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This week: Reporting In from Shoptalk 2018, Part Two.

Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

Yesterday, we posted Part One of a conversation between Tom and his business partner, Justin Leigh, about the recent Shoptalk "next gen commerce" conference in Las Vegas, (I wasn’t able to go.) Part Two follows. Enjoy.

Tom Furphy: I want to talk about the interview that Jeffrey Dastin from Thompson Reuters hosted with Gianna Puerini and Dilip Kumar from Amazon Go. We both go back with them to our Amazon days. With Dilip when he was running forecasting, pricing and promotion tech and Gianna in the early days of the Consumable businesses and the development of the Subscribe and Save program. It’s great to see them both shining with the Go initiative. (Kevin interviewed Gianna when he did his piece about Amazon Go opening to the public.)

Justin Leigh:
Gianna interviewed me when I was hired at Amazon. I will forever be in her debt for a temporary lack of judgement and letting me slip under the high “hiring bar” there.

TF: Good point. But I’m glad she did or I never would have met you. But enough about us. What did you think of the interview?

Amazon is simply on a different level than other retailers. What was striking in the conversation was how differently Amazon thinks and operates. Jeffrey asked what the hardest thing about the Amazon Go store was. Their responses were simple and profound. They said that the hardest thing was building a system where someone can pick up any product in any environment and be accurately charged without the need for a check out.

TF: Straightforward. Gianna also talked about writing the press release prior to starting work on the project. That provided the group clarity on the task at hand.

When pressed for tangible feats they had to perform Dilip said, “We had to build many, many algorithms that are far beyond what exist today. We had to take machine learning way past where it was.” At the time when Giana wrote the press release and gained approval to start the project, the science didn’t exist to accomplish their goal. Which is to say, it literally could not be done when they began.

That’s what Amazon does – they don’t ask why can’t something be done. Instead, they seek the biggest challenge out there and figure out how to do it.

TF: I was struck by the confidence of their body language and conviction of advocating for the customer from both of them. It was very different than I saw from any other retailer at the show. I think it speaks volumes of the benefit of true customer centricity. It’s not arrogant. It is confidence in knowing that you’re relentlessly advocating for your customers by building things that they want, even before they know they want them.

As a powerful illustration of the new table stakes, Dilip was asked how many data scientists were at Amazon. He seemed a bit surprised by the question and simply stated, “Thousands I suppose. It’s not like they are all in a room somewhere, they are embedded in all the teams.”

TF: It goes to show that retailers need to get moving in data science, machine learning and artificial intelligence to bring new capabilities to their customers. They are going to have to get beyond their product roadmap / internal IT quagmire. This will require that they partner with outside firms, outside of their comfort zones.

In what I actually found to be the most intriguing part of the session, Jeffrey asked why Amazon didn’t use RFID tags to track the items as that would be simpler than the employed camera learning solution. Dilip’s answer was simple – if RFID tags were used it would have increased operational cost (attaching the tags), would only work on items with RFID tags, the tags could be covered by the customer and all the traditional limitations of RFID tags would persist.

At that moment it dawned on me that they didn’t just build a retail store, it was so much more. It was a system that will be able to understand every object in any space, understand what that object is doing and take appropriate action. The applications of that kind of technology are endless – security, transportation, inventory management, etc.

TF: Imagine the ways that can help their customers. The lead expands, and the ecosystem becomes further daunting to compete with.

Another big session of note was Jason Del Ray of Recode interviewing Marc Lore of Jet / Walmart and Andy Dunn of Bonobos. We’ve spoken highly of Wal-Mart’s “big swing” taken with the Jet acquisition, but we’ve also cautioned that Marc has provided great returns to early investors with company take-outs, but is yet to build anything of enduring value. Not that he can’t. Just that he hasn’t that we’re aware of. And we’ve always respected Jason’s work. What did you think of the interview?

Jason was ruthless! He hammered Marc repeatedly on two key themes – the drop in Walmart ecommerce growth to 20% in Q4 2017 and whether Marc will stick around much longer in his current role. Marc was cool as a cucumber in answering the questions, saying that the drop in growth was planned, that it will increase again this year to 40% and that he has no plans to leave anytime soon.

TF: He did say that it was still the early days there and feels like a startup. They plan to operate the Jet and Walmart platforms separately for the foreseeable future, to serve different customer segments. Marc also said that they will continue their ecommerce brand acquisition strategy, such as Bonobos, and are meeting with more potential acquisition companies as ever.

I do appreciate the bold moves they are making. But 20% growth rate in any quarter isn’t going to help them in their quest to keep pace with Amazon. Amazon is still gaining share in e-commerce. And with the new initiatives in place, it should keep a good pace going forward. I know we come off as overly pro-Amazon. I’m just not seeing the kind innovation anywhere else that is required to win the customer and compete with them. Amazon just continues to build the bond ever deeper.

TF: Speaking of deep bonds. I really enjoyed meeting many MNB readers at the show. I was proud to sport my MNB press badge and very much enjoyed meeting and chatting with many MNB readers there. I know Kevin gets this all the time, but it was a thrill to be recognized by so many passionate readers from all walks of the industry.

And the clout of the MorningNewsBeat brand is impressive! Our Shoptalk hosts welcomed us with open arms into the press area, which was a well-stocked with refreshments and a comfy reprieve from the show. We had scheduled a meeting with a reporter from Thompson Reuters in the press area. However, the bouncers wouldn’t allow him entrance as he wasn’t on their list. Apparently, this area is reserved for serious members of the press only. When he mentioned that he was here to meet with Tom and Justin from MorningNewsBeat, they quickly escorted him back to us. It was a powerful.

TF: It sure was. I get choked up thinking about it. But seriously, Shoptalk is probably one show that should be on everyone’s list to attend each year. Not all of the content will appeal to everyone. But it encapsulates where retail is going. There were over 200 company announcements made at the event. For networking, education on the latest in retail and access to thousands of startups in one place, it can’t be beat.

The Conversation will continue…with a new Innovation Conversation podcast that will drop on April 18. Stay tuned!

KC's View: