Annual Predictions Episode - 2019 Commerce Trends and Technology

Brian: [00:01:38] Welcome to Future Commerce. The podcast about cutting edge and next generation commerce. I'm Brian.

Phillip: [00:01:45] And I'm Phillip. That's how we open a show. You sound a little groggy, a little foggy.

Brian: [00:01:52] I am a little foggy. I'm just kinda getting over a cold here.

Phillip: [00:01:55] That's okay. So that's what happens when you drink as much future as Brian does. It sometimes burns going down, and sometimes your voice takes a toll. And he does it for you. That's how much he loves you.

Brian: [00:02:09] Yeah. Yeah. It might have something to do with the January push, the January cold wave that's flowing through my family right now.

Phillip: [00:02:24] January cold wave. Oh, gosh. Yeah. That's kind of hitting everybody. We don't have that in Florida. But that's okay. Life is good. What do we have in Florida? Oh, we have Future Stores Miami coming pretty soon.

Brian: [00:02:39] Oh, yeah. Oh, yeah.

Phillip: [00:02:41] So we've got a bunch of shows actually that will be out between now and Shoptalk. Let's run them down real quick. If you're around, we'd love to see you. So I'll be at Future Stores Miami.

Brian: [00:02:49] And I'll be at eTail West.

Phillip: [00:02:52] Yeah. So that's super cool. And then we'll both be together again at Shoptalk in March. And we hope to see one of those three shows. If we saw you at NRF, saw a lot of people that listen to Future Commerce at NRF. So that was cool. It was really, really great to see all of you. We will be supporting our new swag. And I think the cat might be out of the bag by the time this episode lands, but you'll know it when you see it. We've got some cool stuff coming, and we're really excited about it.

Brian: [00:03:23] Coming? It's here. Let's just say here it's here.

Phillip: [00:03:27] Yes. We've spent the last eight months working on a rebrand, and we've figured out a lot. Actually, I would love to do a retrospective at some point of what it takes to actually, you know, grow up and be a fully realized brand. We're figuring that out. It's a lot of work.

Brian: [00:03:44] Super exciting though. I love our new brand. I'm really excited about it. I'm excited where we're headed. And I think, you know, the brand's a good reflection of that.

Phillip: [00:03:55] And it's guided, in some way, by the results of our survey. We're taking the data, and we're crunching those numbers, and we're helping to make Future Commerce a better show that we all enjoy. I know I love Future Commerce, and I want you to enjoy it more, too. So we're starting to compile that feedback. If you have not still entered our survey, we've got it open for another two weeks from the time of this recording. So until about the end of the first week of February 2019. And so if you haven't taken it yet, you can go on over to survey.FutureCommerce.fm, and that will... It's about a four to five minute survey. It's super easy to get through. If you've ever listened to the show even once, that means you right now listening to this show at this moment, go over to survey.FutureCommerce.fm and fill out the survey. And when you do you'll be entered to win one of three Google Home hubs, and that'll be on us because we just love you that much. So do that now. Do it.

Brian: [00:04:54] Feedback is super helpful. So thank you.

Phillip: [00:04:58] And it will be really good for us to hear from you because we love hearing from you. OK. And speaking of hearing, you're going to hear from us. This is our annual predictions show. And Brian is going all out this year.

Brian: [00:05:14] I don't know about that.

Phillip: [00:05:15] Brian has way more content than I do. He's really put a lot of thought into this this year. Can I start?

Brian: [00:05:21] Yeah, start us off. Get it going.

Phillip: [00:05:23] If I had to start, I'm going to so regret ever saying anything of this nature whatsoever. If I had to start off a 2019 predictions episode, I would probably do it... Have you ever seen that meme where the guy is set up in front of a college campus with like a folding table? He's got a sign on the front that says, change my mind. It's like something controversial and it's like under that it just says, "Change my mind." My prediction, my number one, my first... I shouldn't say number one. My first prediction of what will happen in retail in 2019... Death of Apple. Change my mind.

Brian: [00:06:05] It's bold.

Phillip: [00:06:07] It's not going to happen in the way that we think it will. It's not going to go out with a bang. It'll go out with a whimper. I believe that we see the decline of Apple and its dominance in the marketplace. Some people are already sort of predicting that, the slip in the stock. They've still been successful moving a lot of handsets, but they're starting to do a lot of the things that unsuccessful brands do. Right? Brands that are on the backside of the adoption curve, brands that are now legacy, they're starting to do a lot of those things and make a lot of missteps. They have a tremendous amount of like friction in retail right now. They have a lot of half realized products, like the toilet roll disguised as a smart speaker. They have a lot of promised technology that still hasn't landed, like wireless charging for air pods. And while consumers love their products, Apple loves to make their products harder and harder to use and more expensive every year. And with diminishing returns. And I think that face ID, while it's cool, and more expensive iPhones are interesting gimmicks. I think that other companies are starting to do it better. And I'm an Apple fanboy. So I think that this is scary in retail because a lot of what we think of around retail experience comes from our knowledge of how Apple has changed the way that we think of how brands that were historically... Remember, Apple used to be a computer company that sold in local mom and pop computer stores and they've transformed into a direct to consumer brand. I think it doesn't bode well that that, you know, the experiential retail curve ends with the king of experiential retail and direct to consumer evolution starting to be on its way out. And I think that that's something we should all start to look very hard at and start to learn from. So, yeah, death of Apple.

Brian: [00:08:13] So there's a couple comments that I'll add to that. I love that prediction, in that I think that Apple's had a couple of strategies, innovation strategies that they're starting to struggle with. Apple's sort of like... One of their best strategies in the past has been to take an existing technology and then say, oh, we can do that way better, right, and come out with something that people actually want to use and is easy to use. And I think that one of the challenges that they faced was they kind of became the top doc and they kind of had to step out into the front of innovation at that point. In many ways. And so...

Phillip: [00:09:03] Yeah.

Brian: [00:09:05] Then you see them start to release features like FaceTime and stuff that's more experimental. And then they sort of have to run that as an innovation strategy because everyone's sort of waiting to see what they do now and thinking of ways of doing it better. And so it's hard to be in that position because you've not traditionally been a company that's focused on innovation in that way, where you're pushing the boundaries of what technology can do. Kind of like what Microsoft was doing back in the 90s. Right? And I think that they're kind of hitting that point that Microsoft did back when Apple started that takeover. Right?

Phillip: [00:09:53] Yes. One hundred percent. And I think a lot of people are really impressed with the direction Microsoft has gone, which is adopting, in every way, open source. Right?

Brian: [00:10:05] Bingo.

Phillip: [00:10:06] And acquiring trusted technology brands to underscore their commitment to open source. And Apple has done a lot of things verbally. They've said that they've committed to open source. I mean, we've seen things like Swift, which is, you know, interesting. But I heard 10 years ago that, you know, Bonjour and all sorts of other protocols that were supposed to make messaging between people, human beings, easier and instead they've become more... I mean, Apple's always been a walled garden. It's never been more of a walled garden than it is today.

Brian: [00:10:46] It just sounds like Microsoft was. Really.

Phillip: [00:10:48] It really is. And I think that's the thing. They're not going away. They're not going away. They're not going to fade into oblivion.

Brian: [00:10:55] Right.

Phillip: [00:10:56] But we have seen for the very first time in, I don't know, something like 19 years, Apple just slashed its earnings earnings forecast. People are not buying the new devices, of which there are like 13. Yeah. I don't know. Apple can't afford to raise prices anymore and they're creating more durable devices that don't need to be replaced based on feature set, every single year. It's interesting. But at the same time, by the way, this leads me into sort of a tangential thing which is we see other brands that I think are in completely different fields, by the way. Brands that have been through their share of turmoil that are making a resurgence. And I think things fall in and out of fashion. Apple, unfortunately, played King of the Hill for so long.

Brian: [00:11:55] Right.

Phillip: [00:11:56] They may have just fallen out of fashion.

Brian: [00:11:58] Exactly. Yup.

Phillip: [00:12:01] Even if they've done things very well, I think that they've pretty much lost... I'm sort of already on the record of saying they pretty much lost the AI wars five, seven years ago. I don't think anyone's going to outpace, as a cloud company, and a cloud first company... You have Amazon as the absolute dominant player. A lot of people are eschewing Amazon for Azure and Google and other services. They actually have tremendous investment in tech to build massive neural networks and actual computational farms for doing real machine learning and AI, and you're never gonna see Apple get to that point, at this point. Now, they have a lot of money, but they don't have a lot of time. They're really far behind on that front. And I think that they slept on a lot of technology. So we'll see.

Brian: [00:13:04] Or maybe they don't have to go that route. Like look at Microsoft did. I mean, actually, I love that you brought up Microsoft, and I didn't intend to talk about them. But I am so stoked on Microsoft right now in that they have a very diversified business, extremely diversified. They're making wise investments, in terms of the types of businesses they acquire and invest in. And I heard a rumor, and this is probably confirmed fact on the Internet, and I just need to look it up. But that they've actually... Windows doesn't even really exist as division anymore. It's split out into Office and Azure. And they're 100% focused on building tools for businesses instead of being an operating system business. I mean, that change happened a long time ago. But I think it's really come full circle. And I think this just happened in the past six months that they've done.

Phillip: [00:14:14] Ok, so I've now... I took up 10 minutes for one prediction. I don't think that we're going to, that's sustainable for us in this show. So I'm sorry about that. I'll make sure to keep it a little shorter. Ah, death of Apple. Change my mind.

Brian: [00:14:26] No, that's good. Some of them will be really fast. One thing that...

Phillip: [00:14:31] He says now.

Brian: [00:14:31] Yeah, this might be like an hour and a half long show.

Phillip: [00:14:37] No, I physically don't have the stamina for it. Let's do it. Go, go, go.

Brian: [00:14:42] So here's one of the things that I see coming this year. We're going to see a lot more creative and tailored experiences and offers focused on adding value, not discounting. I think retailers have finally reached discounting fatigue.

Phillip: [00:15:03] Retailers or consumers?

Brian: [00:15:06] Consumers never reach discounting fatigue. {laughter} No, but retailers have in that they realized that consumers don't need the deepest, deepest of discounts all the time in order for them to purchase products. There's a smart discounting strategy out there. But it doesn't mean dropping prices so low that it's cheaper to buy at this kind of product than a secondhand product on the secondary market. Because let me tell you, that happens a lot right now. And so I think that that we're going to see a lot more thought going to smart campaigns that are more about adding value, adding exclusives, building brands than just the deepest of discounts, and maybe smarter pricing, too. Instead of dropping a... This is crazy. I bought a... I went to New York just this past... For NRF. So last week?

Phillip: [00:16:18] Yeah. Last week. It's all blending together.

Brian: [00:16:20] It is really all blending together. I have been traveling too much. And I didn't check the weather beforehand. And of course, I went with just a very light coat, and it was a way colder than that. And I was like, alright, I need a coat. So I went on Amazon and I was like, you know, I don't wanna spend a lot on this. I've already got some nice coats at home. I don't need to spend a lot of money on this. So, you know, I dug around and maybe within 15 minutes I landed on a forty dollar coat from Ben Sherman that was sold by a third party retailer of sorts. And when I got that coat, it had a $280 retail tag on it. Something is broken.

Phillip: [00:17:01] Right. For sure.

Brian: [00:17:06] And so and, by the way, that was a great experience. It was free, one day shipping. Right to our office. You know, it's like amazing. Anyway. So something is broken with the way that we're pricing products and that we're marketing products and I think that we're going to see a lot more focus on just being very creative around how we go to market and how we price.

Phillip: [00:17:33] Yeah. You didn't say the one word on here that I wanted you to say.

Brian: [00:17:36] Which is focus on the lifecycle of the customer? {laughter}

Phillip: [00:17:42] Yeah. It's the year of the customer. 2019 is the year of the customer.

Brian: [00:17:48] It is the year of the customer. Exactly. So instead of...

Phillip: [00:17:50] Shoot me.

Brian: [00:17:50] Yes. Yeah, exactly. And it's your fault. You said that.

Phillip: [00:17:55] I kind of actually believe it. That's the thing I hate so much.

Brian: [00:17:58] Totally.

Phillip: [00:17:59] Clienteling is the word I was trying to get you to say.

Brian: [00:18:04] It's right here on my notes. So clienteling and focus on more touch points and really...

Phillip: [00:18:09] Yeah.

Brian: [00:18:09] Building a connection with your customer that then you know, you do provide them with with additional value. Maybe it's exclusive things that they couldn't get otherwise except for by spending with you or having a relationship with you as a brand. But also this is going to be accelerated by a focus on on technologies that can increase your touch with the customer. So like PWAS, progressive web apps, where you're gonna be able to have someone within browser, opt in to push notifications and be able to communicate with them even better, and have a real relationship with them as opposed to just pushing a discount at them.

Phillip: [00:18:55] Yeah. Okay, great. I could talk about that for an hour and a half, as well. So...

Brian: [00:19:02] We might want to do a whole show on that.

Phillip: [00:19:04] I will say I'd be remiss if I didn't give a counterpoint to say I'm gonna go ahead and call that anybody who's professing PWA as "the thing" as it is a one implementation of a style of customer interaction. It's vague, and it's just vague enough that people are excited about it. And especially Google. They seem to very excited about it. They're the ones that coined the term. I'm not sure that we all understand what progressive web apps mean. I mean, technologically, I understand what it means. I think, like anything there will be good implementations and bad implementations. And unfortunately, like HTML 5...bad implementations, are the ones that get a lot of press. And I really hope that people who are heavily invested in telling a story around PWA, like Adobe, don't take any heat for it. I'm concerned that when you lead with one implementation of technology and retailers cling on to that, that it's going to be really hard to tell them what they should be doing right when they're hanging some sort of future roadmap on a particular implementation of a named technology. So I'll draw a caution there.

Brian: [00:20:32] Sure. I would agree with that, except for I think it's just one part of the strategy. Like if you're hanging your whole strategy on PWAs, that's ridiculous. And actually, I think with that, what I'll say is, there's gonna be a lot of investment in technology, and I cannot believe I'm about to say this word... So...

Phillip: [00:20:52] This is how you know we're getting old, people.

Brian: [00:20:54] Yeah. I think that retailers actually have the ability to invest in omni channel technologies this year for real and actually provide experiences that... The dream of omni channel is actually going to come to life in 2019.

Phillip: [00:21:10] And the dream of the 90s is alive in Portland. Here's the problem that we have. We've just now, you could play buzzword bingo now. et's play Future Commerce Retail Buzzword Bingo.

Brian: [00:21:22] Oh, my gosh.

Phillip: [00:21:23] You get the center space for free. We already gave you omni channel, and we gave you a "year of the customer." {laughter} So let's knock another one off there... Retailpocalypse. {laughter} Something I cannot get past is the phrase that I heard uttered and then kept repeating at NRF, which is, "Millennials don't have a short attention span. They're just highly sensitive to things that are boring." And I think that the retailpocalypse that everybody was touting, which by the way, still gets used in mainstream press pretty much everywhere. That phrase keeps being mentioned, usually in conjunction with Sears. It's just the end of boring retail. And I think about the places that I frequent. And I do not go to boring stories, right? I like to think that I, you know, naturally gravitate to places that have interesting experiences that, in many cases, are ones that I can share with other people. So I think specifically, like instead of going to the ice cream store that I used to take my kids to, we go to the the Thai rolled ice cream place now. I don't know that I like it any better. But you know what? My kids love watching it be made. And I think that there's something about that. You're seeing this in some other interesting luxury good brands. You know, I go to the mall and I see Coach, for instance, and I can actually watch them engrave and create a luggage tag. It's like I'm having an engagement with something that's sort of bespoke in the store. I think about when you and I were at Filson a few months ago, and you can actually physically watch people mend the  merchandise. I think about Canada Goose, who, you know, I want to be able to try this jacket in a cold room environment to make sure it's the piece that I want that will keep me warm on the cold winter days. Those are truly putting you closer to the product and make you feel more intimate in that purchase decision. It connects you deeper to the brand. So, yeah, I really feel like boring retail... We're seeing the very end of boring retail in 2019. And I think that that means exciting retail is actually happening. And it looks very different than what we thought it would look like. I think everybody thought you were going to walk into stores and deal with magic mirrors. I've yet to come across a real magic mirror that was either a) magic or b) a useful mirror in an environment that I actually felt like it was useful or in everyday life. I think instead, we're going to see that the companies we want to frequent, especially the big ones that come up a lot, like the Nordstrom's of the world, we'll see them actually invest in technology that will be assistive in your shopping experience that doesn't rely on me having to learn how to work the technology, you know, the aged legacy technology that you're going to deploy in your stores. Anyway. That's that. Boring retail. Finito.

Brian: [00:25:04] I love that. I love that. I think that our last two predictions play really well together.

Phillip: [00:25:09] Yeah I think so.

Brian: [00:25:10] Yeah. Speaking of retail apocalypse, I think we're going to see continued consolidation in retail this year.

Brian: [00:25:20] Yeah, we said that last year. I don't think we were prepared quite for how much of it we would... Could you have predicted Toys R US folding in 2018? It's not something I would have ever thought. I mean, speaking of which, the resurgence of FAO Schwartz, like, what's it all about? That's crazy.

Brian: [00:25:39] The brand still exists, therefore, I mean, someone took advantage of it.

Phillip: [00:25:43] I mean, the store now re exists. And there's some really interesting stuff happening there.

Brian: [00:25:49] Yeah that's what I'm saying is somehow the brand that stuck around, then someone acquired it and turned it into something awesome again.

Phillip: [00:25:55] Yep. Yep.

Brian: [00:25:56] Which I mean I could see that happening with Toys R US at some point potentially.

Phillip: [00:26:00] Or Sears. Nope.

Brian: [00:26:01] No, Sears is still alive. It's not dead yet. "I'm not dead yet."

Phillip: [00:26:07] I think Sears has more than a flesh wound at this moment, but that's interesting. Interesting stuff. Sorry. So you were saying...

Brian: [00:26:18] No. No, I think we've seen so much this year. We're gonna see so much this coming year. Actually, you know what was a really sneaky one that didn't get quite as much fanfare. At least it took me until now to catch on to it. Did you see that Walmart bought Art.com?

Phillip: [00:26:35] No.

Brian: [00:26:37] No. And get this. And this is going to lead into another... I'm gonna save this. I'm going to save this for later, actually. This is gonna be my big prediction of the year. So we'll save that for the end.

Phillip: [00:26:47] You can't do that to us.

Brian: [00:26:49] All right, fine.

Phillip: [00:26:50] You can't do that. You can't tease something. They're going to listen to the end of the show. We know they will.

Brian: [00:26:55] Ok. All right. I'll just dive right into my big prediction then.

Phillip: [00:26:58] Do it. Oh, my gosh. Here it comes. I'm so excited.

Brian: [00:27:00] Here we go. So this is the year that... I'm going to title it two things. One, the year that Amazon has to compete, and two the year of Walmart.

Phillip: [00:27:14] Oh, my gosh.

Brian: [00:27:16] I think that... Two things... One, I think that retail tech providers are maturing to the point now... We were just at NRF, and I kind of hinted at this earlier in a previous episode. But they are erasing the competitive advantage that Amazon had, from a technological standpoint. And now mid-market retailers can purchase in and create a system that is competitive with Amazon's system, in that they've got two days shipping vendors that they can work with. They have same day shipping lenders they can work with. They've got, you know, experiences they can provide that, frankly, are better than Amazon's shopping experience. They've got ways they can communicate with the customers that are just as good as the way that Amazon communicates with their customers. As a mid-market retailer right now, you have the ability to go out there and build an experience that actually is at the level, or close to the level that Amazon provides. Close enough that your customer doesn't care. And I think that that is going to be hard for Amazon to deal with. Amazon is going to have to change the way that they think about retail this coming year because they're going to have to compete. Plus, the rising cost of rent means that. I think that the cost of selling at this level of service, this Amazon level of service, these mid-market retailers, it's the same level of costs for them, or similar level of cost, to selling through brick and mortar stores in at least in urban areas. And so at a certain point, it's like, of course I'm going to invest in my online presence. I can reach more customers. It cost me about the same as selling in brick and mortar. And I can do it at the same level as Amazon. This is a new game. This is a new game we're coming up on here. And so logistics and supply chain and software and all the things that Amazon has had as an advantage are starting to go to the wayside. Even assortment...in that these retailers can sell through Google, and through Google shopping and other comparison services and other marketplaces. You don't have to go to Amazon to be competitive anymore.

Phillip: [00:29:54] You're a hundred percent right. I can't argue with that at all. Some of the technology that we've seen, though, and as much as I love NRF, and I love the innovation labs, and I love these innovative experiences... For some reason, if a mid-sized regional brand were to invest in the type of technology that allows just walk out shopping, it's likely going to be a little clunkier and not as slick as Amazon...

Brian: [00:33:07] Just walk out shopping is still so early.

Phillip: [00:33:09] No, I'm just saying, like I... That's the kind of thing... Okay. I mean, you're talking other stuff, I suppose, like two day delivery. And yeah, I don't know. I'm just thinking about the other ways that we see technology startups sort of mature. And I'm hesitant because I always come back to the the thing of, you know, well, what else could they be investing in to grow that isn't "that." OK, let me rephrase it. Sorry. Can you be a successful digitally native online brand in 2019 and not offer two day shipping?

Brian: [00:33:57] It's a great question.

Phillip: [00:34:03] Because I think that there're plenty of brands that don't offer, you know, free shipping, two day. I don't know. I tend to want to agree with you. It sounds right on the face of it. And I think Wal-Mart in particular...

Brian: [00:34:18] That's a different story. Walmart's its own story. This is why I think this is a separate story. Like it's Part 2 of the story which is...

Phillip: [00:34:25] Yes. It's Part 2.

Brian: [00:34:26] Not only is Amazon gonna have to compete against mid-market retailers, but Walmart is coming on so strong right now. Their marketplace is: One, I've heard from retailers that it's easy to work with. And that team there is really great to work with. Two, it's assortment is actually pretty impressive. Oftentimes when I'm shopping on Amazon or Walmart, flipping back and forth between the two and just kind of see what the difference is, and frankly, when it comes to most purchasing, Walmart's got enough assortment to have me covered. Three, I think people are kind of getting sick of the rising cost of Prime, and the fact is Walmart doesn't require Prime to get free shipping. There is a minimum threshold for spending, but it's not high. And people have Netflix. They have video streaming services. The only reason why a lot of people keep Prime right now, I think, is that they're used to shopping on Amazon, one, and they've had it for so long. And two the Prime Video is killing it. They're killing it right now. And some people are willing to pay the price of Prime just for streaming video and the Amazon originals.

Phillip: [00:35:51] Yeah, I think if you were to look at the competition. You look at Netflix and Netflix is up to something like $16 a month. Right? And that's $192 dollars a year, which sounds still more expensive than Amazon Prime, and you get so much more. Right?

Brian: [00:36:09] But everyone's paying for both already anyway.

Phillip: [00:36:15] Yeah, a lot of people are. I don't know that everybody's paying for both. I feel like there's... You know, by the way, this just brings up something completely tangential. But, there was a tweet that I saw a couple days ago. Dan Grover on Twitter said something to the effect of, "Netflix is better than cable. But when I look at Netflix's new releases, I have to look at Rotten Tomatoes to filter out the crappy B movies that they make."

Brian: [00:36:44] Oh yes. Oh, my gosh.

Phillip: [00:36:45] And Amazon's better than Walmart, but I have to check Wirecutter and fiddle with the ranking controls to filter out the garbage products and bad resellers who game things to the top. And it's like every aggregator that you actually use, whose job is to rank and present items to you, you actually have to work against their presentation and ranking and bring in external sources of info to get to the actual truth. Right? That's a problem.

Brian: [00:37:15] It's true for Walmart and Amazon. I think that Amazon has people who are just as suspicious of Amazon reviews as they are of Wal-Mart reviews right now. That's why there's entire websites dedicated to... I wish I had this site with me right now, but there "Are these reviews real?" You can put in Amazon product URLs into the site, and they'll give you a ranking on how real they think their review set is, which is... It's just crazy that we have to have something like that, you know. And I do think you're right, like Wirecutter...we're reaching way back to our episode with Jason L. Baptiste, when he called that out as one of the most interesting things he saw ahead this year, or that year that we talked to him. I think he was dead on. We're looking to experts more than then sort of the masses to tell us if something is good, because, frankly, the masses don't always have it right. And also, you can have a phenomenal review for something in one pricing tier, or aggregated set of reviews in one pricing tier versus another pricing tier. And those products may be competitive with each other. They may not. And so it's really hard to know when you're purchasing something that's good. So I think having those those expert voices is actually a big part of commerce moving forward. And we're going to see more sites like the Wirecutter coming soon. Just to kind of finish things out, in the third quarter Walmart grew its online sales by 43% and its continuing to climb like crazy. And this is the kick. So we've seen a ton of acquisitions just in the past couple of years by Walmart, of digitally native brands. They just acquired Art.com. Marc Lore, who's Walmart's head of US e-commerce, said that one day that they could own upwards of 40 digitally native brands. And that's probably four times what they have right now. I think. I should probably look that up. But, I think that the point is that they're aggressively pursuing more digitally native brands. They're going to find a way to bring those to market in different ways, and they're gonna use sort of their brick and mortar footprint to having an edge on Amazon that I think that Amazon... Maybe they do, maybe they don't know like how important this is. But I think that Walmart could actually be more than a thorn in Amazon's side. It could actually be genuinely competitive with Amazon in terms of online sales. And I think that there could be a lot of people out there that would probably disagree with that. But I...

Phillip: [00:40:34] Yeah, probably. Yeah. I would say they took two fundamentally different paths. One created in-house brands under other names in an effort to, you know, sort of trick you into buying from them direct. Amazon Basics and all of their white labels. And the other took the opposite path, which is we're going to acquire the brands that you love already and learn from them so that we can increase your engagement with us in new ways and attract a different consumer, especially a more online centric, digitally native consumer. And that consumer just happens to love these hip brands. And I think that they still serve two different customers. And those are customers that, you know, will continue to exist in 2019. But I think you're spot on that I think there's a growing trend of people to seek out the digitally native brands that don't have to fit into the rest of what a big box store has to offer, and they can still do that. Walmart can still benefit from that. So, yeah. And you know what, people can disagree with us.

Brian: [00:42:00] I would love to hear if someone disagrees with this. I would love to hear sort of a negative view of where Walmart is. And, you know, have someone tell us who are wrong, because right now I see a lot of momentum. And it's interesting. I've been talking for a while. You're up.

Phillip: [00:42:18] Yeah. I'll say, 2019 practical AR everywhere. I'll give you an example. Augmented reality is just getting bigger and bigger and bigger. I was buying a portable coffee maker for a hiking trip that I'm going on, and it uses Nespresso pods.

Brian: [00:42:44] Sweet.

Phillip: [00:42:45] So you can imagine it's a small little thing that you put an espresso pod in, and you use a pump, and then it makes your coffee for you by the campfire. It's going to be lovely. Much to my surprise on the product detail page on the Amazon app there is a button that says "View this in your home," as if I ever needed to view a portable coffeemaker in the context of my home. But right there, there was the button. So I'm like, I'm gonna definitely push that button. And what do you know? The camera fires up and I'm looking at the little portable Nespresso pod hiking coffee doo hickey on my kitchen table. And I kind of loved it. In fact, I did not believe that it was the size that it actually was. And then I realized... So then I set out to prove how bad there AR must be. Well, actually it's pretty darn good because if I looked at a product detail page, yeah, the thing fits very comfortably in the palm of your hand is not much bigger than a closed fist. They got it pretty good. And that was really surprising, like just having that as a thing that I didn't even know I wanted to do definitely increased my propensity to want to shop through Amazon, and it definitely increased my desire to have that particular product. I think that we're going to see that pretty much everywhere at the end of 2019. And I think that there's very little to stop it. What we're gonna have to see for it to come to smaller brands, you know, in the way that you described for small brands to be able to compete with Amazon is you're gonna need a whole heck of a lot of technology that helps those brands create the digital assets needed to actually power that. So no longer are you... So this is the challenge of a retailer in 2019. It's no longer just about being a successful manufacturer of a product and the successful steward of a brand that people love. You also now have to own things like digital assets and models. And if you're in manufacturing, you probably have a lot of the stuff specifically from CAD for the actual manufacturing process. But I'm thinking more and more, you know, if you're not a furniture company, and you're in apparel, or you have something a little less obvious. It's like they're soft goods, or textiles, or something to that effect. You have a much bigger challenge because your retail lifecycle is so fast. And I'm interested to see how those things sort of play out as retailers or as manufacturers. Actual brands have to start...they have to be omnichannel now with digital assets is what I'm trying to say. AR everywhere means that you don't just have to be omnichannel as a retailer. You have to be omnichannel in the way that you create and distribute digital assets. And wow, that sounds really challenging. And some brands will do it really, really well. And I think the ones that are going to do it exceptionally well are the are the ones who will be tooled from the get go to do that. We're going to have a very hard time seeing storied and iconic brands make that leap. And we'll see massive consumer adoption and more digitally native brands that do that from day one. So yeah, practical AR everywhere.

Brian: [00:46:57] Finally.

Phillip: [00:46:59] Yeah, I know. We've been only barking at that for three and a half years, so.

Brian: [00:47:03] Yeah.

Phillip: [00:47:05] I don't know. What do you think about that? Yeah, it's kind of hard to say no to it, I think.

Brian: [00:47:08] No, I think you're right. I mean, I think, you know, maybe not everywhere, but it's going to be something that you'll actually use or take part in in multiple places.

Phillip: [00:47:23] Yeah, I think once it comes to Instagram... If I had to put it into something that you can grok, I think Instagram has AR as not just a selfie facing thing for you to play with, but as an actual practical forward facing thing. It's not the selfie camera. It's the outward facing camera. I think we see Instagram apply that in a big way, especially around product search. Google Lens is already doing this and that powers Google shopping for a lot of things.

Brian: [00:47:53] We're right at the cusp. I totally agree.

Phillip: [00:47:54] We're right at the cusp. And I think it will be everywhere once Instagram gets it. It will be everywhere once Apple dies, and everybody only has the Android phones. But we're... Yeah, I think we're right there. I'm going to call it 2019 as when we cross over the tipping point. Back to you, Brian.

Brian: [00:48:16] I love it. I love it. I think it's a real. I do. All right. Yes. So here's another interesting one. We talked a little bit about some churn in retail. Here's an interesting one. I think retail wages are going to rise this year and that more... Yeah...

Phillip: [00:48:37] Uh what? No way. {laughter} Tell me why.

Brian: [00:48:37] Yeah. There's been a shortage in retail labor. This is a real thing. WSJ has chronicled it.

Phillip: [00:48:49] It is.

Brian: [00:48:50] Chain Storage had an article about it earlier this year. This is a really big gap in the labor market. And so not only is it a big gap in the labor market, but I think the types of skills that are going to be required to be an effective brand ambassador, essentially, it already requires more than we've required from retail store associates in the past. So they have to use more technology. They're gonna be doing more interaction with the digital teams because as we do more of what I said earlier, the clienteling and passing data back and forth between the digital accounts and in-store experience, we're gonna see a higher level of expertise necessary to handle those types of systems and interactions with the customer. And so there's going to be more training involved. There's going to be more technology invested in empowering those associates. And ultimately, it's going to be about having that same level of experience online, in-store, everywhere, where it's not boring, you're being well taken care of, and it's a true retail relationship. And I mentioned this a couple of episodes again ago from NRF floor, I think that we're going to see more blend between B2C and B2B, where you're going to have B2B type interactions happen at a B2C level, just like we're seeing a lot of B2C technology spillover into B2B. And so it's going to be almost like a purchasing type relationship, and it's going to be bigger sales, it's going to be longer term relationships... That lifecycle of the customer, locking in that customer, is one of the most important things that retailers can do in terms of... Acquiring a customer's hard, keeping a customer is better.

Phillip: [00:51:15] Yeah.

Brian: [00:51:15] And so I think we're going to see a lot of investment and a lot of change in the types of skill sets that are required for retail. Therefore, we're going to see wages go up.

Phillip: [00:51:29] So good. Yeah, I can get on board with that. I like that. I like when my wage goes up, so I can get behind that. {laughter} Can I take a stab at one? We've been talking about secondhand commerce basically since June, I think it has sort of been six or seven months now that we've really noticed not only a huge trend towards brands that focus specifically only on secondary markets, or second hand sales, that are marketplace driven and very vertical centric, like luxury goods, or sneakers, or something to that effect. One that caught my eye recently was that the American Cancer Society has what they call a discovery shop, which is basically a donation center for loved ones, for people who have passed away due to cancer, to donate their goods, and all funds and proceeds go to fight and find a cure for cancer. And what's really interesting about it is the way that they're positioning it among the consumer, as "You should shop here because it supports a cause that you care about." And that sounds very familiar to me, because it's basically what the Toms brand was promising. It's charitable commerce, it's the social good. Some might call it slacktivism sort of mentality, but I think it meets a meets secondhand commerce in that we don't have to continue... In order for a brand to grow from the ground up they have to continue to differentiate themselves. And you see product line expansion, you see goods and services expansion, you find that Toms is now a coffee shop because they need people to engage with the brand more, and it starts to dilute the original core purpose and cause. Whereas secondhand commerce doesn't need to do that, right? You can still have a charitable purpose. But, you know, if you can imagine, for instance, I'll give you a practical example... If you can imagine, for instance, a GameStop, or something like a GameStop, which only sold used or previously used merchandise, you know, video games and various accessories and consoles and that sort of thing, which is a very, very large part of GameStop revenue. But certain portions of the proceeds went to support organizations like women gamers and disability access for folks who...like Microsoft has made a big investment in accessible gaming devices for people with disabilities. Those are the kinds of things that I think that people might actually flock to if we could find ways, if we could find and amplify the brands and the companies, the retailers that are doing this well, I think that we'll see that actually begin to happen in 2019 as people become more accustomed to shopping for secondhand goods off of the eBays of the world and Letgo and other sort of closed marketplace or local centric marketplaces. So that's second hand commerce meets charitable commerce. That's my prediction for 2019.

Brian: [00:55:39] I love that. In fact, I'll piggyback on that a little bit. I think second time commerce continues to thrive. In fact, there's a phenomenal report that Thredup put out... Thredup is a secondhand retailer. It's Thredup.com/retail. ...on non secondhand commerce in 2018. And the stats they put out in this, and you can go read the report, are just it's a huge trend. It's going to continue to be a trend. They're saying, they're predicting, that by 2027 that secondhand commerce is actually going to be a bigger market than even fast fashion. And this is just in the clothing market. I think secondhand commerce goes way bigger than just clothes, obviously. But it's obvious that the secondhand commerce is something that was really difficult to control and capture before. And now it's becoming so much easier because of the Internet. So you can build, verify...

Phillip: [00:56:54] That's what it is. Yup.

Brian: [00:56:54] ...verified secondhand markets, where you can control your brand, you can control, you know, to some degree pricing... So my prediction is that we're going to see more brands build out their own secondary markets. And really, I think it's going to be good for consumers in that they're going to get more verification of things, and they're going to get more ability, and even curation.

Phillip: [00:57:28] For sure. Curation. Yeah.

Brian: [00:57:29] Curation. Totally. Yeah. But it's also gonna be good for brands and that they're gonna be able to make sure that they're one, able to serve those markets, and two be able to profit from those markets. Three, be able to make sure that people are getting a good brand experience no matter when they're purchasing their product.

Phillip: [00:57:50] Not to rail on it, but you saw Stadium Goods acquisition earlier this year or late in 2018. You saw Marc Benioff and many others invest in companies like StockX who they're all around the sneaker market where authentication and verification is paramount. And they provide basically escrow type services to verify and authenticate that the goods are legit and curate products that are specific to certain niches, and I think that you're 100% right in that there are certain markets where that's very highly prized and very valuable. And we're gonna see tremendous growth. This is a tremendous place of growth in retail in 2019.

Brian: [00:58:53] We've been calling that for a while, but I feel like 2019 and into 2020, 2021... This is just going to be a massive trend, massive trend. So give me one more. One more from you, and then we'll wrap it.

Phillip: [00:59:10] Ok. Yeah. Well, you know what? There's a lot that's been said. I think one more that I'll get on which is we have to repurpose a lot of this retail space.

Brian: [00:59:24] Yes. Good one.

Phillip: [00:59:24] Right. So. So there's a lot of retail space that I think could be repurposed. And I'll let you guess as to what those could be. I'll tell you one thing that's happening here in Palm Beach, and it's not just here. It's you know, it's in other places, as well. I am impressed with a private high speed rail company called Brightline, which was just invested in by Richard Branson. And and now is co owned and could be filing for IPO pretty soon with Virgin Trains US. So, it's a high speed rail that was piloted between Miami and West Palm Beach and soon will extend up to Orlando and then over to Tampa. And they've got three or four other markets they are looking to launch into, including rail service in Southern California to Las Vegas and in some other metro areas. What's really interesting about them is that you need public/private partnership to do things like rail. I mean, especially when you have passenger rail, there's a lot of regulation around that. And so there's a lot of public/private partnership. And I'll tell you what, it's really, really hard, really hard to be successful in public transit when your only source of revenue is ridership. Right? Is the actual adoption. Well, that's one of the things that Brightline is trying to solve, because what they have done is they're taking the stations, and the areas immediately around the stations and making them destinations, all of which are commercial real estate and residential real estate that they own.

Brian: [01:01:18] Whoa.

Phillip: [01:01:20] OK? And the idea here is that they're not just making money on ridership. They're making the places that are hubs for transportations destinations to live and to work and to shop. And they are the benefactors. Right? The company itself is creating small pockets of community within cities. And there's probably some downside to that. We could talk about gentrification. You could talk about the things that come along with that. But when I'm looking at what retail space and condos and Cross Fit gyms, and the things that are popping up around these stations, and I'm looking at how massive...how much change is happening in these areas in such a short period of time and that you've created a commerce hub around a mode of transport that we haven't had here before... It just makes so much sense. Airports are not just a place for you to catch a plane. It's a place to dine and shop. It is also part of the experience of the travel. And I think they really get it. So when I say repurposed retail space, I'm thinking that we see a lot more of this in 2019 because I think they're proving out the model right now. And if I had to get far future on us a little bit, I think shopping malls could become new destinations for places. If you combine driverless cars and train stations, old derelict department stores and shopping malls could have new life if you give them the floor space of something like a citizen supply where you have mini vendors that exist in a place as a hub for transportation. So these become new forms of hubs of transport. We don't need bus stations that are out in the cold. We can bring people into centers of commerce to do the same. And it's all private partnership. It's all private industry that's driving that. And I think that's why commercial real estate will help drive some of that.

Brian: [01:03:36] Oh, my gosh, I love that so much. I just had this vision in my head of, like the Old West when people won't sell out their lands, you know, and the railroad's like, "No, you got to sell your lands," and you know, "We'll pay you to two times on the dollar." And I just imagine that happening. There will be blood all over again. Yeah, that's 2019 in a nutshell.

Phillip: [01:04:07] Oh, I love that. I love that. That's a phenomenal place to end it. Great. Why don't you take us home, Brian?

Brian: [01:04:14] Thanks for listening to our show. We had a great time talking about retail today. We hope you had a good time listening to us. And as always, we want your feedback. So please go to survey.FutureCommerce.fm fill out our survey and provide us with some valuable feedback that will shape the future of our show. The future of Future Commerce. And so we really appreciate that. Also, if you have a chance, hop over to iTunes or Apple podcasts, Google podcasts, anywhere you listen and leave us review there, too. We always appreciate a five star review and any feedback you want to give us. You can reach us on our site through the discuss box on the site, or you can reach us on LinkedIn, Twitter or anywhere else or any other social engagement point out there these days. Everywhere. {laughter} Instagram. And so with that, we appreciate you letting the show. Retail tech is moving fast...

Phillip: [01:05:14] and Future Commerce is moving faster.