The heavyweight fight for the title of worldwide retail champion
Our expert panel discussion features: Tony D’Onofrio, CEO of TD insights and previous as the Chief Customer Officer at Tyco Retail Solutions; Bryan Gildenberg, Chief Knowledge Officer of Retail, Sales and Shopper at WPP’s Kantar Consulting; Paul Lewis, CMO of digital transformation agency Valtech. Join us as we explore these two contenders and how their battle will shape the future of retail for all of us.
Hi everyone. Thanks for joining today. We're here to talk about the brewing heavyweight fight for the title of worldwide retail champion.
In one corner, we have the current champion, Walmart, weighing in just north of 500 billion in revenues and in the other corner the challenger Amazon, a young plucky upstart less than half of the revenues of its rival.
Today's judges are eminently qualified to render their prognostications and opinions to help us size up these two contenders and how their battle will shape the future of retail for all of us.
Welcome to the show. We have Tony D’Onofrio CEO of TD insights and he held previous positions as the CCO of Tyco Retail Solutions. We have Bryan Gildenberg, Chief Knowledge Officer of the Retail Sales and Shopper at WPP’s Kantar Consulting. And we have Paul Lewis CMO of digital transformation agency Valtech.
Welcome, everyone. I'd like to start out with just some opening comments from each of you on the panel. Tony, would you like to start kick us off.
Sure. Pleasure. First of all, thank you very much for this invitation. Always a pleasure to talk about retail and always a pleasure to talk about the giant in Walmart and Amazon. It's been an interesting battle to watch. I think it's been going back and forth. A few years ago, Amazon was gonna take over the world. I think things have changed, so I'm looking forward to discussing how that’s changed and where it goes from here.
Excellent. Well, we're happy to have you. And we're super excited to chat about that too. Bryan did you want to have an opening comment just in general.
Yeah, it’ll probably be two. One, I think it's important to remember that Walmart and Amazon together are less than 15% of global retail, so it's always helpful to put this into context.
You know, there are several hundred thousand people that work for Alibaba that might object to the world championship of global retail being given to either of these companies. Which is a different topic for a different day.
I do think that the second thing, though. I do think it's important to understand that as Amazon's reach broadens, particularly in the U.S. Which is really the key geography in which they intersect. These two companies intersect. You are starting to see obviously at a direct competitive environment them overlapping, but also from a pure shopper expectations perspective.
I think Amazon and Walmart are both rivaling to be the baseline of shopper expectations in the omni-channel world.
Totally agree and I like that you brought up Alibaba, because they are definitely in the game when it comes to retail. And so that's a good reminder to set the playing field there. Paul, did you want to jump in?
Yeah. First of all, I think. Great opening comments. I think that what we've seen up until now is there's been a lot of blue ocean. Amazon's been able to grow its business, you know, very rapidly without running into having to take Walmart on head to head in physical retail. And likewise, I think physical retail, you know, still, by far, the dominant form of way people buy products today has not had to overly worry about what's happening in the online world. But I think we all see that those two ships are on a collision course.
I think that what we'll get into the discussions today is that for Amazon to continue to meet the growing expectations of its consumers across a variety of needs – their grocery needs, their immediate delivery needs – they’re going to have to expand their distributed physical base.
And I think likewise, Walmart can't continue to be primarily on only the physical side. They have to succeed and win and continue to grow market share in their online sales. So, these two are definitely on a collision course and it's going to be interesting to see what happens next.
Great. Thank you, Paul. All very good comments to kick us off. So, I'm just going to j ump us right in. Starting off, so, Amazon’s CFO recently said their new one-day shipping initiative is going to be groundbreaking for Prime customers.
But we see now that Walmart and Target are already offering the two-day shipping. They're doing free pickup, free returns. With that in mind, do you think the Prime membership at $119 a year will still entice customers to remain loyal to Amazon as much as they are now.
I can start. If you’d like. My view - I think the one-day shipping is just a stepping stone to getting faster and faster. Somebody mentioned Alibaba earlier, if you look in China. They're already looking at six-hour shipping or 30 minutes for fresh food. So, it's going to get faster and faster. And I do think that that last mile is an important milestone for all of them to strive towards but to me it's just one of those milestones.
I'm not sure if Walmart doesn't have enough of the third-party sellers or products that Amazon has in mind until they catch up on some of that somebody says a battle more in terms of positioning versus actually how the battle is being taught through the field.
Yeah. And I'll build on that a little bit. I think practically speaking Amazon's been at one-day shipping for a while in a number of markets for a number of Prime members.
So, Amazon's pretty good at choosing when to announce things versus kind of doing them in a slightly different speed.
I also think that yes, eventually. The other advantage that obviously Walmart has in this battle is that you can already go online to Walmart and if you need something today it's actually easier to do that on Walmart than it is an Amazon. You just go pick it up.
Whereas Amazon does not have that capability. So, I do think that yes, on balance, the speed for home delivery is going to continue to get faster.
There are a lot of American consumers that already don't want to pay for a Prime membership. They'll solve the problem of the last mile differently than Prime members who do that. Our data would suggest it's about a 50/50 split right now - about half of all American households have a prime membership, about half don’t.
That number has been plateauing so our guess is that will plateau somewhere in the high 50s. So, you'll have a lot of people that don't have a Prime membership that shop differently, and you'll have a lot of people that will solve the last mile problem and speed that trade-off between speed and cost in a lot of different ways.
Yeah, I think it's the same thing. I think we'll see this one-day shipping as kind of a blip on the radar as we transfer to, you know, same-day delivery of products.
So, I don't know how long that will hold. But I think as we look at same-day delivery products, what's going to continue to erode the Prime membership is that people want their grocery, their perishable products.
And as they see that whoever their perishable supplier is also has the same things that Amazon has and can offer them the delivery services without the Prime membership costs. That's going to be a big attractor for them and a detractor for Amazon Prime numbers.
Yes, exactly, the overwhelming percentage of people in America to get their perishables from an outlet that doesn't sell anything like a range of general merchandise the Walmart does. Most of them still get their perishables from a supermarket.
So, if I'm a Kroger shopper, the perishable solution that Kroger comes up with, whether it's online grocery pickup or whatever home delivery, they're not going to have the same platform to be able to get me access to the non-perishable product that I need that Walmart does so.
Then that's one of the things I think that’s important throughout this whole conversation is that, you know, the Walmart and Amazon Clash of the Titans story is a fun one, but in real life, the American retail ecosystem is much more multiple-forward than that.
Great comments. Well, I will continue on to the next question. That kind of builds on that. So, Walmart took a jab at Amazon after they made that announcement. Which Bryan, you said they've kind of already been doing it, but they know when to announce, and they said “One-day free shipping without a membership fee. Now that would be groundbreaking. Stay tuned.”
So, can you guys expect Walmart in the near future to be offering no cost, one-day shipping?
You think they have that capability?
I think consumers will drive a lot of this. There will be a threshold that all these companies will reach where the consumers get say 119 is enough or a number of much less than that, and they'll have to adapt – you've seen that in parallel industries like iPhone. Where they've reached a plateau where somebody's not going to spend that much money on a phone, you'll see the same thing in consumer services. And you'll see others again jumping in to set prices that are lower. And again, again, I'll go back to China. In China, most of the deliveries are free – even for the ones that are less than one day.
Yeah, I think. You'll see that there's just a switching cost. If you look at the cell phone, mobile phone, battles, service battles in this country for some time is eventually you get comfortable with the carrier you're with. And so, to create switching costs, you have to create a lot of incentive. I think that Walmart's going to be willing to take a loss on those shipping.
To pull numbers away from Prime, to slow the growth of that, it’s already slowing, but to further slow the growth and accelerate their own growth in online.
Walmart also has to show that they are a dominant online marketplace, so that they have more products and more competition in their marketplace to be competitive.
I mean, we're talking about on one hand, the delivery aspects of your shopping, but another huge aspect is selection. How many different products do you get to choose from to find the products that you want?
And so, Walmart has got to show that its marketplace is just as competitive, just as large, as much opportunity as Amazon's. And so, to do that they're going to take, I think a loss for a while, on the shipping costs to drive that business and to drive that switch over to their marketplace accelerated.
I think the other thing that Walmart's gotten smarter about is with partnerships, with you know what I was called the to-know companies like DoorDash and Postmates and goat plane and whatever those to-know companies are.
Those to-know companies all have access to much cheaper capital and a much different economic expectations than Walmart does so they can partner with those companies, they can you know probably, systemically underpaid those companies because those companies are looking to gain velocity and critical mass for whatever rationale their investors are using to frame up the narrative around those businesses.
I think they've gotten much smarter around how to tap into what Scott Galloway calls the “chief capital marketplace” to help solve this problem and expect to continue to do that.
We're going to come back to this idea of marketplace, but I've already going to queue up now that I think that the notion of Walmart needs to have the same breath of assortment as Amazon does in the market – but one, I don't think it's possible. And two, I don’t think it's true. But we'll come back to that.
And I agree, and I do think that the big battle is going to be over grocery three – that is the biggest sector worldwide. And Walmart already has basically 90% of Americans within 10 miles of a store, so that perishable battle they can fight because of their massive infrastructure that they already have in place.
That's true. Except that I'm within 10 miles of a Walmart, but I live in suburban New Jersey and on a Saturday that could be like a three-and-a-half-hour drive
It’s all relative.
Great. Well you guys brought up two good points. We're definitely gonna move on to talk about grocery in a minute and also marketplaces, just to wrap up kind of on the topic of shipping – throwing Target into the mix. Obviously, they are much smaller in terms of revenue and physical stores.
But they already offer same-day delivery and they partner with a company called Shipt, like Bryan you were mentioning. Do you think that their delivery service is strong enough to battle Amazon's $800 million move from two to one-day shipping? Do you think they're going to hang in there?
I think Target… we'll talk about a couple of different things. I think Target is going to engage in a number of business problems selectively versus full on. And that Shipt is an interesting one. Target isn’t in a partnership, they own it – so it allows them to have a captive model that allows them to explore the different economics and the different processes.
I think a lot of Target’s online growth is going to come from the urban markets where Target’s got both great brand recognition and increasingly a physical footprint through small stores.
Target is nowhere near as much of a grocery retailer as Walmart is, so they have a very different competitive situation versus Amazon than Walmart does. So, I think that when Target looks for this, they are trying to solve an urban convenience problem rather than a broad-based grocery problem.
I think what Target’s doing is interesting. I think the problem we're trying to solve is pretty difficult.
Makes total sense. Tony, Paul, did you guys want to add to that at all?
Yeah, will fully concur that, will fully concur. I think Target’s in a different space than the other two. I did the other two are going head to head with major battles still to be fought.
Yeah, I think that Target might get brought into that, though, right? Like, I think that Amazon…ultimately, I believe that people are going to want integrated experiences where they can have some of their products in store and have in-store experience. Some of it them want to have immediate delivery or pick-up in store and they want to combine those things. And then I think they also want the big selection of products at the same time.
So, for Amazon to deliver across all about. I think they're going to have to look at additional acquisitions. Their current physical footprint is not the right one to accomplish all those goals.
And I think that, you know, they may need to look at acquiring a Target or a collection of smaller stores to do it.
I think Target is a good fit, it would fit to put their Whole Foods acquisition inside of Targets. And it would give them a lot of physical distribution. It's a big one. That's a $50 billion, you know, acquisition buy for them. Most like little north of that.
So that's going to be hard on Amazon, they would do would they take on additional long- term debt, probably doubled their long-term debt servicing and some stock implications for them. But at the same time, I think it's a path like that might be the one that's necessary to fight all those fronts.
We want to talk about that now or wait until later?
We can talk about about it now because I think next, we'll just move on to the topic of marketplaces.
I'll offer what I would call a counterpoint on the Amazon-Target acquisition, just as a way to think about it. The cost of capital for Amazon is not an issue, they could borrow as much money as they want.
I don't think that's going to be the problem. I think the challenge for – and I think the reason why Amazon bought a business of Whole Foods is size.
When you look at it today, if you look at Amazon's financial statements, they’re different now that they have Whole Foods, but they're not demonstrably different. There's still a confusing collection of assets masquerading as a tech company, that's an easy narrative for them.
If they're going to buy something as big as Target, the problem is that the financial statements start to look like a retailer. That I think is the issue – it's the size of the business versus the rest of the Amazon business.
I would think that if you are Amazon today. I think you're much more likely to solve the problem of access to consumers through varieties of doors. I'd personally, looking at their financials, I would probably solve that partner problem through partnership, rather than acquisition.
Now, if they're genuinely a $500 billion company, sure they could buy Target because then a $50 billion business would just get lost in their financials.
I think today then buying Target would make them look like a retailer, which I really don't think they want to do. Because then I think they start to get picked apart by the investment community like a retailer and that that's not helpful for them of course.
Right – and they get away with it with Whole Foods, I mean, because it's less than 5 billion. Around there for them, so, you know, the investment community isn't really taking the screws to them. A little bit but very, very lightly.
You can't because you just can't look at their financials and really figure out exactly what the implications are. And I think that's a real advantage for Amazon.
I think if Amazon were to acquire a retail business, it would be something more in that size. But just again, for ease of height not hiding is one way to put it. But just for lower visibility is advantageous to them.
So, I would say if they were much bigger that would be interesting. If I were a digital asset looking at Target, and you know I've said this in a number of places.
So, I actually think if Target was going to merge with a digital asset, I wouldn't make it Amazon, I’d make it Pinterest.
I think the combination of Target and Pinterest would be really interesting - but that's…
What you just said is exactly, exactly what I would say. More on the visual side and their Target audience person, I think Target would be a tough fit in Amazon, personally.
Yeah. And that kind of brings another topic up. Because a lot of people are saying that Amazon isn't doing as well in, you know, personalizing the shopping experience.
What are your thoughts on that? A lot of movement is going towards recommendations and just really visual selling methods online, specifically. Do you think they're going to invest more in that? I mean, we've seen some changes recently, but is there anything you guys have been hearing?
Well, I think Amazon has always approached their business as ‘they are the search engine of products’.
I think that they’re utilitarian view is designed around that.
But I think that they have seen that that view works and has certain weaknesses when it comes to, especially visually- oriented things. Clothing, furniture, other things that are visually-oriented.
But I also think that Amazon is the king of, if nothing else, of experimentation. And I think they certainly are looking at alternative interfaces that could come into their digital store, their digital e-commerce front. And I think that we’ll start to see the rise of those in the near future.
Yeah, I would – agree. First, I agree with that basic sentiment. And then the only other observation I would offer in that general line is that a lot of what Amazon does from a search marketing point of view to me looks a lot like – I’m the old school retail guy – my world's more analog retail than digital. To me it doesn't look like search marketing, it looks like an end cap, like you're putting something in the way of a shopper that's trying to go somewhere else and trying to show them something.
So, Amazon’s success has always been based on simplicity of the one-click and getting through the website and recommendation based on previous purchases that pattern. That is something they've repeated worldwide. It works in some markets; it doesn't work in others.
I do think it's going to change over time. Partly, primarily because technology's changing to make it different, but ultimately, it's a key component of their success formula that I think they will stick to on a go-forward basis. It will get in hand, but it's what made them successful to their formula.
Yeah, that's an interesting perspective that you're saying that if they changed it too much it might take away from the value they've created through that approach.
Yeah, I think it's going to be a bit of a Swiss army knife approach. I think you're going to find they're going to always stay with that search engine layout format that allows people to very quickly search and sort by reviews, by brands, and products to find against the wide assortment, wide array of things.
But I think that you're going to see an extension of that is much more experiential. And that will be options that you can get into. And you can transform your searches into more experiential searches. I also think that we're going to see a growth of artificial intelligent recommendations where you have intelligent shopping assistants that are, you know, looking at what you're looking for and making smarter recommendations as to what it is you probably want to see.
There and you see some experiments in that space where they are is they've tried different things to see how far they can extend the model. So that will continue. But ultimately, you do want to leverage your core strengths going forward.
I think the other thing is Amazon's very good at what I would call linear – “if you liked this, buy that” algorithming.
The rest of it is pretty – and this is one of the interesting challenges Amazon has in grocery – they're not particularly good at selling baskets of things. You know, if you want to buy 20 things on Amazon, it takes exactly 20 times as long as buying one thing. That's not ideal for a grocery shop. So that's one of the really interesting issues Amazon's gonna have to solve for whether it's through data, or I think it's a combination of data and user experience. Which is to get better at selling multiple things more quickly.
That's interesting – so they're not as good bundling products in terms of experience, but then they bundle so many things into their Prime membership.
See, they don’t really bundle them as much as – like I'm sitting in my mother in law's house in the process of moving her at the moment and this house isn’t bundled. There's a lot of things next to each other, but I don't know that I would describe them as bundled.
Unrelated things that are bundled, yeah.
Great. Well, let's see. Moving on to grocery. So, the online grocery industry is struggling to catch on in the U.S., which is 3% of grocery spend occurring online is the stat we pulled. Where it's like 10 to 15% in UK and South Korea, as an example. Why do you guys think that is – what's the big challenge?
Geography. So, we'll just start there. I think the distribution of purchasing power in a place like Korea replaces like the UK.
Yep, so much of the UK is economy at the moment is London-centric, some like 45% of the UK’s GDP is within 25 miles will pole in downtown London. If you put two more poles up in the northwestern part of the country and somewhere loosely in the middle, you know that 70% of the GDP of the country is within 25 miles of one of three poles. That makes it easier to master a delivery model that's based on a centralized logistics model in some form of last mile solution.
I would say it’s the market that’s most parallel to the U.S. – and Korea’s obviously same. I just think the geography of the U.S. from the last mile solution point of view for perishable foods is a really daunting physical problem to solve.
And then I think you build into that if you look at how that problem got solved. I just think the U.S. retailers so far and haven’t approached the problem the way that the one market in the world that has a geographically dispersed population, but a relatively high e-grocery sales and shares is France. And France has been able to solve that largely through click-and-collect, largely by the retailers buying up more convenience locations and using them as pick-up points on a model called “drive”. The problem in the U.S. has: one, nobody really has the appetite to do that, and two, those physical locations are just owned and zoned differently.
So, I think there's been a logistics issue that's on the table there to start with. I think there's a lot of talking about ‘Americans are really choosy about their perishables blah, blah, blah’.
I certainly don't think they're more choosy than French consumers. So that's probably not right.
And then the other thing is that in the U.S., your grocery retailers – except for Walmart and arguably Kroger, are family-run, not terribly well-capitalized businesses that are not well positioned for a multi, multi-hundred-million-dollar investment in e-grocery. And the solutions that came along to try to socialize that like my web grocers weren’t very good.
In my point of view, Walmart is probably the best position to take a better shot at it along with Kroger, I do think those two companies have the infrastructure to deliver even perishable.
I think some of it is there, take the going on the stream in terms of self-driving robots and self-driving cars versus solve the problem, ‘how do I get the perishables to you now’ and not wait till all the rest of the infrastructure actually catches up.
I do think that is the critical market. Again, not just in the U.S., but worldwide, that has to be solved, just because there's so much of the spending that goes into grocery. If you look at the global, up to 50 retailers, only 10% of those revenues are apparel, 66% is in the grocery space.
And there's still a ton of investment going into that. So, it needs to get solved. And I do think if you listen to Walmart, that's what they're trying to solve. 56% of the revenue of our Walmart comes from grocery and then you see all the investments that we're making now, in terms of how to make it easier to click-and collect.
How to make it easier to actually choose and pick up your groceries at your local store. They’ve understood that is a leverage that they have over Amazon and they're aggressively trying to figure out how to scale before Amazon figures out who they gotta buy, and how and what they have to do to get even close the infrastructure that a Walmart can bring to the table.
Yeah, I agree. I think Walmart is the farthest ahead here and I think that even they would admit that they're in the infancy stage of this – of figuring it out. You know how much is it that is click-and-collect, how much is the actual delivery, who do they need to partner with, how did they do that.
But I think that, you know, if I were to go back to Microsoft's challenges over the years, at one point, Netscape was going to dominate the Internet. And then I watched Microsoft rally and go from having less than 10% of market share browsers and bring that back up to I believe 93% it at its peak.
And I think that we're seeing the same thing with Walmart. They're not going to be caught flat-footed again on this online thing. I think they're investing heavily and smartly, and running the right tests on ‘how do we get people to engage with us in grocery, in perishables.’
And I think the knowledge they're gaining from that, which I think they're the leader on is going to propel them to the next stage, which is going to be, you know, even more impressive.
And Walmart should do it without getting arrested for anti-trust violations like Microsoft did.
Another important distinction, right.
I was going to say, “you heard it here first.”
I don't think Whole Foods is gonna get them there, just based on what they've done so far. In terms of all the retail that's why they've announced, or suddenly announced, that they're going to open up a separate grocery chain.
And again, I'll go find the parallel. Alibaba is planning to open 2000 grocery stores, because they would like to get through your cooked food or perishables, or you cooked food in 30 minutes or less to your home.
So, there is a model out there because of exactly what was said earlier. U.S. infrastructure will take some work, but it is something to strive for based on the importance of that market segment.
Yeah. And then if you're trying to match Alibaba, as you all know, their economic model is so different than Walmart's. They're not a trading company, by and large. They make money basically by monetizing their audience. And their audience is huge, and their audience is huge for a whole host of things and you know retail is just one of those connectivity points in there.
Everybody always compares Alibaba to Amazon – to me and some ways the business of Alibaba reminds me almost as much of, if anything else, is Disney just for the sheer breadth of things that Alibaba is involved.
It's almost more like Disney than anything else I can think of.
Yeah, I will just go back to one thing when you mentioned the antitrust point. I would say that one of my caveats against Amazon being able to make like a Target play is, I think right now where they sit with the current administration, there were some antitrust issues that would come up as well. I think that any deals, we see in that space might need to wait a little bit, at least for 2020.
Well, on grocery just while we're still on the topic – how can Amazon switch over the Prime customers to Whole Foods customers. Like is that possible, what is the angle that you guys think they're going to take to be successful?
I think they've started already a little bit. I mean now keep in mind; its Prime penetration was much larger than the Whole Foods penetration. About 12% of America shopped at Whole Foods so it’s a very niche grocery format. It gets a lot of publicity, but that's a very small part of the U.S. food ecosystem.
So, I think that the biggest thing Amazon's done is, is trying to drop some of the pricing to make it a more rational place to shop on an ongoing basis.
You know, the single biggest barrier to people shopping at Whole Foods, even through all the research we do on this was really obvious is that it's incredibly expensive.
So sometimes research pleasantly confirms obvious conclusions. So, I think what they’ve tried to do is democratize the value proposition a little bit.
I mean the other issue Whole Foods has is geographic constraints. They're not physically in most places where most Americans live
Now, most Americans don't live within 10 minutes of Whole Foods, probably more like 25 or 30. And certainly, you know, when you can cross that income strata there's a pretty narrow percentage of the population that would probably use Whole Foods as even anything close to a primary grocery solution.
So, I think democratizing the value proposition. Getting smarter about figuring out how to broaden the reach of the non-perishable sides of Whole Foods, particularly 365, their private label, which I think is a really interesting platform that Amazon's under leveraged so far.
But yeah, I think, in general, they really are just trying to make and then they're just – I think the other thing is you've seen them do this already. Trying to convert some of their existing Amazon Fresh ecosystem consumers into the Whole Foods network. That was a really small percentage as well. But you know when it’s 12 to start with every little bit helps.
Personally, I think they've done a very poor job of integrating Prime into Whole Foods. I’m a shopper at Whole Foods, and I also use the Prime card at Whole Foods, and frankly I stopped doing it.
Basically, give Amazon all that information to get $1 back in savings is totally unworthwhile. And you see that all over the internet, what consumers are saying “what exactly am I getting by using my Prime card at Whole Foods?” So, I think they’ve done a poor job of actually turning that into a loyalty program of Whole Foods and really they're squandering that 100 million plus Prime audience in making them loyal, or at least have someone that wants to go to Whole Foods.
Yes. And again, I think Amazon's ability to solve integrated problems that go across multiple parts of its organization is dramatically overrated. So, Amazon's for those - I mean, most of you know Amazon better than I do. They're a pretty siloed company – they try to solve things sort of one area at a time. So, the notion that Amazon is going to bring its entire ecosystem to bear, to crack the code on Whole Foods just runs counter to everything I know about how Amazon likes to solve problems. That people responsible for Whole Foods will be responsible for fixing Whole Foods and won't view the other parts of Amazon as interesting, possible assets and possible competitors. The same way that all the different parts of Amazon take a look at each other.
So, with Amazon now offering through some of the retailers that use FBA, the try-before- -buy. Do you think that clothing will take off with Amazon? Do you think more retailers will start using them to fulfill their products or do you think they'll come out with their own better, more competitive shipping strategies?
As far as traditional retailers versus Amazon when it comes to apparel.
The best model that I've seen implemented to date has been at Nordstrom. I think that's a tough model.
It will be a tough model for a number of them, depending on the brand involved. I just do. That's a tougher model for Amazon to actually take on based on how they're structured and what they actually do in terms of sending you a trunk full of stuff, you try what you like and send the rest back or vice versa.
Yeah, I mean Amazon's owned a business that does this in shoes for close to 10 years now, which is Zappos, so they know this model.
I don't know that the convenience of being able to return a bunch of stuff is as convenient as people think. I don't think people really like to do that.
I just don't – no one’s really quite soused out the user experience. I mean even Zappos, I think after people got over the thrill of being able to order 10 shoes and theoretically return nine and realized returning nine pairs of shoes is a total pain in the neck.
But the interesting thing to watch here, I think, is the return partnership that they're forming with Kohl’s. So, now you're going to be able to go to literally any Kohl’s store in America and return stuff that you bought on Amazon.
That’s got some – because returning stuff at a store, though not fun, is at least not having to box it up and go to the UPS Store and figure out how to do that.
That's got a chance. But I think the broad-base notion that people want to buy a bunch of stuff and return most of it just flies in the face of human experience. I just don't think people really want to do that.
Sounds like that’s kind of the consensus. Yeah, and clothing.
And clothing still has the issue of size, and that I mean the dirty secret is over 60% of clothes bought online are returned. So, until that gets solved in terms of how you get the right size to the right individual, that's a tough one to go crack. When it’s also saw the smallest, really, market segment worldwide versus again some of the other biggest segments.
Yeah, I agree. I think one, shoes are probably the easiest of those to get right. And I think we're seeing that they're struggling, even with that.
I think that on one hand, Bryan, you're exactly right. I don't think consumers want to go through the pain of returns. I also want to say that I think that the manufacturing partners don't want to deal with tons and tons of returns.
They have a much higher return rate, you know, Tony, as you said, online return rates are much higher than in store. And so those costs – of the channel costs – are going to be a lot higher for their partners. I think that's the challenge.
And then finally, I think that when you're seeing, you know, some of the different solutions that're out there where designers pick out your clothes and send you things to try. I just don't know the Amazon is the brand I turn to to style myself, and maybe they can be but I don't think they occupy that space in my mind as far as from a marketing standpoint. I don't think that that's the space they occupy in people's minds today.
So, I think there's a lot of challenges to make that program effective in a big way, which is what Amazon needs is big wins. And as Tony mentioned, I just don't know that that segment of the business can grow fast enough to make a dent in the numbers to, you know, affect the street or really Amazon's bottom line.
Yeah. Most of the great apparel merchants of the world, in some way, shape or form are curators – and Amazon's not a curator. It’s not what they're wired for.
The point we made earlier around personalization, to get interesting with that, but they are a ways away from using personalization data to really meaningfully curate a fashion experience. I think for brands you buy all the time, where you know the stuff fits – I buy shoes on Amazon myself because I just know the pair of shoes I buy.
So that's the type of purchase that makes the most sense in that world.
Great, well thank you guys for all of your insights today. It was a pleasure having you Bryan, and you Tony and Paul on the call today as a panel. This was the first panel that we've done, so really exciting – I think it worked out really well so thank you guys for joining.
Thank you very much.
It was a pleasure talking to you all.
Great – thank you, bye.