Ecosystem Innovation

Phillip: [00:00:47] All right. Welcome to Future Commerce. The podcast about cutting edge and next generation commerce. I'm Phillip.

Brian: [00:00:51] I'm Brian.

Phillip: [00:00:52] And today we are joined by very special guests, the V.P. of Strategy for Magento, Peter Sheldon. Welcome.

Peter: [00:00:59] Thanks for having us.

Phillip: [00:01:00] I should have cleared your title that I had it right. You are in strategy?

Peter: [00:01:05] I am in strategy. Yes.

Phillip: [00:01:07] And often labeled as a retail futurist.

Peter: [00:01:10] Yes. Yes. My history is, prior to Magento, I spent spend five years at Forrester Research. And I like to think that I'm a retail futurist.

Phillip: [00:01:21] Well, that's great. Welcome to the show. We're glad to have you join us. We're gonna get into some of that futuristic our retail strategy and technology and talk about what Magento is doing here today. But if you're new around here, we want you to give us feedback about today's show. Make sure you leave that in the Disqus comment box on FutureCommerce.fm. We also want you to make sure you can subscribe on iTunes, which is now called Apple Podcasts, Google Play, and everywhere else you get your podcasts, including Stitcher, TuneIn radio, and the rest. Can also listen on your Amazon devices and we'll trigger some here on the show floor. They've actually got a whole host of those Echo devices sitting out. And you just... All you have to say is, "Alexa, play Future Commerce podcast," and well welcome. Brian and I are very excited. We've been sort of champing at the bit for almost a year now to get someone from Magento on the show. So we're glad to have you with us. Tell me a little bit about who you are, for those who don't know and what role you have at Magento.

Peter: [00:02:18] Yeah. So, I'm Peter Shelden, and I head up all of corporate strategy at Magento. I think people often ask me, "Well, what does that entail being the strategy guy?" So really, it is looking into the future. It's a little bit looking into the crystal ball. Where are we as a company going? Where are our merchants and our customers going and trying to sort of anticipate not the needs of, you know, what our merchants need from the platform in the next six months or 12 months that that's already sort of locked in. And we know what we're doing there. We're taking a more holistic long term view of where's online commerce going? Where's retail going? What are the solutions and tools that as our platform provider, we need to have, in the platform three, four or five years from now. So that's R&D. It's strategic partnerships. It's M&A that we might execute on and really trying to build a picture of where we're going.

Phillip: [00:03:09] And might and do execute on.

Peter: [00:03:12] Yes.

Brian: [00:03:13] I would imagine your background for Forrester probably helps with that process quite a bit. Maybe talk to me a little bit about, you know, that transition from being an analyst for five years and then jumping into this product company, young ish company.

Phillip: [00:03:30] {laughter}

Peter: [00:03:30] Reborn company.

Brian: [00:03:31] Reborn Company.

Phillip: [00:03:34] Yeah.

Brian: [00:03:34] What was that process like and how was that transition for you personally?

Peter: [00:03:41] Yeah. I was at Forrester for five years. I think, you know, incredibly privileged role to be there and be an analyst at Forrester. You know, people often ask me, "What was it you enjoyed most about that role?" And it was the interactions with all of the D commerce practitioners. You know Forrester generally works with larger enterprise clients and the opportunity on a daily basis to have, you know, literally back to back 30 minute phone calls with VP's and C levels that all major retailers and branded manufacturers and so forth. And to hear firsthand the challenges that they're facing, the things they're thinking about, the investments that they're considering making and being sort of part of the process of helping them along that way. So very privileged role and sort of a two way process, you know, being able to help them, but also being able to draw insights from all of those conversations to start doing the analyst thing and sort of figuring out, well, what are the trends and what are some of the emerging changes that are happening in the industry? Write about that and so forth. So, you know, incredibly fun role. But ultimately quite academic in nature. So glad to be sort of back on the vendor side and, you know, actually turning some of that into sort of real products that we can bring to merchants.

Brian: [00:05:00] That probably feels really nice to be able to actually like do some of the things you've talked about and thought about and wrote on for so many years. Now you actually get to implement them.

Peter: [00:05:09] Exactly. I think that was, if there's one frustrating side of being an analyst, it's you know, you're always giving this advice, you're writing these reports and people are reading them, and sometimes it's a little frustrating that you're not actually part then of delivering those ideas and delivering the innovation.

Brian: [00:05:27] Nice. That's cool.

Peter: [00:05:27] You get to prescribe but not do.

Phillip: [00:05:30] That's the easy part.

Peter: [00:05:31] Yeah, exactly.

Phillip: [00:05:31] I've said for a long time, we engage in and some client work in the Magento space and have seen a lot of success there. And I realized when I moved into what I guess we call thought leadership now, it's so much easier just to kind of, you know, spew all kinds of {laughter} strategic decisions to people who lap it up and it's not on you to actually deliver it. Now you have to deliver. So actually I want to jump in a little bit to specifically what Magento is doing that's sort of centric to what we talk about on Future Commerce, which is pushing the limits of digital commerce and retail. And I know that Magento just announced a program, an innovation lab program, to try to harness the power of the community that's behind Magento and leverage that to highlight some innovation in that community. Could you talk a little bit about that?

Peter: [00:06:30] Yeah, absolutely. So, you know, Magento is a very unique platform in that we're backed by this huge community there. There's a quarter of a million developers and architects sort of in that community who use Magento, who make a livelihood, even working for the merchants, working for our system integration of digital partners. And they're a huge part of contributing to the innovation of the Magento platform. Part of Magento's heritage is that we're open source. And so with that community can contribute back to the platform. And we've been trying to sort of encourage a more active participation there. And so we think about this ecosystem, these are merchants, system integrators, individual contributors, they've always innovated on Magento. That's always been core to the value prop of what Magento is. But I think sometimes there's some really amazing things that the community has built on Magento, but there hasn't necessarily been a forum for them to sort of talk about it. And so what we're trying to do here with creating the Magento Innovation Lab, is create a sort of more formalized mechanism for that awareness around these innovations. I think in part so that the creators of these innovations can get some kudos. It's a very sort of vibrant community and creating awareness of what's being done, but also for the merchants themselves. You know, the merchants, I think, are very keen to experiment with potential new innovations, but they want to do so in a low risk fashion. And so making these innovations, creating awareness of them and a mechanism for the merchants to sort of see what's out there and what's coming is going to key to what we're trying to do.

Brian: [00:08:11] That's awesome. Yeah. Tell me a little bit more about the mechanics of how the program is going to work. What's the submission process look like? And how are you going to be displaying what it is that people are working on? Is it going to be at Imagine, your conference, or is it going to be something that happens throughout the year? How's it gonna work?

Peter: [00:08:28] Yeah, absolutely. So I think when we think about sort of ingenuity and innovation, there's a couple of things certainly on the Magento world. There's a ton of contributions back to the platform that I would call or improve the backend processes. They may be developer tools. They may be tools that make the day to day sort of operating procedures for the actual merchandizers more efficient. Better tools on the back end. And we love that innovation. But that's not the key focus of the lab. What we're really trying to focus on in the lab are innovations that disrupt the shopping experience for the consumer and really sort of drive a differentiated way of buying, not necessarily online. This is where, you know, cognitive commerce and all of that type of stuff comes in. But also to look at innovations that are actually driving top line growth for those merchants that are really going to disrupt and bring sort of new ways for the merchants to sort of accelerate their revenue growth. So from a submission process perspective, this is open to the whole ecosystem. You know, we're looking for innovations that haven't yet been commercialized. So if it's something that's already been commercialized, well, there's already a path to market there. We're looking really to sort of foster innovations at a little bit sort of further back on the development curve. But what we want stuff that's real. So we're certainly not looking for four vaporware or, you know, slide deck only materials. You know, this has to be something that doesn't need to be production ready, but we have to be able to see that it's real and sort of test it. So we're accepting submissions. It's an ongoing process. You know, we'll certainly be using Imagine as a great launch board to highlight some of these innovations. But this is an ongoing process. This isn't sort of a one time thing. We're gonna be actively recruiting innovation going forward.

Brian: [00:10:23] Nice. Yeah. So you mentioned that the qualification process is it's not commercialized yet, and it's not vaporware.

Peter: [00:10:38] Yeah.

Brian: [00:10:39] So that's a pretty specific category. So I'm guessing this would be things like one time implementations with specific merchants.

Peter: [00:10:48] Exactly. I think we'll see submissions from a variety of different backgrounds. But we know already from the submissions that have come in. I think the most common place of these type of innovations are actually from our system integration and technology partners. You know, we have 350 formal partners there who implement and manage Magento on behalf of our merchants. And these guys are creating some great innovations sometimes for the merchants. So sometimes the IP may be owned by the merchant, in which case, it's more of the merchant to submit the innovation. But a lot of the times the IP is actually owned by the system integrator and may have been built more of a proof of concept to help in the sales process. And so, you know, that's where we're seeing a lot of the submissions.

Brian: [00:11:31] What are you seeing come in so far?

Peter: [00:11:35] I could tell you, but...

Brian: [00:11:39] General categories, at least?

Peter: [00:11:39] I mean general categories... I think it's you know, we're certainly seeing things around like Alexa and conversational commerce and voice based commerce. AR and VR. We've seen some submissions there. Some really exciting stuff. But, yeah, my lips a little sealed at this point.

Brian: [00:12:02] Sure. Sure.

Phillip: [00:12:05] I have to ask because my sense is that in any program, especially one like this where you're leveraging, I like the way that you put it, the ingenuity of the community. The SIs and the merchants have a very specific niche that they're fulfilling right now in that it's to this point, has been mostly direct to consumer sales. It's mostly B2C and they're mostly retail brands that are taking over some DTC operation. So I'm curious with some of this conversation that you're having around innovation in B2B and how you're your platform is evolving into a more B2B centric platform. How would you frame the customer facing non commercialized component for those who are trying to innovate in the B2B space?

Peter: [00:13:01] Yeah, there's just as much innovation happening in B2B as there is in B2C. I mean, you know, we see a fairly dramatic shift in the opportunity funnel at Magento, not just from sort of pure B2B merchants who are your industrial manufacturers, your wholesalers, your distributors. We're seeing a lot of our sort of lead volume come in from merchants on both sides who want to do both B2C and B2B together. So a lot of retailers, for example, who already have a direct consumer online channel, but want to know facilitate a more sort of efficient process for their wholesale channel and using B2B commerce there and vice versa. A lot of sort of more on the traditional B2B side industrial manufacturers and so forth who are creating new digitally enabled products that they actually want to try selling direct to consumer or at least sort of disintermediate the traditional selling channels of their wholesalers in their distribution channel. So going back to innovation, I think it is just as applicable in those spaces. You know, we think about things like VR and AR. This is really far more applicable in B2B than it ever will be in B2C. I mean, yeah, you know, we see IKEA and we see Target and others doing some great innovation to help you visualize, especially things like home furniture. But it's actually much more applicable in the B2B space when you get into the construction industry, whether that's home construction or commercial construction. One of our clients that I was actually onsite with you weeks ago, Steelcase... They are a supplier of office furniture. And they have this amazing lab environment where it's all virtual reality. And so you can completely custom design your entire office space, but see it virtually before you ever got your place an order. And so there's definitely... I would almost argue more innovation happening in B2B than there is in consumer.

Phillip: [00:14:59] It's interesting that you mentioned specifically in manufacturing and construction, because a lot of the innovations in IOT are happening in those same spaces. And we're seeing... And as much as we sort of want to pan fads and the trends that we see, in at least in consumer retail innovation, things like beacons... They tend to fall out of favor. They're not as sexy anymore, but they're actually finding real... In some cases, if I'm being really honest, there are solutions in search of problems. But in many cases, manufacturing and construction are finding real innovation in those technologies and not just from being able to apply things like data analytics gathering that they never had in those industries before. But even just to streamline their own supply chain.

Peter: [00:15:48] Yeah.

Phillip: [00:15:50] It's interesting. And I think actually that's it's not a sexy, not to use the word a second time, but it's just it's not as appealing, especially for a brand like Magento, which for me, I've sort of identified with as a as a you know the Je ne sais quoi. What's the word? There's like a... I don't know, it's a sexy brand. And it is a young brand who is in a sea of blue around it, of old storied brands like SAP and IBM to some degree. And so you've always been the upstart. But now as the business scales and you start taking over the larger portions of the market, especially in the B2B space, how do you retain the essence of the brand being that scrappy upstart and still providing the enterprise type solutions to B2B? It's going to be a... That's a challenge, I think.

Peter: [00:16:39] It is. It is. People ask me, "What's life of like a Magento?" And what I often say is, "We're sort of an enterprise startup." We're big, you know, a large company. We have 700 employees around the globe. But being independent and having spun out from eBay, we've certainly got a very agile startup internal culture. And so it is critical to know where we're going that we retain that and that we foster that within, not just our internal employees, but making sure that that agility remains throughout the community. And I think the community is critical to that, because that's one of the core differentiators for us is the open source foundation of the platform and having this community that contributes back to the platform because it allows us to go faster than any of our competitors, because we have this sort of extended R&D team that, you know, is hundreds of thousands of people strong.

Brian: [00:17:37] Yeah, I think to kind of riff on that a little bit more, some critics might say that because Magento can do so much and now you've been declared a leader in the Forrester B2B way from mid market, you can do so much that the marketing messaging is kind of hard to define. When we were on Jason Scot, they were like, "OK, what's the the core message?" So how is that process coming? You guys can do so much in the SMB market, you're hitting B2B, you're hitting mid marketing, even up market. So how do you sort of... What's that message...

Peter: [00:18:20] Yeah. Yeah. I think a lot of it is we're investing heavily in sales and marketing. And I think marketing is really key, making sure that we're not just Magento, this...can do everything because I think there is a limit to perhaps as we do mature and going to large organizations is some doubt about, well, is a framework type of thing the right thing for us. So certainly creating more sort of industry specific vertical solutions, leveraging our partners. As you know very well, we have the marketplace of extensions and there are many thousands of extensions for Magento that are built by the community, but actually helping our merchants to say, listen, these are the extensions that are more specific to B2B that are specific, perhaps, to the automotive industry or the pharmaceutical industry and creating packages or bundles of a verticalized, almost as sort of verticalized, instance of Magento. I think that's one of the things that we're very much focused on.

Brian: [00:19:17] Smart. I like that.

Phillip: [00:19:18] That's an interesting perch. I'm sort of pretty well known for being hyperbolic in most of the things that I say or think, or at least I'm just loud about saying them. I just gave a new version of the talk that I titled about a year and a half ago called The Shopping Cart is Dead, which I know you guys love that title.

Peter: [00:19:36] Yeah. Yeah.

Phillip: [00:19:36] And we happened to be sitting here at Shop.org in a hall full of people that run shopping cart platforms. And we're at an inflection point. I mean, Amazon's patent on One Click has expired, or at least that's what people... I'm not a lawyer by any means, but that's what people keep saying. I know that Magento has a community engineering team is who we're seeing some people in the Magento space start to already innovate in that way to bringing that capability to Magento. I think Internet Retailer magazine just wrote an article on that. So what do you think the future, the near future, looks like for shopping cart platforms and direct to consumer shopping cart platforms? Are we moving away from the allegory, the real world analog of throwing items into a basket and pushing it around a virtual store?

Peter: [00:20:23] Yeah. So I love your analogy. You know, the shopping cart is dead, but I would actually argue it's not the cart that's dead. It's the checkout that's dead. You know, I did some writing and been talking a little bit about what I call the Uberfication of commerce. So what I really mean about that is just, you know, if we think about what Uber really did for us as consumers. It just made the the experience of getting a taxi ride just so much more easy and efficient. And I don't want to turn my brain on. It's a bit like what Google Maps did for us. You can stop using my brain. And then that's kind of what Uber did for us as well.

Phillip: [00:20:57] We use our plastic brains now.

Peter: [00:20:58] We use a plastic brains. Exactly. Exactly. So I don't need to think about paying or getting the receipt or doing my expenses. It's just all managed for me. And I think where you can apply that analogy into commerce. And so, listen, the cart's still there. We need a cart because a lot of the time we buy more than one thing. And yes, there's a lot of scenarios where that one click ordering button and that sort of Amazon dash button type of thing... Certainly in sort of consumable goods, reordering the things that I buy all the time, certainly my groceries and that type of stuff. You know, there's applicability for just sort of almost what I call over an unconscious purchase, that ability to maybe this is going to go even beyond speech. And we'll get into sort of where Elon Musk is investing in as you brain company. And we'll just think about it. It's like, you know, I don't need to... I know what it is. I buy this brand all the time. I just need more of it. And so it's a completely unconscious decision. I just need to think that I need more, and it shows up on my doorstep two hours later. And that's fantastic. But there's a lot of purchases still where I need a cart because I'm buying more than one thing and I need to sell them altogether and then I need to buy them. But this concept of, you know, entering my billing address and my shipping address and her payment, that's almost dead. And I think we see a ton of innovations. You know, we've got the Amazon Pay team here, and PayPal and others who have accelerated checkout mechanisms and some innovations coming in the web browsers, in Chrome and others. There's the web payments request API, where you'll save all of your preferences, your shipping addresses and your and your payment information in the browser. And so I think what we'll see is that the buy button will move from the checkout process to the cart page.

Phillip: [00:22:46] Yup. We're actually I've coined the term Groundhog Day. It's very... It's a novel. I'm gonna trade market. {laughter} But that's what checkout has become. It's Groundhog Day. We keep living the same experience over and over and over again at every brand that we visit. If I had to define what the near future looks like, I don't think that it's a mistake that marketplaces have become so ubiquitous. Because that's how we shop in the real world. I think that's how we think is that we find a place that aggregates the kinds of brands together that we want to engage with that fulfills a specific need, whether it's quick and cheap or whether it's, you know, catered and sort of curated for our tastes. That's really a move towards what we're looking for. I'm more interested in... I'd love to see Magento's investment continue in things like your order management platform, where it can power all of commerce no matter where it's coming from. I know everyone is sort of heralding the death of omni channel, but we have more places to purchase now than ever before. And if we're going to really, truly get to places like social commerce, if we're gonna use social currency as our own means... Like if we're getting into ambient commerce where it's thought based, like all of these things that could be on the horizon need to be powered by a platform of some kind and not just catalog based. And so I really feel like I've said that sort of dovetails in to answer the question I just put to you is that Magento has a suite of tools to actually be able to handle it, consume those things. But again, you know, it's a challenge to implement those for a certain segment of the market.

Peter: [00:24:26] Yeah. I think we think what is going on here and where Magento was and where Magento is, and it's the same for all the commerce platforms. It was a web site, and it rendered HTML. And the assumption was wherever that experience was consumed on a mobile device or on a desktop browser that you browse, and you add to cart, and you checkout. And what we've done is with  Magento 2 is it's all API enabled now. So we often find clients using Magento in what we call a headless fashion where we're not rendering any experience. You know, the experience is something else. And it may not be a visual experience. It may be an app. It may be a web site, but a lot of the time it's not. It's an IOT ordering experience. It's a machine learning algorithm that's placing orders on your behalf. It's coming from another channel that you don't control. It may be voice activated, brain activated, whatever it may be. It may be your fridge, which has, you know, Amazon cameras all in it. That's, you know, monitoring how much milk you have left. And is machine learning the milk consumption of your family, and the fridge is placing the order for you.

Phillip: [00:25:31] God, please. I need that.

Peter: [00:25:33] We all need that. It's coming. I guarantee you.

Brian: [00:25:35] We talked about the idea of personal inventory quite a bit on the show and how that's definitely something that's coming up. I don't know if consumers are quite ready for that yet. There's a lot of families out there that don't want their milk levels being monitored.

Phillip: [00:25:52] {laughter}

Peter: [00:25:52] I don't know. I think there's disruptors out there like Amazon now with the Whole Foods acquisition that are really well-placed to drive that type of innovation into the home. We saw that the announcement from Walmart this week that they'll let the delivery driver unlock your front door for you and put the milk in the fridge.

Brian: [00:26:10] That's just mind blowing.

Peter: [00:26:10] At the end of the day...

Phillip: [00:26:13] It was with Ring right? There is a partnership with Ring?

Peter: [00:26:14] Yeah, with the home automation and the door company. Yeah.

Phillip: [00:26:19] August. August.

Peter: [00:26:20] That's it. Yeah. So consumers are we worried about letting someone into a home? I don't think so. I think just a convenience of that is incredible. So it's all about convenience and removing friction from our... We're impatient individuals in this modern society. And there's sort of old fashioned processes that we still put up with that are ripe for disruption.

Brian: [00:26:44] Yeah, that's good. One thing you said a while back, when you start talking about improvements in web browsers. And I know right before you announced the Innovation Lab, you also made a really big announcement about your investment in PWAs.

Peter: [00:28:04] Yup.

Brian: [00:28:05] You want to talk about that a little bit?

Phillip: [00:28:06] Progressive Web Apps for those who are not affiliated with that term.

Brian: [00:28:09] Thank you.

Peter: [00:28:09] That's right. So I think many of the listeners on the show probably hear that and think, "What's a PWA?" And as Phillip just said it's a Progressive Web App. The way to think about this is it's all of the things we love about a native app in that there's generally a native output, a slicker, faster, more engaging experience than that same experience in a web browser. So what PWA's do is bring a lot of the advantages of our native app into the browser. So it's primarily speed. A lot, lot faster in terms of the page loading. In fact, the pages actually don't load anymore. They progressively change. So you never see that sort of page refresh happening and having to wait while the next page loads. And so you get a far more app like experience. There are a lot of other advantages as well. But I think the key thing advantage for the retailers is that they don't want to go and build an IOS app or an Android app because that's a huge investment. It's typically a seven figure plus investment, which is why, you know, the ones that do it well, the Home Depot's and the Amazons of the world, they have huge budgets for their development. And it's a phenomenal experience when you're in that app. But most of the merchants here at Shop.org don't have those kind of budgets to invest in apps. And so I think PWAs will be very, very disruptive because it's just open web technology. It's HTML. It's CSS. It's JavaScript. And it's going to bring all of the advantages of an app into the browser. And that's just an evolution of the web site in the same way that we evolved from pinch and zoom desktop sites to responsive design. We're now going to go from responsive design to PWAs.

Phillip: [00:29:47] And I think that there's a lot of innovation that can take place from there because we have hardware access to things like camera, body data, sensors, like accelerometer, altimeter, all those sorts of interesting...

Brian: [00:30:02] Infrared camera.

Phillip: [00:30:03] Yeah. Oh yeah actually that's interesting. You should bring up a little bit about that because we actually haven't talked about that.

Brian: [00:30:11] We haven't talked about that. Apple's Face ID through the Apple 10. Not Apple X.

Phillip: [00:30:18] iPhone X..

Brian: [00:30:20] iPhone. Yes.

Phillip: [00:30:22] I'm never gonna get this right. I'm gonna continue to screw it up. I still say it as X. I don't know. What's interesting about that is, if you followed the Apple developer curve is there's either a three year timeline for them to open up the infrared camera to developers or at zero your time, like it'll never happen. So I'm interested to see how that goes. I really still feel like there's so much more opportunity. I actually like touch ID I kind of don't want touch ID to go away. I kind of like touch ID.

Peter: [00:30:53] We kind of need to wait till November and actually have the phone to see if we fall in love with Face ID or not.

Phillip: [00:30:59] This is true. Yeah. I actually... It's interesting because a good analog to that would be I was the one who was crapping all over the Air Pods a year ago saying it's just a terrible idea, and I now have a pair and they're magical. But it's interesting. So with progressive web apps, the ability for us to tap into all of this hardware functionality on the phones is going to be a game changer. So the ability for you to have image recognition for brands and for barcodes and things like that actually could be an evolution of the digital commerce experience for brands.

Peter: [00:31:40] Yeah, I think why we're so excited and we're investing heavily in developing PWAs for the Magento platform is we've got a sort of intrinsic issue in eCommerce where all the merchants have seen their traffic shift from desktop to mobile. And most of our merchants, 60, 70% of their traffic now is coming from mobile devices into the mobile browser, be it the mobile browser is the worst form of conversion. Even though we've got great responsive web sites and all of our digital agency spend a lot of time trying to create that to be as good as it can be. It's not converting as well as a traditional desktop site, and it's certainly not converting as well as I native app. I mean, I think, you know, for me, when I use Amazon's native app, it is just such a phenomenal buying experience.

Phillip: [00:32:26] Yeah.

Peter: [00:32:26] It is far easier to buy something from Amazon dot com using their IOS app than it is using their desktop site.

Brian: [00:32:33] Yeah.

Peter: [00:32:33] And so if we can bring... And net conversion rates are sort of typically around 6% for native apps are still 3-4% on desktop, but they're only so 1-2% on mobile. And PWAs offer this, you know, it's perhaps still so slightly so hypothetical promise to bring mobile experience ahead of the desktop experience and move those mobile conversion rates from 1-2% up to, you know, higher than the desktop. And that is, I think, game changing for the whole industry.

Phillip: [00:33:01] I have to wonder about some of the SMB retailers that you have that have been on Magento for some time that might say to themselves, "I'm still struggling trying to keep up with the thing you told me last year, which is increased transparency and supply chain and better control over inventory and visibility into that for your customers. And this is what's going to change. Now, I have to build a native app like experience." What do you say to merchants who feel like there's a struggle to keep up with the technology and where to place their investments?

Peter: [00:33:30] For sure the pace of innovation in this space and it is driven by Silicon Valley and then all the tech innovations and an Apple just talked about just putting more fuel on the fire. But you ever embrace or you die. And so I think we look at things like PWAs, there'll certainly be some a lot of merchants that don't want to be early adopters. There will be others that do. But even if you're not going to be an early adopter, you certainly don't want to be a late adopter because it's innovations like this where there's a real ROI, even if you don't have budget to work with your digital agency to upgrade to PWA next year, chances are you can get a business case and take it up to your C suite and your board to get budget, because, you know, that's such a compelling ROI on the impact it will have on your conversion rate. So I think there's some innovations that are, you know, shiny objects that are sort of experimental with the very questionable ROI on the investment. And then there are others that are just, you know, crystal clear.

Brian: [00:34:29] Oh, Marc Lore was sort of asked that question yesterday. Yeah, he was asked that question, like, what technologies do you see as hype for retail? And which ones do you see as like here and now? Like you can realize ROI the next three years.

Peter: [00:34:53] Yeah.

Brian: [00:34:53] What would you say about that?

Peter: [00:34:55] You know, I think there's very few technologies that are just completely horizontally disruptive. And I do think, for example, PWAs are one of those. But a lot of these, you know, things we get hyped up around around, you know, augmented reality and virtual reality, I think are very, very disruptive in certain industry segments and completely irrelevant in others. So your ability to get excited about an innovation really depends on duplicability of that innovation in your industry. So I think for most, retailers, AR and VR is probably a fad. However, if you're a furniture retailer, this is probably the single biggest, most important investment you can make. So it's a little bit of... It depends.

Phillip: [00:35:39] And there's going to be some who will never grok it no matter what you do.

Brian: [00:35:42] True.

Phillip: [00:35:43] We had an interesting conversation last week at Connected Commerce in Connecticut. We spoke there, and we were talking about some of these things. And we talked to one of the largest textile companies that's historically B2B business, been in business a hundred and ten years here in the United States. They said if we don't have augmented reality in an app in 18 months, we're done. This is necessary for our business. You know, the response that I got to kind of putting that out to the Twitter sphere, their response was, well, doesn't AR app help me sit on the couch and try it out before I buy it? And I was like, well, that's just such a silly argument, because you're buying couches and beds and mattresses and pillows online without trying those out, too. There's some that are gonna be naysayers no matter what you do. But I do think there are good fits.

Peter: [00:36:32] I think branded manufacturers are in this sort of they're either going to innovate and disrupt themselves, or they're going to die. And the mattress industry is just such a fascinating case study for this. We've seen Casper, as well as a number of other startups, and Magento has a number of these running on our platform. Absolutely disrupting an industry that thought it was as foundationally safe. Like who's ever going to buy a mattress online? What turns out actually the experience of going to a mattress showroom and speaking to the traditional sort of salesperson in that showroom is such a horrific experience that it's actually so much nicer to buy your mattress online.

Brian: [00:37:14] Yeah. It's true. {laughter}

Phillip: [00:37:17] I get a little nervous, though, because I see retailers with a very, very different business model to a Casper, which is venture funded in the valley and has incredible amounts of money they can lose and burn through before they ever capture a significant amount of the market to be profitable. If that ever even needs to happen. And what you see is what they've disrupted is the consumer sentiment in being able to buy something like that online. And it's actually translating into success for all of the old stalwart competitors who have the storied businesses. So you know see the gel foam shipped to your house mattresses from everybody from Sealy and Serta. Yeah, they're all realizing an uptick in...

Peter: [00:38:01] But they're all desperately trying to catch up. And I think they're sort of the classic innovator's dilemma of the ones who is first to market... Yeah.

Brian: [00:38:10] Yeah.

Phillip: [00:38:10] Right. So I guess my question would be, is how does Magento and its innovation, broadcast's innovation and how quickly it moves as a platform and not be the first to market that gets lapped by someone who realizes from or learns from your mistakes?

Peter: [00:38:26] I think that's a risk we embrace. Like you said earlier, it's kind of core to our culture now, and always has been is just sort of agility and innovation and moving fast and also, in some ways, not being afraid to fail. I think we talk whether it's Magento or sort of any technology or disruptive firm, you have to you have to try. And, you know, if you fail, you certainly don't take that to heart and you move on to the next thing. But if you're not willing to take some risks and at least, you know, experiment with emerging technologies and see how they're going to be applicable in your business, then yeah, you're probably not going to be around. And in that period of time of, hey, we're not going to be around you. I think that's accelerating. So if you if you sit still and you don't innovate, you know, it's not like well this could impact just five years down the road. Now, it's we could be out of business in 18 months.

Brian: [00:39:21] Yeah. So in that in that vein of taking risks. What would you say that would be that the top few technologies that you think that merchants should invest in right now, or for the here and now vs. what should they be investing in for like the next three to five years out?

Peter: [00:39:41] Yeah. I think for a lot of merchants... There's some constraints around those decisions because there's also budgetary constraints, but there's also just practicality constraints around a lot of it's their back office, IT infrastructure, they're IP systems, their finance systems and those type of things that actually constrain them. That's unfortunately sometimes in adopting these type of innovations. But to answer your question, again it depends. I mean, certainly I think with the new innovation that we're seeing from Apple and so forth. I do think we're sort of on that cusp of a wave of innovation in AR and VR. The Microsoft stuff is really, really interesting as well. The hologram. And that, I think, can be really, really disruptive. And yeah, we've been talking about it for a few years, but I think we're on the cusp of that, actually going mainstream and taking off.

Brian: [00:40:39] Yeah I agree.

Peter: [00:40:39] But it won't be applicable to every merchant. So you've got to really think very carefully about the use case. It all comes back to will this technology make for a more efficient buying and purchase experience as a seamless, frictionless buying experience for you consumer? And if it doesn't add any value, then don't invest in it.

Brian: [00:40:58] Yeah, that's pretty much what Marc said. He said pretty much most of these trendy technologies have use cases. You just have to be thoughtful about whether or not they apply to your customer.

Peter: [00:41:09] And then the other thing is, I think with some of these emerging technologies you mentioned beacons earlier, Phillip... We're kind of past the beacon phase. NRF, two years ago, you know, like there was a beacon in every booth, and every vendor was talking about beacons. You don't hear too much about beacons these days. But I think the classic reason for that technology is potentially very, very disruptive, but it hasn't gone mainstream either. There were all these issues of, you know, you had to have a phone with the right version of Bluetooth, and you have to have Bluetooth turned on and blah, blah, blah. So you actually start looking at sort of an adoption funnel and you find that, you know, well, only 5% of the consumers actually would be able to make use of this. So you have to look at, I think, the maturity of the technology and sometimes you have to wait two, three years for that change and the consumer adoption of technology. So everyone's on the latest iPhone and that type of thing before it becomes real.

Brian: [00:42:03] Yeah. I think there's also a lot of other location based technologies that are emerging that probably make a lot more sense than beacons. Beacons we're like the early phase of something that's now like using some other different technology to actually implement what because we're trying to solve.

Peter: [00:42:20] Yep.

Brian: [00:42:21] And so that's why I think we're seeing them phased out. If we didn't have any other way to track where people are then maybe beacons would have done better.

Phillip: [00:42:29] I love that I brought beacons to Shop.org 2017. I brought it up. It's my fault, everybody. I'm sorry. That's on me. And let's all remember that I'm the one who said it. It's funny we do this sometimes. And I'm curious because I mean, we didn't talk about it before, so I'm just gonna throw this out.

Brian: [00:42:49] Do it.

Phillip: [00:42:50] We sometimes do a lightning round on what your take is on certain cutting edge technologies. So I thought I would...

Brian: [00:42:58] Let's lightning round it.

Phillip: [00:42:59] Let's lightning round it. So since I broached the topic, I'll go first. What's your take on machine learning and AI and what's the near-term impact for merchants?

Peter: [00:43:09] I think I'm very bullish on it. I think there's an impact for the merchants and for the consumers, the buyers. I think on the merchants, it's going to bring a lot of efficiencies to what I call sort of common medial tasks that the merchandiser does. And I'm thinking classic merchandizing, you know, price optimization offers, you know, just general merchandizing on their site. For the merchandiser to come in at 9:00 in the morning, sit down in a seat and for AI engine to have sort of done it all for them and or at least sort of prescribed the things that we think you should do today and why is hugely powerful. It's going to really improve the efficiency of merchandisers, make them more effective at merchandizing and do so at a much lower cost. I mean, a lot of merchandisers really struggle to recruit good merchandisers. And it also makes those merchandisers better because the sort of medial, long tail tasks will be taken over by the AI ML engine and will allow them to focus on some of the more strategic, promotional activities that they're focused on. So I'm pretty bullish on that side of things. And I think for the consumers, we touched on this a little bit, but just learning algorithms about what it is you buy and why. So going back to the fridge, I fully believe that it were not in the too distant future where I don't need to worry about ordering groceries. My fridge and my cupboards will become intelligent, will be IOT connected and will learn what I cook, what I eat,  and will at least get 80% of my grocery ordering completely automated for me, and ML will be critical to enabling that.

Phillip: [00:44:46] It's interesting because the Future Commerce drinking game is when we say there is no reason why this couldn't happen today. I don't need cameras in my fridge to make that happen. I just need to keep shopping at the same retailers and have some loyalty with them so they get to learn, you know, my consumption habits.

Brian: [00:45:06] All right. Next one.

Phillip: [00:45:07] Yeah. Lightening round.

Brian: [00:45:07] Ok, voice. Voice technology and its application in-store or an app or in any way.

Peter: [00:45:19] Yeah. Again, you know, very bullish on voice. We've seen, you know, the adoption of Alexa or Siri and all of this, the voice assistance. It happened far faster than perhaps any of us would have predicted four years ago. So, you know, I think there's a huge applicability in commerce. Obviously, Amazon already has mastered this. But, you know, in the broader realm across all the retailers and merchants, again, I think it's in these sort of consumable products that we order all the time where we don't need to think about the price point or what it is we're buying. I know exactly what it is I'm buying. I need a six pack of beer and just being able to do that via voice way, we don't have to pull my phone out of my pocket. I don't have to open my laptop. That I think is absolutely going to take off. Voice, I think, has some applicability in customer service and post sales support. The classic, overly simplified example of, hey, where's my product? You know, that classic the delivery time thing. But more sort aftercare support issues, that type of thing. But I think when it comes to more of that high consideration purchase where I take weeks or months to research something that has a high ticket value and really need to sort of embrace the brand. I'm not sure that voice is going to play a role there. But, yeah, certainly very excited in terms of those so renewable ways. The way I think about it is we went from One-Click being sort of the innovation from 15 years ago when Amazon first brought it out for reordering things that I buy all the time. And then, you know, we had Amazon, you know, bring along the dash buttons, which I think is a little bit of a fad, you know, having these little Wi-Fi operated dash buttons. But voice removes the need to even press a button. And then if we want to look way into the future, then if Elon Musk succeeds and connects our brains to our phones, then I won't even need to open my mouth. I'll just think.

Phillip: [00:47:18] I'm going to make sure I capture the time codes, so that we can cut this out 10 years from now. Look how funny and how young and foolish we all were then. {laughter} So do you think that there is any use or any benefit to retail in any way for making use of body data and all the things that go around that, whether it's identity management or some sort of federated identity management? I'm curious your thoughts on that.

Peter: [00:47:46] Yeah, I mean, I think it's definitely useful for the merchants, but I do think we're in a phase of a higher degree of security scrutiny from the consumers. We always hear about the millennials not caring about what they post on Facebook and sharing their identities. And I think, you know, with the Equifax breach and this type of stuff, you know, consumers are really getting a little more conscious about sharing that kind of data. I read a fascinating article actually just yesterday about a user who'd requested through sort of a Freedom of Information Act all the information that one of the social platforms had about them, and they got to 600 page document back.

Brian: [00:48:25] I saw that. Yeah, that was crazy.

Peter: [00:48:26] It was crazy. So I think consumers are becoming a little more just conscious and aware, not just that they're sharing important, secure identity information like my facial recognition or whatever it is. But just other stuff that I didn't even ever contemplate that these tech firms were tracking about me.

Brian: [00:48:48] Yeah, we were just talking about this last night. Identity managment...

Phillip: [00:48:52] Yeah.

Brian: [00:48:53] What can be tracked and what can't be tracked and how hopefully in the future will be able to to add a little bit more gates... Like maybe even have personal bots that crawl the web for any instances of...

Phillip: [00:49:06] This is Brian. Yeah. I will disavow any personal bots crawling the web talk. That is all, Brian.

Brian: [00:49:14] I'm looking at the future.

Phillip: [00:49:15] I think that the paradigm has to change entirely in the way that social networks have created a brand new way for us to interact with the Web. And I really feel like the control of our identity is going to require an evolution of the web beyond what we have today. And I think we could get there. It's just it comes with pain. And I don't know how much pain we're willing to tolerate right now around identity. It's definitely top of mind, especially around security issues. Actually, speaking of pain and identity and security, what do you think of cryptocurrency?

Peter: [00:49:51] Oh, gosh. Yeah. I mean, this perhaps isn't an area that I've spent enough time looking at and thinking about.

Phillip: [00:49:58] Perfect. I want to know exactly what you think.

Phillip: [00:50:00] Yeah. Yeah. You know, I think I'm still a little skeptic. I heard that Amazon is planning on accepting Bitcoin later in the year. I don't know if that's true or not. I think I saw that.

Brian: [00:50:14] Oh really? Wow. I had not heard that.

Peter: [00:50:14] So, I think it's something that perhaps we need to watch and embrace. But it's still, I think, in this sort of very early phases. And I think, we're gonna see the regulatory establishment push back very heavily against this. We've already seen JP Morgan, the investment banks, very, very clear on their opinion on it. So, it's certainly an area that as tech evangelists, we should we be embracing and researching more than we are today.

Phillip: [00:50:45] It's interesting to me SEC's cyber unit just basically put out a notice SEC.Gov has the news on a press release that they're honing in on blockchain and ICOs specifically to protect retail investors, which I find sort of terrifying that this is what it took for SEC to get involved then and into regulation to protect retail investments. I find that interesting. We just don't have I think enough... I know I'm going to say this in anger some people. I just don't, for all the conversation about innovation in payments, I don't see a lot of innovation in payments. I mean all the innovation in payments is happening in a way that doesn't actually touch the consumer directly, necessarily. It's innovation that's happening, the streamlining, you know 45 year old systems, and making them more efficient. If you want to talk about true innovation or a paradigm shift in payments, I mean, crypto is that. I just don't know that we can...

Brian: [00:51:55] One thing that I do see in payments that I do like is Amazon payments is really focused on single sign on. They just released with Magento right? The ability to in your Amazon account, you can say I'm signed in all instances of Amazon payments that are enabled for this. And then you can just check out with one click on those sites without having to sign because you already signed in.

Phillip: [00:52:21] Right.

Brian: [00:52:22] Which is pretty cool. That's something that people would try to crack for a long time.

Phillip: [00:52:26] Right.

Brian: [00:52:27] So Amazon's doing some cool stuff there.

Peter: [00:52:30] I think when we think about innovation in payments, you know, there's been a lot of focus on removing the friction from buying. And that's great. I shouldn't have to ever enter my credit card. I shouldn't even need a credit card in my wallet. I do love that Apple Pay kind of digitizes the credit card and that's fantastic. But, you know, until we get to a truly cashless society, until banks stop actually having checks, like there are still people who write checks. So we've got some... Until we go completely digital from a currency perspective, we've got a long way to go.

Brian: [00:53:01] It's like it's still a pretty significant portion of payments. Checks are like 8% of bills. That's a lot.

Peter: [00:53:08] And it's B2B. It's small businesses. They still issue paper based invoices and they expect to be paid by a check. There's an entire multitrillion dollar industry that still does things in an incredibly antiquated way.

Brian: [00:53:24] Yeah.

Phillip: [00:53:24] Yeah. I mean, if they would just get with the times and use EDI... And that was probably the nerdiest joke I've ever made on the show. It's interesting, we've talked a bit about blockchain and how it might relate to other areas other than cryptocurrency. What kind of innovation do you see in, not particularly blockchain, but innovation on supply chain management?

Brian: [00:53:52] That's good. On demand manufacturing, and things like that...

Phillip: [00:53:55] Yeah.

Peter: [00:53:55] Yeah, yeah, this all ties back to personalization. You know, brands are trying to differentiate themselves and in some ways go direct to consumer and disintermediate the retail store channel and the resellers and so forth. And so we've seen it for years, being able to do customize products. The footwear companies did it. You know, the manufacturers are all doing it. You can do a custom paint job on your bike and stuff. And so there's a ton of innovation happening there. But obviously, there's an aspect of needing that configurator on the front end of your eCommerce site and that whole brand experience. But the bigger challenge is the supply chain. If you want to start doing that now, because the consumer is used to our delivery now, you know, it's like, oh, what is a six week delivery? Because we have to make this thing in China and get it shipped to you, so you know this definitely I think a lot of disruption on that supply chain where the final personalization assembly, whatever is going to happen, you know, onshore, perhaps in the distribution center in almost a real time fashion and then get shipped still within two hours to the consumer. But we're going to move that finishing process of the manufacturing isn't going to happen in China anymore. That will happen domestically here in the United States.

Brian: [00:55:15] I agree.

Peter: [00:55:15] But that's a huge, huge change due to supply chain.

Phillip: [00:55:22] Last mile manufacturing.

Peter: [00:55:23] Last mile manufacturing. There we go.

Brian: [00:55:25] Yeah. I like that.

Phillip: [00:55:26] I should trademark that.

Peter: [00:55:27] Well, actually the Amazon drone...

Phillip: [00:55:30] Of course it exists already...

Peter: [00:55:31] No I was going to joke. You know, the Amazon drone will actually be etching your watch while it's flying to you.

Phillip: [00:55:39] That's a great place to end. What's the outlook? What next in the next five to seven years in retail? What are we focusing on?

Peter: [00:55:48] Yeah. I think we're going to unfortunately continue to see more big failures. You know, we saw Toys R US last week. There's going to be more of that. And I think eCommerce will get more of the blame for those type of things. The shift to buying online is going to continue at I think an accelerated rate. We're becoming more and more comfortable. Innovations like PWAs are going to make it much, much easier to buy on mobile devices. So all the analysts forecast for CAGR of eCommerce growth. I think maybe conservative. On the flip side, I think, brands and retailers are going to be investing more in sort of their flagship store model and these experiential, following in the footsteps of Apple, obviously renaming all their stores to Town Halls or whatever they're calling them now. But I think we're gonna see a lot more of that.

Phillip: [00:56:43] Experiential retail.

Peter: [00:56:43] Experiential retail. At the end of the day, you're buying one of two things. You're buying something as a commodity that you're not putting any thought process into. And you're gonna do that through voice and eCommerce. You're not gonna go to a store anymore. But things that are part of our brand experience where I have a brand affiliation and there's that considerated purchase, absolutely I'm going to want to go to that flagship store and embrace and feel and know the brand. So I think it's a little bit of a Tale of Two Cities.

Brian: [00:57:10] Yes. Some of the best brands have already been doing that.

Peter: [00:57:12] Absolutely.

Brian: [00:57:13] Up in Seattle, like REI has really... Like they captured that years ago. Yeah. Like the idea of the flagship store and like the experience in the store.

Peter: [00:57:21] Yeah, I was up in Detroit a couple weeks ago visiting one of our clients, Shinola. And their flagship stores are just phenomenal.

Brian: [00:57:27] They're a great example. Yeah, Filson is their sister company, their flagship store is in Seattle. It's also an amazing.

Peter: [00:57:32] Yeah. Yeah.

Phillip: [00:57:32] And actually, you know, it's funny that you mentioned it that way. Didn't Nordstrom just launch a pilot of...

Peter: [00:57:37] Yeah. A store with no inventory.

Brian: [00:57:38] Yeah it's here.

Peter: [00:57:38] Yeah, yeah, yeah.

Brian: [00:57:39] It's like West Hollywood.

Phillip: [00:57:41] Oh really?

Brian: [00:57:41] Yeah.

Phillip: [00:57:41] I guess I know we're going on way home.

Brian: [00:57:44] We should go visit. Yeah.

Phillip: [00:57:45] That's great. Thank you so much, Peter Sheldon from Magento. And glad to have you with us. And thank you for cosponsoring the poadcast booth here at Shop.org.

Peter: [00:57:56] Thanks for having us.

Phillip: [00:57:57] What's the next event that you guys are putting on?

Peter: [00:57:59] Oh, gosh. We'll be at NRF in January. And obviously we've got sort of back to back Magento community events that are always ongoing between now and then.

Phillip: [00:58:12] That's great. Thank you for joining us and thanks for listening to Future Commerce. We want your feedback, as always, so make sure you hit us up on FutureCommerce.fm. Leave us a five star on Apple Podcasts, Google Play or wherever you get your podcasts. But until next time...

Brian: [00:58:26] Keep looking towards the future.

Phillip: [00:58:29] Thank you so much. Thanks, Peter.

Peter: [00:58:29] Thank you.

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