“An eCommerce Business Requires Two Halves of a Brain”

Phillip: [00:01:29] Welcome [00:01:20] to FutureCommerce, the podcast about the next generation of commerce. That's the entire intro, Brian. I'm Phillip.

Brian: [00:01:36] And I'm Brian. And today we have a friend of the show, Kris Gösser, [00:01:40] on with us. His third time on the show? Second? Second, third. Somewhere in there.

Kris: [00:01:46] Technically first. Jason's been doing more.

Phillip: [00:01:49] Well...

Brian: [00:01:49] First time on the show with us. {laughter}

Phillip: [00:01:51] Is that true? Oh, my gosh. Kris, welcome to the show. I feel like we're old friends, but could you introduce yourself for this listening [00:02:00] audience that doesn't know who you are yet?

Kris: [00:02:02] Sure. No. We've definitely been friends, I think since the acceleration of eCommerce happened with the pandemic. So a good two-year journey that I've been able to go on with you guys as you've been doing awesome work with FutureCommerce, but I am an early member of the Shipium team [00:02:20] back around the end of 2019 and then COVID hit. So it's been a great job to be involved with fun folks like you guys on the forefront of understanding the future of eCommerce and how we can play within that and all that stuff.

Phillip: [00:02:38] And we  [00:02:40]all actually met once upon a time through a really short-lived message board created by Brian Sugar. A message board. And this was deployed in, I think 2019.

Kris: [00:02:57] Yes.

Phillip: [00:02:57] So it sounds like it could be a 20 year old story, but actually [00:03:00] it's quite recent.

Kris: [00:03:01] It feels like it.

Phillip: [00:03:02] We had all those sort of direct to consumer heyday that sort of popped up for the last few years. We all kind of got to know each other. The reason we asked you to come to the show today, news that apparently isn't new but is new to a lot of people is that Amazon [00:03:20] has made at least a marketing site and a little bit of a news push around this buy with Prime one click purchase button. You're our authoritative source to go to when we have questions about what Amazon might be doing in the world or why they might be doing something at this point in time. And you had thoughts. So I thought maybe you could [00:03:40] come on the show and wrap with us a little bit about it. What is Buy with Prime and what is it purporting to serve?

Kris: [00:03:48] Absolutely. I'm happy to share some thoughts, kind of as an outsider looking at this as an analyst. But I've been fortunate to cross paths with a lot of Amazonians here in Seattle. So it's fun to be steeped in the Amazon culture. [00:04:00] So this looks like the next evolution of the MFN Prime to select sellers that has happened in the past. And I think the key constraint when you look through the marketing site, really the key thing to anchor on is a discussion point is the fact that FBA is a requirement [00:04:20] of this. And so you have to ask yourself how does this new program, Buy with Prime, fit with FBA versus the other way around? So let's talk about FBA to just understand that a little bit more as a constraint on the offering. So to best understand [00:04:40] FBA, let's talk about the three famous growth levers of Amazon. So they operate and make decisions as an organization for the last 20 years plus based on three things. One is price. Consumers want the cheapest price. The next is selection. So having [00:05:00] the broadest availability of products and all that stuff that's in stock. And then the third is convenience. And the concept of convenience has really evolved over time in terms of what that actually means from just a good website experience and maybe things like one click checkout. But really what has [00:05:20] stood out is that convenience also means a lot of just the delivery of products in eCommerce and things like that. So we're fond of saying the phrase that "the shipping experience is half the shopping experience" because that's really what convenience is for eCommerce.

Phillip: [00:05:37] Yeah.

Kris: [00:05:37] So if those are the three growth levers, where does FBA [00:05:40] fit into that? How did the evolution happen? Well, one of the biggest inflection points for Amazon as a business was when they added the marketplace so that they had massive growth. You guys have had folks on in the past who have talked about this and marketplaces are just critical. And one of the main [00:06:00] reasons why marketplaces and Amazon's marketplace was so essential to their success and growth is that it impacted the selection lever of the three. Now more and more merchants could go on there and offer their products that maybe weren't otherwise available or accessible through an Amazon channel. [00:06:20] And so that just exploded the selection. That helped with the three principles. But over time, it was pretty apparent right away that the other levers were kind of impacted by the advent of the marketplace. One of them was convenience in the [00:06:40] sense that now an experience that was broadly Amazonian was dependent upon how fast can a merchant actually get their order out of the garage or from a dropship or wherever the case may be? How fast is it fulfilled? How fast is it delivered? Etc. Etc. That became an [00:07:00] interesting problem. Maybe not like the central problem, but it was definitely a problem. So FBA was in a way to help this. It's debatable what the chicken and egg is. Was FBA more so an opportunistic situation where Amazon was like, "Hey, we have all this open warehouse space. What if we utilize that the same [00:07:20] way we utilized our servers with AWS?" or whatever. There's a bit of a debate on what was chicken or egg and somebody who's actually ex-Amazon could probably set the record straight.

Brian: [00:07:31] {cough} Jason.

Phillip: [00:07:31] If only we had someone at our disposal to be able to answer that question.

Kris: [00:07:35] The interesting outcome, though, on this story that we're talking about [00:07:40] is that what clearly happened was that merchants who were on FBA that were also in the marketplace at a tremendous value, not only to Amazon as a business, but serviced customers in a better way, which is really all that matters is the consumer. Because not only could they have the selection of these [00:08:00] products that merchants had on the marketplace, but via FBA, there was a much better probability of a good experience in the convenience factor. So then that prompted all these really interesting and awesome evolutions that Amazon had over time. Now there's a Prime badge for merchants who are on FBA in terms of a select seller. That [00:08:20] incented more of the consumers to buy from the marketplace of the merchants. And you would get to all these other programs like the MFN Prime one that I mentioned earlier. This was fascinating then if you then think about let's talk about the business that is FBA. FBA [00:08:40] is not a very good business unit. There's a lot of debate on things. But the common sense kind of public domain knowledge is that business models are not good when you're dealing with physical atoms versus virtualization.  [00:09:00]And so this is a problem that extends not just beyond FBA, but to, frankly, all of the historical 3PLs that we know and love, to a lot of the tech-forward ones that frankly are doing an amazing job for what they can do filled with very smart, smart people. But at the end of the day, when you're dealing with the movement of physical atoms, [00:09:20] those business models are hard. And so FBA is a very difficult business for Amazon that the only way to really get out of that is just with continual volume. And the symmetry of this is what's so interesting. The more that the DTC crowd [00:09:40] uses FBA versus the ShipBobs who are great, the deliverers who are about to get acquired possibly by Shopify. That's in the news.

Phillip: [00:09:48] Breaking news. Yup.

Kris: [00:09:49] Right. Or Shopify fulfillment. For Amazon, the more of those companies who choose FBA over these other options, the better the unit economics are going to be because there's just more [00:10:00] scale and volume and all that kind of stuff. So the fit when I see this announcement, what I am thinking through is that there is this value to Amazon to incent more direct to consumer companies to use FBA. And then likewise there's value to consumers [00:10:20] that there's more on FBA if they're buying from the marketplace because they get the Prime-like experience. So this program is the next evolution of that, which is how do we now bring the Prime badge for a marketplace listing that uses FBA, bring that to a channel that's not owned by Amazon.com [00:10:40]? Which is a very new, that's the newness of this is that Amazon is now comfortable trying to take an existing model and system and extend that beyond the owned channel that is Amazon.com to other channels, meaning the channels that a direct to consumer company has using a Shopify store or [00:11:00] a Magento website set up or whatever the case may be. That is, I think the interesting play here is the comfortability of expanding channels now.

Phillip: [00:11:11] Ok. Holy wow. There's so much in there to unpack because that feels like if [00:11:20] you look at the announcement only, what it feels like is that Amazon here's a company who very famously innovated and held a patent around something like a one click purchase. And we've seen a lot of activity in the ecosystem [00:11:40] around like unbundling of Prime, like what are specific future sets that customers expect in all of their eCommerce interactions, one of which happens to be one click payments. So at first blush, if you're looking at the Buy with Prime offering my first reaction is, "Well, [00:12:00] this is a one click payment. How does that stack up against Amazon pay? A-Pay is a thing already. How does this differ from that? I mean, Brian would know. I think Brian's ex Amazonian.

Brian: [00:12:16] For a hot minute.

Phillip: [00:12:17] Short-lived.

Brian: [00:12:19] No, that's [00:12:20] exactly right. Amazon already has its payment option. It's not necessarily exactly one click, but it's pretty close.

Kris: [00:12:29] Yeah.

Brian: [00:12:30] And so I think to Kris's point, this isn't really a play. It's not exactly a payments play. It is. [00:12:40] It is. Because obviously, you have to use your Amazon account to do this. But they're bundling in. And actually, the real play here is capturing money not from consumers or capturing necessarily their wallet share, but from [00:13:00] merchants.

Phillip: [00:13:02] Well, it's I think it obviates the requirement of fulfilling through Amazon. Is that right, Kris?

Kris: [00:13:09] Well, there still is the FBA dependency. I think it's more that they're now able to bring a Prime-like experience outside of an Amazon channel. So currently [00:13:20] the direct to consumer companies could could only effectively get the Prime-like merchandizing by using the marketplace channel, which has it's whatever it is. There's some percentage cut of revenue and top of whatever percentage you have to pay for FBA, etc. But [00:13:40] if I add my own channel as a direct to consumer start up or company, I can't merchandise that Prime-like experience even if I'm using FBA. And so this is more of the way that I would frame the conversation or the question is, given a proliferation of one click checkout plays [00:14:00] right now, of which the most famous flameout of that industry just happened a week or two ago with Fast.

Phillip: [00:14:11] That was fast.

Kris: [00:14:11] Yeah it was extremely fast because the challenge is what differentiates these? Apple Pay has its own  [00:14:20]bio. You can use your fingerprint to check out with their one click. That's their differentiator. Amazon has its one click. Paypal has its one click. Shopify has its one click. You have Bolt who's valued at 12 billion. But the question is what actually differentiates them? Some might argue it's a network effect, Apple [00:14:40] is going off of the biometric thing, but what [00:14:43] Amazon's position here is that the thing that actually differentiates checkout at the end of the day is the Prime-like experience. And so what is the Prime-like experience? The Prime-like experience is that you get your [00:15:00] order quickly, potentially free, and if not free, at least cheap and on time when it was promised to be on time. And so Amazon is going to market with this theory that the way in which they win the one click checkout outside of a channel that is Amazon.com is anchoring on the value prop of Prime [00:15:20] more so than the value prop of whatever other thing a one click checkout option button is bringing to the table. [00:15:29]

Phillip: [00:15:29] I heard someone smart say that 50% of retention is the delivery. What was the... {laughter} How did you say it?

Kris: [00:15:38] The way that I like to say it is [00:15:40] that the shipping experience is half the shopping experience. That was the line earlier.

Phillip: [00:15:44] There it is.

Kris: [00:15:44] But what that means is that like if you think of the consumer experience of buying a thing, the number of consumer touchpoints if [00:15:57] I'm a customer and I'm interacting with a direct to consumer website, [00:16:00] the number of customer touchpoints that are dependency of operations is pretty high. From the availability of the product. That's ops responsibility. To what date you promise the customer before they buy. That's a date provided by ops, not by marketing. To the checkout experience, picking a shipping option, actually [00:16:20] delivering the product, the unboxing experience, the returns. It's crazy that the amount of the responsibility that is actually marketing turns out to be a dependency on ops doing their job. And so we always kind of joke that the way to win in eCommerce is the CMO needs to merchandise the COO and [00:16:40] Prime is the perfect example of that actually happening. [00:16:45]

Brian: [00:16:46] This is really interesting because I think this also maybe doesn't mark a shift but is another key indicator that Amazon would rather monetize off of businesses than consumers. Prime is the product [00:17:00]. They're selling it to businesses. Marketplace is the same thing. That probably marks the shift more than other things do. They're not looking to make money off consumers. They're looking to make money off of businesses.

Kris: [00:17:14] Yeah, I think certainly if you want to narrow that to [00:17:20] where does growth come from? Because they're growing both revenue and percent of market share of eCommerce.

Brian: [00:17:27] Doubling up. {laughter}

Kris: [00:17:27] And it's hard to have X percent growth year over year once you reach kind of the marginal return of that. So you have to be looking for new virtual categories to go after.

Brian: [00:17:39] Yes.

Kris: [00:17:39] And so [00:17:40] that's a way of, I think explaining that it's less that they want to necessarily monetize businesses per se and more of that there's an upper bound to the amount of growth that can exist via channels that they own. And if they want to look for more growth, they're going to have to [00:18:00] expand to other channels that they don't own. And how do they do that?

Brian: [00:18:04] They already own 60% of online purchasing in the US.

Kris: [00:18:09] Yeah. {laughter} And it was like 55% before the pandemic. So it's like not only did the pandemic explode in terms of quantity, but they captured even more market share. It's just crazy.

Phillip: [00:18:18] Brian, just [00:18:20] before someone writes us an email, they did just increase the price of Prime. More than one person is helping Amazon.

Brian: [00:18:30] No. They're making money off consumers as well. I get that. No, they're making money off consumers with their paid gateway. They're giving consumers more value [00:18:40] for that, though, by offering Prime through other businesses, like the Prime value package, which they just constantly want to add to, is increased by offering Prime through merchants. But to Kris's point, I think, they're [00:19:00] building a moat for consumers.

Phillip: [00:19:04] They're maintaining the one they already have.

Brian: [00:19:05] Right. Right. Yeah, yeah, exactly. They're adding straight money. It's just profit to roll this out to businesses.

Kris: [00:19:16] Yeah. And I think it goes without saying that [00:19:20] this is also an extremely hot space. So you have all the main players playing in this. You have Apple, Google, Amazon even prior to this new option, Shopify has its own. The banks are getting into it, PayPal and then you have $12 billion of valuation of Bolt. And [00:19:40] one of the craziest stories of the year with Fast. So this is clearly a space that isn't just a throwaway space. It's a real space of how do you create some sort of a network effect by modularizing the concept of checkout across channels? And  [00:20:00]it would be foolish for Amazon to not figure out how to play in that space. And so what this program is, is it's a representation that they believe their go-to-market differentiator in this space is the experience that is, Prime. Consumers value that more than anything else. So why would you [00:20:20] pick PayPal's button? Why would you pick Bolt's product? Why would you use Apple's biometric option, etc, when the thing consumers will really pick is a button to get it with Prime?

Brian: [00:20:31] With Prime, because they trust that. Here's the craziest part of that. There are a lot of sellers that have spent years amping [00:20:40] up their logistics capabilities to become seller fulfilled Prime facilities.

Kris: [00:20:49] Yeah.

Brian: [00:20:50] Literally, there are going to be merchants that have seller fulfilled Prime facilities with a Prime button on their website. They have the capability [00:21:00] of shipping to their customers at Prime level without the Prime button, but it's better for them to have the Prime button there because consumers trust it. That's crazy talk.

Phillip: [00:21:14] Well, is it? I guess. This is better for the consumer [00:21:20] in a lot of ways because it extends their sense of trust to other areas. What if, let's argue the other side. What if consumers become more accepting of purchasing from third-party websites than on Amazon.com because of the presence of Buy with Prime?

Kris: [00:21:39] Right. Yeah.

Phillip: [00:21:39] In [00:21:40] my mind, this is a net gain for eCommerce because a lot of bounces today, especially down funnel happen, to be because people are going to bounce out to Prime to their Amazon.com account and check pricing and check availability and see if they can get it to 1 to 2 days. If Amazon can provide that visibility for me on my  [00:22:00]customers' website where I'm going to have a direct relationship with them and I get access to that customer data in a way that I wouldn't have through the marketplace, this is a win.

Brian: [00:22:08] Absolutely. It is no doubt. Think about this. You could do this without being a Prime seller on Amazon.com. Without being at 1P or 3P, you could just do FBA with a Prime button [00:22:20] on your own website. That is a net win. You're taking advantage of the Amazon promise.

Phillip: [00:22:26] But nothing in this world is going to stay that way if you're going to invest in FBA, Kris I guess validate this, I've not done this on my side of business. I've not been brand side in a decade. But if you're going to make the investment [00:22:40] to do FBA, why would you not incrementally grow that over time if you're having success there?

Kris: [00:22:47] You've got to figure out... Yeah, exactly. And this is just the natural progression of, I think, the business models synergy that Amazon is doing internally. It makes [00:23:00] so much sense for FBA and for Prime and for Amazon.com proper to do a play like this to just help direct to consumer companies grow their conversion and loyalty offsite. It's like a win for virtually everybody in that regard.

Brian: [00:23:18] Go ahead. Go ahead and finish your thought. And I've [00:23:20] got a question for you.

Kris: [00:23:21] I was going to just finalize the big insight for anybody listening. One of the key takeaways is to understand that Prime, this is pretty well documented publicly, Prime is the biggest driver for conversion and loyalty at Amazon. It's [00:23:40] not convenience of checkout. It certainly isn't things like how easy it is to navigate the site or some other things or virtual VR shopping or whatever, whatever, whatever. The driving factor, more than anything else, is Prime for conversion and loyalty. So [00:24:00] why this is a net win, to Phil's point, [00:24:02] why this is a net win for everybody who's not Amazon, provided their on FBA, is that this is helping direct to consumer companies address the metric that actually matters which is conversion and loyalty. Because it turns out dot, dot, dot, nobody wants to talk about this, but it turns out [00:24:20] that getting your orders fast, free and on time is like the thing that actually drives the conversion of the shoes you buy or whatever else. [00:24:26]

Brian: [00:27:15] Here's [00:27:00] my question for you. Why now? Because I [00:27:20] can say with a lot of confidence, this idea has been rolling around in Amazon...

Phillip: [00:27:24] He says, "With a lot of confidence..."

Brian: [00:27:27] This is the...

Phillip: [00:27:28] Why now? Well, because he's afraid of Ryan Breslow. He's afraid of the king. If you're going to come for the king, you better not miss. Ryan King.

Kris: [00:27:37] Yeah. King Bezos is [00:27:40] afraid of a challenger. Mr. Breslow. Yeah. It depends how futile the answer actually is, versus it just may be the time. The program is ready. I mean, you guys have worked in corporate America, too. It takes a lot to mobilize a lot of people, especially at a business as talented [00:28:00] as Amazon with just the quantity of the quality that they have. This is no trivial feat to just do it, that it could also just be this was the time when it was available.

Brian: [00:28:09] I agree. I agree with that. That's what I think. I actually believe that to be the case.

Kris: [00:28:14] Yeah. And to just tie it in, I think with an earlier point in this conversation is that there's [00:28:20] also an element to it that this is just a really hot space. I mean, Bolt is a $12 billion startup and they're doing amazing. And Apple and Google etc are driving on this. PayPal, Affirm. Buy later stuff's now starting to drive in. It's all there that it makes sense for [00:28:40] it to be an initiative or a priority as to why that's launching now versus last year or a couple of quarters from now, it's probably not a specific reason why.

Brian: [00:28:53] I think that's all correct.

Phillip: [00:28:54] I just want to make a couple of statements. Number one, we are partners with Bolt, so in [00:29:00] no way am I throwing shade. I think that the pie is growing big enough for all of us to participate. Please continue to pay your bills, Bolt. {laughter} That's just a full disclosure statement. The other side of it, though, is that when you see a company like Amazon sort of roll their own here. I [00:29:20] mean, roll their own. This has been their own for a decade. I start to wonder about the exit eventuality for a company like Bolt. With Fast out of the way, theoretically, they have no impediment in the marketplace to continue to penetrate. However, you just mentioned they have six competitors who all have existing products [00:29:40] that are not going to be targets of acquisition. And maybe some Twitter drama and Twitter threads have also removed the optionality for a company like Stripe to be able to acquire them. So I'm curious, there's probably a real conversation I think that needs to be had  [00:30:00]that if this is a $12 Billion valuation opportunity for a company like Bolt, is this a $100 Billion opportunity for a company like Amazon to extend their reach beyond their own owned marketplace? Have they assessed the total addressable market here and deemed it worthy of making the [00:30:20] investment to now reach out to other direct to consumer sites.

Kris: [00:30:27] Yep. Yeah. And it could be the reverse flow as well of less of an offensive play and more of a defensive play where the...  [00:30:40]Amazon already has everybody's name and ID and address and part of Bolt's go-to-market that frankly is pretty genius... We think Bolt's awesome. Part of Bolt's go-to-market is that they're collecting the identity and authentication for all these other consumers that can then be leveraged across [00:31:00] retailers and merchants. They're kind of modularizing a relatively vertical stack of tech right now, which is awesome. I think it's so cool.

Brian: [00:31:10] And actually, that makes them even more appealing as an acquisition target, to your point earlier.

Kris: [00:31:15] Absolutely. Yeah. I think the sky's the limit for them still. But for [00:31:20] Amazon, then it becomes almost less of like they don't need to collect any more identities and own the authentication of it. It's almost more like they already have it. So how can we just ensure continual lock-in of Prime? And this just seems like a really synergistic natural next move way to do that.

Phillip: [00:31:40] So [00:31:40] let's shift gears then, Kris. If this necessarily is... I guess then who is potentially threatened by the proliferation of Prime and FBA? Is it  [00:32:00]the ship heroes of the world? Is it the fulfillment network that have an existential crisis around this?

Kris: [00:32:08] Yeah, probably. I mean, we're big fans, for what it's worth, of the tech-forward 3PLs that have come because they are the true [00:32:20] like arming the rebels narrative of Shopify and the SFN too. Like I said it is impossible to be...

Phillip: [00:32:30] SFN is Shopify Fulfillment Network?

Kris: [00:32:32] Yes. Yeah. The physics related to that half of an eCommerce business model is just hard. [00:32:40] And when you're a small company, you don't have the CapEx to optimize the OpEx. And so the enablement options that are ShipBob and Stord and Deliverr and Shopify Fulfillment Network, etc... They're so crucial and critical players in the ecosystem to help eCommerce be successful [00:33:00] and to help life be better for the consumer. Cheaper, faster, etc, etc. So they are incredibly valuable. At the end of the day, FBA is competitive to them and this is more about FBA than it is about anything else in my opinion. And so I think the existential threat is almost [00:33:20] less of a Bolt, even though Bolt has its weakness with this vector because Bolt doesn't have a shipping experience module or option to it. But it's going to be a reason why now ShipBob has to think about, "How [00:33:40] do we better pull forward a kind of Prime-like experience that we can offer our customers on ShopBob?"

Brian: [00:33:47] One more thing to note on this. Actually, Amazon has offered fulfillment by Amazon to merchants for direct to consumer for a long time actually.

Kris: [00:33:58] Yeah. Definitely.

Brian: [00:33:58] So in all reality, [00:34:00] this was just saying, "Okay, we're now taking that Prime seal of approval and we're giving you access to it through your direct channels." But they had already given all of those merchants the ability to use FBA off-site, off Amazon.com. [00:34:20] And so the real I think, again, the real play here is it is an FBA play, it's an FBA play they kind of already made, but they're giving merchants access to the Amazon brand, and that's something they've never really done before, ever.

Kris: [00:34:38] Right.

Phillip: [00:34:39] Yup. I [00:34:40] can't help but offer a lament for direct to consumer writ large. There's the DTC era I think we'll look back and have defined it as a very short-lived four years of 2018 to 2022. Rest in peace. Mostly because and I say that because we went through an [00:35:00] era of about 2005 to 2015 where it was just ten years of eCom brands implementing anything that Amazon did, assuming that that was what worked because Amazon could quant it, they could call it, and they could basically come with a best fit average user [00:35:20] experience up until the buy box, anyway, that any eCommerce brand might be able to take as saying that worked for in one eCommerce experience. And that's  [00:35:33]a lot of eCommerce talk prior to 2016 or 2017 was just talking about Amazon [00:35:40]. That's all it was. Or implementing the playbook of Amazon from a user experience perspective on the dot com site. The direct to consumer era completely changed that because it was it kind of threw out the we parrot what Amazon does and we adopt our own identity. And that inherently is really exciting because there's something new and fresh [00:36:00] all the time and a lot of liquidity went to that space. A lot of venture capital started flowing in. People are creating brands, something new to talk about all the time. And the thing that I fear in a time of economic uncertainty and complete, utter dominance of now direct to consumer by Amazon, I'm going to assume in the next year or two, [00:36:20] is we go back to the old playbook. That eCommerce becomes kind of boring again. And the era that we just came through, which was actually kind of exciting and always rife with news, kind of goes away. And I'm not looking forward to that. [00:36:35]

Brian: [00:36:35] I mean...

Phillip: [00:36:35] It's so much more exciting to talk about beyond Amazon.com.

Brian: [00:36:39] Yeah, hot take, [00:36:40] it's already happened. I think it already happened. That DTC kind of got boring like maybe a year ago or at least overthought that. But I agree with you, like '18 to '22 is the right period. However, I think this next phase, when we talk about traditional eCom selling, [00:37:00] I think you're right, Phillip. The idea that like this incredible DTC period we've had is kind of like we're kind of entered out of it and we're kind of back to like, okay, like Amazon is still taking market share and it's working. But I do think that there is an [00:37:20] element of this, dare I use the word headless, it's the wrong word. But we're actually kind of componentizing a lot of this. Before DTC required kind of creating your own fulfillment network. You had to row it all yourself. And yeah, things kind of came in to help you do that. There were tools, but [00:37:40] you had to kind of build it all out yourself.

Phillip: [00:37:42] Yeah. You're talking about the era wherein that I just mentioned.

Brian: [00:37:46] Right, right.

Phillip: [00:37:47] '05 to '15.

Brian: [00:37:49] Right. And I think going out of this, I think what we're going to see is a different type of selling that it's not the Adidas DTC era that we've seen [00:38:00] the last four years where it's like a Shopify site with a bunch of extensions installed. I think we're going to look at people heavily investing in specific channels in different ways and actually like more creative brand implementation because people [00:38:20] like Shipium, who I actually really want to talk about in just one second, are making it super easy for them to just forget about that. So Amazon, Shipium, Bolt, all this is actually even in the past four years, that's something you've had to think about and it's a big part of the DTC narrative. I think [00:38:40] moving forward we're going to see even more focus on like what it means to clean up in a specific channel because the tools are now at our disposal. I think what more proof of this do we need than the recent rounds that you just raised, Shipium. Congratulations. [00:39:00] Tell us a little bit about what just happened.

Kris: [00:39:02] I would love to, but I totally want to jam on Phil's point first.

Brian: [00:39:06] Okay.

Kris: [00:39:07] How about this, Phil? Ready. This is one way to think about what you just said of the eras and what was like sexy versus now kind of boring. I would also offer that an [00:39:20] eCommerce business, capital B business, essentially has two brains like two halves of a brain. Just like you have a left brain in a right brain that does math and does art. An eCommerce business has always required two halves of a brain. And the [00:39:40] 2010s was this period where the way in which an eCommerce business was successful was this emergence. Almost going through adolescence. This emergence of origin and then growth such that the thing that actually powered success was marketing, was the right [00:40:00] brain, which is sexy because we're talking about brand, we're talking about different experiences, we're talking about virtual shopping and all these different things that made people want to do tweet storms that just felt like it was fun and interesting and exciting. Meanwhile, the other half of the brain is operations and [00:40:20] operations is boring as heck. I can't. I don't know if I can swear on your podcast.

Phillip: [00:40:26] Yeah, drop it.

Kris: [00:40:27] That would have been the place to do it. Right? It is the least sexy thing that can exist because you're dealing with unit economics and constraints and all of these things that [00:40:40] OPS has to solve that just don't matter when you're a glasses company realizing like, "Wow, people can actually try glasses on virtually on a website now," and that's fun and exciting. But then [00:40:51] we just hit this maturity point where a lot of these direct to consumer companies got big enough where the way in which success was measured wasn't this growth [00:41:00] based on brand and marketing. It was now margins and unit economics. And why is their product not available? It's out of stock. And like all of these things that are the actual responsibility of operations that it turns out the other half of the brain is just as essential to grow and get to, I mean, Amazon [00:41:20] is obviously way out on the high end of the spectrum, but that's a really important part. And that's almost more of the era, is we're moving out of adolescence and into an era of adulthood, of maturity, where OPS matters as much as marketing. And if you're the founder [00:41:40] of pick your favorite direct to consumer brand right now who maybe is getting slaughtered in the public markets, if you're not saying how do we innovate operations the same way that Amazon did, then that's why it's boring and why they're getting killed. [00:41:55]

Phillip: [00:41:57] Woo. How [00:42:00] does Shipium help? I guess we have to tee you up here at the end. How does Shipium help and how does the new fundraise help you in this area? Aren't you harmed by the proliferation of Buy with Prime?

Kris: [00:42:13] No, not necessarily. And I'll explain why. So maybe if I make one plug that I think has value to the audience.

Phillip: [00:42:19] Sure [00:42:20].

Kris: [00:42:20] If you go to Shipium.com/Framework, this is a resource that we've been working on that is essentially the byproduct of a lot of blood, sweat, and tears over the last two-plus years to just understand the industry specifically from an operations point of view because we help operators. That's who our customer is. And with operations, [00:42:40] if you go to Shipium.com/Framework, you'll see that what we identified is there are essentially four stages of OPS from childhood to be the geriatric. And the first phase is, is just basically enabling an eCommerce business [00:43:00] to work. So OPS is focused on making sure product is getting built and is available. It's outsourcing their OPS to a 3PL like a ShipBob who is essential to this phase. It's focusing on a handful of OPS things like post-order customer experience and customer [00:43:20] support, Wizmo, all that kind of stuff. That's why the Yatpos and the Narvars and all that kind of stuff are so important to the younger, earlier stage eCommerce company because that's all OPS can really focus on. But then there becomes this moment in time where your unit economics [00:43:40] are just no longer serviceable without bringing on more ownership. And so the next level of OPS is ownership, where you see these eCommerce companies migrating off of 3PL into their own FCs or warehouses. They're starting to go direct to have their own contracts with carriers, all of [00:44:00] these things that optimize them as a business so that CapEx now helps optimize the OpEx. And that's this adolescence, this growth phase that now feels like it's boring, but as an operator is exhilarating. Then you go into this third phase, which is adulthood, and that's optimization. There are really only probably like 500 or fewer companies that are in the optimization [00:44:20] phase. Grove. Glossier. Those types of organizations. Warby Parker, etc. And then you have scale, which is there are 20 companies. Best Buy, Walmart, Home Depot, etc, right?

Brian: [00:44:32] Geriatrics.

Kris: [00:44:34] The geriatrics.

Phillip: [00:44:36] We need to come up with a better word, Kris. {laughter}

Kris: [00:44:37] Yeah. So [00:44:40] this is a relevant point that hopefully adds value to the audience but also explains Shipium in that we help organizations who own their own operations or are hoping to own their own operations, trying to figure out how to open some sort of a warehouse. Because what our platform does [00:45:00] is it brings a lot of this Amazon Prime-like experience or the tech that powers that experience in terms of order routing, inventory placement, outbound shipping, but also the front-end visuals of "Buy it in the next 23 minutes and get it Thursday." That kind of a delivery promise. All of the things that constitute a Prime-like experience, [00:45:20] the software, is what we do and what we help with and it best fits organizations that own their own operations. For those who don't, we're more than happy to let the really innovative and awesome companies like a Stord help those companies be successful. And then we're here when they're ready to be the next J.Crew [00:45:40] or whatever at that size.

Phillip: [00:45:45] Fantastic. We need to just have you back on, Kris, just to do news roundups, because I love your perspective and you definitely have a different eye on things in a different part of the universe. I think that's the other thing.  [00:46:00]These last four or five years have been marked by an extreme attention to the marketer and egregiously so. Like over-indexed toward the marketer in a big way. And the thing that we've been saying for a little over a year since I had a bit of a realization around it, is that loyalty [00:46:20] and retention have everything to do with what happens after the marketer's job is done. And now now I'm intensely, as a customer, focused on my experience has everything to do with that box when it gets to my door and what's inside of it which has very little to do with the eCommerce marketers' playbook. [00:46:40] And so I feel like we just need to have you back more often. Kris Gösser.

Brian: [00:46:45] Thank you, Kris.

Kris: [00:46:47] Always happy to chat, guys. Thank you so much.

Phillip: [00:46:49] Yeah, thank you. And thank you for listening to FutureCommerce.

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