The [True] Cost of Convenience

Phillip: [00:00:00] There's always a cost associated. It's either your time, your patience, or your dollars. And sometimes paying more means that you get a little bit more of your time and you save a little bit of patience.

Brian: [00:01:24] Hello and welcome to Future Commerce, the podcast about the next generation of commerce. I'm Brian.

Phillip: [00:01:28] I'm Phillip. Lots for you here today. We're recording this just ten days before our Visions Summit in Chicago here in 2023. Brian, June 15th will be together in Chicago, sharing the stage at the first-ever public Visions Summit. You can get your tickets right now at FutureCommerce.com/Summit. And it's going to be a wild time. I've never put this much work into anything. This is by far the biggest thing we've ever done, Brian.

Brian: [00:02:00] Easily.

Phillip: [00:02:00] So excited. So excited for it.

Brian: [00:02:02] I feel like we just keep ramping it up. Everything we do, we just go bigger every time. Archetypes was insane in December.

Phillip: [00:02:12] It was insane. Yeah. And we're going to continue to raise the bar. Amazing speakers. José Cabaço, who is the Head of Storytelling over at Adidas, is keynoting for us going to sit down with Orchid Bertelsen to talk about how brands actually take the kinds of things that we do: trend forecasting, cultural insights, and specifically those around commerce. How do we take that and make that real? And so Orchid and her former Head of Innovation role over at Nestle Foods, there's no better person, and also the co-host of the Infinite Shelf podcast and Future Commerce.

Brian: [00:02:46] Hey-o.

Phillip: [00:02:46] So no better person to have that conversation. Also, Matt Klein, Ruby Thelot, Ashwin Krishnaswamy... Incredible speakers. One day only. Creative visuals. Coming alongside us in this season is the visual art director and the creative powerhouse behind the Smashing Pumpkins, Lizzo, Maxwell, and many others, Linda Strawberry is coming alongside us for this event.

Brian: [00:03:12] How? How?

Phillip: [00:03:13] I don't know how we're doing it. It's incredible. I can't tell you anymore, or else I'd have to kill you if this event doesn't kill me first. But we'll be there one way or another. June 15th. And it's a whirlwind. We'll be in... If you're not in Chicago, but you're in New York and you're not planning to come to the Retail Innovation Conference in Chicago, the following week, June 20th through 22nd, Brian and I will be at CommerceNext just in a couple of weeks time from the time of this recording. So head on over to FutureCommerce.com/Summit and get your tickets to the Visions Summit and stay tuned because our big Visions drop is forthcoming and you'll know it when you see it. Should we shift gears, Mr. Lange?

Brian: [00:03:59] Lots to talk about right now in commerce. Lots happening.

Phillip: [00:04:03] Do you think you're a loyal customer? Would you describe yourself as a loyal customer?

Brian: [00:04:08] I mean, it depends on what brands or what products. Obviously, everyone that's ever listened to this podcast knows I'm a pretty big Costco fan.

Phillip: [00:04:17] Pretty big. You're up there.

Brian: [00:04:18] Yeah. I might be in their top ten fans. Maybe. Maybe top three. I'm a pretty big Costco fan.

Phillip: [00:04:28] A loyalist. That's a membership.

Brian: [00:04:30] It's a membership, Absolutely. And there are a few other things that I'm pretty loyal to, like I'm a pretty big Delta guy, and I have been for a long time.

Phillip: [00:04:42] And Hilton. You've been on the Hilton train for a long, long time.

Brian: [00:04:44] Yeah. Less loyalty than they probably want me to have there. I do use them all the time.

Phillip: [00:04:50] You're like a diamond member, it counts.

Brian: [00:04:51] Yeah, true, true, true, true. I am. But that's by virtue of the amount of travel that I do.

Phillip: [00:05:00] It's such a double-edged sword. I kind of take offense to the idea of loyalty, like customer loyalty, because it presumes the presence of disloyalty.

Brian: [00:05:14] {laughter}

Phillip: [00:05:14] So I don't like this idea that's like "I'm a disloyal customer."

Brian: [00:05:19] I mean, I think loyalty... There's a show. It's an all-time show about loyalty. There's a lot of disloyalty that happens in that show called Suits.

Phillip: [00:05:31] I never saw that one.

Brian: [00:05:32] Oh, well, you know, if you really want to watch a lot of Meghan Markle, that's the show to watch. But it's actually a pretty good show.

Phillip: [00:05:42] Is that the lady who also has a podcast named Archetypes?

Brian: [00:05:45] Also. Yeah. Yeah it's so weird. It's simultaneous inspiration there. I feel like we wore it better. But you know.

Phillip: [00:05:53] Oh, we wear Archetypes way better. The first episode, by the way, if you're listening to this first episode of our Archetypes podcast is now out. Host, Kristen Vencel, is taking us through some of the stories that fill the Archetypes Journal that we put out earlier this year. But Meghan Markle... I never watch Suits. I should watch Suits.

Brian: [00:06:12] Anyway, my point is talking about Suits was loyalty. And it's like loyalty is a two-way street. That's the interesting thing about loyalty. You got to pay your people. That's part of loyalty.

Phillip: [00:06:29] How about this? What most brands try to describe as loyalty is actually Stockholm syndrome.

Brian: [00:06:36] It's Stockholm syndrome. Yeah.

Phillip: [00:06:39] It's not loyalty. It's a manufactured loyalty for fear of repercussion.

Brian: [00:06:49] If I don't book enough flights, I will not get my status for next year. I'm afraid that I'm not going to get upgraded to a seat with three more inches of legroom. {laughter}

Phillip: [00:07:01] I also think that loyalty is this overwrought term that also supposes that people are actually even thinking about their choices. Because if I'm loyal to a person and if I'm a loyal friend, if I'm a loyal and devoted husband, these are all conscious choices that I make when faced with decisions that make me have to make those conscious choices. I am a loyal person. This is what I do because I have a mutual shared relationship and respect. We don't actually have that with brands and it doesn't...

Brian: [00:07:35] Well...

Phillip: [00:07:35] A lot of it's muscle memory more than it is actual loyalty, but we don't have a better word for it. It's like more muscle memory and habit and, I would say, habituation of routine that perpetuates loyalty. Brand loyalty I mean.

Brian: [00:07:50] I think for the best of them, there probably is some of that conscious behavior going on, like for the best of the best.

Phillip: [00:08:00] That is, I would say, reserved for the few and far between cultural brands, and cultural institutions of the world.

Brian: [00:08:08] There's like the Nike versus Adidas people, right? There are certain people who consciously will not buy Nike or vice versa.

Phillip: [00:08:19] Sneakers, too. I remember that whole conversation. That's happened. {laughter}

Brian: [00:08:22] Yes. There are people who will consciously shop at Costco over other options. Walmart. Whatever.

Phillip: [00:08:32] So on the subject of loyalty, why did we broach this topic? It seems like the long-running and oft-cited but hardly present in economic data recession is something that is concerning a lot of people. A lot of mixed numbers. Still can't get a read on the economy. We keep adding jobs.

Brian: [00:08:50] I think this was in our predictions episode. I think I've said I expect the economy to be super choppy this year.

Phillip: [00:08:58] But the choppiness is strange because a lot of retailers are... We're seeing mixed signals, so if you look at a Nordstrom, Nordstrom getting just destroyed in their earnings. But however you look at, I don't know, if you look at what say, Walmart is doing in the world or if you're looking at like a Costco, potentially that's where these often seen... Like Costco as a membership. Walmart is sort of everyday low price. These were seen as they weren't always the digitally savvy. They weren't always the convenient forward-thinking brands. They were the ones who were a bit laggard and they got their savings by being a little bit traditionalist and old school and maintaining the old ways of doing things. But that seems to be changing. I mean, we've talked ad nauseam on this show about Walmart's digital transformation over the last couple of years.

Brian: [00:10:03] Just had something delivered today from them. And it was a good experience.

Phillip: [00:10:07] Walmart+ got me through the Amex program earlier this year. Definitely changing how people think about it, but Costco seems to be shopping for an eCommerce platform now, too. Making a new investment. There were some rumblings. There's a job posting that made the rounds on Twitter recently, where Costco is looking for some digital strategists and some folks to help architect what it looks like might be a North American eCommerce solution. Some people are saying, "Hey, maybe. Maybe if that happens in the next year or two, that could be a really big shift for Costco." Brian, this is where it gets a little fraught. What is a Costco? What eCommerce platform does Costco buy in 2023?

Brian: [00:10:55] Is that where we're going?

Phillip: [00:10:57] I mean, just for a minute, and then we'll wing it back around to memberships.

Brian: [00:11:00] Dude. Yeah, I'd love to get back to membership, but yeah, man, I have long thought about this because I would have loved to transform Costco's eCommerce experience many years ago because...

Phillip: [00:11:11] Once upon a time.

Brian: [00:11:13] Yeah, Costco's my favorite. But their eCom experience has been lacking. {laughter}

Phillip: [00:11:23] {laughter} To say the least.

Brian: [00:11:25] It has improved a little bit over the past few years. UX has gotten a lot better. They've made some improvements that are like just barely enough to keep them in line with semi-modern eCommerce practices.

Phillip: [00:11:42] I have to wonder though, depending on what your Twitter or LinkedIn algorithm looks like, you might believe that your eCommerce platform of choice is the natural choice. I wonder how an enterprise like Costco actually decides on a technology stack. And to date, I believe they're on some sort of custom build of some kind.

Brian: [00:12:06] I think it was actually some kind of SAP derivative.

Phillip: [00:12:10] Ah, ok.

Brian: [00:12:11] Yeah. Yeah, it might even be Hybris, which is now SAP Commerce Cloud.

Phillip: [00:12:15] Could be. Could be.

Brian: [00:12:16] Yeah. But I think it's something in the SAP realm there. A big SAP company, I believe.

Phillip: [00:12:23] Well, they might be loyal to SAP.

Brian: [00:12:25] They might be.

Phillip: [00:12:25] And if they were, you're likely to see some sort of variant. SAP has done a lot of work in the headless space in the last couple of years, sort of changing things there. Also, their MarTech acquisition from what was it 2021? When did they acquire that MarTech company? Help me out here.

Brian: [00:12:51] Emarsys.

Phillip: [00:12:52] Emarsys. Yeah. That sounds right.

Brian: [00:12:52] Yeah. Acquired Emarsys, I want to say '21.

Phillip: [00:12:55] 2022?

Brian: [00:12:56] Yeah, somewhere around there, not '22 I don't think. '21.

Phillip: [00:12:58] There was a headless play that sort of accompanied that and they seemed like they were making a kit of parts to sort of modernize the stack as well. We've seen everybody do this to varying degrees of success. Salesforce did it with Demandware. I think it's  [00:13:14]the loyalty in the ERP space, and what your business actually runs on that has a lot of bearing on how you choose your eCommerce stack in enterprise. [00:13:22]

Brian: [00:13:22] The reason why I think that they probably will stick with some sort of SAP product suite or stuff that they already have is because Costco home grows all their talent. And so they don't typically go out and hire. They do sometimes. They'll go out and hire people from outside of the Costco family. But a lot of the corporate Costco talent comes from the stores, from the warehouses. And so they get trained up by the people that are already there, which means that...

Phillip: [00:13:56] Perpetuating culture.

Brian: [00:13:58] It is. Yeah, totally. And they take care of their people. It's a very incredible way to offer a career path or offer options. But it means that usually I think you build upon what you've already built, so maybe they will go out and get something. But that would be a pretty big effort because they're going to have to retrain their whole workforce.

Phillip: [00:14:23] It's going to be a long, long move. Speaking of memberships and memberships programs, there are a couple of big news stories that took me by surprise the last few weeks. In The Senses recently, our newsletter that comes out every Wednesday and Friday, we'd love to have you subscribe to it. We think about what current news has the biggest future-altering impacts on brands and the way that customers develop expectations of brands. And one of those things that we're seeing right now there is the first that I've ever seen. It may have existed prior, but Frontier is put out an all you can fly low price option for a low price fare. I think what was it, like $350?

Brian: [00:15:10] Three hundred bucks, I think it was. Yeah. For all you can fly for the summer. Is that right? Yeah, just for the summer.

Phillip: [00:15:15] It was time bound. I think for the summer. And it was if Frontier Airlines, which, let's be honest, not the most desirable of all of the commercial airline logos. I would also say as you might, you would correctly presume, it's your ass and gas. That's all you get when you buy this ticket. I don't even think you can carry things in your pocket, brother.

Brian: [00:15:39] You can. You can. But if it's even like a millimeter over the size, you're going to get charged ten bucks. And then if it doesn't fit, you're going to get charged to check your bag.

Phillip: [00:15:51] A lot of caveats. Yeah.

Brian: [00:15:52] Yeah. A lot of caveats. A lot of caveats. I think there are a lot of black out dates on this, too.

Phillip: [00:15:56] New fare class. It's an experiment. But experiments often lead to some competitive motions.

Brian: [00:16:58] Well, I could imagine a parent gifting this to their student child who's out for the summer and wants to go travel around, like a college student who's excited to go travel around the US or wherever. And yeah, this could be an amazing graduation present, like a post-grad thing. "Go fly everywhere. You have an unlimited ticket." I would be super happy about that.

Phillip: [00:17:23] This has existed in other modes of transportation.

Brian: [00:17:26] It has. That's right.

Phillip: [00:17:27] Right.

Brian: [00:17:28] Also, I want to say this, I actually think that Frontier has done this before. I want to say actually, I think this might be...

Phillip: [00:17:34] If only there were a way to search for this on the Internet. Someone ask ChatGPT. I think there's an interesting perspective around who this is for. And want to come back to someone that we haven't talked about in a little while. And her name is CARLY. C A R L Y. It's an acronym that stands for Can't Afford Real Life Yet. And our Archetype of CARLY, this persona that we developed back in 2019 was this idea that despite whatever age you might be, there is a kind of a person who just can't afford real life. And as we're seeing a k-shaped recovery and a k-shaped economy and k-shaped products and k-shaped brands and the world that has emerged post-pandemic, most everybody can't afford real life anymore, right? I mean, eggs are like $7 for a dozen.

Brian: [00:18:26] Not at Costco.

Phillip: [00:18:26] Or you have to wait in line for an hour outside of Trader Joe's to get get your $1.99 eggs. Why not? Why not? Why wouldn't we have this? And it reminded me of a story, Brian. Post-graduation Jaci's cousin came from England and came and visited us. Stayed here in the States on a tourist visa for like two months and bought a, I think it was a $99 Greyhound bus pass. You can go anywhere on any Greyhound bus for like months on a $99 Greyhound bus pass and has the most incredible stories, harrowing experiences of having been robbed at knifepoint and having, like, crazy stuff.

Brian: [00:19:17] But I think the beauty of Frontier is you probably won't get robbed at knifepoint, but... {laughter}

Phillip: [00:19:25] It's Frontier who's doing the robbing at knifepoint, actually, when they're like trying to... {laughter} They're the ones trying to get more money out of you. Give me your money. They do call it Frontier.

Brian: [00:19:39] It's the wild, wild West.

Phillip: [00:19:40] It's what the Frontier was like, but I do think that there is many a memory to be made to the kind of person that might buy this ticket. And it's a CARLY. It's a person who wants to have experiences and pay and put up with a ton of frustration and a ton of...

Brian: [00:20:05] Or maybe not frustrations.

Phillip: [00:20:07] But there are a lot of unknowns.

Brian: [00:20:08] Yeah. Unknowns.

Phillip: [00:20:08] I think some of these are standby class fares. Like you may get on the plane. You may not. It's going to come at a cost. And this is [00:20:16] what I've always realized, especially when sort of being budget conscious, there's always a cost associated. It's either your time, your patience, or your dollars. And sometimes paying more means that you get a little bit more of your time and you save a little bit of patience. [00:20:37]

Brian: [00:20:38] Yeah. There's the wear on the soul.

Phillip: [00:20:45] {laughter} There is.

Brian: [00:20:45] You can pay a premium to not be bothered. And if you've got a lot of responsibilities or things to think about, then you might need that mental space. I was talking to Jason Nyhus, the President for US Shopware because I was out at the Shopware user conference in Germany speaking...

Phillip: [00:21:08] How was that?

Brian: [00:21:09] It was amazing. A lot of energy.

Phillip: [00:21:12] Düsseldorf you said.

Brian: [00:21:14] Duisburg. I flew into Dusseldorf. Yeah. I probably just butchered both of those city names, as I'm apt to do. But I got to speak on AI, and naturally, everyone wanted to talk to me about AI and so I got to explore a lot more of my own thoughts on AI as a result of this. Something that's really interesting is we think about the revolution, the Industrial Revolution, and how it pushed the boundaries of our bodies. It it forced us into work situations and made work situations like long hours, we didn't know when to stop. And eventually, we had to develop rules to protect workers from extending their bodies and their time too much and working too hard. And so eventually we now landed on something called OSHA, which is like the long tail outcome of those rules, workers' rights, and so on. But what we haven't really realized is how far and how taxing things are on our minds. And so as AI pushes the boundaries of thought and human mental capacity, I expect that we're going to have to start to see rules or things put in place, boundaries of some sort, and OSHA for the mind if you will. And so currently the way that people deal with this is they pay for premium experiences to give themselves the peace of mind as they go through their busy schedules and go do all the things they have to do. You can pay to give yourself that cushion of not having to think about how to get from point A to point B without frustration.

Phillip: [00:23:07] I think there's so much to unpack there. But one of the... Having written a piece or two about this very topic in the last couple of years for Future Commerce, I think that there's a lot of this is actually the efforts of organized labor and public policy that tries to court the organized force that used to be organized labor. And so it was a voting block.

Brian: [00:23:40] Right.

Phillip: [00:23:40] And this is where potentially we have the upstart of a new sort of labor organization effort, in the United States at least, to try to understand I don't know if it's so much as the protecting people's mental health as a function of work. I would say we have lost in society the structures that have given us the ability to share our load and burden with other people. So if you lived 30 years ago, 40 years ago, you probably knew your neighbors and could ask them for help. You could have them not watch your packages on your front step, but can you keep an eye on my kids while I go take care of something unexpected? There are all these little breakdowns in the way that societies and we have become more insulated in society from each other in our neighborhoods. The loss of communities and sort of the co-opting of communities for commercial purposes, something we talk a lot about with communities and community-centric brands, those things that used to be you had a public square, a town square, or you had the rec center or you had the lodge or you had.

Brian: [00:25:02] Your block.

Phillip: [00:25:04] You might even have a church. You know, as those things are on the decline and [00:25:08] we're becoming much more isolated from each other, we have to share all of that burden with a fewer number of people. And that's just people within your own family. Or maybe you're shouldering it all on your own. So naturally, the workplace has become the place that has to help compensate for this because you have to have a community of people that you work with in the workplace. And that's why we have the rise of these sort of social groups and mandated social groups within the workplace, not just for entertainment and for bringing your whole self to work. But there's also an element of just trying to find people and connect with people who have similar life experiences. [00:25:50] ERGs are wonderful examples. These Employee Resource Groups are a wonderful example of it's a reflection of work having to compensate for other failings of society. And you can't blame it all on Facebook, unfortunately, because I haven't known my neighbors' names for much longer than Facebook has existed.

Brian: [00:26:10] No.

Phillip: [00:26:11] But I digress. So the membership piece is an interesting thing because however you're seeing it playing out, it's really just trying to incentivize what we open the show with, which is more brand loyalty and more brand recognition and having part of what comes along with that is giving you more opportunities to have to intersect with that brand. So if you buy an all you can fly pass, you're going to have to intersect with Frontier more than you usually would. Or if you buy this new $200 sweatsuit from Southwest Airlines and you get $350 of flight credit as a result, you are also causing other people to see you wear their merch and rep their gear while getting something out of it in return as well.

Brian: [00:28:49] I think there's an interesting... So that's what I want to call out I think is the idea of brand loyalty, to your original point, a little bit silly. A lot of people buy stuff because it's a good product for a good price. They at least they think it's going to be. I continue to buy Suya and drink Suya because I like it and I can buy it at Costco and it's a really reasonable price at Costco.

Phillip: [00:29:19] I need a whiteboard that's like "Days since last Suja mention," and then have to like cross it off and put it back to zero.

Brian: [00:29:26] {laughter} And I bring it up because we're talking about brand loyalty right now, man. It's the perfect time to bring it up. What looks like insane brand loyalty to a lot of people. You just brought up the whiteboard thing. I bring up Suja all the time. It looks like it, but I only buy it because I like it. It's in my budget and it gives me the benefits that I want. And I can get it at the place that I want to get it at.

Phillip: [00:29:57] If any one of those things changes, the calculus of your loyalty changes, in which case I would say yet again...

Brian: [00:30:05] If Costco stops carrying Suja it probably be over for me. Genuinely it would be over. The Suja love affair would be over.

Phillip: [00:30:11] If the product changed in some way that was significant, if the price changed...

Brian: [00:30:16] So that's loyalty. That's brand loyalty in a nutshell.

Phillip: [00:30:20] No, it's not. It's just transactional relationships.

Brian: [00:30:22] That's exactly right. Yeah.

Phillip: [00:30:23] Yeah. We're in it for something. We're all here. We're big kids. We know. We know why we're here. Give me the thing that I want at a fair price. And if you don't, then we'll find someone else who will.

Brian: [00:30:34] That's right.

Phillip: [00:30:34] But I can't think of any other... How many other options for bottled green juice do you have at Costco? So that's the other great challenge of this analogy.

Brian: [00:30:46] That's true.

Phillip: [00:30:47] Costco curates. There are many options for this kind of bottled juice, cold pressed bottled juice, but there aren't many at Costco because they've curated one collection.

Brian: [00:30:58] That's right.

Phillip: [00:30:58] Or a very small number.

Brian: [00:31:00] But I do go to Kroger a lot too. I'm in my local Kroger all the time and I don't buy anything else. Occasionally I will go try. I will go try other green juices just to see what they taste like. And they're not much better or worse than Suja is.

Phillip: [00:31:14] I had a piece a couple of years ago called "Loyalty is Irrational." And it is fundamentally irrational. The Costco relationship is a great example because it is irrational for you to buy 18 bottles of Suja at a time. You would never do that in a grocery store. You just never would. It doesn't matter if they were the same unit price or not. You would never pick up 18 and put it in your cart.

Brian: [00:31:36] Correct.

Phillip: [00:31:36] They just happen to all be in one cardboard box. It's easy to pick up. I think a lot of this also hinges on overconsumption, which becomes something that you try to reign in, and you really start to rethink your decisions when times get tough. And it's really interesting, we just had a piece this week by Amy Madonia, formerly of Hanes brand and most recently a Digital Innovation Director over at Estee Lauder Company, a good friend of Future Commerce, an advisory panel member... We love Amy and she has incredible insights. She just wrote another piece for us talking about the shiny ball, which is subscriptions and memberships, loyalty and trying to manufacture that and how a lot of brands chase this revenue model because the revenue, having a revenue model that's somewhat guaranteed or somewhat forecastable is in the best interest of a lot of brands who are trying to navigate planning and forecasting. And wouldn't it just be nice if customers just gave us money on a regular basis that we could depend on? And so you see a lot of brands chasing this. It's an awesome piece, but it kind of comes at a time where she makes this case that [00:33:00] during economic downturns and uncertainty, brands tend to look at memberships or loyalty, maybe a subscription program, as the thing that makes up the difference. It is a lever for the business and not a benefit for the customer. [00:33:16] When you chase that, you've already lost because you've forgotten the fact that it is a transactional relationship and you have to bring something really compelling to the table.

Brian: [00:33:31] Right. This is why Prime is winning right now, because to talk about the ultimate membership, they're about to bring free or $10 phone plans to their subscribers. I will seriously consider switching my phone plan because who can ignore free or $10 unless they're going to run ads at me all the time like the free TV. What was the free TV?

Phillip: [00:33:55] You get ads all the time. Do you ever pick up your phone, and it says, "We'd like to call you about your auto insurance," or something like that? "...your car's extended warranty." There's always something that's being sold to you on your phone anyway.

Brian: [00:34:11] True.

Phillip: [00:34:11] I get so many spam calls and texts.

Brian: [00:34:13] Push notifications from all the apps that I have.

Phillip: [00:34:17] That's true too. Yeah. Here's the rub. When things get tough, you start trying to reach into a bag of tricks and membership in particular, while many brands are employing membership right now, you don't know what's working for a brand or not, but you are seeing a proliferation of membership and you feel this draw. It's the keeping up with the Joneses effect. You feel this draw that you have to do it too. And that irrationality of a consumer who will just mindlessly pay is in question. If you really believe... This is what I used to do as a strategist, Brian. I'd sit down with a brand and I'd say, "Let's make sense of the argument you're making right now. Because what I'm hearing is two different things. One, you believe economically there is distress ahead." "Yes. Yes." "That's what you believe. Okay. As a result, you are trying to ask customers to pay you on a more frequent basis over time. Is that how customers behave during economic distress?" Maybe with some brands. "Why your brand? Why Mr. or Mrs. Dupe Running Apparel company?" Athleisure company. "Why do you believe that in a time of economic distress that someone will pay you $50 a month to get one credit for a pair of leggings? Why do you think they'll do that for you?"

Brian: [00:35:48] Yeah, it's a really good question. I think Amy's dead on with this. If you're not offering something of value to them, and maybe they actually are, they kind of need to come out on the winning side of this. If you want someone to come join your membership program or your subscription program, they need to feel like they got the better end of the deal. And if they don't, they're not going to do it again. This is transactional, what's in it for them?

Phillip: [00:36:20] I don't think that very many brands consider that the thing that they believe is this massive unlock for their business and it's a brand new business model is actually a program with an expiration date. This will be beneficial and a customer will take advantage of you for the next 24 to 36 months before you decide that you can't be taken advantage of anymore. And it's your time to win as a brand. And that's when the death of this program begins. So you have three years to try to find some other means to replace this when the customer gets soured on the fact that you're going to start trimming back because you can no longer afford to give them the unfair advantage that you have through a membership program. And that is business in a nutshell.

Brian: [00:37:07] I feel like we need to get Dylan Whitman on the podcast. He is obviously super hyped on membership and like what the benefits of membership are. And I think we are rightly criticizing the way that people are approaching membership that we've seen, where we're like, "Why would we ever sign up for that?" But I am curious. I would love to have him come on and be like, "Here are some brands that are doing membership, and here are the results they're seeing." That would be cool.

Phillip: [00:37:36] You know what I would like, I'd love some intellectual honesty for once from people that you ask those hard questions of. I'd love for them to just look me in the eye and say, "Do you know why they'll pay me $49 a month? Because there's a sucker born every minute. There's someone out there who will pay the money." That's just how we're going to survive is the fact that some people are just going to spend the money. They're just going to do it.

Brian: [00:38:05]  [00:38:06]I know I've bought into things before where I'm like, "Man if I just bought stuff piecemeal a la carte, this would have been better." Why did I go for the bundle or the membership or whatever? And I now have paid way more than I would have otherwise. [00:38:23]

Phillip: [00:38:29] Let's cap this off with if you're keeping a scorecard of Brian Bingo. We covered Suja. We covered Costco. We hit on, what else did we hit on? We hit on a bunch of things here today.

Brian: [00:38:47] It was a good time. {laughter}.

Phillip: [00:38:50] And we talked about Amazon. You know what you can't do? You can't close a show about commerce without talking about another juggernaut, and that is Shopify. Shop Day just happened. Shop Day.

Brian: [00:39:03] Shop Day.

Phillip: [00:39:04] Shop Day.

Brian: [00:39:05] Hey, didn't you know about Shop Day has always been there, right?

Phillip: [00:39:09] I woke up the other day and I was being gaslit from the moment I woke up, "Today is Shop Day! Every year on our birthday, we like to celebrate by giving back to you our loyal customers." I'm like, Shop Day has never existed before. It's like the Frontier Annual Summer Travel pass. I don't care if it's existed before, you're going to gaslight me and tell me that it has. It's fine. It's been coming for a long time. Shopify has a Shop Pay product, and Shop Pay started as an app or started as a payment method within the Shopify ecosystem. Truly was the fastest One Click payment. Who knew? Captives right? Amazon One Click pay. Of course, Shopify One Click pay because they have distribution. But I digress. But hey, listen, Shop Pay. I buy a lot of stuff on Shop Pay. Woke up the other day. Shop Day celebrates Shop Pay by retroactively between a specific period of time giving 1% back in Shop Pay credit.

Brian: [00:40:24] I'm curious how much I got.

Phillip: [00:40:27] You can go look it up.

Brian: [00:40:29] I'm gonna. I think it's probably zero. I think it's probably zero.

Phillip: [00:40:32] You have to go look up your Shop Pay amount.

Brian: [00:40:35] Go to the Shop app right?

Phillip: [00:40:37] Go to the Shop.app. That's what you need. So you go to Shop.app and when you log in, log in. I have $8 sitting in there. And if it's 1% cash back, does that mean I've spent $800? At some point in time between an eligibility period, I guess I've earned $8 in Shop Pay. What you are greeted with when you go to the Shop app, is an experience that has been there for a long time, but there was no incentive to use it the way that Shop is now incentivizing you to use it, which is to look at it as if it's a marketplace. So now when you go to the Shop app, I have had wonderful curated results from partner stores and stores that may appeal to me based on my past purchase history in the Shop app. So that has been happening for a long time. In fact, I bought a book from A24, a coffee table book about the state of Florida from the Shop app by cruising through their sort of marketplace and their algorithmically generated, you know, for you page, but for shopping. What's wild is the $8, such a nominal amount of money. The $8 that I have in my Shop Pay credit now is like burning a hole in my pocket. And I'm just in there like, "What can I buy?"

Brian: [00:41:54] What bar of deodorant can I buy?

Phillip: [00:41:58] What can I possibly buy? I need to spend this $8 of credit that I didn't even know I had on this day that did not exist, even though I'm being told it has always existed to celebrate the wonderful behemoth that is Shopify. Brian, do you have any Shop Pay credit?

Brian: [00:42:13] You know, I think I signed in with the wrong account. I have nothing on this one. Zero. Like zero purchases, which I know is not true. I've purchased things on Shop Pay before, but when it comes right down to it, I actually just don't buy a lot of stuff online. I genuinely don't.

Phillip: [00:42:33] For reference, see the prior 45 minutes of this podcast.

Brian: [00:42:40] {laughter} I do buy some things online, but it's definitely like I'm not loyal to Shopify sites by any means.

Phillip: [00:42:48] It's wild to me that you could become... We've used the... Do we win something for using the word loyal like 28 times in this episode? What is also irrational to me is the small incentive, the small incentive of finding money that I didn't know that I had. This happens to my kids all the time. I don't know if you experienced this with your kids.

Brian: [00:43:13] Couch cushions?

Phillip: [00:43:13] Yeah. If your kid finds $5, it's like, "Can we go to Five Below? Right now. At this exact moment." Like $5. I made $5. "Oh, I need to go somewhere. We have to go spend this." And that never leaves you. I am exactly the same way.

Brian: [00:43:28] I do hear that. Yeah. Our kids are in the same camp, except they've been actually saving their money, which I've been really proud of them.

Phillip: [00:43:36] That's great.

Brian: [00:43:37] Yeah. There's economic uncertainty. And so they're like, "Dad, we know that the economy is not looking super good right now."

Phillip: [00:43:48] {laughter} Your kids are like, "Inflation is on the rise. We have no safe store of value, Dad. This Pokemon card is the greatest store of value that I at 11 years old can afford."

Brian: [00:43:58] Actually, that's not that far off from the truth.

Phillip: [00:44:01] It's not that far off. We got it. Hey, we had a Radiant Charizard that we pulled the other day. It was a big, big, big explosion of excitement in my house.

Brian: [00:44:08] My kids swear that they have cards from 95 and I'm like, "Guys, are you sure?" And they're like, "Yeah, we've checked everything." And I'm like, "Yeah, we probably should get that into a shop."

Phillip: [00:44:20] Yeah, you should check that out. One thing about this dynamic with having found cash is it's coming at a critical time for Shopify. So Shopify is in the midst of at least 2 or 3 major transitions. One, they've reduced headcount.

Brian: [00:44:37] Significantly.

Phillip: [00:44:38] Significantly.

Brian: [00:44:39] Like we made a big deal about that initial layoff period. But then they came back and they hit it harder.

Phillip: [00:44:45] And they have a number of sweeping changes. One, they did the Shopify components launch back in January. So this new pivot toward the enterprise.

Brian: [00:44:59] They're responding to RFPs now. We talked about this.

Phillip: [00:45:03] Those are all big changes. But they are piloting right now in an innovation side of the business, GPT4 and chat experiences. And they have had a GPT for partnership for some time. I had heard rumblings about six months ago, way back in December, that Sam Altman and Tobi had had lots of conversation around how the future of shopping may be impacted by chat UIs and generative AI. In fact, they just spoke together on a panel recently, both Tobi and Sam Altman, who's the CEO over there at OpenAI talking about all of this. In development right now is a chat-centric UI that Shopify has a beta access to or alpha access to. This goes along with what I've talked about in the past to shop with. Along with that now is the capability for you to use a plugin in OpenAI in ChatGPT. So if you have access to plugins, if you're a paying subscriber and you have enabled plugins, you can go to the plugins store and you can find the Shop app plugin. Now... {laughter} If you're not watching the video feed, Brian just took a very large swig of Suya, on camera and did the death stare in the camera as he did it.

Brian: [00:46:39] {laughter}

Phillip: [00:46:39] What doesn't exist just yet is this agent-base eCommerce, that is, who knows how everything's moving at such an exponential pace. It feels like it's right around the corner. Today you can query the Shop API with ChatGPT, so you can do very complex things like, "I need to plan a trip going to Italy. We're going to be there for five days and I need sunscreen, a bikini, and I need a bag."

Brian: [00:47:12] You need a bikini? Yes, I need a bikini. Right. You could come up with this list of things that you would need and ChatGPT can help fill in all the gaps, query the Shop API, and give you all the links to go purchase all the things. It feels like we're very close to just being able to hand over your payment information to ChatGPT to automate some of those decision points.

Brian: [00:47:35] Handing over budgets. I think this is one of the things I talked about when I was in Germany. This is the not-so-distant future. Being able to have a digital proxy, digital assistant, digital whatever you want to call it, that can handle budgets and make purchasing decisions on our behalf. And it's going to do a really good job.

Phillip: [00:47:59] There is where being called Future Commerce and not talking about the future of eCommerce is so important because this to me feels like the birth of three things at one time. One, it is Shopify pivoting to a marketplace app-owned channel where people are incentivized to more loyalty. Let's go back to the original opening of the show. They're incentivized to seek out Shopify stores so they can earn this benefit that they didn't know they could earn on purpose instead of by accident. You said, "I don't go in search of Shopify stores." Well, you can now. Okay.

Brian: [00:48:33] There's a reason to.

Phillip: [00:48:35] There's a reason to do it. And this is that unfair advantage that I talked about before. It's like Shopify has to now out of the 3% that they're taking off the top of all of their merchants have to give up 1% back to a customer. How long can they realistically do that? This is a three year window that they have to really amp up the adoption of Shop Pay. Now let's get to that. So that's one thing is that discoverability is now solved. There's an incentive program to do it. This helps merchants. There's an ad model, I'm sure, right behind this so that you can list yourself in the Shop store now. The paying and commercializing that experience where Shopify can make money out of becoming an ad targeting platform for that shopping experience is going to be the next big level.

Brian: [00:49:23] Amazon ads. And it's the next Amazon ads.

Phillip: [00:49:27] So now they're creating a nascent channel. It's new, but it's one that is well documented. This playbook has been run before. People know how to do this. Customers now know how to use that. They have all this built in information relationship with the customer from the last 4 or 5 years of Shop Pay. But it gets even crazier because the next generation of experience is happening in a brand new channel that never existed before that has now had a billion unique users in the world and that is ChatGPT. When you have that much attention and the ability to create something that has never existed before. And the end user can architect these types of shopping journeys that are agent based and not human based, that is not just a channel for innovation and growth. It is a platform for disruption. That is an area of growth that Shopify is the first to at the moment. And I think that bodes very, very well for them. And it's going to be fundamentally disruptive if they can turn that into not just a place for discovery where ChatGPT is making recommendations for things, but where you can fulfill on that new purchase intent that is being cultivated there.

Brian: [00:50:45] Yeah, I think that's dead on. And they're going to monetize it along the way. That's the thing that I think is brilliant about this is as they make moves towards this, these are just easy monetization channels for them. I think that [00:50:58] getting people, and I think to your point, to the Shop app, which is not even called a Shop Pay app anymore. It's just the Shop app. It's adoption I think has a lot of opportunity. There are still a lot of legs, and there's still so much growth opportunity for that, as far as people using it for shopping experiences that Shopify hasn't even touched that yet. [00:51:28] You see what I'm saying? The opportunity is so big and all of the pieces are in place to go take advantage of it. So yeah, I'm bullish on Shopify.

Phillip: [00:51:39] I think that you would kind of have to be at this point, especially if you're in eCommerce and you want to see eCommerce continue to grow, then it is eCommerce today. But I think that [00:51:51] there is a wealth of new channel growth for tomorrow. There's something brand new happening right in front of our eyes. You want to talk about loyalty and how irrational it is, to capitalize on that, you kind of have to be thinking about the future, and you have to see this through. [00:52:13] And Shopify is doing that. It's very exciting. I'm very excited right now because one is an outlier. Two is a trend. Three I think becomes the normalization of a new paradigm. So we have to... I don't know. I'm excited. I don't know who's going to come next. What other platform could be? Amazon, obviously. But they have their own AI plays to have to worry about. And it's going to be an interesting thing to think about.

Brian: [00:52:47] I would argue that maybe someone that comes from the open source angle. We could see someone come out of Europe, open source angle potentially, that finds a way in here because right now this is very US-centric. Shopify is very North America-centric.  [00:53:08]It could come from somewhere else in the world and I think it would probably be open source because I think that that's how you tend to see things like this play out in international contexts is through open source projects. [00:53:22]

Phillip: [00:53:22] That's right.

Brian: [00:53:23] So I'm bullish on seeing a second or third player come through an open source channel.

Phillip: [00:53:31] Yeah, well, if that happens, then you'll have heard about it here first on Future Commerce. Thank you so much for listening. Thank you so much for giving us your attention. You find more episodes of this podcast and more Future Commerce properties, including Archetypes, Visions, and find out more about things like our Vision Summit. You can find all of that FutureCommerce.com. And we have two newsletters, Insiders, which comes out every other Monday, and The Senses, which is Wednesdays and Fridays in your inbox, helps you to understand and synthesize what's happening at the intersection of culture and commerce and through the lens of what brands are doing and the places they take up in the world and what you can learn from it and how you can try to adapt to what the world is doing and how culture is changing. We can give all that to you and more. FutureCommerce.com/Subscribe. Thank you so much for listening to this episode of Future Commerce.