61 minutes | Apr 30th 2021

EP262 - Amazon Q1 Earnings

EP262 - Amazon Q1 Earnings It's Q1 earning season. We recap Amazon, EBay, and Shopify Q1 earnings reports. We also lightly touch on Google and Facebook earnings and cover some other Amazon news. 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. Episode 262 of the Jason & Scot show was recorded on Thursday April 30, 2021. Transcript Jason: [0:24] Welcome to the Jason and Scott show this is episode 262 being recorded on Thursday April Twenty Ninth twenty twenty-one, I'm your host Jason "Retailgeek" Goldberg and as usual I'm here with your co-host Scot Wingo. Scot: [0:41] Hey Jason and welcome back to Jason Scott show listeners well Jason it is late April and you know what that means. Nope not pollen season not finally warming up in Chicago it is earning season. Jason: [0:56] I thought it was the week before Star Wars Day. Scot: [0:59] Oh yeah that's coming up lot a lot of exciting May 4th things going on but that's not the focus of today shows Today's show this earnings season it lined up really nicely for podcasters so we appreciate all the big companies working with us on this so the sequence that was kind of interesting is we had Google first on the 28th and then eBay that same day and then Amazon and then I'm sorry Shopify so it went. Google Shopify eBay Amazon and Amazon was today so we have kind of four of the key companies that we like to talk about all releasing so, gives us a good chance to kind of see where we triangulated on q1 the other one that announced in there is Facebook and we have a couple tidbits from that one, in fact I'll kick it over to you to start there. Jason: [1:51] Yeah so Scott one of the interesting things in Facebook's announcement is they referenced the the likely impact that the that Apple's changes to mobile, app tracking the idea of a would have on their go forward advertising revenue and is a reminder. We did a deep dive into changes in privacy from mobile cookies and from mobile tracking and from from third-party cookies and episode 257 which was a very popular episode. But one of the things we talked about is Apple's making it harder to track. [2:30] Mobile app behaviors and the company most impacted that by that is Facebook because. Facebook sells a lot of ads to mobile app Publishers to help them get installs for their mobile apps and they'll now have, a lot more difficult time doing attribution For Those ads and being able to State when those ads trigger an actual install. So in the earnings Facebook had pretty good earnings and in their guidance they said they still expected the that ad, Revenue to grow but they did acknowledge that the changes to IDF a would be a headwind. That likely would slow down the rate of growth of advertising related to these mobile apps and this this change that Apple was doing actually took effect in the. [3:25] The iOS 14.5 which released this Monday which I think was three days ago April 26. And a related side note that that's interesting to me about Apple is Apple is super good at getting all their users to update their operating system so it's been like three days in a huge huge majority of apples users are already on that new operating system so, whatever effect it's going to have on Advertising Facebook is starting to see it we probably won't get any data about what it was for at least a month. [4:01] But Facebook is undoubtedly already feeling it whereas where you know Google to make a similar change with with Android. It would take much longer to take effect because they're their operating systems tend to get deployed much more slowly. Scot: [4:18] Yeah. It's a as a app developer the Android operating system is a huge Bear Tooth to support everything people will call up and say I'm still on I forget what C is I'm still on KitKat and caterpillar and your thing doesn't work like that's 30 years old dude get upgrade your upgrade your operating system. Jason: [4:42] Exactly sir So speaking of Google did you follow their earnings at all. Scot: [4:48] Yes and. Just briefly that episode 257 I've had a lot of people say that it was the first time they understood cookies I DFA and the Cookie list feature so kudos to you for explaining it in a way that people can understand I like to take eighty percent of credit because I kind of interviewed you on that one and I like to say I answer I asked all the right questions and that's that's kind of what led it to be set to get up soon. Jason: [5:13] I feel like you are the Terry Gross of cookies. Scot: [5:17] Fresh air okay let's talk about Google results so we normally don't cover Google results here but it was pretty interesting because as I was scanning through some of the analyst reports it kept seeing a theme and the theme is that Google's search volume surprised everybody it it was up thirty percent year-over-year and what they call course or search which is people going directly to google.com not distributed through like the Apple relationship in that kind of thing that surprised everyone it was they're expecting con 24 percent year-over-year and they got thirty percent so kind of over 6% beat there and when they asked the CFL about it they specifically said that retail as a category was driving that strength, and that they saw eighty percent year-over-year growth and local businesses including lots of searches I hope you're sitting down these are some of your favorites with local inventory availability and drumroll, curbside pickup so so yeah so people are using the Google to figure out where to get curbside pick up and they do I do like this feature that if you need something for like a project you can say you know where is a I don't know a electric sander near me And if you do near me it will Keys Google to show in. In stock inventory at retailers near you so that's evidently become quite popular. Jason: [6:43] Yeah fun fact when you do a search on a mobile device Google just assumes you mean nearby and gives you those results. Scot: [6:50] I always do near me so I can I guess I can stop doing that I'm old school I like to really explicitly State my intent to Google for those exactly what I'm doing. Jason: [7:02] You are helping to train the algorithm they greatly appreciate that. Scot: [7:06] Yeah and then I thought this note was really interesting for listeners I'll just kind of summarize it here you know one of the Wall Street guys said that this was you know refreshing because quote in our view retail search query share lost to Amazon has been a, pillar of the Google bear bear case so a lot of what that let me translate that so so I people are worried that Google is going to eventually lose share to Amazon which we talked about on the show all the time on the show all the time and then it continues the emergence of true omni-channel retailing amid covid has demonstrated Google's relevance in an environment where multiple strong retailers are focused on digital and then they asked management and management said that they think that these behaviors are likely to stay around for a very long time and use the word permanent and they called out dopest and curbside again and then, you know they management highlighted how they've kind of integrated advertising and e-commerce Services across search maps YouTube as well as the core search experience so I thought that was interesting for Google to be talking so much about ta retail a kind of you and I have been talking about this forever that everyone says OK Google has you know they did that thing where they put listings into Google shopping for free and everyone's like is it too little too late so it does seem like Google is definitely refocusing on on the retail segment and you know I think. [8:32] I think I'm calling it out on a earnings call has kind of been a first for a very long time that I've heard. Jason: [8:38] Yeah yeah it is interesting and obviously I work for a big evil advertising agency so we see and talk about a lot of these trends, two things to know is right in the pandemic that the two biggest change to advertisers behavior is they you know we were all. Terrified that everyone would advertise less which you know would be bad for my my career longevity and people did temporarily get really conservative but pretty quickly they bounce back but what they did is, the. [9:15] Shifted a ton of their budget from traditional advertising vehicles and predominantly TV to digital so that was like a hugely beneficial Trend to Google, and then the other thing they did is they shifted from all these awareness ads what we would call top of funnel, um to ads with a more miserable call to action which is code for Commerce right like that you know, they wanted to run ads that they could measure sold something instead of ads that just got Impressions and so both of those Trends in my mind. Where you know nice Tailwind for Google and I don't know if this is a commonly known fact or not but but retail has has been the largest share of ads on Google for for some time so, that you know all of those things were favorable and I would just point out to other interesting tidbits I we've talked about this before but I think the. Google losing search to Amazon is. [10:16] Like there's a grain of truth to it but I think it's way overblown like a the explicit data that's all over the Internet is horrible right like it's from. Thousand user surveys of where they claim they do searches, and it's the truth is it's impossible to know because all of those claims are not search volume Google's search volume vastly exceeds Amazons, they're what they're saying is that product searches are going to Amazon not Google but no one can Define what a product search is. Scot: [10:48] Yeah it's the Paris Hilton problem. Jason: [10:51] Yeah yeah there's no taxonomy or yeah exactly that's why I hadn't heard that example before but I love it so so yeah I you know I think. That both both Google and Amazon are we're huge beneficiaries that probably saw their search get you know significantly accelerated so. That was interesting and then I would just point out like because, they specifically called out boat bus it is interesting there it appears that most retailers are equally convinced that the curbside pickup phenomenon is is going to be permanent and out wave the pandemic right because, we've seen Target announced that they're doing a significant expansion of their curbside pickup programs and you know that hopefully the pandemic is starting to wind down right now and yet they're still. Doubling their capacity of curbside pickup locations and then Walmart made an interesting announcement Walmart had all these robots these really expensive robots inside of the stores to do in-store pickups. And they've said that they're actually decommissioning all of those Towers because customers don't want to come in the store to pick up their goods anymore they want to do curbside pickup. Scot: [12:04] Interesting rabbit spent a lot of money on this. Jason: [12:06] Yeah and you. Scot: [12:07] Maybe we could get a used one for the Jason's gotcha. Jason: [12:09] Yeah if I will try to pick one up on that on the second-hand Market if I can but. Scot: [12:14] Put it in your condo in Chicago. Jason: [12:16] My wife would love that. Scot: [12:18] Hmm. Jason: [12:19] It's exactly her Decor Giant Orange robot Towers but the Stephen would love it for sure but the. Scot: [12:28] Think about it she could say Jason have you seen a charger and you could be like hold on in the the tower would spit one out at it. Jason: [12:34] Exactly yeah well remember these are Walmart one so it you would ask for a charger and you'd get a banana. But obviously in all seriousness so I. If Walmart thought that the curbside pickup was a pandemic only phenomenon they wouldn't be decommissioning those Towers so it's. You know it remains to be seen what's really going to happen but it seems like the retailers have a lot of confidence in in this being a permanent new consumer Behavior. Scot: [13:05] Yeah one last thing on Google you jog my memory when they talked about more activity at the bottom of the funnel they talk about e-commerce but then they also kind of did I kind of I kind of caught it as throwing a little shade at Facebook they said yeah we've seen a huge surge in app download ad buys because they're they're not. Because all this traffic is inside their Network they don't have the the IDF a or the cookie-less problem that Facebook has. Jason: [13:32] Yeah yeah I think I like I'm not shocked that they pointed that out but I think that's all it has the added advantage of being true like they they probably are a beneficiary yeah. Scot: [13:41] Yeah well called the next up was Shopify what did you see that tickled your fancy in there. Jason: [13:49] Um yeah so they're continuing to kill it like you know certainly if you're an investor they are doing very well by you so they had like a hundred and ten percent year-over-year growth I think it was 94 percent last quarter so that's accelerated growth, the like obviously q1 is an interesting quarter for all these retailers because there was this you know economic stimulus that was in q1 this year that was not in q1 last year and so, that that helps everyone's comps this year and it makes everyone super gloomy about their comps. Either their quarter-over-quarter comps that are worried about next quarter and their year-over-year comps there. They're also worried about next quarter because they don't have the pandemic Aid that the as much as they had last year. Um Shopify of course in additional Revenue has a gym V number and the gym V grew even faster so a hundred and fifteen percent. And I would just remind people that what like as an investor I love all these numbers they're super exciting but I see people all the time use them as some evidence that the. That the long tail sellers are thriving and growing on Shopify and I would just point out that like. [15:13] These numbers are the amalgamation of likely hundreds of thousands of sours many of which have. Like less than 12 months of more you know of life and there's huge churn, and so the these growth numbers are more indicative of Shopify signing up twice as many businesses as they had last year than they are that the businesses that are on Shopify are, doing twice as well because quite frankly there's a lot of evidence that that. The the majority of Revenue growth in retail is disproportionately going to these large players at the top of the echo system and not all these long tail players that you know tend to live on the Shopify. [15:57] So that being said you know everyone like it's interesting to see how everyone spins their Q2 right, so you're starting to lap the pandemic and I think I would characterize the Q2 comments from from Shopify as being kind of conservative right like they. They painted a picture about facing some significant headwinds and I think they they told investors that they plan to significantly ramp up investment spending. So you know that that. May well be smart but it you know sometimes investors don't like to hear that they'll be pouring all the prophets. Back into the company and they did my favorite topic of all like they you know they did talk about. How successful their their Shop app has been the mobile app and I think they disclose that. Scot: [16:52] The marketplace. Jason: [16:53] Exactly the marketplace that put Amazon out of business I think is what I read on Twitter. The by the shop arrazi I like to calm the Shopify zealots. They disclosed that the mobile app has 24 I think 24 million active monthly users am I remembering that number right Scott or. Scot: [17:14] Ma use as we say in the biz. Jason: [17:16] Exactly so. You know that's a meaningful amount of users now what they don't disclose is any hint of Revenue or gmv that goes through that app. You know are what or you know how people are using that app so I you know like it's predominantly a shipping tracking app and so I the. The positioning it as a shop app is is in my mind pretty thin at this. Scot: [17:50] Yeah absolutely when other. Jason: [17:52] I'd be shocked if 500,000 people have ever bought something from the shop app so the fact that they have 24 million active users doesn't doesn't mean a lot to me it doesn't mean they're taking any share from Amazon. Scot: [18:04] I like their payment system because they've gotten it now to be more like Square where if you once you enter your e-mail it kind of like send you a code and then fills everything out I like that because I can never remember my password I mean this stuff so. Jason: [18:16] Yeah authentication via email in general is a. A rapidly-growing ux trend and it mostly is way more secure because it encourages you not to. To have it easy to remember password that can easily be hacked and some payment providers even give you the option to not to literally not have a password. So I agree I like that user experience I think shop pay is an excellent product and, you know I didn't see any mention of it really in their earnings report but last quarter. Was the first quarter that that Shopify made shop pay available to people outside of the Shopify ecosystem because they you can now accept shop pay on Facebook check out which is also used by Instagram so. Scot: [19:04] Yeah where it shows up is Shopify is interesting it has its kind of like something like forty percent of their revenues are kind of traditional software as a service subscription revenues, and then 60% is effectively at a grade on that gmv almost like a marketplace where they get subsidies subsidies you have subsidies from the payment providers their own payment system they're loaning program Backstrom some of the shipping providers and that's kind of where that take great comes from and that take great increased pretty materially from two point three eight two point six five and they largely, called out the adoption of shop pay amongst that pool of GMB as a driver as well as some of the other other like the what's it called The Loan program where if you need some like a little spot learned by some inventory I always. Jason: [19:58] Finances are called or something like that. Scot: [19:59] Yeah something like that they all have PayPal everyone has one now that saw that grew very dramatically to kind of like a 300 million dollar kind of a quarter loaning base up pretty substantially from so that was also part of the take rate move so, that's that's where you can kind of dig in and find where that's going on in their earnings. Jason: [20:19] Yeah yeah and I would at the risk of turning this into a two-hour show I would just say like the digital wallet space in the u.s. is super interesting to watch the. Pre-pandemic 23% of e-commerce used a digital wallet in the US as a result of the pandemic 23% went to 30 which is a, pretty decent acceleration but to put that in perspective. The worldwide average for e-commerce is 44 percent and China over 75% use a digital wallet and you look at, a bunch of the shopping experiences that work in China where 75% of the people are paying with a digital wallet, that haven't worked very well in the u.s. when we only had 23 percent using a digital wallet you go man if digital wallets catch on in us and continue to grow like this that's going to open the door to a lot of new Commerce experiences like social commerce. Scot: [21:11] That's cool and then did you see that they're going to do some more investing in the Fulfillment. Jason: [21:21] I did I did like there continues to be some controversy on on Twitter about how bullish, some of the the industry experts are on that but. It to me it makes total sense like I I actually think that's a smart play for Shopify and in general they like they pivoted, they used to mainly be in the business of renting servers to people to host, stores and increasingly as you've already pointed out like their business model is to make money on services that they provide to small businesses right and and though it just X is one of the most lucrative potential businesses, you know if I were a third-party carrier I would not be in love with that trend. Scot: [22:08] Yeah well called The Nut next up we had eBay and, this one was kind of the most interesting so so far both Google and Shopify were kind of what I would call kind of beaten raise so you know already in an elevated environment the pandemic they exceeded already high expectations and then they kind of raise going into the next quarter. [22:29] And then eBay came out and they were definitely a beat on q1 but then as they started talking about Q2 people kind of freaked out a little bit so so on the Q one side the GM V which is the transaction volume going through the marketplace exceeded the street forecast by 4% and therefore Revenue beat by 2% and it was actually there they're q1 gmv was higher than their q4g Envy which you know is pretty interesting feet because most times you you surge up in the queue for you come down and then by the time you get to Q3 it's kind of levels Q4 and then your next Q4 is a step up so if you look at eBay over time they've got this stair step and then they had this really interesting inflection point and yeah I think that's largely driven by this whatever it's called the stimme dollars so I think they were beneficial of beneficiary of that people buying I don't know if maybe a hard to hard to find collectible they've had the ion or something but then when they projected DMV that. Pretty material decline in there for Q2 and that really kind of freaked people out that you know the they're not going to be able to sustain growth so. Yeah I don't know if it's conservatism or here we are the other interesting thing is these guys have about a month of the current quarter to kind of. [23:46] Factor into their guidance for that quarter and it just felt like eBay I think the read-through was eBay was seeing something there in April that they don't get pretty conservative and it's interesting because and you know so far, we have talked about the Amazon but of the other companies they reported we didn't really get much other than like that Facebook warning that you kind of hey you know we may see some softness from this IDF a thing so that was the scoop on eBay. Jason: [24:12] I have a. Scot: [24:13] Another good. Jason: [24:14] As you can see I have a hypothesis there that I'd be curious if what your perspective is on so Q 2 of this year they'll be competing against Q2 of last year Q2 of last year was the. The the thrust of the pandemic and that that initial tranche of people that suddenly were afraid to go to stores and we're buying everything online and if you you think back to that time, you know Amazon had a service level glitch there right like they conservatively pulled back on shipping a lot of non-essential Goods to really focus on. On shipping essential goods and that had the consequence of. Shifting a lot of purchasers off of Amazon to Alternative e-commerce sites for the first time in a long time and so, I think like Target Walmart and eBay were all beneficiaries of that Trend in my hypothesis is that Walmart and Target feel like. They had an opportunity to permanently capture some of those customers but that eBay may feel like hey people came and bought stuff from us when, when Amazon was on you know two-week delivery windows but when they go back to one day delivery Windows we're not going to get the we're not going to be able to keep those customers. Scot: [25:27] I think I like your theory that makes a lot of sense yeah and also spoiler alert for our Amazon section but they're going to be doing a June Prime day so that it's going to create a headwind for everyone because you know they're going to suck some of the oxygen out of the room in Q2 whereas last year it was in Q4. Hard wait was it was October September to September right. Jason: [25:53] October. Scot: [25:55] Yeah okay so last year it was cute for. Jason: [25:59] Well maybe we should pivot to Amazon. Scot: [26:01] That's a great idea Jason let's talk about Amazon so Amazon came in with net sales up 44 percent to 108.50 billion with a B in the first quarter so that is very strong on the US side they were up 39.5 digital's physical stores were down 16% again I think that's a little bit of a. Kind of a head fake because you know that's going to largely be grocery which is moving to delivery and curbside but that puts it over outside of physical stores and into the digital side of things so a little bit of a apples and oranges thing there are attribution I guess I should say. [26:38] Some of the metrics oh I should say International was up 60 percent year over year so that was pretty impressive so International is seeing a really nice acceleration you and I are talking before the show in the green room and you know you pointed out that open up some new markets which I agree but Internationals kind of been lagging the us for a while and now it's really picking up I wonder if they're starting to see some of the benefit of you know like all my friends and UK say things are in pretty good shape there the vaccination rates are up and that kind of thing so I wonder if they're starting to feel some benefit from that on the international side that that was interesting. On the third-party side couple of metrics I look at is the share of third party is holding steady at 55 percent and then they do talk about a couple other metrics that you can kind of read through here 3rd party seller Services were up 64 percent that's largely FBA and some of the things they charge for some small subscriptions for stores then they have another category which is subscription Services that's where Prime lives and that was up 36% and as a reminder they did reiterate in the in the release the Bezos letter 200 million assertion on Prime subscribers so, interesting to see that kind of reiterated in the press release and then you know hope you're sitting down but because. Jason: [27:59] Yeah it's got before you go any further like it's impressive that they sold all that stuff but it's a shame they don't make any money on that right. Scot: [28:06] Yeah yeah and I know you and I have talked a lot about how Amazon is never profitable well they did make a little profit the eked out a profit this quarter net income was twenty six point nine billion, and what's a fun fact with that is you take the profit from q1 2021 of twenty six point nine billion that's more than Amazon's profits from the three past years 20 17 18 and 19 if you add up all the net income from those three it was 24.7 paltry twenty four point seven billion and so just in this first quarter this is a nursing idea that kind of gives you an idea of the scale that Amazon is kind of growing this thing they did twenty six point nine billion so they did more in q1 than. [28:50] Previous three years and in profits so you and I get this whole thing where Amazon wouldn't be profitable if it wasn't for AWS well yes AWS is a, pretty good kind of portion of those profits but it's not a hundred percent and international is now profitable the marketplace is profitable retail is profitable, so Amazon is turning into a cash flow generating just a machine and Wall Street loves this so their stock was up, pretty materially I would say last I looked kind of 10 to 12 points so that was interesting and that profit was kind of a beat as well so then as they gave Q2 guidance they they actually were kind of pretty bullish so they said that they expect pretty strong continued e-commerce growth and then of course they're going to have a prime day which is about a 10 billion dollar benefit shifting there so this was a kind of a you know not only a beat for q1 but a little bit of a raisin Q-tip so everyone was pleasantly surprised by that so little bit different than the eBay story which kind of ties into what you were saying I know your favorite as Chief digital retail curbside grocery officer there at an ad agency I know you like to track ads how did that do. Jason: [30:09] Yeah so you know you mentioned AWS and AWS is a very good business that any of us would like to have but my hypothesis is. It's it's potentially. The third best business at Amazon so I actually think that that Amazon may have made more money in the last 12 months selling ads than they did on AWS and the reason for that is if. If you can sell ads it Those ads are almost pure profit right so. For the last quarter there are there other Revenue which is mostly the ads they sell to Brands and Merchants was up seventy three percent so that's a great rate of growth, we won't even talk about run rate because the ad business is kind of seasonal but if we just, look at the trailing 12 months. Other Revenue was twenty four point four seven billion dollars so so they sold 24 billion dollars of ads in the last 12 months, and they're only cost to do that is a little bit of infrastructure costs and some salespeople right so that's almost. Pure profit so that you know that may have spun off 23 million dollars in. Scot: [31:30] Yeah that's that's pretty good. Jason: [31:32] It's a it's a good. Well no that would have been in 12 months so but still like compared to their you know that's a likely more Revenue more earnings than they get out of AWS which we'll talk about in just a minute and I just. Backtracking for one second like that they don't, report separate financials for third-party sales versus first party sales like they they give us some cellular data but just as a reminder in third-party sales it would almost be impossible not to be profitable right like because. They don't really have any carrying costs they sell a bunch of services to those Sellers and then they take a commission when that seller sells to a buyer in the fact that that's the majority of the retail sales like it's almost inconceivable that, that the the 3p business at Amazon isn't more profitable than AWS also so I would just in my mind both of those businesses are probably at least as good as AWS which is also excellent. Scot: [32:35] Yeah I agree. Jason: [32:36] So that being said AWS had another good quarter you know again there they're the dominant player in cloud services so you know the fact that they're still growing like this is, is pretty impressive their q1 year-over-year growth was 32%. So it is obviously decelerating a little bit but that you know 32% is pretty healthy clip, that unlike the the sales business so I get is I think fair to look at run rate for AWS because. You know people don't tend to turn off their servers for part of the year so that. They're basically at a fifty four billion dollar annual run rate on AWS which is a, you know nice healthy Revenue rate. [33:33] We don't really have a way to compare apples to apples and as you were kind of educating me offline there's definitely some fuzziness particularly in Microsoft's numbers because. They have a lot of their own cloud services that they you know potentially are including in the Azure number but, some kind of back of NAB can estimates I've seen for the size of azure that may or may not be inflated have Azure it around 30 billion dollars against and Amazon's fifty four billion, and Google Cloud platform you know is probably in the nature of like 16 billion so both Azure and Google say their businesses are growing it just under fifty percent so they're growing faster than AWS but off of a much smaller base. Scot: [34:24] Okay. Okay any other tidbits want to talk about here this was an interesting one where they they said in the press release they said and I'll say this I'll quote this to make sure I don't mess it up in the u.s. same day delivery in as fast as 5 hours is free on orders over $35 for over 3 million items in select cities so five hours so we've talked a lot about same day Prime is going to be the standard we talked in previous episodes that go puff is really I saw another article that, they are doubling but they're getting a lot more competition so you know I think that Amazon is going to really start to turn up the heat on go puff by getting down to. [35:14] Hours if not minutes of delivery for those kind of essential items that people want so snacks and ice cream and starts to hit some of the grocery items as well and then the continues this is an addition to free same-day delivery on millions of items and thousands of cities and towns across 47 major US Metro areas plus over 10 million items available for free one day delivery Coast to Coast so you know so it's really interesting so there's these concentric circles where the little the smallest circle is three million items in select cities so that's probably like 5 or 10 is kind of how I read that then you come out and then you get same-day delivery on millions of items and thousands of cities, and towns across 47 metros so 47 metros three million and then the biggest ring is 10 million items for free one day delivery Coast to Coast so pretty, pretty interesting that they're continuing to grind away at getting things to you faster with a bigger selection closer and closer and closer to you. Jason: [36:14] Yeah I actually think I think is all super impressive I think you might even be conflating two things that are both like, expansions of their very fast delivery I interpreted that announcement slightly different than you U iqu it sounds like we're thinking that that's, referencing Amazon's company competing with go puff and I would argue also like door - for delivering like top off groceries right so stuff that you might have picked up at a bodega, in the pre-pandemic world you're now getting delivered to your house and this this digitally native company go puff that bought BevMo asked year like they're there. [36:56] They're growing quite well providing that that kind of service and we've we now have some evidence that Amazon is building out fulfillment centers to compete with them so. This publication called hungry actually like like found video of the. The contractors that are building these new fulfillment centers and they're targeting delivering like you know a small assortment of groceries in under two hours and there's one that's under construction here in Chicago, so that I think that's all true I don't think that's what they're talking about here what I think they're talking about here is delivering the most popular items from the Fulfillment centers, with a faster service level and, part of the reason I think that is they talk they made this announcement today and I got a new experience on Amazon today so I live in Chicago. We tend to be one of the first markets to get a lot of Amazon services but I put some stuff in my cart and it had a new message that I hadn't seen before which is, you know order this in the next X hours and get it delivered by 8 a.m. tomorrow if you spend a minimum of 35 dollars. [38:11] And so the fact that that those offers had this $35 threshold and Amazon specifically referenced the $35 threshold in there. In their comments and their earnings call make me think that that's what they're talking about so I don't think it's the. The grocery items are the go puff competitors that are talking about here I think it's. Popular items from Amazon that a week ago they would have said ordered in the next 4 hours and get it tomorrow which. Tomorrow at my house usually meant they delivered it like 8 p.m. at night and now they're promising it like at 8 a.m. Scot: [38:49] Perry nursing yeah let us know how that goes. Jason: [38:51] Yeah I in fact ordered a few things so I'll be curious to see if I get that am delivery tomorrow. Scot: [38:57] Call any other Amazon highlights before we go to the summary. Jason: [39:01] You did allude to they confirmed not in the earnings announcement but in their investor, call they did confirm that they were moving Prime day to June and as you referenced last year as an anomaly it was in October because of the pandemic. But ordinarily Prime day is in July so the way to think of this is they are pulling Prime day in earlier than they typically did. Which is interesting they said that it's because they they 4 sieve some would just take challenges in July and the Fourth of July puts a wrench in things and they think June is just a better. A better fit for Prime day so so likely we still don't know the exact date but expect to see Prime Day in June this year I have a. A partial hypothesis that another reason that they would move Prime day to be a little earlier in the year is. They did have primed a last last year in October and it was very successful and I will be shocked if Amazon doesn't invent some new Sales Event. In October of this year so if that's true that would be another reason to space out the sales events more by making Prime day earlier in the year. Scot: [40:20] Yeah and arson cool so to summarize if we kind of start and build up we have so imagine your head a chart where we have eBay at 24 percent growth Amazon North America 39 Amazon international at 50 and then, Walmart e-commerce they haven't reported yet but just as a baseline there it kind of 69 and I would be shocked if they don't do as good if not better than Q 1 and then Shopify at a hundred and fourteen percent so that's how it kind of stacked up and I forget Jason when you did that initial read I know they don't do the converse one yet but they have that. Other Commerce or whatever they call it how does where do they kind of fall into that stack you remember. Jason: [41:08] Yeah so it's a it's a mess it's a lower number so so Ike the US Department of Commerce which I assume is what you're asking about like, they're they're tracking around 25% which sounds way way lower than these numbers the that non-star sales number is higher so that's like in the 30s. Adobe released some data that they said q1 was like 35 percent and. What used to be internet retailer magazine now I think it's called digital 360 they came out and said that they saw e-commerce at like 45 percent growth so so there's numbers all over the place right now. Scot: [41:56] And then they'll update that one though and in like the next 30 days right so we'll get a better picture. Jason: [42:01] Yeah yeah so the the e-commerce out quarterly and so I think that's going to be mid-may I'll have the intern check on that while we're. We're chatting but but I think that is right. Scot: [42:20] Any other interesting Amazon tidbits you saw. Jason: [42:24] I think that was everything that the jumped out at me there is a little bit of Amazon news outside of the earnings do we wanna talk about. Cool before we do I will just confirm that the ecomcon quarterly data from the US Department of Commerce will be May 18th so some middle of next month. [42:46] So other Amazon stuff that was interesting to me a couple of things a lot of activity in the UK so. Amazon has opened their first Amazon go stores in London so they for the first time have just walk out technology. In London unless I'm misreading something it's interesting because the it sounds like the stores there look exactly like the stories here but they're branded Amazon Fresh in the UK which is interesting because. [43:22] In the u.s. those stores are called Amazon go stores and Amazon has an entirely different retail concept that is. So far not just walk out technology that's a grocery store that's called Amazon Fresh here so it's interesting. That they're they chose the Amazon Fresh name and the just walk out technology and related to that we also got news, from Bloomberg I think that from that day he broke a story that it looks like there is a Amazon Fresh door under construction in like Connecticut. And he got copies of the plans and it very clearly shows the. Though I turn Styles and mobile scanning units and stuff of Amazon ghost or so and I think Amazon even confirmed it was true. That it appears they're going to be opening their first full-size grocery store that. [44:17] Has just walk out technology and in some small way we were part of that news because you and I sort of broke the news. That some of the grocery stores that were not just walk out technology had all the cameras from just walk out technology and and you'll remember we theorize that they might be using those cameras to collect data for a future. Just walk out grocery store and Amazon confirm that that was true as well so we were right. Scot: [44:45] Wow yes. Jason: [44:47] Exactly yeah so that was interesting to me all of this just walk out stuff, the the more fun wacky news from London was the Amazon opened another new retail Concept in London and this is I think a much anticipated one that we all saw coming a mile away Amazon has opened a hair salon. Scot: [45:07] Yeah I found this one as a Services person I found this one interesting and also scary at the same time and then as I dug in it seemed like a gimmick like someone else is actually running the salon and it just seemed like a gimmick to sell more Echoes I guess because. But article kept talking about how they be highlighting you know kind of in home automation kind of stuff do you think there's something or in some beauty products too. Jason: [45:33] Yeah so I think two things are going on and who knows right so I joke I certainly didn't see this coming but so yeah so they, they've opened their own hair salon they've hired a established well-known hairdresser in London, to be responsible for the actual hair styling. And they've invented a lot of new in store or in Salon I guess you would say Technologies for the store, so they're using augmented reality to show you what your haircut is going to look like before you get your hair cut, which is a new technology we haven't seen before they're using digital signs with gesture recognition to give you product information about the, the Professional Salon Hair Care Products oh so imagine they have a shelf of shampoos. You point at one of the shampoos and a screen above the shampoo knows which shampoo you pointed at and and gives you content about that particular shampoo and then you can order that shampoo by scanning a QR code. So all three of those those Technologies would potentially have broad application and a bunch of retail categories and you know as someone that talks a lot about. [46:52] Digital technology is moving to store one hypothesis I have is that Amazon decided that a beauty salon would be a good. Sort of laboratory / proofpoint for testing some of these new technologies that they're rolling out right and so. I think one of the reasons they may have opened the store is to give them a customer facing way to test some of these Technologies and they work well. <!-- wp:paragraph --> [47:16] You would expect to see him in Amazon forest our stores and bookstores and and you know at some point selling them to other retailers. But the other thing that Amazon has leaned pretty heavily into is broader product categories and B2B, and so one one decent size category is the B2B Beauty category right and so these are products that are not sold at Walmart but are sold by professional hair stylist to their customers. And Amazon has been trying to recruit more sellers to sell those products, and in the same way you need a liquor license to legally sell beer, you most of these B2B products contractually you have to be a salon to buy and sell and so, I have a hypothesis that they may literally have opened a salon so that they could go to more vendors and get those vendors to give them access to their their B2B beauty products. <!-- /wp:paragraph --> <!-- wp:paragraph --> Scot: [48:22] Yeah because a lot of what a weird lot of things require stores these days so that would check the box. <!-- /wp:paragraph --> <!-- wp:paragraph --> Jason: [48:29] Yeah and I mean like it's a little known fact but like there are there's a fulfillment center in every state that you can walk up to him by alcohol right because the. The like you can't get a delivery liquor license only and so so like there's a door that's not advertised in one of these fulfillment centers to meet the requirements for that liquor license right and there's no lot about these beauty product distribution but as a, it's a contractual term and you know it's just it's conceivable to me that Amazon is doing this as both a learning opportunity and. Couple other little interesting tidbits bunch of news today we try not to get too much into the political stuff but Amazon announced a significant wage increase for 500,000 of their employers so, they said that that would they be investing over a billion dollars a year in giving 500,000 workers arrays of between 50 cents and three dollars an hour. So that's that's interesting like Amazon has you know use the fact that they were one of the first three tears to embrace the $15 minimum hour. <!-- /wp:paragraph --> <!-- wp:paragraph --> [49:43] Thing as a as a kind of foil against some of the the the negative press they get I personally feel like the labor market just getting really tight and it's getting hard to hire. And Amazon is Raising wages because they they're continuing to grow like a weed and need to hire a bunch of people and they're finding that they just have to pay more to get the people they. <!-- /wp:paragraph --> <!-- wp:paragraph --> Scot: [50:05] Yeah you might as well get political credit for it while you do. <!-- /wp:paragraph --> <!-- wp:paragraph --> Jason: [50:07] Yeah it's like you do it a month earlier and you get that that for a first mover PR and then when Target matches it just won't look as impressive. Um and then there was a little bit of a buzz, you know Amazon had done a bunch of seller unfriendly things like they actually started masking if you're a 3rd party seller on Amazon and you you don't fulfill your own good so you use fulfillment by Amazon. Amazon is no longer telling you the name or address of the customer that bought your goods. <!-- /wp:paragraph --> <!-- wp:paragraph --> [50:40] Which a lot of people you know we're found found to be kind of offencive and so then a couple weeks ago they launched a new program that actually gave brands on Amazon. Better access to Amazon customers they actually launched a campaign where you could pay Amazon to email. Um marketing material to your customers your fans on the Amazon platform and so there was a lot of. Talk about this being you know a potential thawing of the ice and in all these you know things Amazon does to kind of. The customers and seller separate I think it got a little overhyped because to be honest right. The conditions for that program are pretty restrictive so I don't think it's going to be a huge amount of people that can take advantage a you have to be a brand that's registered in the Amazon brand registry so you can't just be. 3rd party seller you know that's that you can't be like a wholesaler of Chinese Goods or something like that but then. You can only email to people that have designated themselves fans of your brand page so again you have to be paying for and have a separate brand page and the only people you get access to are the people that clicked the like button on your brand which you know is probably not a lot of people on Amazon. <!-- /wp:paragraph --> <!-- wp:paragraph --> Scot: [52:10] Yeah but it is kind of you know that that plus the next one that I'll go over were I view them as signals as this kind of like nibbling away at Shopify think that we've been talking to him about it's the one I wanted to talk about is they made an update to their fulfillment fees and one of the things that's interesting is they've offered what they call multi-channel fulfillment so FBA was born to essentially give you the choice as a Marketplace seller to either fulfilled them yourself or have them Prime eligible through FBA then they've introduced seller fulfilled Prime and all this other stuff but the intent is that all those programs are for things to ship things that were sold, on Amazon through the third party Marketplace then I think like five maybe seven years ago they introduced kind of multi-channel fulfillment where you could run your whole store. <!-- /wp:paragraph --> <!-- wp:paragraph --> [53:00] Your whole online store you could have a Shopify store for example and then route those orders to FBA what's nice about that is you didn't have to split your inventory so a lot of a lot of people that don't just saw on Amazon they would have to send a big pool of inventory to FBA then they'd have a separate pool of inventory somewhere else and then Murphy's Law is kicks in and you would send not enough to FBA or too much and then you know you'd have to constantly be load balancing your inventory between the two two warehouses so they introduced this kind of multi-channel fulfillment where you can send everything to FBA and then you could fill your fill your eBay orders your store orders and your Amazon orders through one channel then a couple years ago so then does like 7 years ago let's say and then a couple years ago they started to kind of like, really limit people's availability to this program I think they started to see that FBA was becoming so full and they just really wanted it to be so for single Channel the Amazon Channel fulfillment. <!-- /wp:paragraph --> <!-- wp:paragraph --> [53:56] And then now they announced that they are going to add an option to block orders from being shipped by Amazon logistics for a 5% surcharge because sales channels like eBay and Walmart prohibit the use of Amazon Logistics you'll be able to block this shipping method at the account level within your FBA settings, so this is interesting to me it signals that they're refocusing on this as an option you eBay and Walmart explicitly disallow this what happens there is they don't like it when you buy from eBay and Walmart and it shows up in the Amazon box it confuses the consumer I've seen this happen a lot but also you know you know it's really confusing I remember a story where this kind of urban legend the eBay CEO at the time whose name I won't say went to the mail room and he saw yeah all these Amazon boxes and as he dug into it everyone was ordering off eBay but everything was showing up in Amazon boxes so so I think they then very quickly kind of came up with a policy that that was bad and that they would not allow that anymore so what's interesting here is so then if you're not going to fill to eBay and Walmart why do this well the answer is they want to capture some of those webstore fulfillment and. <!-- /wp:paragraph --> <!-- wp:paragraph --> [55:14] You know we had Faisal talk about this on Twitter where he kind of viewed shopify's week underbelly as fulfillment so this is another one of these little kind of things and it may be my radar is just kind of. <!-- /wp:paragraph --> <!-- wp:paragraph --> [55:27] Too high on this and I'm over reading into it but you know it's the emailing to Brands they would have never done that, two years ago are emailing allowing you to email to your to the customers that you that you acquired on Amazon or that interacted with you on Amazon, all right let me see let me reset it allowing you to remarked it to the Amazon Doan customers that you're borrowing for leasing or whatever that's kind of a new bridge they're going over and then this one is interesting so I thought those were two interesting tidbits in this kind of, larger war between eBay and Shopify or Amazon and Shopify. <!-- /wp:paragraph --> <!-- wp:paragraph --> Jason: [56:00] Yeah yeah I just want to take half a step back because I feel like this is potentially hard to follow right but essentially, you're saying so let's pick a brand and they're probably not even using this programs but just for Simplicity, I'm anchor and I make batteries instead of like having some batteries in my own Warehouse that I can ship if you order my products from Walmart or from anchor.com, and having some of my batteries in Amazon's fulfillment centers that you know Amazon will ship if you order it from Amazon. I send all my batteries to Amazon and then if I sell one on my website I tell Amazon to ship one and if I sell one through Walmart I tell Amazon to ship one, and, Walmart didn't like that because those batteries were showing up in a Amazon box and so Walmart and eBay and I imagine others have said hey, you're not allowed to use Amazon to deliver our packages that you sell on our on our platform right that that's the gist of it. <!-- /wp:paragraph --> <!-- wp:paragraph --> [57:03] Um so one wrinkle the way I interpreted this that I'm not maybe is different so this option is, is not to say hey we won't fulfill your Walmart orders if you check this box I think the option is will still fulfill your Amazon your Walmart orders, but we'll use UPS instead of Amazon Logistics so I think Amazon would just X is actually the, Amazon Flex in the Amazon W2 employees that deliver stuff. <!-- /wp:paragraph --> <!-- wp:paragraph --> Scot: [57:33] You're right yeah you got it and then yeah and then they do offer a re boxing so maybe that solves the boxing problem and then the reason while Mart and eBay don't like the Amazon Logistics that the truck is there's no tracking number that that's easily accessible so yet also you know we saw in the UK they announced. What they called door-to-door Amazon Logistics where they used an example where a retailer on High Street can ship a product to a consumer through the Amazon Logistics which is to me is effectively competing with FedEx and UPS and con Sebastian had some really good reporting on that that I thought was interesting I didn't put that on our show notes but that was another thing that just jog my memory there so all these things are getting closer and closer to 2 Amazon competing with with the carriers. <!-- /wp:paragraph --> <!-- wp:paragraph --> Jason: [58:29] Yeah and I think for sure your hypothesis that hey Amazon would only be rolling out these kind of policies that they were planning to lean into these. These delivery outside of Amazon service has more right so that makes perfect sense one other thing I'm not sure if you caught in the the call. After their announcement with the CFO another service that the CFO and nouns that I was surprised about because I've had this service for a year in Chicago but apparently it's not it wasn't. Um he announced that they were providing bitter granularity into shipping tracking. From Amazon Logistics so the example he used was, like you you'll get proactive notification when your package is about to be delivered and you'll get something that says like hey your Amazon driver is 8 stops away, and that you can you can Track Em on a map just like you would track doordash delivering a restaurant meal to you. And the reason that surprised me as I've literally been able to do that for a year when Amazon's delivering something I get a notification and I can see the guy on a map. So that those kinds of services you could imagine like could address some of the objections that that other sellers would have about trackability because that's way better tracking than you get from UPS or. <!-- /wp:paragraph --> <!-- wp:paragraph --> Scot: [59:54] Yeah you just don't have that you know you can take a FedEx or UPS tracking number and split it into anywhere and there's kind of like it's very easy for any consumer to track it's not Amazon school not quite there yet. <!-- /wp:paragraph --> <!-- wp:paragraph --> Jason: [1:00:05] Sure well Scott is going to surprise no one but we've taken this short earnings call podcast and turned it into a full hour of our listeners time. <!-- /wp:paragraph --> <!-- wp:paragraph --> Scot: [1:00:17] Boom we give the people what they paid for. <!-- /wp:paragraph --> <!-- wp:paragraph --> Jason: [1:00:19] Exactly good more than what they pay for for sure but one way they could pay us for it is they could jump on the iTunes, the new improved podcast experience on iTunes and finally give us that five star review, and we sure would appreciate that and as always if you had any questions or comments or we confuse the bejesus out of you feel free to hit us up on Twitter or Facebook and we have to discuss it further. <!-- /wp:paragraph --> <!-- wp:paragraph --> Scot: [1:00:48] Thanks everyone for joining us for this earnings recap. <!-- /wp:paragraph --> <!-- wp:paragraph --> Jason: [1:00:51] And until next time happy commercing. <!-- /wp:paragraph -->
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