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On this episode of Too Embarrassed to Ask, Recode Senior Commerce Editor Jason Del Rey joins host Kara Swisher to talk about Walmart, Amazon and the future of commerce. Which companies have a workable online strategy? Which don’t? Is Costco going to go online? Is Jeff Bezos pissed that Marc Lore went to Walmart? All this and more.
You can read some of the highlights from their discussion at the link, or listen to it in the audio player above. Below, we’ve posted a lightly edited complete transcript of their conversation.
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Kara Swisher: Hi. I’m Kara Swisher, executive director of Recode, and you’re listening to Too Embarrassed to Ask, coming to you from the Vox Media Podcast Network. This is a show where we answer all of your embarrassing questions about consumer tech, so send us your questions. We do read them all. Find us on Twitter, or tweet them to us @recode, or to myself or to my regular co-host, Lauren Goode, with the hashtag #TooEmbarrassed. We also have an email address, tooembarrassed@recode.net. Reminder: Embarrassed has two Rs and two Ss.
As you might guess from that intro, Lauren Goode is not here today, so let’s have some real fun. She’s off working on her new show for The Verge, Next Level, and will be back next week. In the meantime, I’m delighted to have Recode’s Jason Del Rey back on the podcast. Today we’re going to be answering your questions about Amazon, Walmart, and where e-commerce is headed. Jason, welcome back to Too Embarrassed to Ask.
Jason Del Rey: It is my pleasure.
Thank you. You sound fantastic. I’m so interested in this topic. What’s interesting is that so many people are talking about Amazon in this sort of inevitable way. I had a dinner last night. Someone was saying Amazon was the best company ever. At lunch, the same thing. Very prominent people were thinking that they’re the be-all and end-all.
Unstoppable. Right.
Yeah, so let’s start with Amazon. Let’s start with them buying Whole Foods — or trying to buy, they’ve not completed that deal yet — at $13.7 billion. Can you explain why they did that, because they’re moving into a different sector than they’d been in?
Yeah. I mean, they haven’t said much publicly about it, but I think one thing to look at, for sure, is depending on what numbers you look at, grocery market in the U.S., something like I think $800 billion, and any retail sector, Amazon wants to own a big piece of it, and help it move online. Over the last 10 years, they’ve tried through Amazon Fresh and some other initiatives. They’ve made some progress, over that decade, but I’m confident in saying they haven’t made the progress they would have liked to have made, so they get a lot of things with Whole Foods. They get a name brand that a lot of Americans and a lot of Prime members already know well or love. They get a chance to potentially layer, on top, Amazon Prime to Whole Foods, and bring more value to Amazon Prime and hopefully an actual, meaningful loyalty business to Whole Foods, which doesn’t yet exist.
Right. No, not at all. That’s interesting.
They get expertise, for sure, and then they get more than 400 brick-and-mortar locations, which may end up just being Whole Foods locations, or may end up being hubs for same-day delivery, hubs for pickup, and so I think that’s ... When I talked to someone who runs Amazon’s one-hour delivery service in New York and other markets, Prime Now, last year, one of the things she said, one of the most challenging things, is real estate in these dense markets where they have a lot of Prime customers.
Right. Whole Foods are in nice areas. They’re in relatively fancy areas, or up-and-coming millennial areas, or trendy areas, correct? They put them in sort of a hot spot of people who like to spend $4 on a tomato.
Yes, and listen. I think prices will likely come down, over time, and so I think they could broaden the appeal of Whole Foods a bit, whether it’s directly through only Whole Foods locations, or maybe under a different brand related to Whole Foods. Whole Foods has this 365 idea, where they’re going to open up — I think there might be only one open right now — new locations that appeal more to a younger generation. I think there’s a lot of pieces here, but I think it all starts with a massive market. Amazon hasn’t made necessarily the progress they would have liked, in the last decade, going at it.
A critical market. Groceries are a critical market. Daily use of Amazon versus occasionally.
Correct. Exactly. Yeah, that’s the thing a lot of people talk about, is the frequency of the purchase, is something in which, if Amazon can, that’s been a big piece of Amazon Fresh, which is their current grocery delivery service, which is you can get more than just groceries. But it makes the economics work a lot better when you could add, with the milk and eggs, you can deliver a TV, or some clothing.
Or whatever else, yeah. What’s interesting is we’re going back to the old days of milk and eggs, the milkman, the quick delivery, and how easy it is to get things on a daily basis. But why would Whole Foods do this? Talk about their situation, because you don’t sell, necessarily, if you’re in a great state. Were they having troubles?
They’re not in a great state. I think the brand is still super strong. They had co-CEOs for a while. One of their co-CEOs, Walter Robb, stepped down earlier this year, so now it’s just the founder, John Mackie, running the company. The big trends they’ve been bumping up against are the fact that you don’t have to just go to Whole Foods to get organic or gluten-free. You can now go to your local Kroger or Stop-N-Shop or Target or Walmart. They have a lot of the basics at least in organics, and at half the price of Whole Foods, so I think a big piece of it is Whole Foods helped to push these categories into the mainstream, and then they’ve also sort of suffered a bit from pushing those into the mainstream, as their prices have stayed high and a lot of their competitors, with more of a mass appeal, have stepped in.
They haven’t been very digital, that I can think of. Whole Foods wasn’t digital at all. I don’t think I ever used them in any way that was digital. They had an app that I didn’t use. They had no ... I just went there, essentially.
Yeah, another piece of this that Silicon Valley cares a bit about, in the startup world, is when it comes to digital, they’ve relied heavily, over the last couple of years, on Instacart, which is the San Francisco-based grocery delivery service. I’m sure many of our listeners know what it is, but for those who don’t, Instacart doesn’t have their own inventory of groceries. They partner with grocers.
Like Whole Foods, yeah.
They send people to go shop. Whole Foods has been sort of the most prominent partner over time.
They’re gone. That’s gone for Instacart.
Well, they signed a five-year contract with them, a couple years ago. There are sources who were saying, to a lot of different reporters, that it’s going to be really hard, if not impossible, for Whole Foods to get out of that deal. I have trouble believing there’s not some out in some way. It may be expensive. It may take some time.
Yeah, it’s not a good future.
Well, Instacart’s spin on it is it’s just more reason for other grocers to partner with them, and they do have 160 partners, including some of the biggest ones. I think they’ll be okay. But we’ll see.
Yeah, but still, you don’t want Amazon moving into your biggest customer.
No, no, no.
I was with someone yesterday who was at an Instacart offsite, and I said, “What are they talking about there?” “Well, what do you think? Amazon.” Like, it was Amazon, Amazon, Amazon.
Right. We’re taping this on Thursday. Blue Apron, another startup in the grocery space, went public today, and they had to cut their IPO target price. They went out at about the target price of $10 per share. One of the factors that investors are talking about is not knowing what Amazon/Whole Foods means for them, as well, so a broad impact.
Right, integration, yeah. It’s interesting, though. Amazon eats up everything. Is there any other buyer for Whole Foods, at all?
Well, that’s the thing. The stock price — I haven’t checked it in the last couple of days, but it was up above what Amazon had offered, which means at least the broad market thinks some other bidders might come forward. I’ve done a bit of reporting, trying to talk to other potential acquirers about whether they’ll make a bid. Not surprisingly, people are super, super mum about this. I think there could be. I think in the next couple weeks, we’ll know.
Who?
Who could it be? I mean, people have thrown out Walmart, which kind of sounds crazy. They have their own huge infrastructure already of grocery. They’re a giant grocer that maybe people in big urban centers don’t think about, but outside of cities, they’re huge in grocery. Could someone like a Kroger, which is one of the biggest retailers in the country, do something? I have trouble seeing that happen.
What about a digital company?
Yeah, you could find people who will throw Google’s name out there. I really think it’s a stretch.
Yeah, there’s not many people. Then, the last part on this, this idea of what they’re doing, is there anything else they looked at? Trader Joe’s is something I could see Amazon looking at. They’ve got a very similar footprint in cities, but not as big, I guess. Are there other things they could try to buy in the retail space?
Outside of grocery? I mean, Macy’s is going to have to do something. Maybe selling off real estate, which is super valuable, but they’re getting hit on multiple sides. I think Amazon’s apparel play is hitting them, because it’s sort of in basics and sort of middle-of-the-road apparel. Not super high end, not super low end. But no, I don’t see that.
You could find former Target employees who would say they’ve heard rumblings that at some point, Amazon may have looked at them. I don’t know how real that is. Another one that I just heard recently from an analyst is rumors of Amazon sniffing around Dollar General, so that would be going low end. They’ve gone high end. Dollar General, I think, has 12,000 locations. That’s a big real estate play to make.
Big footprint.
But, I mean, whether or not the Dollar General stuff has any truth to it, I think they are thinking a lot about how to get lower-income households into their ecosystem.
Using Amazon.
Yeah. I think Prime, they’ve made moves with Prime recently to attract ... I think they have something like 80 percent of U.S. households with around $100,000 in annual income already Prime members, so now they’re making moves to try to get lower-income households.
Get everybody in it, yeah.
They’re giving a discount to Prime to households that have some form of government assistance, and they’re making other plays. The monthly Prime payment option is new.
They want everyone.
They want everyone.
Let’s move to Walmart, then, because Walmart’s sort of been that store for people of more lower-income profiles. Working-class people. Walmart’s always focused on price. In an earlier episode of my other show, Recode Decode, Enjoy CEO Ron Johnson said, “Walmart might be able to beat Amazon with a robust loyalty program called Walmart Prime.” Here’s a clip of what he said.
Ron Johnson: Walmart, I think, is going to give Amazon a run for its money.
Okay, tell me why, because everyone keeps saying that and they never ...
Well, they earn 15 billion a year, Amazon earns three. They’ve got more cash. They’ve got the physical footprint, which is like a warehouse network, right? They’ve got a large customer base. They’ve got access to all the merchandise. They can price lower than Amazon, if they want to, because they’ve got a lower cost structure, right? Walmart can compete really hard. It’s interesting to contemplate to me, Amazon has this program called Prime that locks people in, and they have a lot of benefits.
Which we love.
For $99 bucks, and they add services all the time, and that gets you such incredible loyalty you’ll always buy from them. Imagine if Walmart had its equivalent, Walmart Prime.
Why hasn’t it?
But it offered benefits online and in-store. Every time you come to the store, you get free food. You get a discount on your purchases. You develop all these benefits.
Right, so why hasn’t it done that?
I don’t know.
Jason, would Walmart Prime work?
Would Walmart Prime work? Ron Johnson thinks so. I mean, so far, they’re taking a different approach that does not look a lot like Prime, but does provide benefits to loyal shoppers, and shoppers that help them take costs out of their logistics system.
Just to back up a step, they made a big move, I think it was last year now, to acquire Jet.com, which was as much about acquiring Jet.com as it was about acquiring Mark Lore, the e-commerce entrepreneur who once started diapers.com and worked at Amazon after he sold it there. Mark came in, and he’s made a bunch of changes already. He’s moved really fast. I’ve heard some rumblings of he’s moving a little too fast for some longtime Walmart people, but I think that’s bound to happen.
One thing he’s done is now, if you buy online an item and pick it up in the store, and it’s an online-only item, you could save 2, 5, 8 percent on that item. They’re making a big grocery push, although a lot of what they’re doing around grocery is buy online and pick up in store. I think that’s now live in 500 locations, and I think, I forget what promise they’ve made about one that will be in every Walmart location.
Right, right. They bought Jet for three billion. The same day that Amazon bought Whole Foods, Walmart bought Bonobos. How do you assess their e-commerce, especially because I just feel like I can’t believe how slow they’ve been over the years, given how strong Walmart ... to say that Walmart’s in distress is kind of shocking to me, given the strength of Walmart, over the years, but they just feel 10 steps behind, at all times, but maybe I’m just not seeing it correctly.
No. I think they obviously felt they were way behind when they made the Jet acquisition. You don’t spend $3 million on a very young business that had not proven it was sustainable in any way, on its own, if you feel like you’re in even an average position. So they’ve acquired, made some smaller acquisitions. Bonobos is the biggest one of them.
A big piece of that is bringing in good digital leadership that probably wouldn’t go to work at Walmart otherwise. Andy Dunne, who is the co-founder and CEO of Bonobos, would he have gone and worked at Walmart if Mark Lore wasn’t there? He has said publicly, “No.”
I understand bringing in the digital talent. I understand they’re trying to aggregate types of products and brands that you can’t find on Amazon, so I get that play. The part I don’t quite get yet is they’re not going to sell Bonobos in Walmart stores. The brands don’t mesh, so then what is the distribution they’re going to provide for these small brands that’s going to take them to be mainstream, mainstream brands that makes a difference? I’m not clear on that yet.
Right, so they’re just buying talent.
That’s sort of an open question.
They’re essentially just buying talent.
Well, they’re buying talent, they’re buying brands, they’re buying brands that are I think ModCloth and Walmart, I’m sorry, Bonobos. Compared to Amazon, they’re nothing, but these are businesses with $100 million to $200 million in annual revenue, and I think they’re going to keep acquiring these businesses like this. It just feels to me right now like it’s going to take a long time to move the needle, but they’re making other aggressive plays. One is they’re testing out the idea that Walmart employees who work in stores are going to start testing out delivering stuff on their way home. They’ll be paid extra.
Oh no. Jason, it feels like a Turducken to me.
Those can be tasty, but I guess it depends on your taste.
I know, but it’s like in Bentonville. I’m like, “Hello, there’s this thing called the internet.” And this Amazon thing is, like, you could just copy them. They’re not even copying well. That’s what it feels like to me.
Well, one more distinction that I don’t think gets talked about a lot: A lot of Amazon’s retail success has to do with how much they’ve grown the marketplace, where other businesses and entrepreneurs and manufacturers on the other side of the world sell stuff to Amazon customers using the Amazon warehouses and the Amazon website. That’s around half of Amazon’s retail business. Walmart has had a marketplace, but it’s coming along much more slowly. They’re trying to make a big push there, but they’re way behind Amazon’s selection, and the idea that these merchants can also use Amazon’s Prime service to get stuff to people fast.
Yeah, it just seems like they’re way behind. I don’t know. In the bigger picture, is there room for both these companies? We just have a few questions before we get to readers’ questions, but there should be room for them. And then of course in Asia, there’s Alibaba and other players, too, that have big footprints.
Yeah, there’s totally room for both of them. I think you’re going to see Walmart, especially if this Whole Foods deal goes through, they’ve been making a big push in grocery. I think they’re going to really, really push that hard, and I think it’s smart. I know my family, we live outside of a city. We live in New Jersey.
New Jersey.
My wife will stop by Walmart if she’s in the area and needs produce or some other types of groceries. They do well there. Then, you mentioned Asia. Amazon is making a huge, huge push in India, but they’ve had a very tough time in China. Walmart’s made a smart move in China, I think. They now own around 10 or 11 percent of JD.com, which maybe some listeners don’t know here. I could look up the market cap, but I want to say around a $60 billion online retailer that has a very similar model to Amazon. Half marketplace, half actual first-party retailer, and so I don’t know if they’ll ever buy the majority stake there, but they’re better positioned in China right now, it feels like through that stake, than Amazon is.
A couple more questions. Two more questions, before we get to some reader questions. What do you think each of them is doing that the other can’t or won’t? Each of them. Look at what the other should be doing, or what they’re not doing that they should.
Oh, that’s a good one. You didn’t prep me for that.
Sorry.
Well, I mean, the obvious is Recode and others have shown how in the last two years, Amazon has crossed over past Walmart in market cap, and now they’re somewhere around double. A big piece of that, obviously or maybe not obviously, is AWS, and that provides Amazon a lot of advantages. It’s a very profitable part of the Amazon business. It adds, obviously, to their tremendous cash flow, and so that’s a big help when investing in new projects, whether it’s in AWS or new projects in retail, so that’s something that Walmart’s not going to do.
Yeah. What about Amazon? It seems like there’s nothing they won’t do.
Again, I think until recently, I would have said the in-store, buy-online grocery trend. I think a lot of Americans don’t want to spend delivery fees and pay potentially higher prices for home delivery, so I think pick-up in store is really smart. I would have said, until the Whole Foods deal, Walmart has the advantage in grocery, and I think could be the biggest online player in grocery. Now, I would say they still have the footprint of the Walmart stores, and the ability to offer discounts to people who don’t mind picking up in store. I think that’s a smart test they’re doing, and it’s something that’s hard to replicate, for Amazon.
All right, last question. Walmart’s really challenged in this area of commerce, and presumably, you think Amazon is its biggest threat. I think Amazon’s the biggest threat to everyone. I think they’re an existential threat to all of retail, because I just look at my own patterns. The other day, I bought four different things. It was like agave, printer ink, something. It was a weird group of things. They were literally at my house five hours later. Everything in one box. It was sort of scary. I felt bad, because I should have walked down to the corner store to get a lot of this stuff, and I just was busy. I was sort of like, “Oh, that was easy.” Then, I know I’ll do it again. It’s a really interesting situation, that it was such an odd group of things that were at my house within hours, with no delivery cost. How do you do it, because I like to shop locally, but even locally is sort of, now, it’s easier just to click on the Amazon thing.
Yeah, I think you have to, back to a point I made earlier about Amazon going after sort of lower-income households, it’s easier to forget that $99 a year for Prime is a big deal to a large swath of America, so I think the monthly payment option has helped, but I think they have a long way to go to bring it down. And the other piece is there are still a lot of Americans who, when they hear Amazon, they’re like, where we think “fast delivery, my saving grace, amazing,” there are a lot of people who think, “Big, scary, bad corporation that’s killing mom-and-pop shops, and I don’t want to do business with it.”
That used to be Walmart, by the way. That used to be Walmart.
To a lot of people, it’s still Walmart, too. I mean, Amazon is, in a lot of ways, the new Walmart, but Walmart’s still the old Walmart. Yeah, I mean if you look at comments on some of the blog posts that Andy Dunne wrote when he agreed to have Walmart acquire Bonobos, and also the ModCloth founders, there are a lot of people who say, maybe it’s a vocal minority, but saying, “I’m never shopping with Bonobos again.”
Because of Amazon, or because of Walmart?
No, because of Walmart. Anyway, I don’t know if I answered your question.
Yeah, no, and then we’re going to get to readers’ questions now. One question, and bear with me, Trump went against Amazon again today, yesterday, or this week, again with some idiotic rant that was absolutely inaccurate in every way. But still, it’s that same ... He seems to be real bothered, even though Jeff Bezos had just appeared at the White House at the whatever tech council they were doing.
Well, he’s bothered when Bezos isn’t in the room, it seems.
Yeah, he put him right next to him, right? He was sitting right next to him.
Is that a threat? I mean, I ask the question a lot when I talk to smart people in the industry. What can stop Amazon? However far-fetched it still might seem, people still say, “The government, maybe.” I think it feels like the Whole Foods deal will go through, assuming there’s not another bidder that beats out Amazon that Amazon decides not to match, but yeah, I can’t predict.
I don’t think he can do it. Honestly, I think it’s just a lot of noise from someone who’s losing their mind by the minute. I don’t think they can actually, without good cause, go after a company that is very well liked by most customers, on anything not serious just because they have a pique over the Washington Post or whatever the heck he’s mad about that day.
I would just say the one thing November taught me was never say never.
That said, everyone’s still standing. So far, no effect on the health care bill, no effect on anything. There’s effects though, obviously, of the executive orders and things like that, but in terms of taking these companies down, these tweets are less effective. I don’t know. I just think it’s a lot of noise. You know what I’m saying?
I do wonder at what point Bezos or other people inside Amazon are like, “Okay, you’re not going back.”
Well, you know what? They’re just playing the long game. The match-up between Bezos and Trump — I’m sorry, Donald Trump, I feel terrible for you, at this point. I don’t know. Just like, I’d bet on Bezos every time.
All right. In a minute, we’re going to take some questions about Amazon and Walmart from our readers and listeners, and Jason’s going to answer them, but first we’re going to take a quick break for a word from our sponsors. Jason, you have to say ka-ching, because you’re the e-commerce guy.
Oh, okay, ka-ching, okay.
No, that wasn’t a good ka-ching. Come on.
Oh, right now? Ka-ching.
Okay, thank you.
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Okay, we are with Recode Senior Commerce Editor Jason Del Rey, talking about Amazon and Walmart and the epic retail battle between them. Now, we’re going to take some questions from our readers and listeners, and here is the first question, Jason. Kevin, it’s @Kevito920: “What advantage does Walmart have over Amazon? It seems Amazon’s prices and distribution give it a competitive advantage.” I don’t think that’s true, but Jason, why don’t you talk about what advantages Walmart might have.
Sure. I may have touched on this earlier, but I still think the store footprint can be an advantage if used in innovative ways. We’ve seen a couple of ways. I think there will be more to come. I think the other piece of it is Walmart, itself, has a pretty tremendous logistics system in the back.
Famous for it.
Like you said, they’re famous for that. I think that’s all tied in. That’s an area where some of the Jet people besides Mark Lore who don’t get a lot of attention are really good as well. So I think it’s like the not-sexy stuff, but over time can potentially at last come close to matching some of the ...
Will compete.
Yeah, so those are areas. Another thing I didn’t mention earlier but sort of fits in here is there are some areas where Amazon has followed Walmart’s lead. Amazon opened two drive-up grocery locations in Seattle over the last few months. Again, that’s something Walmart’s been doing for a while, and rolling out in big ways. Really, the smart ways where digital and physical stores can make things easier for people who still like to go into stores but also maybe like to provide discounts is an area. The last thing I’ll say is I wrote a big piece, a couple months ago, about the battle between Amazon and Walmart, specifically in CPG, the consumer packaged goods category, and how they’re squeezing some of the biggest CPG brands in terms of price.
Yeah, the CPGs, like Walmart used to do, or continues to do.
Walmart still has massive leverage for these giant brands that want and need shelf space. I know that’s changing over time. It’s still low-single-digits CPG spend online, and so they still have huge leverage there that’s going to make them, that gives them the capability to compete on price for a very long time.
Yeah, for a long time. Although as people switch to those, I literally just bought cat litter online for the first time. It was delivered to my house. I never did that. Never before. It was interesting.
Kara, I don’t think, we should rule out you as sort of a good model for ...
No, I know. Of course. No, I know. I get it, but I’m saying I never have bought CPG stuff. I always just go to the store. It was a weird shift. I bought unusual stuff, or technology stuff, but two areas I’m buying a lot more online is clothes and CPG goods, like cleaning supplies. That is interesting.
Yeah, no, there’s a huge shift happening there.
Yeah, I never did that before, which is I know I’m not the thing, but I kind of, a little bit. Like, I’m a mom. I’m a mom.
All right. Andrew Wyatt, @Awhyit: “How pissed was Jeff Bezos when Walmart scooped up Jet.com?” Was Jeff interested in that? Was Amazon interested in that? They were kind of fighting them, right?
I don’t think they were pissed. I think there’s definitely this dynamic that, as a reporter and someone who likes good narratives, loves, which is Mark Lore not loving his time at Amazon and having a chip on his shoulder.
Chip, yeah.
Amazon definitely pays attention to it. I could go back, quickly, to the story of them. Amazon shut down Mark’s old company, Quidzy, which was the diapers.com parent company, and folded all those brands into Amazon. You could make an argument that that made sense for a lot of reasons, but the reason that Amazon talked about publicly was that they could not make Quidzy profitable. I reported, at the time, the Quidzy employees were told by an Amazon executive that the company would be profitable this year, so there’s still something there.
Tweaking. Yeah, he’s a tweaker. Bezos is a tweaker. He’s definitely so competitive.
Yeah, so they did not want to buy Jet.com, but does he love that Lore’s working there? I don’t know. Maybe he likes to tweak them so it makes him happy.
All right. Next question. I can’t pronounce this. I’m not going to. Teej @DaBurghIT: “Can Walmart ever overcome its ‘People of Walmart’ reputation?” I don’t know what that refers to. I won’t comment on the question. What is the “people of Walmart” reputation? I don’t even know what that is.
I think that’s a reference to people poking fun at the type of people that shop at Walmart. Maybe if I was younger.
Oh, people with double-wide trucks. Yeah, okay, all right. Poor people, essentially. That’s not nice.
Yeah, so “People of Walmart” is probably the majority of America.
Yeah, that’s not nice. I don’t like that question, Teej. That’s not a nice question. What’s wrong with its reputation? Everyone has to buy somewhere. I don’t like that question. Me, speaking from an elite city in San Francisco, where we are overpaid and pay too much for things. I think that’s me.
There actually is a People of Walmart website.
There’s probably a “People of Whole Foods” too. Like, come on.
Well, there definitely should be.
That’s a demo, I can tell you. I can tell you. There’s “People of Neiman Marcus.” Needless mark-up, or “People of K-Mart.” People that you ... that’s rude.
Whole Paycheck for Whole Foods.
In any case, you have to overcome that. They’re very good customers with good money to spend on goods, so I don’t like that question at all.
More of a comment than a question, but Kevin Morrison writes, “Whatever happens, I think Amazon will stay ahead simply because they have no brick-and-mortar store legacy costs, and no, I doubt that the Whole Foods acquisition will matter much at all.” Well, Kevin has an opinion. Jason?
Good opinion, Kevin. I think if there’s one thing I’ve learned, over the last year or two, the idea of omnichannel — which makes me, that word makes me barf.
I remember Martha Stewart was on Omni.
Yeah, so historically, it has made me barf, but you are seeing more and more interesting ways that digital first retailers are using physical presence that doesn’t mean tons of inventory and vice versa, so I think online, a lot of online retailers are looking at physical presence in a more positive light.
I agree with you on that, too. I think it’s an interesting distribution theory.
Still want to touch stuff.
Yeah. You know, diapers have a physical space, and need to be put somewhere. It’s not like we can do everything virtually. Maybe someday, we can have virtual diapers, that would be interesting. But probably not.
For adults or for babies?
Well, I’m headed that way, but for whoever needs them, I think. I feel like diapers should not be, no diaper-shaming on this show. Let me just say. I do think the Whole Foods matters a lot. I think it changes the image of Amazon, too, to get people thinking about it.
Mark Little, @MTLittle: “Which of these two companies treats its front-line employees better, paid benefits?” Okay, they’re both kind of awful in a lot of ways. They both have a reputation as being awful places to work, but which of these two treats its front-line employed better? Jason, do you want to pick?
Oh, I don’t. You can find people that have a lot of complaints about how both of them treat people. I would also say, I mean, I don’t know. You find people who have worked at Amazon warehouses who say, “I can’t imagine how people do this every day. I walked 12 miles today.” And I’ve actually met other people who say, “I like the job because I walk a lot and I’m not sitting on my butt all day.” And Walmart, I don’t know how it all stacks up. I will say, you know ...
I think they both have reputations as tough places to work. More than other companies.
They do, they do, and they both know that, and they’ve both been making moves to try to change that. Amazon has a program, I’m not going to remember the name of it.
We’re-not-as-asshole-as-you-think.com? What is it?
It’s helping out with education programs to help train people who don’t want to do this forever, and help them get on a path toward other jobs. They’ve gotten some accolades for that kind of stuff, but they both have at best a mixed reputation.
They should do that. They’re tough companies. They’re tough companies, both of them, compared to other companies, too. I mean, I think most people, if you had to pick companies in online who are the toughest, you’d say Amazon would be up there, and then the same thing with Walmart, in the retail space.
What is it about Seattle, because didn’t Microsoft have that reputation, right? Or still have. I don’t know if it still does.
They’re just mad they’re not down in Silicon Valley. The Silicon Valley people won’t invite them to their parties. I don’t know. It’s wet. It’s wet and rainy. Maybe they get moldy or something.
I love Seattle.
I do too. I spend a lot of time there. I don’t know. That’s interesting. I don’t know why. Just the personalities of the CEOs, I guess. Jeff is very tough, very tough guy, although I think he’s morphed quite a bit, too, with his other things that he’s doing.
You covered him super early on, right?
Yes. I used to hang out with him all the time. He doesn’t talk to me so much anymore, but yes, I did. Very early. I went with him to see his new office when he moved into this really janky office in Seattle that he was moving to. I was a little frightened. I thought I should have brought my switchblade or something, because it was not a nice area of Seattle, at the time. I mean, most of Seattle is gentrified now, but then, it wasn’t. Yeah, I used to watch him wander around on his Segway all the time, when they first came out. He’s very interesting and brilliant, absolutely. I think he has taken the mantle of Steve Jobs. I mean, in terms of most innovative and interesting forward-pressing innovator in digital. I think we can probably agree, perhaps. I don’t know. I know Elon sucks up all the oxygen.
I think a lot of people would say the same thing.
Jeff is really the most significant executive in digital, I think. All right, and I think a lot of people agree now, at this time. I think everyone pretty much has coalesced around that concept.
All right. Last question. “Somewhat related. What happened to Costco?” Kevin linked to an article titled, “The Best Perk of a Costco Membership Is Still the $1.50 Hot Dog,” Which I would agree. It’s a very good hot dog. What happened to Costco, and not just that, but Trader Joe’s. All these companies. What happens to everybody else? Why don’t we finish on that, Jason, because everybody else is sort of sucking wind behind these two, presumably.
Sure. I think Costco, they have a big decision to make over the next couple years about what their online play is. I still, you’re going to throw tomatoes at me across the country ...
Four-dollar tomatoes. Go ahead.
I still kind of like going to Costco. Like, I was in there in the last month. I’m also a parent of two young kids, so it kind of makes sense, and I don’t live in the big city. But I don’t know. Once they get you in, no matter what, you cannot spend less than $300. It is physically impossible, and they get you in, they used to say get people in for the $4.99 rotisserie chicken of whatever, and you come out with a TV and a lawnmower.
I still am using the paper towel pallet that I bought there, many decades ago. It’s like 900 paper towels and a plastic thing.
They’re still a giant player. One, there is a startup called Boxed, B-O-X-E-D, based in New York, which is obviously much smaller, but outside of Costco, BJ’s, and Sam’s Club, is pretty much the only online-only member — actually, you don’t need a membership, but it’s the same type of idea. It’s limited selection, but good prices, because you’re buying bigger. More quantity. I don’t know. Do they go out and buy something like that, that’s sort of a hit with a younger generation in some big cities? Do they get way more aggressive online? I think they’ve talked about being behind, online.
Then, the last piece is there’s data out there that shows if you’re a Costco member and an Amazon Prime member, maybe this is obvious, over time you spend less and less — even though you keep your membership with Costco — you spend less and less over time, which I would say is true for my family, and probably a lot of others. I don’t know what they do, super long term. They’ve been slow online, to say the least, so I don’t have a good answer.
Yeah. I think a lot of retailers have to think really hard, right now, about what they’re doing, and how. I can’t think of one that’s really fast-forward, compared. I mean, Walmart’s trying, I think, is being the most aggressive of all of them, but they’re all sort of going to have to accept the new reality and figure out how to cope with it.
When I think of the brick-and-mortar retailers that are doing better than Silicon Valley people might expect, it’s a pretty short list. It’s Home Depot, which has had a terrific five years. A lot of that, some of that, I think, is the type of stuff they sell, especially the big stuff, is not easy to move online. Some of that is the housing wave in the U.S., and the rise of ... you see this on TV with the HGTV shows, but everyone wants to update.
You see Best Buy’s done better than a lot of people thought, the last couple years. They made a move the other day where they’re now doing these showcases for Amazon Echo and Google Home in their stores, which aren’t just shelving, but it’s also people helping to show you how to use the use cases. I think for a large part of America, that will be really helpful and smart. But anyway, yes, the list is short of legacy companies doing their own retail right now.
Yep, it is, and I think one of the things — and we’ll talk about it in another episode at some point — is that the retail job disappearance, how that’s going to change everything, but that’s a whole nother can of worms. Everyone focuses on smaller job categories, but retail is going to see a real pinch in that area, I think, over time.
I think this year, already, the most store closings I want to say ever.
Yep. I think people have to think hard. Then we’ll have robotic check cashiers and that will be the end of that. All right. On that note, this has been another great episode of Too Embarrassed to Ask. Jason, thank you for coming back on the show.
Thanks for having me.
This article originally appeared on Recode.net.
