TRANSCRIPT
Peter (00:00):
Welcome to unpacking the digital shelf, where we explore brand manufacturing in the digital age,
Peter (00:18):
Coming to you from our Cape Cod studio and Rob's on from Boston. Hey Rob. Hey Rob. You and I haven't done an episode with just the two of us since I looked back and it was January. Some residual was really been leaning into talking to people who actually know something. But the other day we started having a conversation that I said, stop talking, which I say to you a lot, but this time it was, it was to say that we ought to have it on the podcast and said, so here we are. So Rob, why don't you set it up? Well, what were we talking?
Rob (00:50):
All right. So, so we were talking about in broad strokes, changing shopping habits, due to COVID and other things. And we started having the conversation about what Peter has been purchasing, given that he's got his new place on the Cape and had moved there effectively full-time for because of COVID. And I, I had moved in with my in-laws to help with the kids. And now I'm back in the city in a new apartment and, and had done all this purchasing with my wife and, and the fact that COVID was so disruptive, caused us both to change some of our shopping habits in ways that I think are going to stick around and were, were, were surprising to me when we started talking about it. And then we started talking about big picture, what are the big business moves that are coming out of this, that people aren't talking enough about yet? And the one that really stuck out to me was the right in the middle of apple changing the way that cookies work in Google as well, changing the way that cookies work, great cookie pop, pop apocalypse, Facebook marketplace, and the rise of social shopping and Shopify, and how that trifecta is a storm that I believe is going to sweep across a lot of, a lot of e-commerce and retail and more generally.
Rob (02:13):
So that's, that's the setup of the conversation. I figured that today we would just go over real quick, the Facebook Shopify, apple trifecta problem, and then just have a conversation about what are we, what are we actually doing for our own shopping habits? Cause I think it's actually illuminating to bigger trends.
Peter (02:33):
Yeah. I mean, you know, part of what brought it to my attention was Jeremy Bowman at, at Motley fool wrote an article. We'll put it in the show notes that was entitled. Facebook is on a collision course with Shopify and Shopify has been just shoveling money into their face 2020. And now in, in 2021 you know, e-commerce sales globally are on verge of topping a trillion dollars. And so everyone's looking at what the piece of the pie is, can be. And, and Jeremy Bowman said, you know Facebook is looking at what's happening because to their business because of Apple's move and they're looking for their next sort of meaningful big source of revenue.
Peter (03:19):
And, and you can argue about whether Facebook has done a good job at commerce so far. I would say the argument is probably not really I'd love your thoughts on that if you agree, but if you or disagree, Rob, but you know, with, with Shopify now in the second quarter, they posted 57% revenue growth to 1.1, 2 billion it's profitable, you know, so Zuckerberg on his, on his recent earning reports said that they are embarking on commerce as a major initiative. And that would be long-term they admit will be years before they're a major player, but but they're looking at at essentially they could cut out a lot of shop Shopify as customers by keeping those, those shoppers right on the Facebook platform. I was wondering, you know what, you're thinking Robin, on those two. Yeah. We'll teach to your first point. I think Facebook is only getting started GMV through Facebook is significant. I think it's, I could be wrong on this, but I remember reading recently that it crossed the billion dollar mark which is, which is nothing to frown upon. And I really think they haven't invested that much to date. And if Zach is getting up there and saying, it's a top initiative, you know, they're there all day. I it's like I haven't yet even begun to fight kind of right. I, I didn't know. You knew him. I mean, ISEC, that's your class.
Rob (04:47):
So the I see the second point, let me, let me just think about how I think about direct to consumer and the way that I think about direct to consumer is when you're selling to a shopper, now you might be selling to a shopper on your own website, which is, you know, Rob brand.com. You might be selling direct to a shopper through somebody else's website, which is like Facebook marketplace or eBay or Amazon as a three-piece seller. In all of those cases, you own the listing, you own the price, you own the promotion strategy and you, you own the fulfillment and you own the return. And there's, there's a degree of control that you've got on each of those, that's a little bit different. So on your own.com, you can do any thing. You please, but on Amazon, there's, there's more rules and more restrictions about what a third-party seller can and can't do and can, and can't say, so it's not like they're all exactly the same from a merchandising perspective, but I personally consider all of those various ways of selling direct to consumer.
Rob (06:03):
You know, you're not selling to another business who's then selling to the consumer, you know, your pallets versus eaches, right? Yeah. It's pallets versus eaches. And so for me, I look at Shopify and Shopify, they're trying to be commerce infrastructure for selling to a shopper. And the fact that Facebook might own the shopper relationship from, from an experience perspective, you know, the shopper goes to the Facebook owned website and transacts there. If Shopify is on the backend, powering the transaction, you know, powering the price management, powering the promotion management and things like that, the fact that it's happening through Facebook, you know, maybe that eats a little bit of marginally Shopify business, but Shopify also gains by having a potentially larger addressable market with better unit economics. And so I don't see it so much as disintermediation. I see it as just another, another route to market that Shopify can, can empower its its users to actually drive.
Peter (07:10):
So I don't know, I, I think I'm, I'm less, this is a big competitive thing to be worried about than a lot of people are the way that apple comes into the fray here is that with the cookie apocalypse, it drives up the cost of customer acquisition in a lot of different ways. And so if you're a Shopify business and you're, you're running ads and you're trying to bring traffic in, it makes bringing traffic in a little bit more expensive. And you combine that with Facebook, perhaps prioritizing driving traffic to its own site. You know, you've got a couple, one, two punches there for Shopify sellers, maybe taking a hit on traffic acquisition costs to the owned.com site and therefore making it a little bit more economically advantageous to focus on non owned websites that have their own traffic such as, you know, Facebook marketplace.
Rob (08:04):
So I just, I see these as really interesting big shifts. The shift of social commerce in particular from a shopper perspective is huge. But I also see them all in advance of collaboration rather than one where, you know, Facebook's looking to own this thing that Shopify previously owned. I don't think that's what's happening. Yeah. And you know, I think what's, what's coming out of this cause I think, and I don't have the data in front of me, so I apologize to our listeners, but I've, I think I've been reading that the apple shift has caused the, you know, because you can't target as effectively the, the conversion rate and other things on the advertising that people are doing is getting, is getting lower and lower. So they're paying more and getting less results. And so I, I feel like one of the things that we'll see in 20 20 22 is a lot more focus on the post-purchase experience to drive loyalty and drive more juice out of each consumer over time, rather than focusing so much on acquisition.
Rob (09:12):
Yeah. One of our earliest podcast episodes, and one of, one of my very favorite your interview of Mike [inaudible] from good baby really goes into that where they, they, they built a direct consumer business and it was about share of wallet for shoppers, that they then owned on a, on a longterm basis and built a relationship with through, through their own website. And I completely agree with you one way to make the math work here is if the one-time customer acquisition costs can turn into a repeat buyer, a subscription selling of additional product line is sort knit and all that. So you're advertising the cost of customer acquisition and traffic over many transactions, instead of one, is it, you know, it's a great way to go. And we were already seeing a lot of businesses move that way. And so this just puts more pressure on it.
Peter (10:05):
Yeah. Jason Bornstein from forerunner ventures used to run acquisition of Bonobos, wrote an article that said his, you know, his loyalty, the new CAC. And, and I think, I think there's a lot of truth to that. And, and DTC gives you that power to build those relationships. And I saw that through my own post pandemic of which I can talk about. Yeah, let's, let's, let's switch over there. Let's switch over there. I will tell you the number one recent shift in the last few months, we moved back to the city in late March and we are going to the store and to the farmer's market, way more than we did pre COVID pre COVID. We, we ordered almost a hundred percent of our groceries online post COVID. We're going to the store a lot. And that's exactly the opposite. I think of a lot of the population around.
Rob (11:00):
It's crazy. I wasn't expecting this at all. And I'll tell you, there's two reasons behind that. I was talking to my wife to try to unravel this, and there's two reasons. The first reason is online shopping for grocery in particular, if you like to cook is still a bit of a hit or miss enterprise. You know, we still do a fair amount of online grocery shopping and delivery through Amazon and Instacart. But the mistake rate is pretty hot and you know, it's much higher. It's, it's certainly much higher than if we were picking this stuff out ourselves and we've got two little kids and sometimes you're counting something that you're counting on for a meal shows up rotten or shows up incorrect or the wrong size or whatever. And, you know, you can't correct it if you're making the meal that day. And so that can be frustrating. And so there's a certain amount of grocery frustration that I think that the big companies haven't gotten exactly right, the picking problem, hasn't been 100% solved. And if you're doing a lot of grocery purchasing for a family, it shows up on it frequently enough to be irritating. And even, you know, that doesn't stop us from doing it because the convenience factor is super high, but it just means that especially for like fresh products, we're, we're a lot less likely to buy fresh products through these folks were for fresh products. We're a lot like more likely to be pushed in store or to a farmer's market. But the second reason is just due to the fact that I've got small kids and it turns out that going to the grocery store is an activity that my two girls enjoy doing. And it's a way to engage them in something and contain them a little bit from trying to destroy the entire house. So I can get out of the grocery store instead of, I it's it's the grocery store is someone else's problem. Right. But I can, I can get them into the wagon. I could bring them to the grocery store. We run around and he buys stuff. We ended up buying a lot more than, than we would have otherwise, because they say, can I have this? And I'm like, yeah, of course you can have that. And, and and then, you know, and then we come home and it's fun. And so that combination of, of, for us, the little, you know, a little bit of annoyance with some of the online experience. And then secondly, the fact that it's fun as a family to go to is, has pushed us back into the store and to the farmer's markets. And I would not remotely have guessed that coming into this.
Peter (13:25):
Yeah. I mean, my, my version of that is so Dave and I got a puppy, Lily, who's the cutest puppy ever in the history of the world, just so we're clear and she's this cute little Yorkie poo. When we got her, she was three and a half pounds. She's now like around 11. So she's seven months old, but neither of us have ever had a dog in our life. And so we have no idea what the hell we're doing. And the, the the pet, the online pet places that we started to buy through became our, our, a lot of our educators, like, so the, the importance of, of content when you're a new pet parent is enormous and it also allows for, and I've seen them do it. You know, Dave, all of a sudden, we'll say, we'll be on Instagram. And, and a brand on Instagram will say to him, does your dog have like irritated ears?
Peter (14:23):
Your puppy might have irritated ears. And if so, and it, Lily had irritated hears, and I don't know how they notice, but they probably know that there's general sort of things that puppies get in their early stages. And they messaged the F out of it to you. And I, and I actually appreciate it. Now, I have to say, I haven't built any particular loyalty to one retailer or the other. I am grabbed by the, the issue of raising a PO. And so if somebody can connect with me on that issue and then offer a product, then I'll look at reviews and give it a try. Cause, you know, it's like when you're, when you have babies, Iris, you know, when I go to buy baby gifts for people, you know, those little clothing is so fricking cheap. So here I have three t-shirts who cares. And so it's the same thing with most puppy, like chew toys and all that kind of stuff. They're like, whatever. Yeah. But you know how people are super paranoid that their phone is listening to them all the time and then their Instagram ads. And I just got this idea that I absolutely love, which is that not only is your phone listening to you, it's listening to your dog. And so your dog is going like, and Facebook's, or Instagram's artificial intelligence is listening to the dog and says that dog has it's years. I think it's saying that dog is screwed. Cause those two guys do not know what they're doing. He was like, get me out of here is all the released parking, I think, but we're making it for a minute, but they're just my underlying point or overarching point. I don't know which direction it's in is that in these sort of education, hungry sectors like pets or babies or, or home improvement or the, the, the entry point for me in the direct to consumer journey has been, what can they teach me?
Peter (16:21):
Which I think is, is is a great investment.
Rob (16:24):
Yeah. Content for commerce still. It's still good. It still works. And so the next shift for me has been a move to a lot of subscription services, which is not something that I ever did before. You know, I always toyed around with some of like the Amazon subscribe and save and programs like that. And I found most of them pretty, almost annoying. Like I don't really actually know what my consumption velocity is for most things. So I would set up a subscribe and save and I would get it delivered. And then I get the next one delivered or they get the next one delivered and I'm behind. So then I'm pausing it and then I'm pausing it again. And then it's, it's just ends up being more of a pain to manage the subscription program than to just say the darn thing. Um especially cause I live in a city and a lot of the subscription stuff, there's a CVS, literally 150 feet from my apartment. So a lot of the stuff you might subscribe to, it's just easy to get. But, but I found that actually for whatever reason, I have added a bunch of subscriptions that I love over the course of COVID. One of them is a Sitka salmon shares. There's this sustainable fresh caught fishery in, in Sitka and Alaska that provide salmon and crab and whatever is in season and can be harvested in a responsible way using, using traditional techniques. And they'll send that to your doorstep every month. And I found it to be just outstanding. It's good for the environment. It's good for the local economy. Then the next one is Maui Nui, which is I heard about from Peter, at Tia and Tim Ferriss and a couple of others, but there's an access deer population explosion on the island of Maui. Uh it's an invasive species. And I mean, they just absolutely breed like crazy. So it's, so there's a calling operation, but in order to fall to a fund to the calling operation, they sell the meat. And so this is it is red meat, but it's red meat that sustainably harvested. It's, it's an invasive species. It's not, you know, grown with fertilizer or anything like that. It's, it's very healthy for you and it tastes incredible. And so I I've subscribed to this and I absolutely love it. And it does, it tastes like chicken. It tastes actually like a lot closer to steak than I was expecting. I mean, it's, it's so it's not gamey, not gamey at all. It's super clean. Yeah. It's very super clean. And another one is a dry farm wine. It's a wine subscription, which is mostly old world wines. It's a wines that are done without irrigation. So they're, you know, sustainably grown in that way to inspire dynamic which so there's no fertilizers or anything added and the wines are, have zero residual sugar. So there are a lot to ferment all the way out. No sugar added or anything like that. And and they're just very clean and they're very low alcohol and, and they, they lie to drink without a hangover. And I also subscribed to Gillette for razors now direct from the manufacturer and still on and so forth. So there's just a lot of these subscriptions. I mean, there's a lot to get another three or four that I could go into. I wasn't subscribed to anything before COVID zero things. And now I've got about closing in, on a dozen subscriptions that really drive a lot of what happens in my house. Um and I, I just, I, I found categories where the subscription works, where the velocity of consumption is not very volatile and where the subscription is convenient versus annoying to manage. And I don't know, it's been, it's been interesting to observe that for me, maybe it's just like, I'm old and late to the game here and everyone's been doing it for years, but for me it took a lot of experimentation to find the ones that would stick. No same for me with the ones that I've got. I found the same experience. There's a, I, I know it's crazy. I drink decaf coffee, not regular coffee, which I know is horrifying to people, but I finally found a decaf cold brew from Grady's and that's been great, but it's been figuring out the timing of it. So I don't end up with four months worth of coffees sitting in my closet, but that's been, that's been awesome.
Peter (20:46):
So yeah, it's usually just figuring out sort of how you, how you time it, but otherwise it's a little bit of savings and I don't have to remember it do the same with our X bars, which has been great.
Rob (20:57):
Yeah. So, so you had your pet influencer move. What else has changed for you?
Peter (21:09):
I mean, we did, we did a lot of takeout locally here in Provincetown on the cake and the varying experiences from restaurant to restaurant. And I have to say the square checkout experience is awesome. And, and the Shopify. So the people that are using sort of those kind of you know, payment services where they remember it I just, you know, they, I get a code that, that says, go ahead and do this. And then all the payment terms are there. I get the texts, like that's the sort of the premium experience for me where where it's by restaurant.
Peter (21:55):
And if they're using a good service, then it's a delightful experience. Those that, that are using probably some, maybe somebody who takes less of a percentage or something like that, but it's just a horrible experience. I, it just, it drives me, you know, what's tough about the delivery market. I'm so with you there when you ordered delivery through one of the third-party apps and something goes wrong and you try to contact the restaurant, they can't do anything for you. And the third party apps often have very slow to respond customer support. And so there there's this, there is a customer support customer success issue where I, you know, ideally you, you should be able to contact the restaurant directly if you want something fixed rapidly. Like they're missing something from the, from the delivery. Or yeah, like I had, I had one order where I ordered like two pizzas, two appetizers, a bunch of things for, I was solo parenting.
Rob (22:58):
It was just me and my girls. And what was delivered was exactly one small pizza, like 90% of the order wasn't delivered with, with fearful girls looking up at you saying, where's my food. Yeah. And, you know, they go, they go nuts. If they're hungry, they do not behave well. And and so I want that fixed like really, really quickly. And pizza places can make a fire pizza in five minutes. And if they're five minutes away from me and they can fire a pizza in five minutes, I absolutely know that the owner could fix the problem. But because I had gone through a third-party app, it was like, I called the pizza place and they're like, man, we can't do anything. We can just flag to the third party app and, and hopefully they'll get back to you and resolve it soon. And it was just this whole rigamarole, like who refunds you on what timeline, if, if you've got a mistake, that topic. So, yeah, I mean, there's a, there's a combination of like the quality of the food and delivery, but then also the experience where I think the experience is something that everyone's, everyone's added delivery in the last year and not everyone is figuring out exactly how, how to make it smooth.
Peter (24:10):
So where, you know, when you, when you find new products, where, where, where do you normally get turned onto a new product? What's your in what's your in input? Yeah, this is a good question. I mean, for, for me these days, so much of it is just referral from, from like a friend or it'll be a referral from, from an influencer that I follow and not like an influencer, like, oh, there's like Kim Kardashian on Instagram or whatever the kids follow these days more like I will follow somebody on Twitter or follow somebody on YouTube whose content I really like. And I'll notice that they're using, for example, like a system 76 laptop, which is you know, made in America laptop brand that focuses on laptops with Linux pre-installed and I'll sit there and say, oh, well, that's, that's interesting.
Rob (25:08):
I like that too. You know, and if it's somebody that I, that I respect, that's just using something casually or, or recommend something that they use actively, then that's what really you know, drives me to something. So I, another example is I bought a Vesey sneakers recently because there was a writer that I know that he wasn't even getting paid to promote them. He makes his money writing and he said, look, I just want to say, if you want shoes that you can wear when it's raining, Vesey, sneakers are awesome. You know, they're waterproof. I like, I will never, ever, never use rain, rain boots again. And so I said, so, you know, I'm in, then we get a pair of a pair of these things, which cause given how much rain we've gotten in Boston for the last two months, it's like the monsoon season up here. Uh those things have come in super handy. And so, so a lot of it is like that. Or another example is I was looking for potentially getting back into the gym and I had been using on YouTube a lot of home workouts. Like I think a lot of people have. And so there's this guy guided who does a lot of body weight workout stuff. And I subscribed to his online service because I had been using his free workouts on YouTube. And I thought he did a really good job. And, you know, lo and behold, he had a service as well. And so it worked good lead generation. So a lot of, a lot of these sort of things that I'm already paying attention to will have explicit or implicit product recommendations. And that's, that's most of where I find my new products these days.
Rob (26:45):
How about you?
Peter (26:46):
So you were, you were mentioning workouts. And one of the things that I thought mind, body, it's an app that a lot of salons and spas and other places use to book and things like that. They, during the pandemic enabled a good friend of mine [inaudible] he runs a a gym called Bron core and has trained forever and he's just opened his own gym. And he was able to, during COVID, before he could open his gym, because, you know, he couldn't open chimps during COVID. He was able to put virtual trainings online through the mind body app that he uses to be, to book his, his appointments. And I thought that was really great to enable, to turn around and MINDBODY pretty quickly to turn around the capability to for Braun, to be able to do that, and essentially allow his business to sort of continue in his relationships with his clients, to continue during the pandemic and reach them in a way that, that he would not have been able to before. And he's kept that subscription now going for those that still want to work at home, which I think is really awesome. The hard part is that. And I just had to like, remember I, in order for me to find it, unless I'm getting the link from him, I have to go to mind, body to find bronze site. So, you know what I mean? Like it's mind body hasn't made it. And that's not a name that I remember a lot because I'm thinking of Bron the brand. And so they haven't done a good job at that, but but Bree introducing that sort of online capability for training, I think it was a lifesaver I'd bet for a lot of small gyms during the pandemic. And there is an interesting thread here. Like I bet combining the last two ideas I'd bet if Bron said to you, especially cause he's, I know Brad as well, he's super charming.
Rob (28:36):
If he said to you, Hey Peter, you should, you should buy this shoe or, or whatever. I mean, you're way more likely to buy whatever Brian tells you to buy versus an advertisement. People. The people that are super pro influencer have been saying this, this type of argument for years. So I'm not saying anything particularly novel here, but I do wonder if part of the decline of advertising spend as a percentage of GDP that continues is just due to lowering effectiveness of advertising. Like people have just been advertised to so much that they're immune to it. And therefore the channels that are working a little bit better are the ones that are more influencer E in nature. You know, like, like one that's that's on the rise right now is podcasts where you, where you have the readouts. Now the Cal Newport is one of my very favorite podcasts. And when he does an ad read out I'm, I'm pretty likely to pay attention to the ad readouts that he does because I respect Cal Newport's opinion quite a bit, or really in any of the Tim Ferriss or purity or any of these folks, when they, when they may do an ad read, it's an it's for an ad it's for somebody that they actually endorsed, not just something that's paying the bills. Yeah. The authenticity of it really, it makes you buy it. It makes you buy the argument you makes you listen. Whereas otherwise, cause I was wondering, you know, as I listened to podcasts, I'll do the, if it's just a generic, either generic read or, or an actual ad, I mean, I'm doing the 32nd jump all the time, but when I'm listening to podcasts, who's to your point that I respect, I want to hear what they think is cool.
Peter (30:16):
And you can tell the difference between ones where they're actually invested in the product, versus I'm just modifying a little bit, the script that the brand gave me it's you can tell. Yeah. You know, it's funny Tim. So Tim Ferris did this experiment where he moved to a paid model as an experiment where he said, I'm not going to do any ads for the next couple of podcast episodes. Instead you pay me what you think is reasonable for me to do what I do. And so he collected a ton of money from fans that were willing to just do the pit Patreon thing effectively of just paying him directly to be an artist. Yeah. So stacker. Yeah. So he then brought ads back and he said, the reason I brought it back isn't because of the money, the money was fine it's because people were so angry that I removed the ads because they were so interested in the things that I was advertising.
Peter (31:08):
See. Yeah.
Rob (31:10):
That, that I just you know, they, they felt, it was part of my value that it's like, I only advertise things that I personally use and therefore they found it really valuable. So he ended up giving back like returning a hundred percent of the money for people who gave him money. And just going back to it to an ad ad model because people which is crazy to me, it's like, it's like with TV, you can't skip the ad fast enough. You can't make the ad disappear on TV fast enough and get on podcasting. People are like, give me the app just to close out. Cause I think this is actually in some ways the, the we've taken a road here and I feel like this is kind of the stop sign we ought to pay attention to. And you and I have been having a lot of conversations recently about what is branding in this new age and about the brands that we are responsible for right.
Peter (31:58):
In our lives. And, and what has flipped from, you know, when I was in tech in the early days, your brand was what you said, it was because you had, that was the only direction. It wasn't a conversation, it was a statement. And then people either bought it or they didn't. Now it is a conversation. And you and I have talked about it, that the sort of the flip is that number one, your brand is what your customer says. It is influencer marketing, right? Number two, it's what influencers and analysts, at least in the sort of the tech world, but influencers say so customers, but customers are your best influencers. And then people who have audiences are your next best influencers. And finally, it's what you said. And so I think that that's equally true in our lives, as well as the life of B2B and certainly in a, in a brand to consumer relationship.
Peter (32:52):
And so maybe that's kind of the flip, we all really need to come to terms with, and that's where budgets are going to go. And that's where expertise is going to go. And I think it's a super exciting time. It is in when there, whenever there's a big shift like that, there's an advantage to upstarts who don't have the legacy and a disadvantage to legacies who have through habit and organization structure and budget allocation process, and other things a much more difficult time moving away from an older way of doing things. Yeah. And that recent research that we put out the DSI on, on total growth accountability, one of the major shifts that we're calling for is budget fluidity, like being able to move quickly and try things and test things out and and fail fast that those those characteristics have existed in e-commerce.
Peter (33:43):
But in terms of that existing, across budgets and across organizations at brands, a lot of that people were still struggling with. And now that's a situation that we're going to spend a lot of time thinking about as the DSI in the, in the year to come. But Rob, this was fun to just talk to you. I don't know whether anyone else liked it, we'll find out, but it was great to just chat with you on this topic. I think it's really cool. Yeah, absolutely. Yeah. and I want to say to our audience, please, if you have post pandemic or during pandemic shopping reflections or any thoughts around sort of this shift and in who says what your brand is, we'd love to have that conversation with you hit us up on our digital shelf Institute, LinkedIn page tag, Robin, me in it. And let's have a conversation about it. We'd love to hear it. And as always, thanks for being part of our community.
