Bricks to Clicks Podcast: eCommerce Outlook with Joe Schoendorf, Partner, Accel Partners

Bricks to Clicks Podcast: eCommerce Outlook with Joe Schoendorf, Partner, Accel Partners

In this episode, David talks with Silicon Valley visionary, Joe Schoendorf, about what the future holds for eCommerce. With fifty-one years in Silicon Valley and positions at companies like Hewlett-Packard, Apple, and venture capital firm Accel, he's got his finger on the pulse of eCommerce. Tune in and get Joe's perspective on the future of eCommerce. It's an episode you don't want to miss!

 

 

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Transcript:

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

Dave: Welcome back to the "Bricks to Clicks Podcast." I'm Dave Feinleib. Joining me today is a true visionary in Silicon Valley, Joe Schoendorf. Joe and his wife, Nancy, were early investors in our company, Content Analytics. Joe has held various positions at Hewlett-Packard, was Vice President of Marketing at Apple, is a partner at venture capital firm Accel, and sits on the board of the World Economic Forum. Joe, welcome to the show.

Dave: Well, it's great to have you here. We're gonna be talking a bit about eCommerce. But first, tell us what's going on in Silicon Valley these days. What's most interesting in terms of technologies and companies that you're taking a look at it?

Joe: Most interesting is a hard one to answer. It borders on the question, "What is your favorite child?" And that's one you shouldn't answer, but let me try to say it this way. I've just crossed year 51 in Silicon Valley. I don't even think we called it "Silicon Valley" then. There has never been a time like there is right now. And what's unique about it is the number of areas at which we're making fundamental breakthroughs. Normally, we've had two or three things going on at a time. But from artificial reality, to virtual reality, to words you hear all the time, to self-driving cars, to artificial intelligence, to the cloud...and that's just to name several things that are going on, we're in the process, I think, of almost reinventing everything. We're even starting to see if you extend the Silicon Valley to go all the way up to San Francisco and include what's going on in biotech, and thus some of the biomedical breakthroughs we're starting to see, we could almost describe this as the decade in which everything is changing. And across the board, we are seeing radical shifts in our ability to do things.

We see a big fundamental change like we do now, two things have always been true. It seems to take about a decade longer for the change to really kick in, than venture capitalists and entrepreneurs think. But the good news is when that change kicks in, the impact of the change is anywhere from five to ten times bigger than what we can imagine when we were first predicting it. Facebook is a perfect example. If I had told you is the .com bust area that Myspace that we're gonna build a social network that in one decade was gonna get two out of seven people on the planet fundamentally used it, if not every day, almost every day, you would look to me as crazy.

Dave: That's great. So the lesson, I guess, for entrepreneurs is that it's gonna take a bit longer than you think. But once you get there, it's gonna be big. How should entrepreneurs and how should large companies like some of our brand clients be thinking about reinventing their brands, reinventing some of the technologies that they're using?

Joe: I think I have an idea how it's gonna work out. So we've got radical destruction or radical disruption across multiple industries. And I think these destructions and recreations are headed for a head-on crash and something, I think, good will come out of it. The economies that I think we're gonna face in the next waves, it isn't clear to me that salaries are going to rise at the level at people's expectations have been set at.

There are, however, going to be a lot of jobs that are created that are in the services sector, support the rebuilding of this new economy that we're working on. One of the biggest things that's going to happen is the cost of goods...the cost of goods as the total cost. Every cent that has to be spent from the time somebody thinks about making something, let's say a bar of soap, until that bar of soap is in my shower being used.  It's made somewhere in high volume, it's branded, it's advertised at great expense. It's shipped to warehouses. Then it's shipped to many levels of distribution. And then depending on how you buy your soap, you go somewhere and get it.

If I jump way ahead and we start to use all of this technology we have, and particularly, these robots can be used...3-D printed so it can make goods, the shorter the path, the shorter we can make the path, and the product and the user, the less cost it will be for everybody. So it's possible to think about not only bricks-to-clicks, but as you start to advance 3-D printer technology, you start to reinvent how products are made.

Dave: A dramatically different future than the kind of multi-levels of distribution, supply chain, and so on that we see today.

Joe: I think the whole thing gets disrupted. Because if you can't have the technologies that we have coming, where bricks-to-clicks...and you can call it, if you will, the "Amazon model," the "Walmart model," you can't interject into that, the arrival of drone technology, the arrival of self-driving vehicles, and the arrival of 3-D printers that can build pretty much anything. And not think about, "Over, this what will happen tomorrow," but over some period of decades, a complete realignment of how products and consumers meet.

Dave: You've been talking about this idea of retailers being the horseshoes of the 21st century. Tell us what that means.

Joe: Oh, if you go back 100 years, and you went to New York, we were just about the end of the age of horses. If you go and find early pictures of New York, there were two major jobs that we just don't have anymore. But it was hard to go down a street in big cities where you didn't have somebody who shoed the horses that were pulling the vehicles that provided all of the commerce and transportation. By the way, you also have a group of men who followed the horses around and tried to keep the streets as clean as possible. So you would look at how many people did that, and I told you this thing called the automobile was to, in effect, get rid of all of them.

These horseshoes went away because horses went away. The idea that you have buildings that you'd pay a staff to sit in all day, you ship products to, and hope consumers come and find them and take them home is an extremely inefficient mode of distribution considering the 21st century alternatives. Therefore, bricks become the new horseshoes.

Dave: A great analogy. And now, speaking of changes in the industry and some of the investments you've been involved with, you were an early investor in Jet.com, which was acquired last year by Walmart for $3 billion. How did you decide to make that investment, and were you surprised by the outcome?

Joe: Dave, that was, in the venture sort of things, one of the easy ones. Mac Lore, like you, was a multiple winning entrepreneur. And he had done a company back in the first wave called Quidsi. That was the name of the company...the consumer knew it, if you were a new mom, as Diapers.com. And his business model was "We are going to take care of new mothers better than anybody else." And obviously, new mothers need diapers. But they also needed a host of other things. And he built a bond with this group of customers that was pretty intense.

Now here, you've got Jeff Bezos at Amazon saying, "Wait a minute. We're getting outsold in diapers by a startup? That can't be. Let's show him a lesson, we'll cut the price of diapers." And it didn't matter. He could cut the price of diapers...actually, at one point, I'm told he had his diapers priced lower than cost. And Diapers.com kept growing because Lore had figured out that the bond was really what the new mom, and not just diapers, but everything that she needed.

So Bezos finally said, "Well, if you can't beat 'em, buy 'em." And so, he bought Quidsi and he signed up the team, and they went to work for Marc with the standard two-year, "You can't do anything else." And Marc would go to the staff meetings every week and to understand what Amazon was trying to do while he was coming up with his own idea of, "You know, I think there may be a better way." And the "better way" became Jet.com. And if you look at that model, two warehouses, and using the inventory which sat in existing bricks, meaning retailers all over the country who were given a right to bid in real time for both a price and a delivery on anything you wanted. So you noticed, if you went on Jet and you ordered something, you got a price. And then if you ordered a second thing, you may have got a better price and you may have gotten even better terms because now, you may have brought more people into bidding on shipping you what you wanted. And so, each time you added something, things seemed to get a little bit better.

It was a no-brainer for me that Walmart would get Marc to take over and become the CEO of Walmart.com. We knew that because we were very instrumental in the '90s in helping Walmart set up Walmart.com in the first place, which was their attempt to break free of what was then their corporate culture, and set up an independent or quasi-independent entity. It was clear as that went on into the 2010s that it needed to be yet more independent and run by a very strong guy like Marc. So to us, it was a natural marriage. And based on what Marc's doing in his first few months, he's gonna create some heartburn for Jeff. Because the announcement last week called the "Pickup Discount," where you'll get significant price savings on many items by ordering them and simply driving by a Walmart and eventually just have them put in your car and drive home with a lot more of your own money in your wallet.

Dave: That's great. That's great. What a great story. Now, eCommerce, more broadly today, we're at this very kind of interesting constructive time at the intersection of retailers, brands, shoppers. What are you seeing that's different in consumer and shopper behavior, and if you're Procter & Gamble, if you're Levi's, if you're Samsung, what should you be thinking about differently going forward?

Joe: I would be thinking very strongly about what my brand premium was. I'll give you a great example. What do we all do every morning when we get up? We shave. And what do we shave with? We shave with Gillette razors, and that's...Gillette is almost like a Xerox. You go to the store, you buy Gillette razors, and you pay a lot of money.

Now, here comes Dollar Shave Club and here comes Harry's that have basically said, "We're gonna do a really great razor, but we're not gonna charge you $5 apiece." And the thing starts growing pretty fast to the point where they just pushed Gillette to make significant price cuts because a core franchise was starting to be eroded. Brand premiums for all major products come under attack as people say, "You know, folks, you've been paying 40% more for this. You have the right to listen to funny jingles on television and to see ads which bother you anyway on the internet. Here's a product which is just as good and half the price. Which would you like?"

Dave: Now, does that mean if it's gonna come down purely to price, or is there still a way...how do brands compete on more than just price?

Joe: I would convene meetings...if I were the CEO of a brand-oriented company, Procter & Gamble, I'd have every one of my brand managers working on that problem. "What do we sell besides the safety of the brand that's worth the premium we are charging?"

Dave: That's exactly it. That's exactly it. Now, you're famous in the Valley for having a crystal ball-like ability to predict the future. Looking out another five years across voice, across self-driving cars, across eCommerce, what do you have your eye on?

Joe: Well, five years is a short time. If I look at some period of time...keep in mind, my early rule about how long these things take. It is going to take us longer to get to self-driving cars than our fans are telling us today. But they're gonna start to have a fairly radical impact in the short term. I think one of the first easy ones is the long-distance truck market. Where I can put a truck on the highway at the San Francisco bridge on Highway 80 and send it to New York and have it run 24 hours a day and get there in half the time. And I don't have a driver that I don't have to stop after eleven hours because he's at the end of his legal driving time, or I have to employ two people so that the truck keep going. So that's going to start to lower the cost of trucking which will eventually lower the cost of commerce.

But I think all of these technologies are going to start to come in...the drones are gonna start to come in, some of the robotic delivery services are gonna start to come in. And you're gonna start to see the millennial behavior continue to take off. Obviously, I live in a place where a lot of things happen first. But as I talk to...I've got two daughters who are just hovering around their 30s. I'm not sure the last time they have been into a store to buy something, including the food they eat for dinner. So boxes show up all of the time, and I think whether it's a Blue Apron or one of the other five or six prepared meal services, along with almost everything they buy, they just don't have time to go to the store. Which is why bricks are going away.

So I think we're gonna see that trend accelerate. And there's usually a meme in the curb. You've seen this, you've been around. It lasts for a certain period of time. The trend becomes so obvious that the whole market shifts and now, you've got everybody on this new thing, and at that point, you start to have wholesale and mass closing and mass repurposing of buildings. The question we're gonna have to ask ourselves is "What do we do with these malls that are shutting down?"

I actually think that over a 25-year period, the spaces become the home of the robots and the 3-D printers that make the products that today we're only using the building to sell them through. So I think that's a potential use for all of this space as we make the transition from this very inefficient 19th century model of distribution to a "What is the shortest path from the creation of the product to its use by a consumer?" And you know, Dave, that's gonna change everything.

Dave: Great. Joe, thank you so much for being on the show. Always an inspiration and we'd love to have you back on in the future.

Joe: I'd like to come back and see how this thing plays out. Each day, you seem to see one more step of this what I call a reinvention of how we get products and spend our time. So thanks, Dave, and you're playing a key role in it. Keep doing it.

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

 

 

 

 

 

 

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