But I do think this trend of let's bring a brick and mortar and e-commerce together in a very curated way is really interesting. It'll be, it'll be fascinating to watch.
Yeah, I wish them luck. I mean, anything that brings life in back to the department stores, I think people would welcome. So speaking of, you know, retail being retail. Retail is also just hard in every conceivable way and e-commerce introduces all kinds of new hard. One story that came out before the Thanksgiving break was Buzzfeed News that it was entitled: “Her Amazon purchases are real, the reviews are fake.” And over the last year, she had tens of thousands of dollars of purchases on Amazon.
So explain who she is.
So this was a reviewer is a reviewer, like a professional reviewer. This is a, you know, a, a gig economy job that I didn't know existed. But basically the process is: she buys something on Amazon and with her own credit card, under her own name, it gets shipped to her house and then she puts a review and it, because she purchased the product that she's reviewing, it's a verified review on Amazon. Because she's a professional reviewer, she does the review right, you know. She's got a picture or a video of the review. She's descriptive about the product and so on and so forth. Then the company that when the review goes up, the company that produced the product then pays her so reimburses her for the product and pays her for having done the review
I think through like an Amazon card, like a gift card. Yeah. It's not like they're not sending her a check. They're there. It's a gift card.
So she's, she's done thousands of reviews this way and this is the type of stuff, I mean we have to get somebody on the podcast that does review analytic in depth. I remember the Review Metta guys were making claims like 75% of new reviews on Amazon are fake or paid. You know, I see. I see stories like this and I think, well, geez, you know, she's written more reviews in the last year than probably me and all my friends and everyone I know have written in aggregate. You just can't compete with the volume of somebody who's doing it professionally.
And this woman who they call Jessica, you know, cause these are all third party sellers that are doing this according to the article. And she was saying: “I'm just a pawn in their marketing strategy.”. I think she's 26, but you know, Amazon says they prevent more than 13 million fake reviews last year.
Sure. But at the scale they're talking about it, right? 13 million fake review prevention is small potatoes.
A couple of weeks ago we were talking about this in the context of Nike and sort of the concern about counterfeit products. And it always comes because Amazon's objective is scale. Some of the niceties of what it would take to really pay attention in a bigger way to these issues are tough.
I know. Yeah. I mean, I mean they spent what, $400 million last year on fraud prevention and things like that. I mean, it's not like they're not trying. And I think that the people that have studied fraud material on Amazon, the number is small, it's small numbers, right? But it's still reputationally damaging. I look at the review things and reviews and fraud are I think two different problems. Reviews. I wonder how much they even matter. You know, I know the star rating matters a lot, but you know what I mean?
Yeah. Well the article says that that the reviews don't impact search results, but they do impact sales. So a consulting company pattern said that a one-star jumping a rating leads to a 26% jump in sales.
Yeah. I have no doubt that that's true. But it's the, it's the star rating that matters and people are gaming the star rating. And I just, I'm not sure how much the actual content of the reviews matters as much as it used to. I mean, I for one, find the Q&A a little bit more valuable. I find sites like Wire Cutter that do the recommendations a little bit more valuable than the reviews themselves. I know Yelp does a really, really good job policing their reviews for restaurants so that the Yelp reviews tend to be, you know, on average more authentic. But I found r Yelp reviews for myself to be relatively useless and right.
And I also, I love this story of this woman Jessica and you know, she's in her 20s and lives with her boyfriend who's a chemist and so she's like, doesn't trust the health and beauty products on the site cause her chemist boyfriend has found toxic ingredients and analyses of the unregulated products. And then she's afraid to use the electronic appliances she receives, which often come with in comprehensible instructions written in both English and Chinese. She took photos of one product, a foot spa without adding water or plugging it in.
Did you say foot spa? All right.
So it's, it's a lifestyle for her, but she doesn't tell any of her friends she does it. So that might tell you something.
Yeah. The scale of this is so big, right? That being able to keep on top of the millions of products that are being added every day to Amazon sites, that's just it. It almost seems like an insurmountable problem. It takes constant movement in strategy to be able to stop it.
I think it's hard, but I don't know that it's insurmountable. I think the issue for me, and there's probably people that have thought about this, this is what I want to get somebody on a podcast that that's an expert in this space, but to me, I'm not sure what the best customer experience desired outcome is. Like if you work your way back from a typical shopper and what's helpful for the shopper back to delivering a great review experience, what does that, what does that actually look like?
I mean, you know, we could sit here and philosophize and say, well, you know, all the reviews are absolutely are, are correct reviews and they're authentic and they're from the people who shopped and all this type of stuff. But it's unclear to me that that's actually the most useful impact of the shopper. Like people who buy stuff and review tend to spend time to review when they're angry more than, more than when they're excited and there's all these types of skewing mechanics to it. And I dunno, I mean there's a piece to me that thinks: “Well, you know, Amazon's doing a pretty good job. People find the star ratings to be really, really useful. I mean, the sales rank stat that you had from pattern is proof that people find the stars to be really, really useful. And maybe that's good enough, right?”
It's a little bit different than the fraud problem. The fraud problem. Again, we're talking, you know, way less than 1% of products on Amazon are likely fraudulent. But it's, that's to me more reputationally damaging this then this review problem. The review problem is harder for me to wrap my, you know, my own head around it and understand like, what actually is the goal here? What does good look like and why?
And there's a potential opportunity here for more established brands in that if this, if this sense in out in the ether of “Wow, if, if it's not a brand I recognize it could very well be counterfeit or it could be or these reviews might be being gamed.” If that, if that builds up in the consumer's consciousness, they might start to become less price sensitive and more trust sensitive. And I think that that's all to the benefit of big brands. And so the more, like you said, the more they lean into the fullness of the product page to have Q&A to have all of these other things really robustly created, the more trust they can build and consumers and they might divert some of their behavior to go towards trust rather than price.
I mean just thinking out loud here, I think you're onto something. For a consumer that really deeply cares, the review content is likely insufficient, you know, the review star rating is necessary but not sufficient. It's like the review star rating gets you to a point where you can narrow down to 40 different things or whatever that you might be thinking of, but you're going to rely on some type of outside of Amazon ranking of some kind, you know, whether it's Wire Cutter or, or whether it's one of these YouTube subject matter experts like that.
There's a guy who's a blender master on YouTube that does all the head to head comparisons. You know, you're going to be going to somebody who outside of Amazon who's expert to it in order to narrow down your choice, and you're going to be using Q&A and chat and other other ways to get more detailed information about the product and isn't typically available on just the feature bullets and packaging and things like that. So I think the future is for the concerned consumers probably outside of reviews at this point. It's, it's some other trust mechanism that the brands are going to invest in and TBD. I think Q&A seems to be pretty promising. It's seen a tremendous amount of growth. And I think there were some stats that show that it's catching up to reviews for something, some types of purchases in terms of, in terms of power.
So yeah, it'll be interesting to watch as you know, as Amazon continues to scale and as and as the, these sort of concerns bubble, what is the shift and what are, what are the opportunities that Amazon creates for brands to lean into to build that trust factor? Cause that's probably where the opportunity is. You won't ever cut all these weeds down, but creating processes where the serious manufacturers can really represent their products more and more authentically. I think that's where the opportunity Amazon will lean into.
And then outside of Amazon, I mean, if you want to outside, nobody has the reviews that Amazon has. So there's even more opportunity to be disruptive because you almost can't play the same volume game that Amazon's playing. You gotta do something different. So there, let me tell you what my dream for reviews is. And it's never going to happen unless someone builds it. But this is what I want. I want to filter to reviews for people like me, right? So like for Yelp for example people go to all my favorite restaurants in Boston are three stars on Yelp. And it's because you go to, you go to the reviews and the reviews say: “Good food, but way too expensive. One star!”
It's like the expense and the food are two totally different things. If I don't care, you know, 20 bucks versus 30 bucks, don't ding them on the star rating based on that. I just want, you know, I got kids and I don't go out that much. And when I go out with my wife I want the food to be great, right? And you see a lot of that type of stuff. And so it's like, you know: middle age, parents, date night. You know. Show me reviews from those people.
Middle aged, parents, date night, shaved head.
Occasionally rate. So when you look at, cause like open table has the top rating, but then they always want you to rate the individual categories of the restaurant. Like to your point, like, great for date night, how was the noise? And you know, sometimes I do that if I'm really enthusiastic about restaurant, but more often than not I won't do that. But that's, you're right. That's the sort of level of specificity that actually helps because it divides out the sort of the cranks that are just taking one thing and making that the reason why they gave the one star.
Like I want to filter out reviews from anybody under 25, like full stop on every site that I'm at, right?
Seriously, it's just one of those things. It's their concerns and their stage of life and all the things that they care about or you know, in broad strokes different than me. And I don't know. That's, that's my dream is to be able to filter reviews that way. So I think if you're, if you're looking for a way to compete with this volume, that game that Amazon has, that's an interesting path to attack.
Well, we now know what Rob's next company will be.
Oh, now we have to go buy the URL. Well, we're heading off to buy a URL, but we look forward to reuniting with you next week. In the meantime, thank you so much for joining us. Please do if you have any thoughts on the news of the day. We are on our LinkedIn page or @WinDigitalShelf on Twitter. And thanks again for being part of our community.