Blake Lawson 5:51
Yeah, I mean, it’s a great question, because there’s so much happening in retail and technology just undergirds kind of the dynamic environment that retail lives in, you know, customer behaviors change all the time, and retailers have to stay on the cutting edge of what their customers wants and needs look like. And with the, you know, the world of data that we live in, that’s what helps us understand those behaviors. And so, you know, all these companies I’ve been so fortunate for kids to work for, have had their own flavor of how they want to approach, you know, developing products and meeting their customers. And I think that’s where, you know, the data that I’ve worked with, and that I’ve seen, has really been grounded in customers at the end of the day. And then from there, it’s how do we figure out how to do this economically? And how do we scale. And so I think the data is gonna continue to get more and more granular, as we get more insights into customers lives, it’s gonna get more and more granular with the breakthroughs and emerging technology like AI and you know, even augmented reality, I think, will have a huge role in that. And there’s a lot of different ways that that’s going to be used and sliced across retail, because you have direct to consumer, you’ve got, you know, business customer and retail storefronts. And so that all manifests differently. And so retailers really have to have a unified data strategy, and how they’re thinking about the future of their business. Because they’re meeting customers have different channels. And yet customers want to have a similar experience across all those channels. And that’s kind of in the unique role I’ve had at SAP and helping define a craft division of what we’re doing in retail stores, specifically. Because we want to unite that for customers so that they go in the store, they’re like, Hey, I’m recognized both from my purchase history out online, and I can have a catered experience in store. And vice versa. If I’m in store, my online experience can be feel like I’m there, and I’m getting the things that I need. And so there’s a lot of questions that retailers are asking about how they do that, while also looking behind the behind the curtain in the back office and saying like, how do we do this sustainably? How do we think about improving you know, our supply chain? How are we thinking about labor, management and the workforce as that continues to shift. And so you know, data will just continue to undergird that and having a real clear, unified data strategy is going to be kind of the winning the winning piece for the foreseeable future. And that’s going to enable, you know, a lot of different areas with retailers. You know, the retail experience in general,
Rolando Rosas 8:06
I want to ask you more about the retail experience, simply because if you if if we sit back and just put ourselves in the in the seat of the shopper or the consumer, you’ve got Walmart, you’ve got Amazon. All right, and you’ve got target, all three of them play as big retailers, the shopping experience, but the way you experienced the stores at a Walmart at a Whole Foods owned, which is owned by Amazon, Amazon Fresh or Amazon Go Amazon Fresh or Amazon Go. And Kroger, they’re very different. Now, we’re all they’re all competing for these consumers. And they’re all one way or another trying to bring them in with some type of low price, whether it’s using eggs or milk, or soda, and lure them in. And what I wanted to ask you, given that you worked at in this retail space, experiences matter. But does that Trump the pricing strategy, when you talk about low prices? Is is it all about the experience? Or is it about the pricing that matters?
Blake Lawson 9:16
That’s a great question. I would reference something called the con retail matrix. I don’t know if you’ve heard of that. I have not enlightenment Gen. Yeah, it’s a really great way I think to split down kind of the unique value proposition because I think all three of those retailers fit in different quadrants. And so with a common retail matrix, you have pricing as one quadrant you have I forget the axis that they’re on but then you have convenience and another and another quadrant and then you have a brand experience and another quadrant so I would say target fits in brand experience there is all about hey, let’s make this a great place to shop. We want to you know have our our specific demographics who identify with these brands and this aesthetic shopping here will have prices, but you can also have this really great, you know, brand experience at an affordable price. So they fit the brand experience, in my opinion there. Yeah, there we go. Yep. Thank you. Amazon definitely goes down into friction, that’s piece, it’s convenience, how do we just continue to race to the bottom of how quickly and easily can we get this to customers, we’re going to do this in two hours, you can do it with a single click, you know, they’re all about managing that. And then Walmart is driving all the way to the bottom on prices, how can we just offer the best selection at the lowest price possible, and so they’re gonna meet different customers based off where they sit in those quadrants. And so when it comes to pricing, ultimately, you know, you have to run a sustainable business at scale to be a business or, you know, you’re going to be filing bankruptcy. So they all have to find kind of that, that perfect balance between that. And they’ll definitely start to overlap in some of those areas on pricing. You know, Amazon has definitely started fighting with some of the pricing. Or started fighting towards the bottom of pricing along with Walmart. And same with target as well. But, you know, targets now doing a lot, you know, they bought shipped a few years ago. So they’re trying to now encroach on Amazon without the inconvenience. So at some point, those strategies begin to merge, but there’s true value proposition really sits on the top of that. And that’s where customers see and resonate with that in a very unique way. And that’s where they just, you know, a good company is going to recognize that and continue to just build around that as their core pillar of the business while tackling those others. So, like I said, pricing is going to be a big part of the strategy. But the other piece is going to be what drives the flywheel and their overall model. You
Rolando Rosas 11:36
know, back in 2017, Amazon purchased Whole Foods. And I believe you were around in Amazon 2018, shortly after they acquired that, I’d wonder to ask you about, you know, what were what was the sentiment? What’s going on behind the scenes, once that acquisition was completed, it was announced, and Amazon started essentially implementing the the Amazon way into Whole Foods?
Blake Lawson 12:03
Yeah, yeah. So actually, I was with Amazon in 2015, I was on the operation side of prime now. So kind of give a little context there, you know, Prime Now was Amazon’s first two hour delivery. And it really focused on, you know, a small assortment of household and grocery items that we could deliver in one to two hours within a major metro area. So I joined when we launched the fourth sight. And I stayed within the prime now business as a merchant to Amazon Fresh watching over 60 buildings over, we launched over three different multitap hubs. So I saw this business transform, while we also acquired Amazon Fresh. So I had just moved to the retail side of prime now. So I was on the operation side, watching warehouses and traveling around the country in the world. And then I moved to the retail side of it, where we were, I was owning more inventory management, purchasing how that was lining up with our overall growth strategy on a retail front. And so when when Whole Foods was announced, you know, only a certain amount of people knew about this, but because the supply chain hat was so similar, and the selection that we were trying to bring onto Amazon’s platform was a key part of the acquisition, prime now and AmazonFresh, were kind of at the forefront of how we figured out what that was going to look like on a procurement and an assortment level. And so we had the secret name was project cherry at the time, I wasn’t on that team. But I had a lot of peers who were on that I was on the on the peripheral side of that on building out our hub and spoke network. And so I had to start looking at, you know, hey, I know that these these skews are these items from Whole Foods selection are going to start showing up? You know, we’re setting up our vendors to bring that into these single sites. You know, while our vendor managers were figuring out what assortment to have, I was figuring out how we’re going to bring this in and get this disseminated across, you know, 40 different cities in the United States. And so it was a really interesting seat at the table. Because, you know, Amazon was trying to figure out how do we make the grocery business? A profitable one, you know, I think in the early 2000s, like 2010, and that in that time, Amazon was really trying to focus on assortment that drove revenue. But what they were doing as they were losing those lower cost items that were basket builder, it’s a basket builders and so they call it crap can’t realize a profit.
Rolando Rosas 14:20
What a acronym credit. Yeah. So
Blake Lawson 14:23
you know, prime now is kind of the way to start thinking about how do we realize a profit in a space that Amazon couldn’t figure out before. And you know, grocery is a huge part of the customer experience. And so if the customer is shopping for groceries, they’re gonna buy other things on the platform as well. And then you layer in the convenience to our delivery. You know, it’s another service that customers will just fall in love with. And so, Whole Foods, it was continuing to build out the selection. And so I think we all know the Amazon flywheel we’ve seen the sketch that Jeff Bezos did on the napkin. At that point, it’s we’re adding selection at a better price. And we’re going to just continue to drive that flywheel and so Whole Foods was kind of a macro He’s about the plan when it came to grocery in the grocery business and Amazon. So it was really cool to, you know, see how we were going to do that, you know, we made some big decisions to not integrate the network’s on a supply chain level. But we had to just go upstream to the vendors and figure out what selection we wanted to pull from them directly into the prime now and AmazonFresh. Business. And then we kind of just mentioned there, and at a category level seeing, you know, what was selling what wasn’t selling what made sense. While in the peripheral way, we were also around the periphery, we were also launching third party delivery from Whole Foods directly. So I had a lot of friends and peers who were on that side of the business, who were in the Whole Foods Markets, figuring out how they’re going to start setting up online orders and how to do all the delivery from Whole Foods. So it’s kind of a two pronged approach of how we brought Whole Foods into the platform, you could buy some stuff on Amazon, you can still have the whole foods experience online, if you wanted. So it was really cool to kind of see how they were addressing the omni channel experience that I was talking about earlier, is you know, customers can get that across Amazon or Whole Foods. And I think they just continue to bring those experiences closer and closer together over time. So they’ve figured out how to bring supply chains together, and how they start managing the cost across the group of businesses.
Rolando Rosas 16:12
You know, you talk about cost. And one of the things that when when I’ve gone to Whole Foods, and I love going to Whole Foods, I love the delivery even better, is that the shopping experience has changed. And I think that’s directly attributed to what Amazon is brought into the game, which is the technology piece, more cashierless type of experience. They allow you to do drop off packages returns, which absolutely you want it you want it you want me to drink heavily tonight, you tell me the there’s a lot of returns, heading back from customers and that Oh, my goodness drive.
Blake Lawson 16:50
I mean, I oversaw that part of the business for Prime wardrobe. So returns are a huge, huge part of the Amazon business right now that they’re all retailers are trying to figure out in general, but for Amazon specifically, you know, it’s a primarily online experience, those returns have to go back somewhere.
Rolando Rosas 17:03
Do you think the day of free returns is over?
Blake Lawson 17:08
I do i Yeah. I mean, just from an economic perspective on the wardrobe side, you know, we really wanted to pride ourselves on both now try before you buy, I oversaw the global operations on the front for that kind of the international expansion there. And so we were kind of the forefront of, you know, how far can we push returns before it’s no longer feasible. And so, you know, I was tasked to really try to figure out how to make that business profitable on, you know, a line item level. And so, returns are expensive, you know, the price of gas, you have the processing fees throughout the supply chain, where it’s getting dropped off, you know, all those components come together, then you get back to you know, how it’s being processed in the warehouse, how much space that’s taking in the warehouse. You know, during the pandemic, I was on calls where, you know, the warehouses were so backlogged with returns, that returns were just sitting in trucks. And Amazon was just having to write off truckloads of returns, they just couldn’t process. So I think Amazon was kind of the canary in the coal mine, when it came to, hey, we’re going to we’re going to see how far this goes. And all these other retailers will try to do the same thing and catching up. And now everyone’s in that place of they’re realizing like, oh, you know, for every return item, that’s, that’s, that’s a cost that’s actualized without a profit to it. And so I really think that retailers are being forced to find ways to offset that cost. And I think that’s been passed on to consumers. You know, I think there’s going to be different programs that will try to offset that cost, but the cost will show up and consumer to consumers in one way or another, know whether it’s a membership fee, it’s, you know, some sort of increase costs, you’re paying for shipping, whatever it might be. I do think the return economics returns are very, very challenging. I do think the one thing that we will see to help mitigate that cost is you’ll see more a proliferation of return notes, you know, you have happy returns and staples. You have Amazon and Whole Foods. So see Kohl’s, exactly, you’re going to see more of those types of things pop up, and you’re going to have their own incentives for you to go return there and put that that friction point up closer to customers then to the business. But I think free returns are going to be a dwindling economic model for retailers.
Rolando Rosas 19:19
And we’re seeing it you know, we sell on the Amazon platform we sell in the electronic space and there’s all sorts of fees that Amazon has implemented recently. When it comes to both returns as well as inventory they’re just like what you’re saying they’re trying to mitigate their cost. And you know, when I think about how Amazon changes the game, especially when you’re talking about different things they’d like to get into I want to jump into something when just thinking about how do I how do I say this to somebody that’s a former Amazonian Oh, this is this would be a great way. You know, the Amazon of retail is Walmart And Walmart, in the retail space when it comes to groceries, they’re the gorilla they have approximately like 20% of the market share, or do we have that graphic? There we go. They they basically dominate. They’re the Amazon of, of the retail of the grocery space. So they have about 19.1, based on 2220 22 analysis, and Whole Foods is towards the bottom. And if we were to put a chart up there, of the of the E commerce space, it’d be the other way around. Yeah, Amazon has almost 40% of the E commerce space. And Walmart’s a far, far number two, when you see something like that, and I get that I’m not telling you anything new. You know, Amazon has a long way to climb Whole Foods has a long way to climb in the collectively the Amazon properties that are in that umbrella of retail, what’s the view like from when you were there? And you know that Walmart’s the gorilla? Do you have different tactics? Do you go with something new? Do you say, you know, we’re gonna beat them at their own game with low prices? Or we’re going to we’re going to outmaneuver them with technology?
Blake Lawson 21:19
Yeah. Like I said, I am gonna come back to the con retail matrix, I think the value proposition between Amazon and Walmart at its core is very, very different, they’re obviously going to be down to trying to win people over with price to a degree. But, you know, as I mentioned earlier, Amazon’s model is shifting towards grocery to figure out how do we build a basket for customers, so that we have a basket starter. So you know, to use a great example, with Amazon Fresh and prime, now, we had banana alarms. Bananas are recognized as a high value item, obviously, you know, they’re $1, you know, to add to your basket, whatever it might be. But if you’re out of stock on bananas, the likelihood of someone not converting to a sale is extremely high. And so we had this banana alarm that would go off in the middle of the night, and stock managers would have to get up go place emergency purchase orders to make sure we never run out of stock on bananas, because if we did, we would see a noticeable drop in sales. And so going back to
Rolando Rosas 22:13
Canada, is that is that a key indicator? So So bananas in in your analysis, or the Amazon analysis was the driver, or in some places I’ve heard or maybe it’d be too old to get, it’s putting a big huge stock of Pepsi out front. Yeah, or something like that? Well,
Blake Lawson 22:31
I mean, Pepsi, I would say that’s in that situation, Pepsi is an add on, you’re hoping someone just adds that to the basket. And that’s what those CEP vendors are really hoping for those sorts of Encap positioning, but customers are going into buy groceries, and I was at target when we did the rollout of P fresh or their market. And that was a huge piece target, realize, if we can’t offer groceries, then there’s no reason for customers to come into our stores unless there’s a household goods that they need. So let’s just think let’s get kind of our core grocery selection. So people can come in the store. And when I was there, I mean, this has been, you know, almost 10 years now at Target, you know, bananas were the number one selling item, integrating grocery. So we realize like, oh, people will come in just for bananas, and they’re probably gonna grab diapers, and they’re probably going to grab milk, and they’re probably gonna grab, you know, some paper towels along the way, you know, they might have just ran across the street to Walmart to do that. And so Amazon has kind of the same play there. When it comes to, you know, we have to have a solid grocery offering for customers to step in the door and build a basket with us. And from there, we begin to build customer trust. And we begin to have that, that customer centric flywheel growing, to have customers coming back time and time again. And so that’s where the banana alar became really, really important to us. Because, you know, customers could rely on the fact that Amazon was always in stock with bananas. The minute we were we broke that trust, and they might go to a Walmart, they might go down the street to the local grocery store or Kroger’s. So, you know, I don’t think Amazon is going to try and compete at that scale. Like I said, I’m not there. Now, I’m not on the leadership team and not privy to those conversations. But I think it’s going to be the upper end of the funnel of how do we have a broad selection offering to bring customers in, so we can increase spend across other categories. And that kind of dovetails into kind of what I was doing with the Amazon fashion part with prime wardrobe is, you know, that’s a high margin category in general, how do we drive a business that adds value to the Prime membership base, that also helps convert people that are at the top of this funnel and to increasing their spend across, you know, Amazon as a business. So I think their big thing is they want to maintain that 40% market share on the E commerce side, and grocery plays a small piece in helping that funnel continue to drive that part of the market. I think it’s going to be less on the grocery side. Now. They’ll always be competitive, they’ll always find ways to make that an exciting experience. You know, the just walk out technology, I think is a way to do that. But I think kind of in a in a in a bit of a transition here is I think Amazon uses those spaces to actually just learn more about customer behaviors than it is actually driving a new type of business. Yes, Indeed,
Rolando Rosas 25:00
indeed. Because I did a recently, I think I saw somewhere where they just walk out technology at Amazon Fresh the way it’s the way it was implemented is on the way out, and they’re going to smart carts. Yep. Which is an interesting thing. Because when you think about behavior, the hardest thing to change is human behavior. So if you go into a, and I haven’t been into one, but I know that people that tell me is like, you know, it’s a little weird to walk out with stuff that maybe feels a little like I’m stealing. Yeah. And I also wonder, because I know Amazon’s heavy into the data and analytics, that there may be some value in putting an item physically in a cart, versus just putting it in a bag and heading out the door. And I’m wondering what you think about that, with that shift that Amazon Fresh has done with saying, Hey, we’re gonna get rid of the those other things that we had the cameras and all that, and we’re gonna go to Smart Cart technology?
Blake Lawson 25:59
It’s great question and feel free to stop me if I get down the road, I
Rolando Rosas 26:04
want you to tell me your perspective, a lot, but
Blake Lawson 26:06
what I’ve been doing with SAP and how we’re thinking about the retail store strategy, but you know, to the behavior to answer your behavior question, you’re right, it’s hard to change that behavior. You know, think about air pods, we saw people with air pods early on are like, that person looks dorky. Like, we’re gonna do that. And now it’s the thing, if you don’t have air pods, you’re kind of like, on the outcrop. And so, you know, there’s this, there’s this, you know, growth curve around early adopters. And, you know, to the ad, I’m totally blanking on this right now, the early adopters, to kind of the mass adoption of that product, I think, experiences like just walk out, we’ll be here to stay, they’ll just look differently in different footprints. And there’s a lot of different vendors that are doing this, I know saps working with some specifically and there
Rolando Rosas 26:51
is that the future, by the way, is that is that where we’re going. So if you’re, if you’re watching, or you’re listening to what you’re saying, I gotta I gotta do something is that gotta be part of my roadmap, or my game plan moving forward,
Blake Lawson 27:04
I think it’s gonna be kind of similar to like, how you manage your categories on how you manage categories, and a retail business. And like, you know, I need to make sure that I always have a good mix here, it’s gonna be the same there, I think some businesses, they’re gonna have to have some level of just walkout integrated into their business, whether it’s one part of their store that’s cordoned off, you know, for like, alcohol sales, or, you know, high value items, things like that, you know, you have cameras, you have a way to track where the inventory is going at all times, to the point of sale. And so, you know, it can show up in that format, too, hey, it’s just the small Bodega style store that, you know, it’s a small corner shop, there’s a little bit of selection. And so the reason being now, and it’s going to go down the kind of the road is why I think Amazon made this pivot. And I think why it’s been so hard to adopt in the market is that the costs and the ROI on the equipment are so high. You know, as we’ve done the modeling and SAP, and we’ve looked at the different ways into this, you know, it’s a five year ROI before you start seeing, you know, wow,
Rolando Rosas 28:05
so this is not for the bodega. This is for the bodega stores in New York City, or in LA. So so if your name is not Amazon, or a Kroger, or Costco or target, how do you stay competitive? If these are the names that are looking at a five year ROI? Yeah,
Blake Lawson 28:24
no, it’s true. I think it’s gonna be really challenging. And I think that’s where, you know, my personal brand is I love empowering, you know, small growing midsize businesses or small and midsize growing businesses. And that’s kind of where I’ve been trying to focus more of my time and energy is I really enjoy taking these learnings there. But it’s gonna be a challenge. And I think that’s where the experience is going to be so important to it. I think that’s where that ground up movement of I believe that small and midsize businesses, they’re more they’re closer to their customers, they have to be. And so they’re going to be more aware of how they meet their customers, where they’re at with through, you know, pop ups, you know, localized promotions, you know, localized assortment, those sorts of things, they may not be able to afford the investment of that sort of technology, unless they’re bringing in some big capital to help support that sort of growth or they have a very clear plan for growth to go that way long term. And so, you know, I think the play is going to be different there for your smaller bodegas, and just in general, but I think for you know, the Amazons, the the Walmart’s the Kroger’s, they’re going to look at how they bring that technology into just decrease the friction point and launch smaller format stores. And I also think it’s already happening, you know, this technology is being used in airports as well as being used in, in stadiums. And I know Starbucks is also using this technology as well. So it’s just gonna be this weird mishmash, I think there will be you know, a separation of business businesses and how those experiences are different. But I think that’s you know, gonna just be the tension that builds that’s natural to you know, innovation. You know, smallest midsize businesses will find ways to to innovate and survive and drive value to their their audiences. Ah, you know, with those headwinds,
Rolando Rosas 30:01
you know, you said the word survive. And one of the things that’s been very challenging for businesses that again, not don’t have one of those marquee names is that the environment has become much more challenging. Whether you are an online retailer, or you’re are a physical retailer. And, you know, costs for logistics and shipping have gone up. For some markets, labor has gone up. For others, it’s raw goods going up. And you know, when you’re an SMB, you don’t have the resources that an Amazon has or Kroger or Walmart has. And in the space of retail, the consolidation has really been a big wave as especially if you go back a couple years, you know, Kroger has been buying up stuff and other retailers. In the consolidation is real. I think I’ve read a statistic, or do we have that about the top 10 grocery chains? The top, there we go the top 10 grocery chains in America, in their sales, and I saw stat where if you were to take in 2022, all of those sales combined, you get somewhere around 800, and almost $900 billion, which represents a 24% increase. What I want to get at with this is that that 24% increase over the previous year, were in grocery, the margins are slim. But man, that’s a huge jump in sales. That couldn’t have been all from a whole lot more people going into buy eggs and bananas. Some of that had to be price increases, no, or, or because people are feeling a pinch when they go shop. Yeah, I think that most of that 24% increase in sales had to be I’m just, I’m just your opinion on where that 24% increase in sales, because it goes, that’s great. If you’re an investor, you’re like, hey,
Blake Lawson 32:00
ya know, I mean, especially in the category like grocery, which should just kind of have an even growth of the population size, right, that’s a big jump, you know, as the consumer price index has shown that inflation is a huge driver for those revenues right now. And I think that’s where we’re feeling that that pressure point with inflation being what it is, now that’s being fed directly to us, as consumers. And so, you know, retailers will take that back. And I think that’s where we’re seeing some mounting pressure on, you know, how are, you know, retailers managing their margins in a way that’s ethical. And I think those are questions that the retailers have to continue asking, but the reality is, is the world is changing on a, you know, minute by minute basis right now, as things evolve. And so, you know, I think, at some point that will start to kind of go back to normal growth curve, but I do think recently, that’s mostly driven by inflation. And, you know, I believe those sorts of pressures are the things that drive innovation. So over time, I think we’ll find new ways of bringing new technology and to help manage those costs. So retailers can continue to drive back that that lower price point to bring customers back. So whether it’s, you know, anything from blockchain to other technologies, I think that’s where they’ll try to bring that in to help drive those costs back down. But yeah, I think costs are going to be a challenge for the time being, I mean, my wife and I have seen a noticeable change to our grocery bill. And so it’s just coming down to you know, consumers.
Rolando Rosas 33:23
And, you know, one of the things that I find interesting in all this is how, how this is all playing out. And much like Amazon is looking for how to compete. One of the things interesting things that I found it that we just recently got was an Aldi, store and I went there, it’s a different different footprint, different size, that they’re in between a convenience store and a supermarket, right? They’re not quite a convenience store. But one of the things that grabbed my attention was their approach that seemed very similar to what you talked about with regard to the let’s call them bread and butter issues, or do we have that infographic? Look at this, this is what all D and this is courtesy of Wall Street Journal using some Bureau of Labor Statistics, read $1.29 versus the national average of $1.97 milk a half gallon of milk to 18 versus 396. And my favorite eggs 187 for a dozen versus two. And one of the things that what I wanted to just just it’s amazing that they’re able to go down to those prices. But even more amazing is that they’re using the same idea of the call that the banana alarm because they must see the same thing like you know if if we can have somebody come pick up some milk, maybe they get grab some wine, right? Yeah, maybe they pick up some other item. It’s amazing to see how this plays out at retail. When when you’re trying to bring in new shoes. OPERS through the door. Yep.
Blake Lawson 35:01
Well, I think, you know, it’s really a play by all the right now, just when you look at, you know, all the big retailers that haven’t increased their prices, and then you also have 99 cent stores closing, you know, we were meeting a certain demographic of people, you know, people that might have been shopping at Walmart and are getting priced out of that. And now you have 99 cent stores to get some of that stuff. All these your next best bet. So it’s a great, great way for them to start capturing some market share, based off pipe, that wow, based off price point. So I think all these really setting themselves up for a long term play, they’re they’re taking a short term loss, I’m sure, or they’re taking a short term cut on their margins. But what they’re gonna get, hopefully, is that halo effect of customers coming back because they’re saying, Hey, I wouldn’t Aldi for the first time, had a great experience, it was more affordable. I’ll go back again. And all these also had a pretty, you know, aggressive growth strategy over the last few years in the US. And so I think their store footprints are just becoming more accessible for, for customers as well.
Rolando Rosas 35:57
Talk to me about costs, but it costs in a different way, not so much of the cost of eggs and milk, and bread. All right, but let’s talk about cost to the operator, the store operator, right? It’s because you can’t run like you said, you can’t run a business at a loss. And you certainly can’t run a successful sustainable business if that loss continues in perpetuity. So none of these retailers are really at the end of the day losing money. But if you’re looking at all your line items, you’re looking at, you know, the cost of goods itself, you look you’re looking at the cost of people, you’re looking at the real estate, how can savvy retailers again, we’re not not named Amazon, Walmart or Target, or Kroger, how do you look at this, these line items in trying to determine here’s where we need to be smart about our costs. How do how do retailers get smart about their costs? That’s
Blake Lawson 36:57
a great question. And a lot of retailers are asking this question right now. Yeah, I mean, to break it down, you’ve got different cost line items that you said, you’ve got your you got your fixed costs around real estate, you’ve got your variable costs around labor management and supply chain. So I think, you know, with within those cost centers, you know, I think supply chain, there’s, there’s so much disruption happening there. And I think we’ll see more disruption, you know, to varying degrees. And so I think it’s going to be, you know, how are you managing just in time delivery in your costs there versus, you know, longer planning time periods, and managing your safety stock and making sure that you are at least staying in stock and having, you know, over those longer buying periods, I think that’s gonna be one way to start managing those costs. And thinking about that, you know, I do think blockchain will have a footprint there, at some point, I think it’s still just an emerging technology. But that will be a way for, you know, every touch and supply chain to be recognized and the cost associated with it. And so with that, with that clarity and visibility, I think retailers will know what levers they can pull, and will probably spin up to new, like business models in the supply chain space, on the labor side of things, labor costs are just gonna go up, you know, I think there’s a lot of movement happening, you know, here in California, on the fast food side of things, no labor rates went to $20 hour, there’s just a lot of pressure for, you know, labor to catch up, especially with inflation being what it is. And so retailers are going to become more and more. How do I say, I think some of them will see the value of human capital as humans, and they’ll make decisions to build their businesses around, you know, ethical, ethical thing, be a harsh way to put it, but they’ll build build their labor pools around, you know, hey, we see value people this year. And you’ll have other models that are saying, Hey, we’re just getting a race to the bottom. So we’re going to run a skeleton crew just to get, you know, our meet our customer demand. And so you know, those models are going to show up and how those costs are managed, that will continue to go up as well. And I think labor models will adjust. You know, I think Amazon was one of the first players to really do this flex model. And I was there when we were helping roll that out in RFCs, where people could kind of pick and choose what shifts they wanted to work on. But it was also a way for us to say, hey, we’re not going to have the same labor budget next week. And we need to cut our hours and think about that, but we want to make sure that we’re not overstaffed. And so I think more models around that are going to come out. And one of the other areas too, and sap that we spent a lot of time talking about is how we manage tasks and automations in stores. And so I think technology will kind of augment some of those pieces, you know, whether it’s, you know, robots stocking the shelf to, you know, things happening behind the scenes to help inventory move through the stores. I think those technologies will continue to help drive improvements as the cost of wages go up. And then I think from a fixed store footprint side, I mean, retailers or a lot of retailers are closing doors right now, you know, interest rates are staying high, you know, so it’s really affecting some of those long term decisions for retailers. And so I think the ones that have been smart and are sitting on cash and can make those decisions to say, hey, the markets this way we can make an investment forward. That’ll help them expand their footprint, but they’re going to be doing a cautious See, I’m not an economist, you know, this is purely my own opinion. But I really think retailers are going to kind of just stand and watch and see what happens before they make any big calls on any more fixed costs investments. Let
Rolando Rosas 40:13
me ask you, there’s two things that I think about when I hear the word automation. And some people hear that and they panic stem, especially if you are stocking shelves at Walmart, or stocking shelves at at Target. I know that you early in your career, you worked in that in that arena, before target. And so talk to me about the nervousness that people have when it comes to automation and back end operations becoming more efficient, which in some ways, you know, there, there are going to be folks that are going to be casualties of this, as operation becomes more efficient and more automated, those jobs may go away. How do you have that conversation with, with your clients or folks that are coming to you about, hey, how do we address this? Yeah,
Blake Lawson 41:01
yeah, it’s a great question. Because, you know, businesses are built on human demands. And so we have to perpetuate the cycle by putting money in people’s pockets to come buy from us. So I think when we look at that model, you know, retailers are asking that question, you know, they’re trying to find innovative ways to improve their costs. But they’re also recognizing that there’s other opportunities that are arising out of that I am a believer that for every, you know, job that’s automated, there’s more that are created further down the road, I think it just how is the workforce being upskilled, and or being fungible enough to be able to move into different parts of the business? And I think there are some businesses and some retailers that are doing that? Well, they’re looking at different opportunities, or different roles that are popping up. And so I think, you know, to answer your question, it’s a really challenging one, there’s not a clear, clear cut answer. You know, I think some of the fears are legitimate for some people, because, you know, they are see and are used to, you know, a very specific type of job that they want to have. And they like the security of that. And so any change that comes is scary, and that’s legitimate, and for retailers that, you know, they have to balance the, you know, how do we improve our costs? Because if we don’t, it’s better for us to stay in business, employ some people then go out of business and employ people. So you’re not saying that that’s how retailers are making all their decisions. But you know, I think that’s part of how they’re thinking about some of these big implementations ad technology that’s being used in the stores. Is
Rolando Rosas 42:28
there a way in terms of saving money? You know, if you’re a business, you’re looking at this, you’re like, you know, I’m down to the bone with labor? I can’t, I can’t have anybody in there because of technology to do cashierless is too expensive. I’m down to the bone with labor. Is there a way for retailers to go direct with the producers of the goods so that maybe they’re saving some a couple of extra points. So maybe it’s purchasing direct from farmers are purchasing direct form some of those folks that are making some of the the packaged goods? I know that a lot of them the big the big names, the Procter and Gamble’s and the crafts, those tend to go through distribution. But is there any opportunity or anything happening along those lines where maybe a trend is happening? Or other retailers are saying, Hey, this is this is one way for us to reduce costs? Or is that just like, forget about it, you’re going up against everything in the world and the way the thing works in terms of the supply chain for retail stores?
Blake Lawson 43:34
So you’re speaking to retail stores, specifically? Yeah, yeah, I’m not I’m not really too sure there. I mean, I think Whole Foods has done a good job when it comes to local procurement and how they brought in local selection from for me, from us from different farms and from food vendors. But I’m not familiar with any specific models off the top my head right now. And from the conversations I’ve had with retailers my role with SAP. That hasn’t been too big of a conversation. Okay,
Rolando Rosas 44:01
gotcha. So one of the things that I like to do as we, as we do with most of our guests, there’s a segment called Rapid Fire. And I’m going to ask you a series of questions. But before we go to the rapid fire or a kick off the rapid fire segment
I want you to tell me, what hits your brain there’s no wrong no right answer. Just your answer. All right, here we go. Walmart versus Amazon. Amazon, favorite social media platform.
Blake Lawson 44:46
Instagram,
Rolando Rosas 44:47
I guess. Yeah, instantly.
Blake Lawson 44:48
I want to say x because I feel like I learn more on x, but it’s someone else’s time.
Rolando Rosas 44:52
All right. Favorite piece of tech. Right now. I
Blake Lawson 44:57
think AI I mean, I’m gonna just join The bandwagon at this point, I think there’s a lot there.
Rolando Rosas 45:02
Is there a particular one that you happen to like on the AI? chat bot chat? GPT Claude, Gemini new
Blake Lawson 45:08
chat GPT. I think just it unlocks back to earlier conversation with labor and how I think about those things. I think it’s a huge unlock for a lot of people in lower skilled labor.
Rolando Rosas 45:17
Gotcha. First thing you reach for in the morning.
Blake Lawson 45:23
cup of coffee. That’s not my day without it a
Rolando Rosas 45:28
Exactly. Game Changing book?
Blake Lawson 45:32
Oh, that’s a good question. Or something you read, that
Rolando Rosas 45:35
was a game changer for you. This
Blake Lawson 45:37
is going to be completely out of left field, but the theology of the poetic minds are totally
Blake Lawson 45:46
out of left field, but there we go. The Geology of the Poetic Imagination. fascinating book, I think it’s really changed the way I look at the world and how I think about language.
Rolando Rosas 45:56
Okay. Words matter. Language matters. Absolutely. So I like that one. I’m gonna have to jot that one down. Lastly, a person you admire.
Blake Lawson 46:07
I have. So I’ve been really fortunate to work with and be surrounded with some some great people target my finger on one specific person. I think I’ve probably robbed your deck. I think his really his perspective on how he’s used business to kind of build what he wants to rock his life. I have a lot of respect for. Okay,
Rolando Rosas 46:28
Rob, there you go. Yeah, you go. If you’re listening to this, Rob, big props to you. All right. Well, Blake, you’ve said a lot. We’ve talked a lot. Was there anything we missed? Or that you wanted to say, as we wrap up?
Blake Lawson 46:45
No. I mean, I really enjoyed this conversation, I nerd out into retail, I’ve really enjoyed my career here. And this is continuing, this is where I want to continue growing and developing as a leader, thought leader, you know, as an executor, and operator. So you know, these conversations just fly by, because, you know, this is where I spend a lot of my time and that thought space. And, you know, the things I’m scrolling on social media tend to be in this realm as well. So I’ve really enjoyed it. I think it’s the thought provoking, I think some of the perspective and the questions you brought, you know, there’s a lot there, if retail is continuing to change, I don’t think there’s a category that is changing as quickly as retail is. And it’s just always continuing to reinvent itself. And that’s just what makes it so exciting. These conversations are just kind of a reminder of that. So I appreciate it. No,
Rolando Rosas 47:27
thank you for coming on. I appreciate you sharing your valuable knowledge today. And if you are here, listening to myself and Blake, I want to invite you to hit that subscribe button if you have found this valuable, because that helps us grow the show, grow the podcast, and to bring you information and do more research into some of these topics. And if you found a former Amazonians perspective on this insightful I invite you to go check out Nick Gezzar’s episode with myself and Dave, and we talked about why you should be prophets obsessed. We touched a little bit on that with Blake about knowing your cost and zeroing on that. But Nick jumps into it from a different angle from the advertising perspective, and why you should be profits obsessed if you sell products on Amazon. So go check that out anywhere where you consume your podcasts or your favorite video platform like YouTube. So I want to thank my guest, Blake, for joining me today and I will see you next time.
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