Bricks to Clicks Podcast: An insider view on the Walmart.com acquisitions and the changing eCommerce landscape

Bricks to Clicks Podcast: An insider view on the Walmart.com acquisitions and the changing eCommerce landscape

In this episode, Dave talks with Walmart veteran and VP of Partnerships & Business Development at Content Analytics, Kenji Gjovig, about the strategy behind the recent and numerous retailer acquisitions by Walmart.com. Listen now and learn about the changing eCommerce landscape, why findability and shopability are so important, and what suppliers should be focusing on to stay ahead in the game of eCommerce.

 

 

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Announcer: This is Bricks to Clicks, a podcast presented by Content Analytics and hosted by author, CEO, and entrepreneur, David Feinleib.

David: Welcome to another episode of Bricks to Clicks. I'm Dave Feinleib, your host, and today I'm delighted to be joined by Kenji Gjovig, our VP of Partnerships and Business Development here at Content Analytics. Kenji, welcome to the show.

Kenji: Thanks, Dave. Thanks for having me, really appreciate it.

David: So tell us a little about your background. You've been at Walmart, Sam's Club, here at Content Analytics. You really know the industry inside and out. Talk to us a little about that.

Kenji: My background is I spent seven years at Walmart in a number of different roles. I started off at Sam's Club on the brick and mortar side in merchandising, so I started off as a buyer, and then I was in the supplier collaboration program. I brought that capability out from Arkansas on the brick and mortar side to walmart.com and helped walmart.com build out a supplier development partnership program.

And then when I left Walmart, I did some consulting to help manufacturers optimize their e-commerce go-to-market with manufacturers and then joined Content Analytics a couple of years ago via acquisition, and I really am focused on helping suppliers optimize how they work with retailers. The biggest thing we focus on is our tools, giving out our tools to clients to help them with their businesses.

David: So we just announced the deal with Acosta. You gotta talk a little bit about that.

Kenji: Yeah, thanks. Acosta is exciting. They're one of the top representation groups. They work with major manufacturers to help them with a lot of in-store activation, and they do a lot of services for major manufacturers. So it's exciting for us, because they're really gonna help us leverage. They have feet on the ground. They talk to major manufacturers in a lot of the major retail ecosystems. So they've got a big Walmart team, Amazon, Kroger, and Target. It's a great way for us to learn more about other retail ecosystems and get access to clients and such, and also they provide a good professional service. They're gonna help out on servicing our clients, and there will be a great partnership there. So we're excited about that.

David: Fantastic. And building on that, we're seeing obviously in the news a lot of store closures, closings. What are your thoughts on the overall landscape, brick and mortar, online? What's going on?

Kenji: Yeah, I'll tell you, I would not want to be opening a brick and mortar retailer now. It is bloody, and it is kind of well-documented, so this is not a new trend. But the death of the mall is kind of widely chronicled, and then major, major retailers are shutting down stores in the order of hundreds, J.C. Penney, Wet Seal, Macy's, hhgregg, Sears, Kmart, Abercrombie, Guess, Family Christian, Staples. I mean, you name it, the list goes on. Many retailers are closing select stores. Others are just shutting down completely. It is very difficult in the landscape to be there. And malls are an example. When you lose the flagship store in the mall, then everything else either shuts down or really struggles. So it's difficult to be on the brick and mortar side.

David: And e-commerce has been building for a number of years now. What's changed? What's different? What's going on with all these different retailers?

Kenji: I think one thing is that e-commerce has an expanded assortment. That's kind of one of the benefits, is this long tail. And if you're a busy shopper, which everybody is, there's literally nobody that has excess time on their hands, and having the ability to buy from the convenience of your home, your couch while you're watching a movie, or at least do the research, that's really critical. So the depth of the assortment in e-commerce is really important.

Secondly, the research you can do. Even if you end up buying it in a store, whether you physically go in or you buy it online and you pick it up at the store, it's really important, that research element, the content there.

And then lastly the customer experience has improved. The content is deep. There are a lot of features and tools to communicate, and, just you get what you need there, and so it's a much better experience. E-commerce has really come a long way over the last several years.

David: Talking a little about that experience, here at Content Analytics we have tools that help suppliers with a lot of different aspects of the content, the imagery, product descriptions, rankings, all those different aspects. On the flipside, as a shopper, sometimes you just wanna interact with the product. So how do you see that juxtaposition? How are shoppers reacting to this online purchasing experience when they can't interact with the product before they buy it?

Kenji: They can't touch it?

David: Yeah.

Kenji: Well, that's why content on the item page is so important, because that is the packaging, that's the only way that a customer can interact with the product. Having really good content is critically important. We use the terms here, findability and shopability, and findability is basically whether a customer can discover the product versus not. I give the analogy of findability as an example. You're walking down the physical aisles of a store, and you look at the assortment they have, and if you're not discoverable in search on the e-commerce side, the brick and mortar equivalent is the product is on the shelf but it's invisible. Being able to be discovered is really important.

The other side of what we look at is shopability, which is really a conversion measurement. And, when a customer lands on the item page, are they going to actually add to cart and buy it, or will they abandon and go elsewhere? And that's really about having enough images to make sure you know what you're getting. And so the size of the box is the one that you think it is when it shows up at your house. It's about giving enough information to say as you're reading the description, "Does this have the right features and benefits that I'm looking for or not?" And so it's about traffic and conversion. And, the content on the item page is the only real estate they have, and you can't physically touch the product, so everything else has to be on the product page.

David: Switching gears, we do a lot of work in the Amazon ecosystem, Walmart ecosystem, Target ecosystem. Seems like Walmart's been on a little bit of a buying spree lately. Tell us about that. What are your thoughts on it?

Kenji: Yeah, it's really fascinating to watch. Walmart has traditionally acquired brick and mortar retailers in other countries, and then they acquired some other technology companies, but now they're acquiring retailers, e-commerce retailers, and it's at an accelerating rate. I think Jet closed in August of last year, and since then, they've closed several acquisitions, and another one, Bonobos, is sort of rumored to happen, and it may be officially announced at any day. So they're definitely acquiring companies at a blistering pace. No one else is coming close to making that many acquisitions. That's definitely one thing that Walmart is being very aggressive about, is going after specific categories and capabilities that they wanna leverage to build on.

David: Any sights you have your eyes on that you think we should be watching out for, Walmart M&A folks may be thinking about buying next? I know we just saw what? 3.2 billion or something for...

Kenji: Yeah, Chewy, I think, is 3.6, is what they're looking at. That's pretty crazy for a very specific category. It's in pet treats and supplies.

I would say that it's interesting, because even these very narrow category killers can be snapped up and such. So I think it's important for us to be looking at a lot of things, because, you know, for one there's a lot of good technology that's out there, there's a lot of good...you know, customers are on these sites, and they're getting a lot of traffic. We here at Content Analytics are looking at lots of different sites that we monitor, because our clients, especially in specific categories, are starting to ask. We look at a lot of things, but it's a rapidly changing landscape.

David: All right, great. And how does Walmart go about integrating these acquisitions? You've kind of seen it from the inside. You've seen it now from the outside. What's the strategy here?

Kenji: Yeah. Walmart is being very thoughtful in what they're doing. Historically, they kinda just slam companies together, and they have some history of not being as successful in the past, and they've learned from those things. Now their approach is really about integrating in a very selective way. A few weeks ago when we were at the Shoptalk conference, Marc Lore, who's the head of U.S. e-commerce for Walmart, talked about how he does that. And basically, Doug McMillon, the CEO of Walmart, Inc., when they acquired Jet, gave Marc the keys, as he called it, to run all of e-comm, not just running Jet.

And so Marc, what he does then is he does the same thing for the acquisitions that he makes, that when he buys Moosejaw, for example, he gives Moosejaw the keys to not just run Moosejaw, but to run all of sporting goods for U.S. e-commerce.

It's pretty fascinating, because it gives those small companies that they acquire something interesting to do. It's you're taking on their responsibility. They then do the buying for all of the sporting goods for, let's say, walmart.com, Moosejaw, and Jet. The scope gets bigger, and Walmart then gets category depth in a way that they didn't have, as well as, of course, the ability to access the suppliers, you know, brands like Patagonia, North Face, that they wouldn't have. They get access to customers that they wouldn't have, etc.

They're doing it selectively, and when I say selectively, I mean they're not just going to eliminate the front end and just say, okay, now, everything goes to Walmart, or walmart.com, because they know that millennials are shopping Bonobos. This is a rumored acquisition. Millennial men are shopping Bonobos, and in general millennial men are not big, heavy users of walmart.com. So they don't wanna eliminate the front end where they've gotten some traction.

Jet, for example, is really strong for urban folks, and in general Walmarts are kind of in more suburb and rural areas. They're thoughtful about that. They maintain a separate front end for the customer experience, and they try to integrate the back end for any kind of leverage, you know, leveraging smart cart pricing and other technologies like that.

David: And on the technology front, is that a difference from how they've operated historically, kind of leveraging these technologies that they're getting and empowering the category managers, I guess, to really own the business? Or is that kind of an extension of what they've done historically? What's the right way to think about it?

Kenji: I think it's stepping on the gas big time. I mean, I think anytime a company does an acquisition, they wanna get leverage out of any of the assets they have. From a technology perspective, they are really trying to accelerate that technology leverage.

An example is Jet. Jet was fairly famous for their smart cart pricing. The more you add to your cart, the more discounts you got. If you eliminated the return option, you got discounts, etc. That's basically what Amazon has been doing for a long time with like Subscribe & Save. It's a different flavor of that, but they understand the concept of frequency there and giving discounts.

Walmart's doing kind of the same thing. In fact, I think yesterday they just launched the Pickup Discount, as they're calling it, which is basically starting at like a batch of 10,000 items, very manageable, and if you order them on walmart.com, then you can pick them up in a store and get some discount, maybe $50 off of a TV. They intend to expand that to like a million items by the summer, so very, very quickly. So you get a discount.

Several years ago, when they were starting to do pickup at store, you would pay for shipping if it was going to home. It would be free shipping if you were going to pick it up at the store. Now, in general, shipping to home is free for most things. Now they're giving a further discount. You can see kind of the direction they're going is shipping has to be eliminated as a cost, and now they're trying to give discounts.

David: So things are getting cheaper, seems like. Where is the money coming from? You've got the retailer. You've got distributors in some case. You've got suppliers. You've got us shoppers. What's happening in the chain?

Kenji: Yeah. This is a tough one. I mean, e-commerce is famously thin margins. And retail and grocery are famously thin margins, and e-commerce is difficult as well, because the last mile delivery is really expensive. I think the way that retailers are trying to optimize is a number of things. So, one, with this Pickup Discount, that does a couple things. One is they're not doing the last mile fulfillment to home. The FedEx package going to home, they eliminate that cost. Secondly, they can increase the basket. Because if a customer goes to the store to pick up the product, and you're going in to pick it up, then you're gonna grab a bag of chips and a few other things, and so you get an incremental sale there. I think those are kind of the big things, is kind of saving off of the cost.

David: So it could make the pie bigger, because you are going into the store, you're gonna do some additional purchasing while you're there?

Kenji: That's it. Yeah, especially impulse purchases and that sort of thing, that's a big part of what they wanna do, is increase the number of transactions and the basket size. That's absolutely true. And I think the other thing is there is a bit of a price war going on. I mean, they are trying to compete with Amazon, which Amazon famously pours every ounce of profit into their retail business, and so to some degree it's about just maintaining growing their market share, and the only way to do that is to compete on price, which Walmart has done for 60 years. That's their approach,  they have to win on price.

David: 1P versus 3P, are they gonna be bringing more items in-house? Is that a way to drive margin leverage or kind of expand the marketplace, a bit of both? What do you think is gonna happen?

Kenji: Absolutely both. And I think expansion on both channels, 1P and 3P, will help on the margin. So, on the 1P side, having more physical distribution centers, while expensive, just gives them the ability to have larger product depth and that sort of thing and more control over the inventory so they don't have out-of-stocks and that sort of thing. So I think there's definitely opportunities for them to optimize their business on the 1P side. 3P side is largely an expansion, an assortment expansion play. But there are opportunities to be profitable there. I mean, a 3P transaction is, I don't know, 15% commission model, so you don't do any of the fulfillment in shipping. That's done by the sellers.

David: No inventory?

Kenji: No inventory, no slots in the DC, no labor and that sort of thing, and so it's a very profitable model. Amazon does FBA and something similar. It's definitely a channel that's growing for them. They went from 5, 6, 7 million skews to now more than 30 million in a very short period of time. It's assortment expansion as well as opportunity to get some leverage.

David: Outside of kind of Amazon, Walmart, Target, what do you think we're gonna see in the rest of the ecosystem? We've heard from some customers about specialty independent retailers. We're seeing other folks doing acquisitions. How do you think this plays out? Is it more folks adding marketplaces to their sites? Are those gonna go away? What are some of the things you're seeing out there?

Kenji: Well, I do think there will be consolidation. I think that some of the...for example, the brick and mortar retailers are sort of consolidating just because they can't compete. So I think that that's already happening on the brick and mortar side.

Something similar is happening on the e-commerce side. I mean, an example is when Walmart acquired ShoeBuy, the three main between Zappos, ShoeBuy, and Shoes, Shoes shut down. There was consolidation there, and it was competitive, etc. Now, there's just Zappos and ShoeBuy.

Chewy as an example. Chewy was kind of the industry leader as a pure play in the pet category, and they just got snapped up by PetSmart. I think it was PetSmart. So there's some consolidation there, and Bonobos and some others.

Whether they're brick and mortar in...you know, Moosejaw has 10 stores, and there are like 30 guide shops for Bonobos. Some of these retailers, whether brick and mortar or e-commerce, are looking for ways to get leverage. And at some point if you start to slow your growth, a great way to get some growth is by getting acquired and leveraging the capabilities of the other retailers.

I actually think that there will be some contraction of the industry in terms of the number of retailers. I think specialties is tough to compete in. I'm sure there will be some new specialty retailers popping up, but I think overall there probably will be fewer and fewer retailers that will get consolidated by the big guys.

David: For our clients, for suppliers, big suppliers, mid, small size, how should they be thinking about where they should be selling, where do they invest, where do they need expertise, what's the right strategy over the next few years?

Kenji: Well, I think number one is they have to be an e-commerce, right? And that's kind of implicit in your question. And I say that specifically because a lot of major manufacturers have focused a lot on the brick and mortar side.A lot of them are waking up to that. Point one is, if you're focused too much on brick and mortar, you gotta look at e-commerce as a channel, because, A, it's large in most categories and, B, it is the only growing channel that's out there. Every other channel is just robbing Peter to pay Paul. You have to look at e-commerce as a channel.

I think two is you, by nature, have to focus on the big ones. They're gonna be focusing on Amazon, and Walmart, and Target, and BestBuy, maybe the category specialty leaders and that sort of thing. Focusing there because that's where the volume is and that's where the big momentum is. So I think that's kind of one.

And then third I would say, you know, not to kind of be self-serving around our own tools, but I think you have to have the right tools. I mean, my personal story is that I left consulting to join Content Analytics in part because my professional service did not scale without good tools. And  it's really important for brands to have tools to be able to scale their work. I do think having the right tools to be able to get the job done, whether it's managing your inventory, or your search, or content measurement and such, I think is really important, because otherwise with all this pure play and lots of small retailers, it's just impossible to be successful in each one, so tools.

David: What else are you seeing in the landscape? I know we've seen some things shutting down among all these acquisitions, not all good news there.

Kenji: Yeah, Quidsi is shutting down. Amazon just announced a few weeks ago they're shutting down Quidsi, which was an acquisition they did, I think, in 2011 for hundreds of millions of dollars. They ran those brands, Soap, Diapers, and Wag, separately, and they were never quite able to make it profitable, and I think at the end of the day Amazon felt like it was just not profitable and it was sort of dilutive to the core of their business, which is what they were trying to drive. They basically are shutting those domains down. They laid off 260 people, and that's a real challenge. The messaging that the industry is getting is basically trying to follow that traffic back to their core site. Who knows what's gonna happen, but that's kind of one thing, that brick and mortar is consolidating and shutting down, in this case Quidsi is shutting down, so that's difficult as well.

David: Flipping over to the good news, you've been out on the road, talking to suppliers, closed some amazing clients recently that we're really excited about. Any thoughts, stories, insights you can share with our audience, some of the great work that you're seeing suppliers do with our tools or more generally?

Kenji: Yeah. I mean, it kind of goes back to what I said earlier,  e-commerce is a really dynamic channel. We would encourage manufacturers and do more of this, is to shift resources more and more to e-commerce, not just because the categories are growing, but because this concept of omni-channel is so powerful. Bonobos has guide shops. Amazon is opening their grocery stores and such. And so omni-channel activation is really important. Walmart is focused so much on...it doesn't matter where the customer is shopping, from a store, or from their phone, or from their desktop, it doesn't matter. It's just gonna be a seamless shopping experience. Bing masters at digital is really important. That's kind of point one.

Two is it moves so quickly, that if you're not paying attention constantly, then you miss things, right? Quidsi shutting down or the opportunities. It's really important for people to kind of shift not just financial resources, but sort of attention and time on working on these things. I think that's important.

I think retailers need to develop real strategies. I think if you're a small brick and mortar retailer, especially kind of an old line grocery store, I think you're in real trouble, because grocery as a category is dynamic and moving now, and it hasn't been up until recently. With Amazon Fresh, and Walmart Grocery, and Peapod, and Kroger's ClickList, and others, like some of these brick-and-mortar-only grocery stores, I think, are having trouble.

There's a lot of stuff going on in the industry, and I think everyone needs to really be focusing on this. This is where all the action is happening.

David: It's where it is.

Kenji: Yeah.

David: Now, our audience may not know this about you, but I am gonna share with them.

Kenji: All right.

David: You're a father of three.

Kenji: Father of three today.

David: You're about to be father of four. Congratulations.

Kenji: Thank you, appreciate it.

David: What we wanna know is what are the top products you're gonna be shopping for online. What are the ones that are key for you?

Kenji: Yeah, good question. Well, I just bought a nest, which is not really a baby product, but as we're having another baby, I'm trying to think about how we can sort of optimize our home, and so we bought a nest. So I'm trying to make our home smarter, for one.

Two is a baby monitor. So that's the one purchase that my wife has said, "Why don't you handle that thing?" That's kind of an interesting one, because there's all these technology-enabled monitors, and there's smart home devices, and there's all kinds of stuff. I'm kind of using the baby monitor as an example of a product that I want to buy for the functional purpose of monitoring our child, but frankly also because to see kind of what new technology is out there that's interesting.

I don't think augmented reality is necessarily something for a baby monitor or voice-activated shopping is something that I'm gonna take advantage of at this point. But I think that some of these smart home kind of devices, ring video door bell and other things like that, I think is kind of where I'm gonna be focusing on.

David: Love that. Any other insights, thoughts you wanna share with our audience? I've really enjoyed talking with you. Love to hear anything you wanna share. Parting words of advice.

Kenji: Yeah. I think I would say that... again, I really emphasize that people focus on content. We spend all of our time on the product page, and in general that's where the action is happening. Whether a customer goes to bestbuy.com and navigates off of the left-hand navigation or searches for something, or if they're just searching on Google for something, that Google search is going to redirect them to the product detail page of some item. It's just critically important for manufacturers to think about their product pages in the same way that they think about a brick and mortar package.

When I was a buyer in a skew-limited environment like Sam's Club, we spent all of our time agonizing over every square inch of the box while in e-commerce the box is the product page. Our people going to comp shopping on sites, as opposed to traveling several hours to go another market to walk stores and things like that. My advice is spend as much time looking at product detail pages off lots of sites as you would looking at boxes, and shelves, and things like that in stores.

David: Kenji, so great to have you on the show.

Kenji: Thanks, Dave, appreciate it.

David: I hope you will come back soon for more podcast episodes.

Kenji: Anytime. You got it. Anytime.

David: Thanks again. Congratulations again on number four.

Kenji: Appreciate it, thanks so much. Looking forward to the next round.

Announcer: To find out more about Content Analytics or to order a copy of David's book, "Bricks to Clicks," visit contentanalyticsinc.com/brickstoclicks.

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