Interview: Make the Most of the Marketplace Opportunity in 2023, with guest Emily Pfeiffer, Principal Analyst at Forrester

Transcript:

Peter Crosby:
Welcome to Unpacking the Digital Shelf, where we explore brand manufacturing in the digital age.

Peter Crosby:
Hey, everyone. Peter Crosby here from the Digital Shelf Institute.
More than ever, brands need to wring maximum efficiency and performance out of every channel in which they invest. Marketplaces are places of great potential opportunity, but also require investment in new capabilities and skills to be successful. To make the most of your 2023 marketplace opportunity, Rob and I welcomed Emily Pfeiffer as our guest on the pod for a special hour-long episode, a megasode you might call it. Emily is a Principal Analyst at Forrester Research covering commerce tech, specifically focused on B2C brands and retailers, and she's got things to say.

Peter Crosby:
So Emily, thank you so much for joining us on the podcast for the very first time, which I have to apologize. I'm sorry, it has taken so long.

Emily Pfeiffer:
I'm honored. I've been hoping. Thanks for having me.

Peter Crosby:
I'm so excited to have you here. I first have to remind everyone listening that you have sat in their seat, most recently in an eight-year stint at Berkshire Blanket running digital business, taking it from scratch, building it up to a substantial part of the business.
So now you have become one of the great brains at Forrester, really as sort of a challenger brand of their commerce ecosystem, if you will. Your LinkedIn profile I saw actually has a quote, "Terrifying but not impolite." Was that your self-assessment or was it someone else's?

Emily Pfeiffer:
Not my own. Look, I admit I can be a little intense. I think it's one of my virtues. But so is my ability to mind my manners when needed. So someone assigned me the title. And I was just so proud of it, I thought if I can't put it on my business card, I'll put it on my LinkedIn. "Terrifying but not impolite."

Peter Crosby:
I think it speaks well of you.

Emily Pfeiffer:
Thanks.


Peter Crosby:
So what we wanted to do when we have you is really tap into the deep research and the advisory that you've been working on really to help the clients you talk to, the brands make the most of the marketplace opportunity. And probably the best place to start is your view of what the marketplace opportunity even is as you look at 2023. Is this a wise area to invest in at this particular time that we're in in your mind?

Emily Pfeiffer:
Yeah. I mean, according to Forrester data, only 18% of US consumers under age 65 have not purchased from an online marketplace. And that number gets lower as the demographic goes younger. Meanwhile, well over half tell us an online marketplace has allowed them to locate items they might not have found otherwise. But your listeners aren't surprised to hear this, right? We know that marketplaces are huge, and in the US they account for a massive portion of online sales. I think in 2020, Amazon captured 40% of total US E-commerce. And it's been going up, eking up year over year. While totally E-commerce is growing, their portion of it is also growing.
So there are reasons for brands to proceed with caution into marketplace selling, but it's still a very wise investment for most brands as long as they kind of go into it with a plan around assortment for each channel and realistic expectations around their own costs.

Rob Gonzalez:
So when we look at the realistic assessments on costs and we look at the investments that brands have to make, a lot of it comes down to the mechanics of picking, packing, shipping eaches. And while the opportunity may be significant, the costs are also in some cases significant.
So I just want to start with a rough sketch for maybe companies that this is an absolute no-brainer for types of products, maybe easily shippable products. And then are there types of products where the cost is just too high, maybe you shouldn't participate, maybe you should just leave the marketplace selling to the 3PLs and others that specialize more in the logistics? Is there a way to think about that breakdown?

Emily Pfeiffer:
Yeah, I generally recommend that my clients manage their own profit and loss sheet per channel. And when you look at the P&L that way, it really surfaces those kind of unexpected costs that you might not see coming.
So it's easy let's say selling into Amazon. And your category, you know that Amazon takes a 15% cut. That's easy to account for. But what you might not think about is the costs of the advertising, the things you have to do to boost your listings. If you use FBA, Fulfillment by Amazon, you can't leave your product sitting for too long. You have to pay to ship it back, or they get rid of it for you if it hasn't been selling. So there are all of these other costs that are really easy to forget to look at.
So thinking of that per channel is really important. And sometimes it's worth it to almost look at a blended margin, meaning I'm going to put some products up that might have a great profit, they're more expensive products, or I've just got more markup on them, and others that are a little bit slimmer, but it's worth it for the exposure or to just move them out. So a blended margin can be a healthy way to look at the profit. But it's just terribly important not to lose sight of the bottom line in these channels.

Rob Gonzalez:
So some of those costs are specific to operating where you're selling on a marketplace yourself. So you're managing the advertising budget, you're paying for, let's say that you're using FBA, you're paying for the cost of managing FBA and whatnot. There's other models where you're going to be shipping each, such as dropshipping, where the retailer's going to take responsibility for those costs. And so maybe from just a pure profit-loss perspective, they may look a little more attractive to you as a brand. You don't have to do the end consumer merchandising and advertising, the things that can sort of eat margin.
Is there an easy way to think about the differences between these models? Would you prefer to do dropshipping as a brand if you can do it? Or are there advantages to the marketplace model in terms of controlling your own destiny that you'd prefer? I mean, what's the trade-off architecture here?

Emily Pfeiffer:
I'm so glad that you asked that. There's a lot of confusion about this in the marketplace and sometimes I think it's because some vendors are kind of all or nothing. They wouldn't ask it the way you just did. They would say, "It's marketplace or bust. This is the only way to think about it." And that's, well, usually anybody who says that is being a little limited in their view.
So let's just define dropshipping first. It's simply just a merchant, that can be a marketplace, a retailer, selling an item that they don't physically own and then they pass the order off to the supplier or the brand who dropships it, the item, directly to the customer. That's it. That's dropshipping. And so when you boil it down to that level of simplicity, you can see that all of this is dropshipping. Marketplace selling is dropshipping. So dropship is like the umbrella over all of it.
But there are some common differences between a traditional dropship model for retailers and marketplace selling. They're always exceptions, okay? So I'm going to tell you these are rules. They're not. They're just generally accurate.
For instance, think about who chooses what to sell or who sets the retail price. So with marketplaces, usually the brand can just list whatever products they want. You put it up. They set the retail price to the end customer. There's more control in that sense on marketplaces for brands.
Brands who are selling into retailers might find that it feels more like a traditional wholesale relationship. They might have buyers or category managers who are at the retailer, who are choosing which of their products they'll actually accept and decide to put on the website. And generally, it's a wholesale cost to the retailer and the retailer will then set the end price to the customer. So those models typically vary.
And there are also legal implications. A lot of people don't realize this, but there's something in the US called Section 230 which provides some protection for marketplaces. This is the thing that makes Twitter not responsible if you tweet something that's false because it's really clear to anyone reading that you tweeted it. Twitter didn't post it. So because there's that level of transparency, Twitter is not legally responsible for your words. Similarly, on Amazon, if you try to sell counterfeit Nikes, you're responsible. Amazon's not because there's that transparency again. It's clear to the buyer that you are the seller.
So that protection is in place for marketplaces and not so for retailers who have dropship suppliers because they don't have that level of transparency. It looks like the retailer is the one selling it. So there are these kind of interesting legal and logistical differences between the models.

Rob Gonzalez:
Yeah, it's interesting. So in the classic dropship model, my understanding was always the buyer of a category at a retailer contracts with you, but they're not going to buy a bunch of stuff ahead of time. When they get an order, you dropship. So they're sort of transacting on an eaches basis. Maybe they true up with a PO every quarter or whatever, but they're transacting more or less on an eaches basis. And the brand doesn't have any responsibility other than just shipping the thing. And there's something attractive to that. Whereas you're getting to a whole other can of worms on marketplace selling, which is you as the seller are responsible for all kinds of stuff on the marketplace.
And one of the things that brands worry about is the damage to the brand that happens when there are counterfeits for their brand and when there are channel conflict, like a 3PL might be trying to unload inventory and dropping price on your product and going below map in a way that you want to control.
And so I don't know, to me the advantages of the marketplace are that you get access to more consumers and you get access to how you're presenting your products and you get access to setting price. But it also comes with all the downsides to all those things as well.
When you're measuring, like you said earlier, on a channel basis the profit and loss for the marketplace, how do you account for these additional complexities, or is there a way even? Is it just the cost of doing business that you just have to deal with and at some point you can later on account for it?

Emily Pfeiffer:
As Peter said in the beginning when he introduced me so nicely, I am a recovering practitioner. I was a vice president of marketing and digital for a brand manufacturer, and I was responsible for these channels. And as such, I still have a little bit of baggage, kind of the damage that comes with having been through it. You know how it goes?

Peter Crosby:
Yeah.

Emily Pfeiffer:
And so managing your brand and all of those channels is terribly important. It's something that we absolutely have to keep an eye on. And these channels don't often have to care about protecting a brand or its image or it's pricing. It just wants to capture the sale.
So we've seen some brands pull out of marketplaces completely. They'll say, "If you see my product there, it is counterfeit or being sold without our permission fraudulently because we can't control the brand well enough in these channels." So it is really important for brands to use some form of E-control and just to make sure that they're keeping an eye on what's out there because yeah, it is, protecting the value in the brand is everything.

Peter Crosby:
So from one can of worms to another, I did want to bring up, you mentioned earlier the importance of assortment strategy for marketplaces. And I've heard a lot of brands are talking about the necessity of having some sort of value option in their portfolio right now as an example, a place for a consumer to go where they can pay a less price without having to move from your brand. What's your advice, and I know there's a lot of detail underneath the surface here, but for strategic assortment planning right now?

Emily Pfeiffer:
Yeah, this is one of the top questions that my brand clients ask me. Assortment strategy, as you said, I mean, it's really complicated. And I think it's kind of underrepresented in the conversation a lot of the time. So I'll try to kind of summarize the key points here because you're right, we could take all day on this one.
So first, try to find some uniqueness in each channel. It doesn't necessarily mean different product lines though. Something unique could be a bundle. It could be a certain combination of products that's only available in this place or that place. It could be something exclusive. It can be closeouts that you just pull from most of your channels. Or sometimes there's a little add-on, when you buy it here you can give this little something extra. So just letting it be a little unique so it's not directly comparable can be interesting for folks who are shopping in different channels.
Then consider the audience on each website. And this is hard to do in the beginning. Sometimes you have to just start and then see what happens. But you'll find that there are different preferences. The same brand will have different best sellers on different websites. There are lines that sit better on that digital shelf than another, for instance. So you can kind of continue to curate the products that have the right attributes, the right style for each of the sites.
And don't be afraid to have a really broad assortment. I find that sometimes folks want to hold back like, "What if we just start with..." Right? But if you're not ramping the business, if you know how to fulfill and how to manage just the dropship processes at all, it's not a bad idea to kind of cram as much as you can into some of these channels as appropriate for the audience because you have a better chance at moving volume and at using the channels as a testing ground and gathering volumes of data.
But couple of quick pro tips. First, track what you've offered to each channel. So specifically for retailers where you've got a buyer and they're choosing what to take, it's really nice if you know that you already offered two months ago these couple of product lines and they said no for some reason. Track it. Because if you understand that that happened, you won't put it right back in front of them again and they will learn that they can trust you not to waste their time. Keep track of what they accepted, what was discontinued in a channel. It makes you a lot smarter as a merchandiser.
Another one is to order cautiously. So Rob, you said something earlier about these channels that we sell into, they're not ordering from us. It's one at a time because they've already sold it to their customer. So I had a lot of experience with buyers at my dropship channels coming to my showroom, showing lots of interest, asking me to bring in product for them. You just have to remember, there's no guarantee they will even put it on the website, let alone how many they might sell.
And of course, if they're smart merchandisers, they want you to bring in the riskier stuff that fills in the white space so they don't have to take the risk on it even though it might not be the big movers. So just be careful what risks you take in the inventory you own.

Rob Gonzalez:
You mentioned you get the value of the data, if you jam a lot of stuff into the marketplaces, you get the value of the data. And I think you were implying that some of that data could be useful in general retailer negotiations with buyers from not marketplace selling, but selling to the retailer.
I'm intrigued by this idea. I mean, I love the thought of somebody coming out with a product, selling it in a pure online channel, whether it's on their direct-to-consumer site or whether it's on Amazon or whether it's on Etsy or whatever. And then using the data from that to go to a buyer at one of the major brick channels and say, "Look at this. You want to buy this in your store." Is that something that actually happens, or is this just a dream that I've had that I want it to be true?

Emily Pfeiffer:
No, dream come true. Absolutely, this is what happens. Look, when you walk into a store and you see something on the shelf, you have to realize that the retailer calculated their dollars per foot on that shelf. And this is a finite amount of space. It takes a big deal to get a product onto a shelf. It's hard to do.
`So in the unlimited digital shelf, retailers are a lot more willing to experiment. And if you can say I have a direct digital channel where I tested this first or I put it on this marketplace first, or I've tried it alongside these certain other products first, and you can prove, look, it didn't cannibalize this other line. Actually, they amplified each other's sales. Find ways to say we know it has legs. It's proven already. You're asking a lot less of a retailer now that they don't have to take the risk on an unproven, unknown product. So it's a huge benefit to use these digital channels as a testing ground and as a way of gathering real-time data.
So a brand who isn't selling direct to consumer online or who has a small footprint compared to what they do in wholesale retail channels, they don't have access to real-time selling metrics. And so case in point, if you've got a color that just takes off. It turns out this season that certain green is really, really hot and it's flying off the shelf. By the time the brand knows, when they get their quarterly selling data or they hear that it's sold out, it's probably too late to get more for the season.
On the other hand, if they're getting each order as it comes in because they're shipping it to the customer, they've got access to data they've never been able to see before. It is actually real time, and there's a huge advantage to that.

Rob Gonzalez:
Not so much a question as I'm using. And for years I've wondered...

Peter Crosby:
Uh-oh, here we go, Emily.

Rob Gonzalez:
I know, I'm sorry.

Emily Pfeiffer:
I'm ready. I'm ready.

Rob Gonzalez:
For years, I've wondered, if you're a buyer at Walmart.... And I remember we did a webinar with the buyer from the personal care category at Walmart maybe eight years ago or something like that. It was 2014, 2015. And he made the statement on the webinar that was the role of the buyer at Walmart has changed. Now, we used to be in charge of picking the best products for the consumer, and although that's still true, we're now tasked with getting all of the products for a category listed on the website.
And so that was the statement that was made on that interview. And this was right in the process of Marc Lore and there was huge buyer turnover for a few years after the jet purchase. Almost the end game is where the buyers, at least for the everything stores, for the big mass merchandising retailers. I mean, what is their job if sort of the data and the algorithm kind of boosts the things that are trending and selling and they end up in stores?
So anyway, that's my musing here. Do you think that there's bottom to that, or do you think that the role of curation becomes even more important in the world of everything is available online all the time?

Emily Pfeiffer:
It's terribly important, but in a different way. So we have Forrester data that says really clearly consumers don't want to be shown products online that they're not already interested in. Now, does their behavior demonstrate that? Questionable.

Rob Gonzalez:
Okay. Can you restate that?

Emily Pfeiffer:
Yeah.

Rob Gonzalez:
I don't want to see something that I'm not already interested in.

Emily Pfeiffer:
Correct. Correct. When I'm shopping online, I probably have a purpose. I'm here for a reason, there's a thing I'm looking for. Show me that, or show me things that I'm going to happen to be interested in.
So when you walk into a store and you see an end-cap display in a retailer, you're kind of willing to take it in. You walk by it, you look at it, maybe you're tempted by it, you're in the line to check out and maybe you have an impulse buy from something that's in the aisle there. You're willing to shop that way, not online.
And retailers have told us we know we sell less when folks buy online. We know we don't get the impulse buys when they buy online because they're there for a purpose and they buy that thing. And there are exceptions, but the experience of shopping and discovering and happening upon, it's just not the same when they're shopping online.
So the role of that curator, that merchandiser when it comes to presenting product online, yeah, terribly important, not going away, and not at all the same as in-person merchandising.

Rob Gonzalez:
Yeah, that's really interesting. I'm kind of thinking about in Amazon, they've got like an anti-KPI, which is time spent on site. They want to minimize the time spent on amazon.com. And the whole experience is like a spear fishing strategy. You go to Amazon, find the thing you kind of want as quickly as possible, and then you click buy now. And then an hour later you go back and you buy something else, buy now, and an hour later you go back. And so they're not trying to get you to basket build, they're trying to get you to just buy now, buy now, buy now in as little time as possible.

Emily Pfeiffer:
And Amazon's smart. Right. I mean, if that's their mission, it seems to me they understand this already. You're not here to browse and look around and discover. You're here for a reason. I hope that you find what you're looking for because I want you to buy it and get out, thanks.

Rob Gonzalez:
So have you seen exceptions to this though? I'm wondering, for example, and I'm just going to say this because I'm an unfashionable guy, but if I'm looking for something for my house and I go to Wayfair, I don't know what I'm looking for. It's like I need a lamp. I don't have the vocabulary to describe lamps. And wayfair.com does a good job with their category browsing of allowing you to explore the space a little bit just to even understand what's around there. Clothing, similarly too. I mean, we've seen some of these AI companies come up that do a good job with basically match suits on apparel websites and increasing conversion rate that way.
So is the statement that you made true across all categories? Are there exceptions to it, or even in those exceptions that I'm talking about, the kind of spearfishing mentality that you're saying is still the dominant mode of shopping?

Emily Pfeiffer:
Great question. And it's really interesting that you framed it with Wayfair because they came up through implementing a different type of online shopping. Wayfair, it's always been focused on home, they only sell home goods, and they've always been focused on style. I think I've seen them kind of pull away from this in more recent years. The shopping experience on Wayfair used to be very focused around style and they would say things like, "We're trying to cater more to someone who's redoing an entire room than someone who just wants a lamp." And they want you to find your industrial style or your mid-century style or whatever is your thing and to buy all around that.
So in that sense, they probably are expecting more of a shopping process rather than a strike mission of buying. But they were also funneling you to the style you wanted. They weren't showing you all the lamps. They were showing you the lamps and the style that you self-identified as liking.

Rob Gonzalez:
So for me, it would be steampunk and my wife won't let me have any of it.
So if we tie it back to marketplaces then, okay, I know this is kind of a big end around for the audience, but it's the reason to be on all these marketplaces is that they might be looking for you there or might be looking for something in the category there and they're going to be in and out. So your merchandising capacity is basically catch them in the search, catch the transaction, or you don't get them and you don't get the brand awareness and you don't get the exposure and just because of the way that the shopping model works.

Emily Pfeiffer:
You're also touching on something that we're going to need another podcast to really talk about, which is product discovery. This is something I spend a lot of time looking at in my role. There are search vendors on websites that help merchandisers put in front of a customer the stuff they want. And what does it rely on to be the matchmaker between the customer and the product? Two sets of data, customer data and product data.
So when we are talking today to brands who are syndicating their products out to all these different websites, one of the most important things that they can do is have really rich product data that's fully populated with product attributes that hopefully work well with the system they're being sold on so that the products can be surfaced when appropriate using, hopefully, very smart technology that the retailer or marketplace has in place.

Peter Crosby:
So Emily, dig into that for me because I think it's so important for brands and retailers to partner well so that a rising tide lifts all boats. Right now, The Wall Street Journal had an article a week or so ago about Walmart reasserting its power over price online in addition to in-store. That situation has changed, and now retailers are back in charge. And we all know that retailers are also putting out new programs to get more money from their suppliers. That's become an even bigger source of their revenue.
But to your point, in order for the brand to be successful through the retailer, there are things they can do that aren't necessarily paying those programs you need to do those as well but that they can do that you're now starting to dig into. Can you walk us through your advice of really own your experience on any touchpoint that you're on? What is it that you would advise people– 

Emily Pfeiffer:
Yeah. So for brands to do a really good job at this, I mean, number one, send product data so that it's complete, immaculate, well in advance of when it's needed. If you've got a specially timed launch or something, don't wait. Send the data and make sure it's in the correct format. That point is not news to any brands listening. The fact that every channel needs their data in a different format is why we're here and why it's so complicated to do this. But every retailer will say, "I wish the brands would just send it right." And every brand says, "Why does every endpoint have a different format?" So figuring out how to send that data perfectly for each end channel, that's number one.
There are requirements per channel. Every channel has requirements around imagery. My last life, I sold blankets online. And there's one retailer that requires you to fold it on a white background and turn back the corner. It doesn't matter whether it's reversible or not, you have to turn back the corner. And if you haven't photographed it that way, they will kick it back and you'll re-photograph it. Trust me, been there. Every channel has its own requirements. So know them and don't make them remind you. Really try to stay up on it. Hopefully, they'll let you know. Sometimes it's a surprise.

Peter Crosby:
That would be nice.

Emily Pfeiffer:
Fulfill as promised. So there's something we haven't gotten to yet that I wanted to make sure to mention, which is both ends of the relationship, the retailer or marketplace, the brand or supplier, they're giving up some portion of the end customer's experience, they're outsourcing the experience management.
For a brand, what you're outsourcing is that online experience, the purchasing experience. But to a retailer, they're outsourcing to you the fulfillment. And they need to trust you. They need to know that it will go as promised. And hopefully there's an avenue for you to communicate if there's a reason you can't meet the SLA. If you know that your warehouse is closed for a reason in a certain month or closed for the holidays or has to do cycle counting at a certain time, communicate that in advance and make sure that they know you're not going to hit the SLA at a certain time.
And quick bonus for a brand is to learn the style of the website channel that you're selling into. Create a version of your product content for them. It still has to be brand consistent. But every website has its own style and requirements. And the requirements in this case might be we always have an introductory, two sentences, and then a list of bullet points of features and benefits, and then care instructions, whatever, country of origin. But learn their style. If you're used to selling on Amazon, you know have to concatenate things like size and color and variance and brand name into the name of the product.
But every channel has their own require... So learn them, figure it out, and maybe even find out whether the retailer has a program so that you can train your content people to provide the content in their style so they won't have to edit it, which does two things. One, makes it all move faster, and two, prevents other people from editing your stuff.

Rob Gonzalez:
Have you seen data about whether or how much the style matters? It's one of those things that I've just seen is difficult from our seat, from the brand side of things to AB test. So you could say, "Here's an image that's our stock style. Here's an image that's more closely aligned with the style of the retailer."

Emily Pfeiffer:
Oh, I see.

Rob Gonzalez:
Yeah. Basically, where I'm coming from is I'm the head of E-commerce at a brand. I'm making the case for more content resources to develop these retailer-specific looks. How do you justify that expense? Where's the ROI argument there other than being a good partner?

Emily Pfeiffer:
I'm going to tell you a personal story, okay?

Rob Gonzalez:
Okay.

Emily Pfeiffer:
A true story. I was meeting with a certain website for which I dropshipped and they had a printout on paper, hold your judgment, but okay, showing a certain category with photos and selling metrics. And they pointed to one of my products and said, "See how your competitors have this certain other style of photo for this one, but yours is this other style and I don't think it fits well merchandised on this page. And we don't believe that that's how our customers want to shop. So we would like you to re-shoot it and show it more in this style."
So I calmly asked whether she thought that that had any impact on the fact that the product of ours she was pointing to was literally our best-selling product on her website. Maybe it stood out that it was a little different. Maybe that style was actually a better fit for that audience shopping that type.
So the reasons why these requirements exist are sometimes questionable. Sometimes it's somebody's taste and has nothing to do with actual performance. Sometimes, hopefully, it really does match the way that the shopper in that channel wants to shop. So yeah, it matters.

Peter Crosby:
Terrifying but not impolite.

Emily Pfeiffer:
Right. It works. I'm on brand.

Peter Crosby:
So when you think about it coming back the other way, we talked earlier about the retailers asking, and increasingly many more of them asking for more money for more programs that they run, advertising and data and all this. What should brands ask in return? What does the retailer owe them for that investment?

Emily Pfeiffer:
Never tell a retailer that they owe you anything, but we could politely ask.

Peter Crosby:
They gave you their shelf, didn't they?

Emily Pfeiffer:
That's right. That's right. Digital or otherwise. We could politely ask.

Peter Crosby:
Yes.

Emily Pfeiffer:
If retailers wanted to be an amazing partner to brands, they could, number one, remove bottlenecks to onboarding products to make it faster. I personally have literally seen seasonal products miss their season after being fully set up and ready to go by the brand because they were stuck in a bottleneck with a retailer and never made it live in time. Missed their season. So that process is complicated, often time consuming, and in many cases we haven't really figured it out yet. It's still not ideal.
Provide data that will help brands improve. Hopefully, it's founded in a little bit more reality than some of the conversations I've had. But understanding what's working and what's not, understanding the types of products that are performing well. I mean, again, we know that selling this way, selling in this model, gives the brand the opportunity to have access to more data more quickly. But the retailer has so much more data than that. In a certain category, they've got your products and all of your competitors' products.
So if retailers can provide information to their suppliers and their brands, helping them understand what's working and what's not, what they think is an up-and-coming trend, they can kind of see things coming before it's there. Just understand the performance, or even, "Hey brand, you're not performing as well as your competitor. Have you considered trying this or that?"
I would also caution retailers to be mindful of editing brand-provided content. As we've discussed, it's got to match the style and the requirements. Got it. But I've seen retailers make edits that either became completely false, such as the product content of a certain alpaca throw being labeled as made of 100% alpacas. Yep.

Rob Gonzalez:
Is that nose to tail, the whole alpaca?

Peter Crosby:
I'm picturing what that throw must look like.

Emily Pfeiffer:
I don't want to know. I promise, it was a very nice throw.
But I've also seen edits that were so disastrous they broke licensing agreements. If a brand is licensing another brand or certain characters or a name or a logo, they have to be used in a certain way. There are licensing agreements that dictate that. And if the end retailer makes edits they shouldn't, they can risk the brand losing their licensing agreement or being subject to fines. And for goodness sake, maybe just grandfather the requirements when they change. If you now need the corner folded back, maybe make that go into effect in a while and not immediately.

Rob Gonzalez:
So this is just for my own curiosity, but when you fold the corner back, does that mean you sort of fold it under? Can you see the corner or is the corner hidden?

Emily Pfeiffer:
The corner is on top and sort of facing you and folded back so that you can see the reverse side of it. Rob, I realize you might personally not need a hair dryer, but maybe someone in your life does. So if there's one in your house, it probably has a label that says something like, "Do not use while sleeping."

Peter Crosby:
Yeah.

Emily Pfeiffer:
It says that because somebody did. Okay? Somebody did that. So similarly, I assume there was some reversible blanket where the photos didn't show the reverse and it was a problem. So now every single blanket has to have, that's my assumption.

Rob Gonzalez:
Got it. That's one of those warnings where, I mean, you almost want it to be unnecessary because you kind of deserve whatever you got if you fell asleep using the hair dryer.

Peter Crosby:
The hot coffee at the McDonald's. Yeah.

Emily Pfeiffer:
We live in a litigious society.

Peter Crosby:
Yes, we do.

Rob Gonzalez:
Oh man, that's such a fantastic warning.

Peter Crosby:
So Emily, let me dig into the data piece because to me that makes absolute sense. You're in an online digital environment. You have data. It's there. It's changing all the time. I mean, of course, there's some things you hold back, something that is purely competitive in nature or something, but otherwise why wouldn't you share that data to be able to drive performance, especially by your key suppliers better and better over time? But most of the people that I ask that of who are either at retailers or retailer familiar are like, "Oh, there's no way they're ever going to do that. That's their secret sauce."
But then I look at a program like Walmart Luminate, which is essentially setting up another revenue stream for Walmart, but at least you get sort of data in return. And I was just wondering, A, in your conversation with retailers where you encourage this behavior, assuming they ask you your opinion, that's what they pay you for, what is the response that you get? And do you feel like Luminate is a sign of things to come or is that just Walmart? Yeah, anything you know about that would be fascinating.

Emily Pfeiffer:
Well, I'm personally very excited about the fact that Walmart Luminate just announced that there's a free version coming. And I'm wondering whether I could get access without being a supplier. I think that'd be really cool. I think they just announced it about a month ago and it doesn't come out for another few months. But I'm psyched about that. I hope so because, I mean, oh my gosh, the volume that they do makes this data incredibly valuable. But they wouldn't release it unless it were more valuable to them to do so than not. And I think that it's a beautiful and idealistic view that you have, Peter, that you're hoping that it's because it brings...

Peter Crosby:
Those are my adjectives on the top of mind.

Emily Pfeiffer:
It's a lovely idea that Walmart just wants to help, that if we all have this information we can be smarter about it. But Walmart is charging for this access. There's a cost. I don't blame them. It's a lot to maintain. It's a lot to serve, and there's value in it.
But I also can't help but think about the fact that Amazon became almost accidentally profitable because of AWS, not because of the products it sells in such massive volume, and that data and the storage of data and the serving of data is a really profitable, can be a really profitable business.
So from a business perspective for Walmart, I think this might be a really smart move. I suspect it's mutually beneficial. If I were a supplier, I would pay for access to be clear. I want that, right? So it might be mutually beneficial, but it's not altruistic.

Peter Crosby:
And it's not easy to pull off. So it's not something that a retailer can just say, "Oh yeah, I'm going to start doing that and I'll have that data to you tomorrow." I mean, they've created a product team to design something that will deliver that data and now they've added a freemium level to it. And obviously, the freemium level is to get people in and then to pay more.

Emily Pfeiffer:
I want that.

Peter Crosby:
Yeah. Yeah.

Emily Pfeiffer:
Yep.

Peter Crosby:
Yeah. Interesting.

Rob Gonzalez:
One of the things that jet.com did before the Walmart acquisition, and I thought was very clever, was they provided significant demographic purchase or details to their brands for free. But you have to register on jet.com. You didn't necessarily have to list anything on jet.com, but you had to register. So I knew folks that would do very, very low volume on jet.com, but would still list with them and deal with all the hassles of shipping on jet.com as a marketplace seller, even when they weren't listing as a marketplace seller on Amazon just to get demographic purchasing data that they could use with their exec team, updates. Right?

Emily Pfeiffer:
For sure.

Rob Gonzalez:
And it's just interesting that six, seven, eight years later, I forget the exact timeline, Walmart's come back around and is now offering this as a carrot. I'd imagine that if you were a smaller retailer, you could get disproportionate brand attention by investing in something similar, right?

Emily Pfeiffer:
Maybe. I mean, I'm reminded of the fact that brands that aren't doing a huge volume in dropshipped merchandise don't have that visibility. Right?

Rob Gonzalez:
Yeah.

Emily Pfeiffer:
And if they do, it's still only their own goods.

Rob Gonzalez:
Yeah, okay.

Emily Pfeiffer:
I had a channel when I was dropshipping for the brand I worked for, I had a channel that would share with me, just one, that would share with me really good information about what the best sellers were in my categories, whether or not they were my products, what they saw coming up. They didn't give me data. It wasn't charts and graphs, but it was curated conversations that gave me really valuable insights, these little nuggets. And it was so helpful because I was ordering nine months in advance for seasonal products. So just to have a little bit of visibility, I see this as gold. I don't think it's foolish to think that we should pay for access to it. For a retailer that does this volume, really valuable.

Rob Gonzalez:
Yeah, it makes sense. Okay. Well, I'm going to move on here because we are coming up to time and I would like to ask you the most important question for us, which is crystal ball, what are the big shifts and opportunities that our listeners should be preparing for over the next couple years? I mean, we just had COVID and that whole bit, and now we're doing crazy inflation trade war. So I'm not sure that any two-year predictions are worth betting on, but then it also sort of gives you creative freedom to pick anything that your heart desires. So what do you think next two years?

Emily Pfeiffer:
Aliens. It's aliens, Rob. Yeah.

Peter Crosby:
Oh, thank God.

Emily Pfeiffer:
Definitely.

Rob Gonzalez:
Literally the only way to raise the bar.

Emily Pfeiffer:
Yeah. What's left? No. Okay, great question. And we did just publish our commerce predictions for 2023. So I've kind of been through the crystal ball exercise and I can tell you what we're thinking.
The first is retailers who sell direct to consumer have to figure out how to get their operational data closer to the customer. Operational meaning inventory availability and delivery timing. Everything now is about expectations management. So I'll give you an example. We know that 70% of consumers say an order confirmation with specific delivery or pickup information after purchase is important. So you place an order online, you get an order confirmation email, it says here's exactly when this will arrive or when it'll be ready for pickup after you've placed the order. Okay? So that's the easy part. That's the easy time to do it.
In near real time on the website, in milliseconds. When they're most likely to abandon, that's harder. But okay, I'll give you a pass. It's just the post-purchase confirmation. 70% of consumers said, "Yep, it's important." We went and looked at 60 retailers, 45% of them are doing this, giving specific expectations post-purchase for when it will arrive or be ready for pickup.
And what do they need to know in order to answer what sounds like a kind of simple question? They have to know all the places that the inventory is available, the proximity to where it's going. You're shopping from wherever you are, where are you shipping it to? Right? The proximity. They have to know how soon they can get it out the door. So their own lead time. They have to know the time and transit based on the carrier and the shipping method. They have to understand if there's a holiday. I mean, it's really complicated.
And a lot of that information in a dropship relationship is around inventory availability and reliability. Don't make them cancel an order. Only show them the inventory you know is really, really likely to be available when they place that order with you.
So getting all that operational stuff out closer to the customer, it's very important. Consumers are getting much less patient with all of that. And I think that's going to be one of the things that's a huge differentiator in the next year or two.
I'll double down and give you one more prediction.

Peter Crosby:
Yes, please.

Emily Pfeiffer:
I think retailers and brands are going to pull back on the promises that they make. So historically, it's the customer's always right, remove all barriers to purchase, make it as easy as possible for them to hit that confirm order button. I don't think we're there anymore. I don't think we can afford to be there anymore.
So the lifetime guarantees, free plus fast shipping, price matching, even the huge discounts that we're used to. Look, we're in the age of the customer. Forrester talks about this all the time. But I think that an overfocus on just giving the customer whatever they want has made a lot of very common business practices financially unsustainable. I think we're going to see brands and retailers pulling back on what they offer.

Rob Gonzalez:
Yeah, that second point I think is really interesting. I was in a conversation a couple weeks ago, which was not E-commerce related, but really about the shopping experience. I live in downtown Boston. It's a interesting area, all kinds of people around. And a lot of the local stores here have been adding more and more barriers to just picking products up. So if you go into the CVS that's nearby, more and more of the shelves are locked and you've got to hit the button to get a store associate to come and unlock the shelf so you can get the thing.

Emily Pfeiffer:
That's theft prevention.

Rob Gonzalez:
Yeah, it's theft prevention. But it certainly is not about a good shopping experience for me. It's not about getting me the thing that I want as quickly as possible.

Emily Pfeiffer:
Absolutely.

Rob Gonzalez:
In Massachusetts, we have all the smoking accessory, CBD, marijuana stores and none of those are of the motto where you can go in, pick something off the shelf, bring it to the register, checkout. They're all like, you go to the counter, you tell the associate what to get for you.
Yeah, I think it's interesting. I hadn't thought about taking that trend and applying it online. Because you think online what are the online equivalents of the theft and the strength, it's the shoppers that return 80% of the things that they buy. And there's examples like that where they're just putting so much cost in the system. I could imagine retailers pulling back from that right now. I hadn't thought about that. That's a really interesting one.

Emily Pfeiffer:
Yeah, I think they'll get smarter about it too. I think that broad policy will be replaced by personalized policy. If you're a customer who spends a ton of money with us and doesn't return 80% of what you buy, we might be a little more lenient with you.

Rob Gonzalez:
Yeah.

Emily Pfeiffer:
But that requires getting customer data into the hands of the algorithm or human that's making the decision.

Peter Crosby:
I love what you said earlier about expectations, setting expectations, and I think there are the people that when they imagine a container of ice cream, it's in their hands in the next 12 minutes. And I get that. But as you said, that's not a profitable business and it's never going to be a profitable business until you could be like Willy Wonka and the Chocolate Factory where it sort of appears in front of you.
But that to me is when a retailer shows up for their consumers, when a brand shows up for their consumers, as you said, when they're clear on how this is going to work and then they actually deliver on that and if for some reason they can't deliver on that, they communicate about it and maybe they apologize for it or give... Those are the things that I feel like will always be the right underpinning that we've lost track of and, frankly, a test and learn of an online environment that now as it's a bigger part of everyone's balance sheet, it really starts to matter.

Emily Pfeiffer:
It does. And when we're talking about these complex relationships where the customer bought from a retailer and the retailer is outsourcing that delivery experience to the brand, the customer doesn't know or care. It's not their job to worry about it. Retailers will say to me, "Look, if I ship on time and the carrier was delayed, is it my fault?" Absolutely. Not because you're literally responsible for the carrier, but because your customer didn't choose the carrier. They chose you. They gave you their money. They made all the promises to you, you gave them the commitment. That's it.

Peter Crosby:
We'll take care of the rest.

Emily Pfeiffer:
When you ask me how a brand can be a great partner and do a good job, and I said, "Ship on time, meet the SLAs." Imagine now how a retailer is setting expectations for our customer at the time they're placing the order. And what that means to the trust and loyalty the consumer has in the retailer if the brand fails to literally deliver.

Peter Crosby:
Emily, thank you so much. Every time I talk to you, I learn things, I laugh, and I appreciate your expertise and your candor. It's really been a joy having you on, and I can't wait to hold you accountable for these predictions a year from now. Thanks for coming in.

Emily Pfeiffer:
Can't wait. Thank you so much for having me. Really fun. Thanks.

Peter Crosby:
Thanks again to Emily for joining us. Please head over to digitalshelfinstitute.org to become a member and keep on top of everything coming up from the DSI. Thanks for being part of our community.