EP218 - Amazon Q1 2020 Earnings and Covid News

EP218 - Amazon Q1 2020 Earnings and Covid News 

Episode 218 covers some Covid-19 related e-commerce news, and provides an analysis of Amazon’s Q1 2020 Earnings.

Announcement

Next weeks show will be a live listener question show. Join our Zoom webinar on May 6th at 9pm ET, and you can watch us make a show, and ask your own questions.

https://us02web.zoom.us/j/89837125650?pwd=QTM2QWZKRDlSNFFIU0xnRmZ2VWowQT09 Password: 877145 Webinar ID: 898 3712 5650 International numbers available: https://us02web.zoom.us/u/kuutcaEJm News Shopify becoming a marketplace?  Google shopping is now free Covid impact 630,000 retail businesses have been closed since mid-March (about 61% of sf sq) Forrester 16% E-Com -> 25% in april (70% digital influence) 3% digital grocery -> 10% digital Grocery Goldman Sachs: Retail Chain down 20.9%  ShopperTrack: Traffic down 48% Bankruptcies – JCREW, Neiman, JCP, Tuesday Morning, Lord & Taylor  Gordon Brothers 25,000 stores and 100,000 restaurants could end up closing permanently this year  UBS 100,000 retailers close by 2025 (15% -> 25% e-com penetration) Everyone making PPE Happy Story: Pets (“adopt a pet” surged about 335% in volume)

Simon Properties Opening Plans

Amazon Q1 2020 Earnings Earnings Release (PDF) Presentation

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 218 of the Jason & Scot show was recorded live on Thursday, April 30th, 2020.

http://jasonandscot.com

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this is episode 218 being recorded on Thursday April 30th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

Scot:
[0:38] Hey Jason and welcome back Jason Scott show listeners Jason 40 jump into it we do have a pretty exciting announcement we tested about a month ago now we tested a live event
so with listeners and that went really well we had a lot of folks on and got a lot of really good questions and engagement from
the community out there so next week we are going to do another one of those
you zoom so I think everyone’s pretty familiar with zoom at this point so put May 6th at 9 p.m. Eastern
that’s 8 p.m. central 7 p.m. mountain
6 plus 6 p.m. Pacific on your calendar in this episode show notes you’ll find a link to that Zoom
and we’ll be sharing the link on Twitter
LinkedIn and Facebook all the socials so we hope you’re able to join us and just kind of hang out talk e-commerce see each other we can’t
get together at conferences right now so it’ll be a lot of fun and we’ll talk about whatever topics everyone’s interested in talking about.

Jason:
[1:41] Yeah and if you have any questions feel free to send them to us in advance.

Scot:
[1:45] Jason how are you doing this is probably the longest period of time you haven’t been on a plane in 40 years.

Jason:
[1:53] Yeah some maybe not quite that long but yes I like to say I’m living the covid dream I just wish I could wake up from it.

Scot:
[2:03] Are you frantically checking your tickets to make sure you don’t have a flight tomorrow or you you’re out of the.

Jason:
[2:10] No but there are still some like cruel reminders like there’s you and I were supposed to be in Arizona if I’m not mistaken doing a gig together this week which I was very much looking forward to.
And so like a reminder on my calendar will pop up for the check in at the Marriott Inner in Flagstaff or whatever and I’ll be kind of sad.
But I feel like the bigger question is how is my family doing if he guess they’re not used to quite so much Jason.

Scot:
[2:45] Yeah and a little behind inside baseball your son and I had a little mini Star Wars podcast before this sucks one.

Jason:
[2:52] Yeah he’s been planning that all day he was super excited he found out that you and I had a podcast and so he wanted to start a Star Wars one with you beforehand so that was super nice of you.

Scot:
[3:02] He I’ll give you he asked what is he 5 6.

Jason:
[3:06] For four and a half.

Scot:
[3:07] He asked kind of like 8 to 10 year old Star Wars questions so you’re doing some good parenting.

Jason:
[3:13] Yeah I will.

Scot:
[3:14] A plus five stars on parenting.

Jason:
[3:17] Yeah in the morning I’ll walk by and he’s having like morning meeting with his kindergartener teacher on zoom and he’s like explaining the nuances of how Anakin got turned to the dark side by Palpatine and that
Palpatine was actually tricking him.

Scot:
[3:33] He’s like forget the alphabet let me tell you about Anakin.

Jason:
[3:37] Exactly yeah I feel like he’s going to be illiterate but super well-versed in the Star Wars universe.

Scot:
[3:43] He’ll do fine I that’s how I got here.

Jason:
[3:44] Yeah it’s all it’s all a trade-off how are you guys doing in the pandemic.

Scot:
[3:51] It has been a bit of a roller coaster over at spiffy on the personal side fine no no no issues North Carolina has been,
pretty mild from a,
pandemic perspective so but we’re still Sheltering in place and following all the good rules and all that good stuff but on the business side it’s been a bit of a roller coaster the I don’t know if you saw it or not but we had
ABC they do a show called pandemic what you need to know and they did a four minute episode on us this week about.
They called the pandemic pivot so we’ve had to
so a big segment of our zits if you was rental car companies and they’re obviously feeling pain because folks like you aren’t out running cars
and then another big segment of ours is office Parks so that was those two big hits that we took so we’ve been diversifying as rapidly as possible
and the ABC show highlighted we’ve moved into disinfecting vehicles but then also one of our Fleet customers asked if we would disinfect the facility we said sure so we’ve added that as a pretty fast growing product line.

Jason:
[4:58] Yeah I so I’ma get spiffy Fanboy so I’ve course I saw the ABC segment and I will put a link in it in the show notes I think have to put a link to like the Twitter post because,
the link on the website isn’t Perpetual but that I thought that was a totally cool story it seem like you both,
expanded you’re offering I wouldn’t call like disinfecting Vehicles necessarily a pivot for you but then the facility’s thing I thought was very agile and clever of you.

Scot:
[5:30] Yeah when desperate times call for desperate measures so we we put it out there and then
you know the other benefit is being on national TV is very good promotion so we have had a surge of activity this week so that’s we’re kind of we’ve been down the roller coaster and now we’re kind of heading back up in here.

Jason:
[5:48] Yeah I if you watch that that segment and then you click through you have a facilities disinfecting landing page
on your website now and it’s super fun because there is a dude with a disinfecting cannon that seems like he can blast like
seems like he could like disinfect an entire Costco from like one location with that thing.

Scot:
[6:10] Yeah we’ve invested in all these spray misters and all kinds of cool disinfecting technology.

Jason:
[6:17] Yeah I’ll bet you you have learned some things you you didn’t necessarily think you would ever learn.

Scot:
[6:23] It’s true as the software guy I get over my skis a little bit on chemistry but hey I can I can at least say the works.

Jason:
[6:31] That yeah Bill Gates I feel like as a software guy that’s pretty credibly giving the pandemic talk so if he could do it you could do it.

Scot:
[6:40] Okay.

Jason:
[6:42] Have you are you keeping one foot in retail are you following the catastrophe that is covid news in retail or maybe we’ll get to that in a minute should we do.

Scot:
[6:53] Yeah and we thought tonight we’d go through a little bit of news just kind of catch up on some things we haven’t been able to insert or talking to guests with the the big news tonight that we want to really get to and spend a fair amount of time on is the Amazon results
or what I would also call hey shareholders take a seat so that was kind of a we’ll get to what that means here in a minute.

Jason:
[7:14] I like this I like the cliffhanger.

Scot:
[7:17] So two before you to Amazon we wanted to spend 5 to 10 minutes on some of the other things going on
and I’ve been dying to chat with you all week about these two and I really just want to see it up to here your your thoughts so the two big things and I kind of put these both in
and kind of newish marketplace news so number one Google shopping announced that they’re bringing back free listings didn’t announce it this way that’s a,
that’s my my framing but remember I think it was 2012 so it started to be as this thing called Frugal that was just free then they
changed it to Google shopping branding wise and then that was paid and free and then in like 2012 it became paid only then they had a brief kind of a
flirtation with kind of shopping kind of aggregate doing their own fulfillment kind of a thing
and then kind of like it’s a good Postmates like a Postmates kind of a business model they get rid of that and then now so then it was just,
paid listings and then now they’re adding back in the unpaid listings they talked about you know pandemic had accelerated their thinking and wanting to help.

[8:31] Small businesses so that was one news I kind of think what’s going on there,
is they’ve been investing a lot in this Marketplace when your revenue from retail is way down that’s the best place to launch a Marketplace because you can’t really cannibalize you’ve already cannibalized the ad Revenue that’s always been the big hurdle for them becoming a Marketplace
also during the pandemic their shopping experience really really suffered so I tried to buy some paper towels and it was like going through.

[8:58] The darkest alleys of Internet kind of up in the Dual shopping there,
another one I wanted to ask you about a Shopify so they had this little app they moved their their notification of shipping to an app whose name arrival arrived I can remember name of
and then they just.

[9:17] That’s the former name and then they just kind of change the name of arrived arrival to shop and then they put a little bit of a front end on it and everyone’s always been kind of wondering you know
what if Shopify became a Marketplace
so I know the Strategic Regice your teacher a guy talks about this all the time Ben Thompson he was like losing his mind he was so excited so
but you know
and there’s there’s a lot of different ways to look at it I kind of think they’re going to be a front door they’re going to kind of get into the discovery game the challenge of that is when you have all these merchants.
There’s a data problem in a don’t want to I don’t want to step on your toes you may be wanting to talk about this but how do you feel about those two things and we can kind of like chat about it more.

Jason:
[10:04] Yeah it depends on how you look at both of them so I think in and of there’s the themselves both of those pieces of news are like,
kind of nothing Burgers right like they like neither one dramatically change their experience or improved things in a
in a way that is likely to be very meaningful to real consumers and so that was the only thing you were ever going to see from Google about Commerce or the only thing you were ever going to see from Shopify about marketplaces I would say it was totally silly
what’s what’s potentially interesting and exciting about both is that you know they could be sort of first initial steps into,
much more significant Commerce activities right so that that’s what would be exciting to me as if Google really invented,
a new experience around marketplaces on their platform or if Shopify really leaned in but but.
These two steps by themselves are like not very significant in my view.

Scot:
[11:07] Do you think they lead to something significant.

Jason:
[11:10] I think we’re going to see other efforts I think the jury is going to be out it’s interesting they both suffer from similar problems in my mind like the messaging about both is pretty muddled so I start with Google shopping.
Right.
You know Google is an amazing company and so it’s always been totally shopping to me shocking to me that they’re they’re shopping offering like The Branding is always super.
Confusing and their naming conventions are constantly changing and it’s like my job to keep up on this stuff and I can’t keep up so I have no idea.
How average consumers are but so for example hey you know they did a press release with this white grandiose headline.
Group listings on Google shopping is now free.
It’s now free to list your products on Google right and so there’s a lot of people that were like paying a lot of money to list their products on Google and they’re like wait do I so now everything I was paying for I get for free which is of course.

[12:15] Not the case whatsoever essentially what they’ve done is they like if you pay for a what used to be called a product listing add or you know you you do a Google shopping listing.
You that add shows up in the shopping tab in Google but it also shows up in Blended search results in a bunch of other places.
And essentially what they’ve said is we’re going to bring back organic listings but only in the Google shopping Tab and only below the the.
The paid ads and so and they’ve never disclosed anything about what kind of traffic that tab gets and spoiler alert when someone like Google won’t tell you how much traffic something’s getting it’s because it’s not getting any traffic.

[13:02] So like having an organic listing and that tab probably isn’t going to get seen by anyone.
And so in and of itself that doesn’t seem like a very big change and there’s like something that I’m still unclear about there’s a separate thing that used to be called Google shopping actions which is.
The actual ability to complete a transaction within your ad unit as opposed to just referring you to the Commerce site to complete that the transaction and it’s unclear to me whether these.
Free listings are enabled for Google shopping actions or not and if that’s voluntary for example right so I potentially,
the listing is free but then they’re going to try to conduct a transaction that they’re going to charge you a commission fee on for example.

Scot:
[13:56] That’s called a Marketplace and that’s what’s exciting I’m tingly all over.

Jason:
[13:59] Yeah so yeah but it’s like I haven’t no one’s been able to articulate to me whether why is that the case with all those listings can you opt into that on a voluntary basis is that not an option that’s available.

Scot:
[14:13] It’s the funnel you got to you got to bring these free people in get them addicted to a little traffic and then you flip them into the marketplace.

Jason:
[14:18] Yeah it’s a great model it certainly worked for the rest of Google and Facebook so so that one again like.
Kind of muddled kind of overhyped if you just look at what it is now but you know they it is a.
A possible step towards a more significant Marketplace for five months ago they did hire this guy Bill ready he was the CEO at PayPal
so you know maybe this is like one of his first initiatives to as president of Commerce to kind of get the Commerce ecosystem Juiced and you know,
for sure Dougal wants to have relevant search results when you search for products and like increasingly they were losing that that search to Amazon and if the only results you could get from Google are from advertisers that paid.
Like you’re just not going to have a complete product catalog so to me this feels like the biggest benefit of this is to Google which is to collect more product data to enable you to have better search results that you can then monetize.
And then Shopify I’m I’m kind of concerned that I’m burning a bridge on Shopify because.

Scot:
[15:36] Toby’s going to kick your butt.

Jason:
[15:37] Yeah I feel like I had some negative comments on Twitter and in the press and I wasn’t smart enough to like not see see Toby on those comments so I feel like my.
My Shopify Fanboy status might get revoked.

Scot:
[15:53] They’re Canadian they’re super nice and forgiving.

Jason:
[15:55] That’s that’s what I’m banking on.
And again I would be interested in Shopify leaning into a Marketplace I think there there there would be some challenges for that but there would be some intriguing things about that.
This is not that right so here’s what here’s why I was pretty negative is because six hours before this announcement I was on Twitter in the middle of the night as one does,
following shopify’s Chief product officer who made a tweet that like in the next few hours we’re going to announce our most significant product release ever.

[16:31] And I’m like oh that’s interesting like that’s a pretty grandiose statement I’m pretty excited to see what they launch and,
you know I’m every couple hours I’m waking up and I’m refreshing my feed to see what they announced and then they announced this exciting new mobile shopping app right.
And at first I’m like okay so this is going to be,
you know we’ve complained for a while that Shopify actually isn’t very good at mobile right so if you want your Shopify site your,
desktop browser experience is likely going to be way better than your mobile browser experience your mobile browser experience does not have awesome performance.
And Shopify has mostly ignored,
some newer web development standards that I think are pretty important for mobile like Progressive web apps Toby’s not a big fan.
So I thought oh so their solution to mobile web is I mean mobile shopping is they’re going to launch a new app that you can shop from.
So a that was a wrong assumption.

Scot:
[17:30] That’s called it’s called shop it’s right there in the.

Jason:
[17:32] Exactly it’s called shop so so jump on this thing and I’m like alright let’s see what the shopping experience is.
Spoiler there is not a shopping experience as you mentioned they rebranded a app for tracking shipments.
Which I’ll come to in a minute is kind of an oily space.
Um and then in addition to tracking shipments it lets you favorite some of your Shopify merchants and it will promote.
Some items from the Shopify Merchants which you would then click to their website in order to browse or by the individual items.
And it has a super limited experience for helping you discover some new merchants.
So so a couple of things first of all if I download an app to track my shipping status.
And it suddenly changes its name to shopping and is suddenly about Merchants Discovery like I’m I am probably annoyed.
And you know everyone was arguing with me on Twitter the right no it’s genius like they built in 18 million user user base from day one by repurposing this existing thing and I’m like oh well they should have bought like The Words With Friends app.
That had a hundred million users and made that the Shopify shopping app if that’s like you know there it’s not the same audience.

Scot:
[18:58] You can’t track packages worth word from Friends.

Jason:
[19:01] Yeah so side note there’s a bunch of apps exist in the world to help you track your packages and what they mostly want to do is scrape all of your e-commerce purchases from your Gmail
and sell that data to evil marketers like publicist.
So that’s that’s what most show shipping tracking apps exist for and the the Shopify app it’s really weird because nobody,
shops or buys from Shopify right like you buy from beardbrand or Kylie Jenner and you have no idea what platform.
They used to sell those goods to you so a like aggregating shipping information for all Shopify merchants.

[19:49] Makes no sense because that’s not a context anyone understands and then,
they don’t tell you this but they do scrape your Gmail
and I and highlight all of your Amazon and apple purchases for example so
like not clear what the privacy policy is there but you at the very least you’re telling Shopify what else you buy and you know in this age where we’re all really concerned about what data we share with,
with whom that’s potentially interesting and then the whole,
so I’m like what this feels a little bit like bait and switch it doesn’t feel very Sharpie it’s not a very like revolutionary experience and it’s really just a bookmark to e-commerce stores to jump you to an e-commerce site and
you know a bunch of Shopify Defenders than jump in on Twitter and they’re like no you have this all wrong I’m Toby’s personal friend
and this is all about the post-purchase experience this is all about providing better customer service
and driving greater lifetime value it’s not about the first time shopping experience and so then I’m like alright well question one.
Why do you have a post-purchase experience called shop that seems kind of dumb to me it seems like.

Scot:
[21:08] Because you just shopped it’s obvious Chase.

Jason:
[21:11] Yeah yeah you get it more than me that’s the problem and then customer lifetime value for whom right like if I’m beardbrand which is a great,
direct to Consumer brand that happens to sell on Shopify and I get it
at market and get a bunch of customers that are customers of beardbrand and I want to provide them a great customer experience to know when their packages are going to arrive and all this stuff like,
I don’t want to send them to a third party not beardbrand branded experience
that then is going to Market other shops with competitive products to mine like it makes it makes no sense if it’s a lifetime value play it’s a lifetime value for Shopify not for the merchants and
heretofore one of shopify’s biggest strength has been their position that unlike Amazon
there they their completely altruistic in terms of benefiting the merchants and this does not feel like it particularly benefits the merchants.
That’s my.

Scot:
[22:16] Doubles I’ll give a devil’s advocate.

Jason:
[22:17] Yeah save me.

Scot:
[22:18] He gives Merchants everything they need to be successful online but if you kind of compared it next to Amazon or any Marketplace.
Place their most deficient is.
Aggregating demand so Kylie is fine she doesn’t need help but if you set up Jason’s Star Wars store no one’s going to find you on the internet except for like R5 podcast look.

Jason:
[22:46] Yeah you and Stephen.

Scot:
[22:47] Cast listeners Stephen and I and maybe like five of the people that listen to this hobby that we have and so you know,
yes they’ll give you tools to go spend money but what if they could say look.
You can opt into this Marketplace and we will you will now show up in this front door that we’ve built so I think I think they will build a friend or because they’re going to use it as a way that’s what you get with Amazon you simply say.
I’m tapping into these hundreds of millions of people that you have captive there so I think they’re building that but then also
you know another if we kind of line those things up another area where they’re deficient and we know they’re investing a lot here is not only fulfillment but a fulfillment subscription program so I think that’s that could be,
you know between tracking packages and a front end is a big step I think there’s probably a middle step there where they say to folks hey.
Yeah and they have this checkout flow where they could say to people hey we use this thing called Shopify would you like to join the Shopify shipping program and get free 2-day for one day shipping,
kind of like so they can be successful we’re like shop Runner wasn’t because they’ll have a much better aggregation point in this app and in the checkouts of their aggregated merchants.
So that’s how I would do it I would start at the end like they’ve done they’ve got a they’ve got however many users of this happen now visit 80 million or something now you.
18 so now that’s pretty good that’s more than shop Runner I think shop on her head like.

Jason:
[24:14] 475,000 of which have already written a review for the app by the way that launched yesterday.

Scot:
[24:24] And then then put that it you have to admit that gives you a platform to launch a prime Shopify Prime.

Jason:
[24:33] Yeah totally get it and I think we’re basically an alignment like.
Turn my original comment if this isn’t a first step like there could be some really cool steps that fall on and
in my mind the biggest mistake if Shopify made a mistake
is just overhyping this right like if they just said like hey we’ve got some super exciting aspiration and like you know given the situation in the world right now like we’re gonna like
you know release fast and iterate and here’s our first little step like I feel like the reception would have been.
Universally favorable but I feel like they over sold,
that this first step and yeah we’ll see how it all plays that I’m I have nothing against him I’m rooting for him.

Scot:
[25:18] Toby actually apologize I can’t find it now but he essentially said yeah we had to put this out fast so we had to strip down a lot of the functionality.

Jason:
[25:28] Yeah yeah I’m sure and I’m sure they have some cool stuff in the in the works to make it more better
I like I totally get it like the one thing that Shopify doesn’t provide is traffic and this is a you know a a much more mature version of this could potentially be a traffic driver for those merchants and that could be a,
a great trade-off right so if that’s what happens totally cool I would just
like to me Shopify and Amazon are not direct competitors they’re totally synergistic that like Amazon the thing they do better than anything is get give you eyeballs and Shopify you know gives you the infrastructure to have your own presence on the web
if covid-19 has taught Amazon sellers anything it’s that they shouldn’t be,
single sourced on Amazon like they should have their own presence in addition to being on Amazon so you know frankly if I was.

Scot:
[26:23] This is why they’re rushing it out to compete with him I think they view themselves as.

Jason:
[26:26] Yeah I would be leaning into man we love Amazon to but in addition Amazon like you you should have a Shopify presence to have your own brand and yeah instead like there.

Scot:
[26:38] I’m not following your argument so your you don’t think they compete but then you do think they can be and then you don’t think they’re helping Merchants but they are helping rich.

Jason:
[26:45] Yeah basically yeah I think you summarized.

Scot:
[26:48] Did your cabin fever has messed up your logic.

Jason:
[26:51] Yeah yeah I just I think their strengths don’t overlap I think their future is much more likely to overlap but today yeah anyway.

Scot:
[26:59] Take it that was our 30 minute 10 minute segments so on to covid impact generally.

Jason:
[27:07] Yeah so while you’ve been saving the world get spiffy I mean Liam giving these briefings on the likely impacts of covid to all of our clients.
And I feel like my new job is done on the Grim Reaper.

Scot:
[27:23] That’s why you’re in kind of a bad.

Jason:
[27:26] Yeah yeah maybe so.

Scot:
[27:29] So how bad is it to say.

Jason:
[27:30] Yeah it’s pretty bad so I’m not going to give everyone the whole Debbie Downer our briefing but like some highlights to kind of.
Frame the impact this is having on retail.
Right now there’s about 630,000 retail businesses that have closed since March so that’s about 61 percent of all retail square footage in the United States so.
A huge swath is just closed.
Like obviously you know a bunch of that is is Big National chains but a lot of it is also independent sole proprietor retailers and on average that sole proprietor retailer had 19 days of cash on hand so.
The fact that they’re now being forced to have zero revenue for 30 or 60 days is pretty economically.
Bunch of those retail stores are never going to be able to reopen.

[28:30] Forrester I did a pretty good analysis on the US Department of Commerce data that came out.
For March and they said the basically hey before covid 16% of all King e-commerce was online as.

[28:47] Forrester defines retail sixteen percent of all retail was online.
April we project that 25 percent of all retail spending is going to be online so a huge jump that likely would have taken 5 to 10 years.
Just happened in one month in terms of digital transition that if you you do some fancy math
that means that about 70% of all purchase decisions are primarily digitally influenced like even of you do curbside pickup or pick it up in the store you still use digital for the majority of your.
Your shopping Journey so there’s a huge,
Boone to digital shopping before covid about 3% of groceries in the US were purchased digitally right now 10% of all groceries are being purchased digitally,
so that is kind of appealing the problem is that that digital shopping behavior isn’t close to enough to overcome the loss of brick-and-mortar shopping Behavior so.
Goldman Sachs,
has this retail chain index that kind of tries to show retail sales amongst National chains and they said that April they’re all retail sales are going to be down by about 20 percent.
Which to put things in perspective in normal times like.

[30:13] Plus or minus like one to three percent is what you’re used to seeing so twenty percent down is several orders of magnitude worse than we’re used to,
Shopper track which is this company that sells traffic monitoring equipment to a lot of chains and they aggregate their data they said all retail traffic is down by 48 percent.
So that right there is the.

Scot:
[30:34] It seems like to me do you think that’s light like should I be like 90%.

Jason:
[30:37] Yeah and so well so.
Part of the problem is Shopper Trek cells meters to some particularly big chains that.
In general tend to be classified as essential right so they’re skewed by like Walmart and Target but but even in those stores.
That like are their sales comps are way up at Target and Walmart even in those stores
traffic is down but fewer people want to go to the store but what they had to do pretty early in this pandemic is there actually throttling traffic and not letting as many people come in at the stores
and probably don’t have time to Deep dive on that but that’s probably going to be the new normal in retail for like 18 months.

[31:23] So a huge problem it for retailers with the brick-and-mortar fleet is
you know you had some economic model where you were you know nominally profitable with the amount of traffic you could entice to come in your stores for the foreseeable future you’re going to have like half the traffic in your stores that you’re used to and
it’s in there for you know profits are going to be super challenge so most most retailers in America even if they’re allowed to open,
I really going to have to lean into digital sales and curbside pickup to augment.
Very soft brick and mortar sales because we’re just not going to be allowed to have the density in the store.
So add all that up and a bunch of retailers are going out of business right so like the ones that are already being talked about in the media there’s rumors that J.Crew could file this weekend,
Neiman Marcus has like skipped a bunch of their interest payments and and is talking to lawyers.
JC Penney is skipping payments and talking to lawyers they’re smaller chain but Tuesday morning is a dallas-based value-oriented chain that’s apparently talking to lawyers,
Warden Taylor was acquired by.

[32:43] The Footwear guys and now that looks like that they’re going to have to go in a bankruptcy again confounding all these bankruptcies is that it’s kind of pointless and difficult to file bankruptcy right now.
Like ordinarily you’d file bankruptcy you do some kind of liquidation sale try to get some value for your assets and see if you could restructure.
And at the moment you can’t do a liquidation sale so.

Scot:
[33:06] And I bet the courts are jammed up because there’s a lot of you know got all these restaurants filing bankruptcies and traditions like a lot of business churn right now.

Jason:
[33:16] Yeah and the dockets are just moving slower because the courts aren’t business as usual right now so so for so it’s a very weird time but there’s a bunch of retards that are at risk.
There’s this company if you ever want to invest in a company that does well in bad retail times it’s this company called Gordon brothers so they’re the guys.
Execute all these liquidation sales for all these retailers and they have come out and said hey we think 25,000 retail stores and a hundred thousand restaurants are likely to permanently close this year.
So an ordinary year for retail would be like 5,000 retail stores closing a badger for retail would be like 8,000 closing.
And and you know some closing is healthy because there’s this churn but 25,000 would be pretty unprecedented and then the restaurants are almost unimaginable.
And then a different spin on that same premise.
Is that UBS they kind of looked at this and said hey this is going to facilitate a permanent shift to e-commerce o we think.
That would permanently going to see this shift from 15% e-commerce penetration a 25% e-commerce penetration.
And that’s going to force a bunch of stores to close to keep the equilibrium and they did the math and said basically that means we need to close a hundred thousand retail stores by 2025.

[34:43] So that means you’re in that 15 to 20,000 stores going a business closing every year for the next seven years.

[34:54] Yeah so that is the super Doom and Gloom.
Portion of my normal briefing I like to always end on a slightly happy note and so the.

Scot:
[35:10] I was going to ask you get invited.

Jason:
[35:11] Yeah yeah well like if you pay me you get the second half of the story which is what I think you should do to survive and thrive in that Clement.

Scot:
[35:20] Okay cool.

Jason:
[35:21] Even if you don’t pay me the one happy Trend and all this is you can no longer adopt a pet because all the pets have been.
Adopted from all the shelter so lots of deserving furry friends have a new home which in and of itself is super happy.
Yeah there’s a bunch of metrics to look at to talk about this but one simple one is search volume on Google for Adopt-A-Pet is up three hundred thirty five percent.
The fun ramification of that is we now have the the largest cohort of new pet owners in the United States of America that we’ve ever had and of course they all learned how to get their pet food and cat litter and all their supplies via e-commerce so if you’re a
you know and Ecommerce in the pets base or pet adjacent you know you probably have a pretty bright future at the moment.

Scot:
[36:18] Cool what a couple other kind of what I would call Green shoots in the
from I’ve had a lot of time to watch CNBC so a couple of things interesting their Apple and Google results were not as bad as expected and you may think what’s that have to do with anything but Apple actually
it’s going to start opening their stores here and
that will be good and then people were expecting gloom and doom from these two folks and it wasn’t as bad as expected so so there that indicates that you know.
Maybe this mix of things isn’t quite as bad and we’re going to kind of come through this faster on the other side Simon properties announced a plan to open a bunch of malls and then I had a question for you everyone talks about,
dopest and now there’s curbside delivery but the is and Opus is in store right so.
I propose we come up with a new term just to be clear so we have both this what we had,
go pack buy online pick up at Curb do you like that.

Jason:
[37:18] I do unfortunately I have to tell you I believe you independently invented that but you are not the only one to have invented that.

Scot:
[37:25] Shucks about in the UK they have click and collect how about clicking curb.

Jason:
[37:30] You are the first person I’ve heard to invent that I’ll add one to that vernacular though
like we talked a lot about curbside pickup and that like if you’re a store with a parking lot curbside makes a lot of sense but a lot of stores don’t have their own parking lot if you’re in a mall or you’re in an urban center you might not have your own parking lot and so curbside pickup may not work and so,
I’ve heard a lot of stores that have launched a door side pick up.
Meaning we don’t let customers in the store but come to our front door with your your quick your QR code and we’ll deliver your order to you in a touch u.s. way.

Scot:
[38:09] I propose we call that bow pad bulbous bow pack and moped.

Jason:
[38:11] Yeah absolutely yeah can’t have enough good acronym.

Scot:
[38:17] Trademark Jason discussion.

Jason:
[38:20] Inside note like based on
how things were covered from SARS in China and in 2003 when we had kind of a this kind of quarantine and what we’re seeing in China right now which is maybe two months ahead of us,
you want to learn those acronyms because,
curbside pickup or door side pickup are going to be a super important part of the retail shopping experience for the foreseeable future and,
like probably has customers weren’t how to do it and retailers get better at it like probably forever.

Scot:
[38:56] Yeah so another interesting kind of thing to keep an eye on is in this is again from watching CNBC in the first weeks of the pandemic and we’ll talk about a v-shaped recovery and then it was kind of like a you and now it’s like a long L but if you
there’s enough data out of China that it looks like it’s been a very sharp V recovery there so another kind of thing to be slightly optimistic
I don’t want to burst your death bubble but something to be slightly optimistic about.

Jason:
[39:21] Yeah so so I like so what I’ve actually like when you dive into it what’s interesting is some segments
some categories of product had been very v-shaped in China and other segments have been very u-shaped so it has not like not everything has come back at the same,
rate which is interesting and not necessarily what you’d predict so there was a there was a theory in China that there would be a ton of Revenge shopping like that as soon as you’re allowed back in the store
everyone would have rushed back to their old vices and in some cases that has happened and then another cases,
it’s recovering very slowly like primarily because both in China and here consumer confidence is it all time low people are super concerned about the economy.
Pretty obvious that we’re going to come out of this in a deep recession and so all of those things tend to make the recovery slower.
The the most terrifying letter that I’m hearing is not U or V or L it’s w.
And that is because there are a lot of places where they thought they were through the worst open back up and then saw.
Re-emergence as of the virus and now and in the height of irony foreign Travelers are traveling back to China and bringing the virus back,
to China with them and so like the worst thing to happen here is this w-shaped recovery where sales start to recover and then get knocked back down.

Scot:
[40:50] Yeah yeah I’m optimistic it’s going to be I’m going with a sharp V I’m going to be The Optimist on this show.

Jason:
[40:57] I I think that’s smart positioning and I admire you for it.

Scot:
[41:02] Let’s jump into Amazon results so
so it was interesting setup coming in this because eBay actually had a really good quarter they got a new CEO so you guys got a little momentum in the e-commerce world you had this kind of,
super dark clouds like Jason highlighted there
and then we had Amazon results tonight so I want to walk you through those just kind of frame this up this is Amazon’s q1 results so covers January February and March we’re recording this.
You know very late April so we have kind of a whole nother month of knowledge based on what happened in that quarter but just kind of you know time is,
getting really warped oddly at least for me and this pandemic state so just kind of put some dates out there California was one of the earliest dates to do shelter in place
/ quarantine whatever you want to call it and they did March 19th in the New York XX and another States kind of came in there all the way through as late as April 1 I think Alaska was the latest it like April 3rd or something like that so
so you really only had you know call it,
20 days out of the 90-day quarter so whatever 2/9 is from a math standpoint so so it’s really only kind of 15 to 20% of the quarter was
impacted by the pandemic and it happened so fast it wasn’t like this kind of slope into it really.

[42:27] So that being said the results are a little mixed so clear beat on the revenue side and I think 2 2 is just going to be,
tremendous if they only had 20 days of this in q1 and they had him significant bq2 is just going to be there just going to destroy Q2
see how that goes but the the- was to achieve that they had to do really heavy spending on fulfillment and my guess is what happened here is Amazon,
it is a stream a well-run company and one of the downsides of being extremely well done is you have the impact of like Cyber Monday in,
and you know
for 10 days at the end of March the system wasn’t planning for that and prepared for it so it probably took it a while to flex and know what you have to do is you have to say well we weren’t really ready for that so we’re gonna have to eat some shipping fees we’re going to have to
run a bunch of extra shifts we didn’t have people for
Grant to eat some overtime you know those are the kinds of things that just ramp cost way up because they are probably really good at predicting this is what revenue is going to be this is exact number of people we need in trucks and fulfillment centers all that and then when Revenue kind of surges 30%
it can kind of blow that up and take you a while to catch up so that was kind of the mixed part of it
let’s see another thing so that also kind of flowed through margins in the bottom line and we’ll get into specifics.

[43:52] We’ll talk about AWS that was interesting a lot of people think the stock trades more on AWS even than all the other parts I’m a little skeptical about that
but you know just kind of the early read and we’ll know more about this when the podcast lands but here tonight the stock was down 5% and you always see these news reports Amazon mrs. bottom line stock down 5% well the stocks been up 30 percent year-to-date nose actually up
five percent during the day to day so it just kind of like went back down to the price before takes people a while to just these things and see what’s going on.
So we are going to dig so that’s the high level so we’re going to dig into the corridor go through some of the results and then we’ll have
detailed and super intellectual analysis so Jason run us through the headlines on revenue and profits.

Jason:
[44:39] Yeah happy to I’m just hoping
you’re signed up for the super intellectual part of the end Revenue was a happy story so Global Revenue came in at seventy five point five billion
which is up 27 percent year-over-year once you take out currency fluctuation
and that’s actually a faster rate of growth than Q4 which was a 21 percent growth so 27 percent Revenue growth,
in this in this quarter that is you explained is kind of only,
partly influenced by covid is a happy story Wall Street was looking for 70 3.7 billion so that’s a Beat,
and the high end of Amazon guidance for the quarter was 73 billion so so like from Wall Street perspective the revenue was a great story and then as you alluded to
the down side of the story was profitability right so gross margin for the quarter was,
41.3% which was below wall Street’s consensus expectation of 42.5 percent so that’s a myth,
largely for all the reasons you talked about like they just incurred a bunch of extra cost and.

[45:55] Therefore like didn’t hit their margin goals so that means operating income came in a little bit below their goal I think it was like,
it’s right around four billion dollars so I think it actually came in at 3.9 billion.
Versus a goal of 4.1 billion and shipping costs which always grow rapidly for Amazon grew.
Like at a an accelerated rate so shipping costs were up 49 percent year-over-year previous quarters we saw like 43 percent up so
faster shipping went up even faster they’re still a hangover effect you know remember it’s not that long ago than Amazon really leaned into one day delivery and so cost kind of went up for that as well so,
a perfect storm of negativity on the profit side.

Scot:
[46:45] Yeah and when you dig into that revenue and Amazon used to have a lot more color here now they really only give you the kind of the Geo split so North American Revenue came in at forty six point 1 billion
that was a 29 percent year-over-year growth so again I haven’t seen numbers during the pandemic but coming into this e-commerce was growing,
twelve to fifteen percent is that kind of what you’ve seen Jason.

Jason:
[47:08] Yeah I think like US Department of Commerce our comscore would say like yeah right in the fifteen percent right now.

Scot:
[47:14] Yeah so yeah so here you have you know Amazon accelerating up to 29% and and acceleration the way it is if you look at the year-over-year growth from queue for their at 22% so then they ramped up to 29 percent so that’s that’s a.
More than a third increase in the acceleration of growth which is just it’s just really hard to put that into.
It’s hard to wrap your head around it because I know we’re talking about 22 to 29 wow big deal but this is this is that a 46 billion dollar quarterly rate you know and those accelerations there just like I did the math one time and they were gobbling up like 10 JC Penney’s.
A point of grow that I don’t know what that math is now but just kind of amazing.

Jason:
[47:58] That’s the problem like you you hear that those kind of growth rates all the time but you hear them from the smallest companies in the industry like not from the overwhelmingly you are just company in the industry.

Scot:
[48:10] Yeah there’s the rule of large numbers that Amazon seems to be able to defy which is which is pretty amazing
International revenues came in at 19 Point 1 billion that’s 20% growth all the numbers I stayed are in constant FX or what they call XFX taking out the fluctuations of financial are,
currency fluctuations so the so International Group at 20% that was also a material tick up in fourth quarter the international growth wait rate was 15%
one of the units of measure everyone looks at with Amazon that’s interesting is called the unit growth rate that accelerated,
just 32 percent year-over-year and then fourth quarter it was a 22 percent so that’s kind of the fastest-growing metric here that went from 22 to 32 so what’s interesting is.

[49:02] That accelerated more than revenue and what that indicates is asp
came down and Amazon talked about that a little bit I think they said yeah the mix really shifted a lot this Corridor to essential Goods so you can imagine
toilet paper paper towels face mask know all these kinds of things they have a lower ASP than buying
please digital camera or something like that so so that was interesting aspect of the quarter on the prime side,
this is one of the growth rates that didn’t accelerate materially it grew 29 percent this is tucked into a
footnote called subscription Services Revenue it includes some other things but it’s mostly Prime so that grew 29 percent and then in fourth quarter that was 32%
what you have to realize is the fourth quarter usually almost doubles so I think like if you looked at the third quarter it was like sixteen percent and then
because of the holiday you have all these people signing up for Prime so then it surges and then it usually goes back down to kind of like about half the rate of Q for so it actually kind of hovered at that cue for a rate so while it’s not an acceleration
it’s pretty much signing up Prime members at a Holiday pace so that that’s you know I think that.

[50:15] Probably the most material metric in here that just kind of.
This is brought all these new Prime people in they’re going to get addicted to the Amazon experience post pandemic and they’re just going to kind of raise the.
The sea level of so to use your setup that you said at the top of the show you know if we do get to that 25% of sales are our online Amazon’s going to get a disproportionate.
Chunk of that because I’m get everyone addicted to Prime.

[50:44] Third-party Marketplace the mix there has been hovering around 50 to 53 percent so even with all this going on still a lot of activity on the third party Marketplace 52% of units were from that
one of the one of the big amazon things I wanted to kind of inject here not not specifically related to the quarter is there is a lot of noise so there was a congressional hearing and some ex amazonians and then some current ones gut
got asked a lot of tough questions about Amazon’s private label business and in there and I haven’t read the specific thing maybe you have Jason that the kind of let.

[51:21] The kind of quote-unquote let slip that they absolutely do look at third party data to come up with all these products so that was kind of.
Blew Up in a New York Times article that you know Amazon is set for years they don’t do this now there’s proof that they do then you know.
One of the Amazon lawyers was like yeah but you can’t know what’s in our heart or something like that and that that caused it to get even more negative PR that they kind of like they didn’t intend to but it just kind of happened so that that didn’t sound very.
Very apologetic tickets so so there’s there you know it’s kind of tucked into politics little bit so this then this whole thing like kind of rolls into some politics going on but that was interesting because you know Amazon has said for a long time
don’t look at that data I think everyone kind of knows practical standpoint you know how do you how do you go researcher so let’s say we were in charge of.
Amazon private label batteries I mean you’re not going to look at Amazon’s data you’re going to look at,
Walmart’s and Best Buy’s but not your own that just doesn’t seem practical for a lot of different things what did you think about that article.

Jason:
[52:27] Yeah so again like Amazon has.
A number of PR challenges and that certainly one and they testified to Congress that they weren’t doing that so that that like create some legitimate concerns for them like there’s part of me that’s like.
This is nothing new that hasn’t been going on in retail for 60 years right and and,
I mean private label and lately exclusive products like Target is wildly successful at creating their own products and there’s nobody that doesn’t think targets not using,
the sales data they get from National Brands to influence what what products they make so it’s a little bit weird.
The Amazon gets singled out for this like I you know I feel like a lot of other retailers are benefiting from Amazon being in the boogeyman now like even when they.
They all engage in a similar practice so to me like I don’t look at that as a super nefarious thing but I certainly understand why.
You probably shouldn’t testify in front of Congress that you’re not doing something that you are I guess.

[53:38] I did want to like once white piece of color onto the other things like just talking about the the revenue growth that you talked about,
one of the things that’s impressive in that is once covid kicked in there’s a lot of evidence that Amazon was doing everything they could to slow down sales right so you know they certainly reduce their shipping promises for non-essential Goods,
but the more interesting thing is they turned off all of these like suggestive selling features and recommendations and it really seems like when you buy stuff from Amazon right now a lot of the the successful tools they use to try to increase your basket size.

[54:13] They’re intentionally not doing right now so that Revenue growth all the more impressive considering they probably didn’t use their full arsenal.
To sell,
and then the thing that’s interesting to me on Prime is going to be there now is this event every year that really Goose has Prime Membership which is prime day and nobody knows what’s going to happen with prime Day this year like most of us believe,
at best it’s going to get postponed I think it’s on unofficially already been announced that it’s going to get postponed,
but you know you wonder what’s going to happen with that this year so interesting stuff to watch
as you know the category of Revenue that I like to always pay attention to is the
super excitingly labeled other revenue and the the the reason I’m interested in other is because other is primarily Amazon’s advertising business so the ads
the revenue they generate selling ads on their platform that that was the fastest growing piece of the revenue That’s That Grew at 44 percent which is a significant its acceleration
that amount of to like 5.56 billion dollars for the quarter.

[55:34] You know it’s it needs to be seasonally adjusted but if that’s a
a twenty billion dollar advertising run rate to put that in perspective Google does like 41 billion in advertising so,
that that they’re becoming a significant number three advertising platform behind Google and Facebook.

[55:58] And I I’m spacing in my head is Google that Google does like 41 billion a quarter right.
Yeah yeah so so 20 billion versus 120 billion so
you know still not still far away but by far the third largest advertising platform out there
so that makes them much bigger than like a snap or a Twitter or some of those folks and it’s way higher margin than all these other services.

Scot:
[56:28] Yeah the growth rates are pretty interesting so Google’s growing it Google and Facebook are growing kind of mid teens so call it 13 and 17 percent so the Amazons
continue to grow kind of in this 40% so yeah your chart it out they’ll eventually catch up it’s going to take a while but
yeah you and I are saying that about Walmart for like five years and then like sure enough five years later they did that that’s the amazing thing about that Amazon is day you know.
You can kind of set these trajectories at five and ten year cycles and you know I’ve been at this long enough that you’re like crap it they just kind of did it you know if they got there.

Jason:
[57:03] Yeah and so this is a place where the law of large numbers probably is working right in the much slower growth of those bigger players but,
like what’s also interesting not only is Amazon potentially catching them but Amazon is catching them with a mixed Revenue model where they have Diversified set of Revenue which is way better than being exclusive exclusively
single Source on the advertising Revenue model which is essentially the position that
the Google and Facebook are in so if Amazon ever caught them they would caught they would catch them with a much.
More robust business model than,
the Facebook’s and Google’s of the world so that is is super interesting and it has all kinds of ramifications every other retailers trying to figure out how
like this is another you like huge competitive Advantage for Amazon you can operate on a lower retail margins when you’re supplementing that Revenue with all this ad revenue and so if.
Amazon’s retail competitors you’re trying to figure out how do you get your share of that and it’s very difficult.
The other piece of Revenue that everyone totally totally follows that I tend to think is overhyped you alluded to earlier is the AWS business and AWS is an awesome business there’s no question about that.

[58:22] Revenue for this quarter native us was ten point two billion which is 33 percent growth which is.
A slight deceleration I think I think they were right 34% last quarter but but it’s been consistently.
It’s growing but but at a slower rate which again is probably the.
The law of large numbers now what is interesting this quarter is margins.
Um we’re considerably up for AWS so they’re up to Thirty point one percent versus 26 percent last quarter so that’s a.
Meaningful increase the the reason I say overhyped despite the fact that AWS has this great business it’s a great business that’s.
Segmented in the earning statement so you can see it by itself and so everyone tends to look at that and go oh that’s where all the profit is an Amazon and the retail business for example isn’t profitable,
and as you and I know and as we always try to teach listeners on this show.
You really can’t think of the retail business as one business there’s a bunch of business models in there and some of those business models,
are probably even more profitable than AWS so you know I think of for example the three piece out of Amazon’s business as being.
A much larger piece of Revenue than AWS at similar gross margins so.

[59:45] Like I would not turn down the AWS business if someone offered it to me but it’s not the only jewel in Amazon.

[59:56] They obviously in their earnings hyped up a lot of the ways the AWS is being helpful in the fight against covid-19 and you know there’s a lot of Educational Tools that they’re giving away free to teachers.
They’re providing a lot of data and processing power to researchers all over the world to help fight covid which is interesting.
The other Revenue class that I’m always interested in is Brick and Mortar retail.

[1:00:22] Um and so brick and mortar retail this quarter for Amazon was up eight percent which is super interesting because the last,
quarter and for the last several quarters brick and mortar retail had actually shrunk at Amazon so it was down 1% last quarter this quarter it’s up 8%.
And that’s actually remarkable because.
There’s a super important piece of covid friendly Revenue that isn’t in that number,
so if you think of all the people that are now having Whole Foods delivered at home and you go oh Jason yeah Whole Foods is selling way more stuff as a result of covid-19 and that’s why brick-and-mortar retail revenues up.
That would make total sense except that in Amazon’s world if you place the order for those groceries online and then pick it up curbside or have it delivered to you