Hello, you are listening to the OMNI talk fast five brought to you in partnership with Microsoft the a&m consumer and retail group takeoff and sezzle. The OMNI talk Fast Five podcast is the podcast that we hope makes you feel a little smarter. But most importantly, a little happier each week too. Today is June 16. I am your host Anne Mezzenga
And I’m Chris Walton
And we are here once again to discuss all the top headlines making waves in the world of omni channel retailing. Chris,
The best news of this morning is that we survived our European tour. We’re back home in Minneapolis. How are you feeling this morning? Are you ready to rock this podcasr?
Yeah, I’m a little worse for weary Anne. I’m not gonna lie. Five five cities in 12 days.
Three video demonstrations as well that we recorded while we were out there.
For those that don’t remember we were in London, Germany by way of Cologne and Munich.
And then we went to Amsterdam and
Utrecht which is my new favourite city.
Not Utrecht that’s what we thought it was. We were corrected that the right pronunciation is Utrecht
Oh okay. Say it again Anne
Yeah good it’s good it for those watching on video you
So their shirts too.
Whole body action Yeah, too. But yeah, that’s my new favourite city.
Oh god it was amazing
That place was off the hook.
Yeah, I loved there.
So many college students and young adults and thrift shops
And Like really cool architecture.
Cool vibe Yeah,
It was culture.
It was like college students.
No I thought was like Boulder had you know Boulder and Amsterdam had a kid is what I would call that which who wouldn’t want that?
Yeah, well, it was amazing. Thanks for all the support while we were out there we were at Shoptalk Europe that went
You crushed Shoptalk Europe
You did too, You did a good job.
Oh thank,s No you did awesome you your panels were and your pills were tough. Like you have, you had a disassociated group of people there in terms of who you had. Last
Everybody did great
But you did an awesome job.
All right Anne well, before we get to the headline
We’ve got some exciting special guests for us today.
We sure do.
And this is always my favourite show of the month because we get to get the insights from the a&m consumer and retail group and today joining us is noted OMNI talk fast fiver Chad Lusk and OMNI talk fast fiver first timer Truett Horne, guys. Welcome to the show.
Guys good morning. Or Or afternoon? Does it even know what
we’re not really sure what time it is right now. It doesn’t matter space and time. Doesn’t matter right now. Chad, just retail news. That’s all that is important today. Yes,
That is that’s right. That’s well said. Anne well said space time continuum means nothing to me right now. Chad, Truid. Why don’t you guys introduce yourselves?
Yeah, absolutely. So Chad Lusk been with consumer and retail group here for a little over a year and a half former operator multi time Chief Strategy Officer, Chief Marketing Officer, and I predominantly worked at the intersection of CPG and retail with consumer led growth, marketing and commercial transformation. So happy to be back with you guys. Fifth time.
Fifth time, I was gonna ask you if you actually have been keeping record
indeed. So I’m hoping for my jacket or special access to the exclusive cocktail lounge, whatever,
you just get a lanyard. That’s it.
I thought it was a free bowl of soup Anne. I thought we’d give him a free bowl of soup when we see him next in Chicago. All right, drew it. How about you?
Hey, good morning. Truett Horne, I’m a managing director and the CRG is Dallas office. I’m so I’m a Texan and been with crg a year now. And most of my work revolves around commercial growth. So think marketing effectiveness, go to market strategy, pricing, etc. Before joining us here at G group I was at JC Penney for three years leading the marketing team and also led the strategy team proud of that was at another consulting firm, so great to be a part of this and really excited to be on here today.
That’s awesome. And that’s why we love having you guys on the show too. Because everyone at a&m CRG usually has a set operator background which both of you guys clearly have. So we’re gonna have a lot of fun talking about this week’s headlines and Anne this week’s headlines are not short of interest.
I thought these were some great headlines. All right, but first we are going to do what we always do and that is to say a big thank you to our listeners number one because and we reached number three on the podcast ranking.
We’re in we have a bronze ranking right now
We do a bronze ranking yes but we want gold Anne
we want to
go for the gold
I don’t want to go then I want to platinum or diamond you are platinum now on Delta sky too. That’s pretty sweet. Alright, but we wouldn’t be there without all the great reviews you guys are leaving for us each and every week. And as we do each and every week. We’re going to read one of those to you today. And this quite honestly may be one of my all time favourites. It comes from someone that calls himself him or herself. Excuse me, astronomy newbie. That’s kind of a new twist for the naming.
I know I know. Now I feel like we need to add some sort of like astronomical like component to our show. Maybe I’ll just call you to assign a
I’ll call you Pisces for the rest of the day. You’re not a Pisces,
I’m a Scorpio
You’re a Scorpio. All right, I’m gonna call you that my call.
No one’s gonna be surprised.
Yeah, no, right. All right, but if you’d give us five stars, and here’s what astronomy newbie which we got to get the background that had to say, ah, the good old days feels like it was just yesterday. Alas, it was actually 20 years ago that Chris was my boss at gap, few of us are fortunate enough to kick off our careers with that kind of mentorship that teeters somewhere between genius and batshit crazy.
Even if you’re fortunate enough to get a weekly dose of those amazing days back in the form of a podcast. Anne is brilliant. And the two of them have made my weekly trip down memory lane more than just entertaining nostalgia. They educate and inspire and I’m grateful for it. I do think they need some sort of uncensored format though. Chris’s rants back then were legendary works of art. And by the way for those listening and Anne I have no idea who this is.
Well, they know you well.
I have no idea who it is like they haven’t come clean I have no idea who it is like I’ve been scratching my head to try to figure it out but thank you so much whoever it is that actually that note actually meant a tonne to me to the way that was written I thought it was brilliant in how it was done and also was very very nice. So thank you
You need to work on the uncensored the the after dark, the OMNI talk after dark series. The point of what I’m trying to say is if you can please make sure that you review if you’re listening. It means a lot to us you can leave a review on Apple podcasts heart the podcast if you’re on Spotify, Google Amazon music, you know the drill, please follow and subscribe so that we can keep making the best content possible for all of you. And we may just read your review aloud just like astronomy newbies for all our listeners to hear. But Chris it’s time Yeah, and
Let’s get cosy as fluff with Chad and Truett on today’s Fast Five headlines. All right, today we’ve got news on target, expecting further profits squeezed from unwanted inventory. The biggest mall owner hoping to create a new sales holiday Sam’s Club ending free curbside pickup for most of its members, Amazon Prime preparing for drone deliveries. And first we take off with news out of Walmart. Anne
That is right Chris. According to CNBC, Walmart will open four new fulfilment centres over the next three years that the company says will let it pack and ship orders in one day or two days. And the first one will open this summer in Joliet, Illinois, about 40 miles southwest of Chicago. So instead of employees, I found this note really interesting. Instead of employees walking an average of nine miles a day, that’s the average for those warehouse employees that are manually packing and picking orders. They will have new automated systems that will retrieve items from expanded storage space and then shuttle it to the area where an employee will pack and pick or pack the box. And it will be custom made to fit the order.
Yeah, that was super cool. Yeah, I liked that part.
Um, Chad, we’re gonna go to you first on this one. Give us your thoughts on cutting the travel time from nine miles down to seemingly one maybe I don’t know a few blocks
zero zero yeah.
No more five K’s happening. So that’s just to get orders packed and pick
First ones in your neck of the woods too I believe Chad Joliet, Illinois
Yeah, Joliet. Not too not too far away from where I am in the Chicago area. I mean, giddy up like that, like that number was astounding, right? Like it was crazy. Yeah, I mean, listen online is rising. Walmart obviously has the scale and in a margin pressure steady state environment that we have right, let alone nowadays with inflation like retailers need to continually look for ways to address costs fulfillments a huge cost centre and we’re finding more and more retailers doing that with micro fulfilment centres, to way to operationalize both the omni channel shopping experience as well as address these merchant pressures.
So, Kroger and Ocado Wakefern and another one of your sponsors take off. So yeah, get get Walmart on board, you know, little kind of side anecdote here. So a team of a&m CRG consultants recently visited an auto store. MSC recently so got ahold Delhaize is began to incorporate these guys. So we’ve seen this kind of automated micro fulfilment on the grounds happening actually, we just published a paper on it last week, which quick plug loyal listener, you can find both on our website as well as the Omni talk blog site and our CMG repository. So I’m a company man. But listen, lots of great facts in there and you can see why Walmart’s going this path and others.
You know, we found out in this in this visit for grocery items, you’re talking about operating over 430% Faster than manual picking, right and we’re seeing The cost of omnichannel orders by seven to 10 bucks per grocery order on average, like, it’s huge. So if you’re gonna afford the capital outlay, which Walmart clearly can then, you know, make it happen. So, you know, for everyone else decisions not as easy. But, you know, if you cement your Omni channel strategy and you know, are prepared to make the investments, it makes sense, and I think we’ll see more of it.
Yeah, those are great stats to pull to Chad. I think that’s really important for people to understand. So check out that review that a&m did because they’re, it’s, it’s important to understand just how this works. I think a lot of people are still pushing this off, like Chad’s saying, because of the upfront investment, and it’s not, you know, it makes sense in the long run, when you start to see numbers and changes like what Chad outlined earlier, like, that’s, that’s huge for going in, all in on on one of these centres.
Yeah, the other thing to add, just as a point of reference, these are the big centres, right. These are the big automated centres that you know, are a little separate from the micro fulfilment discussion, but I think it’s important angle to discussion. I’m glad you brought it up. I was actually gonna ask you about the report. So I’m glad you guys did is you know, something I learned at Shop Talk, which I had never thought about Anne Tim Steiner avocado who Chad also mentioned, open the show.
And he made a really good point I talked about in some of our live streams to that, you know, he said the aha for them because they always kind of shun the micro fulfilment centre, but the aha for them was it actually the the large scale micro fulfilment centre, similar what they’re doing with Kroger with, then going to the smaller centres, is actually a necessary precursor in his mind to get the efficiencies in the smaller centres later, which I think is a really interesting point. And if if that’s how Walmart’s thinking of this is step one, a to then step one, B, I think it’s brilliant. And because, you know, they’ve said they’re going to do the microphone, but for some reason they’ve been slow. Maybe this is the reason why. And if that’s the case, I think that’s that’s really important angle here.
And the technology is super cool, like CONOPS CONOPS, a part of this technology, I think the piece about, you know, fitting the box to the actual order is huge when you think about sustainability, which is also a theme out of Shop Talk, but But Truett you got anything to add here? First timer?
I think Chad covered that. I mean, the only thing is, I think, I mean, obviously Walmart really pushes for innovative innovation and logistics and keeping Amazon in mind, as obviously is kind of their Northstar in terms of how to stay competitive, and so you’ll likely see more of this. I think Amazon is another topic, which is interesting that we have both on the docket today, but I would just expect more of this.
Yeah, for sure. Yep. Seems like it seems like a good move. Yeah, seems like resolutely we applaud Walmart, which is not a typical thing we’ve done on this show of late. So that’s good.
But what can definitely one of the themes of Shop Talk Europe that you mentioned, Chris, I mean, there, it wasn’t just Ocado there. It’s, you know, most of the retailers, especially grocery retailers in Europe, who are starting to really dive deep into this, it was one of the key themes coming out of that conference, especially when you start to look at how those trends make trickle down and make their way into the US. So I think kudos here to Walmart, as you said.
Absolutely. All right Anne. Let’s keep on rolling. So again for headline number two, According to CNBC, who was much in the headlines this week, nice reporting from them. Target said it will take a short term hit to profits as it cancels orders and marks down unwanted merchandise. Target’s CEO Brian Cornell said the big box retailer wants to clear room for the merchandise that it wants to sell like groceries and back to school supplies. And target anticipates that its operating margin rate for the second quarter will be around 2% which is lower than the outlook it gave less than three weeks ago which the timing is important on this story. The company also reiterated its forecast for sales growth and said margins will look healthier in the back half of the year. Truett we let you off easy on that first one. What’s your take on on this story? What do you what does it say about target or maybe even the state of retail more broadly?
Yeah, I mean, to me, I think it’s a story of state of retail more broadly. You did a credible amount of news in terms of the souring consumer sentiment, right, multi, multi decade low inflation, multi decade high and and, you know, savings that were built up through stimulus rapidly burning through with consumers. And so it’s been interesting just to see the inventory builds across retailers that they reported right and almost to retailer, there was something 40 plus percent Bill year over a year, and Flatus to negative sales. And so I think it’s a challenge that everyone is facing in terms of too much of the wrong stuff.
I think target is very differentiated in terms of being willing to take their medicine and so you know, obviously, coming out three weeks after a report, cutting your your operating margins of more than half is not something that anyone aspires to do. But if you’re going to do it and want it well positioned yourself, I think there was something really encouraging about the decisiveness here. And if you, you know, say what you will about Brian Cornell, if he has a lot of conviction. And once he decides on something, it appears they, you know, they had targeted to move on it. And so I think they’re, the strategy is right, from the standpoint of cleaning through the inventory and trying to get positioned. Cool, I don’t think you’ll see many others do it. Because whether it’s the wherewithal financially or the credibility publicly, I think Fox will try to just manage Amanda’s through this and not take the impact to rate. And frankly, longer term, I think that’ll be to the detriment to the year, but I’ll just do damage control.
So you know, you’ll just keep, you know, I would say, not take the markdowns as as fast as you can to try to manage, you know, manage through that. And, frankly, hope that there’s other methods, whether that’s pack and hold, whether that’s the consumer does return to some of these categories. I just don’t think there’s any leading indicators that would state that’s going to be effective. And so I think it’s gonna be a challenging year, you know, and as you all know, buying cycles have already happened nine plus months. So these aren’t things that are easily solvable. So just think it’d be really challenging year for retail, on the earning side, and, and, you know, frankly, just it’s another reset here.
Yeah, that’s the part about why target came out so soon relative to other retailers with this. I think that’s interesting. I want to double click into that more particularly, but Anne what do you what do you think?
Well, I, I initially read this, and I, you and I were together when we read this headline, and I have to give you some credit here. Because this when these earnings gross came out three weeks ago, you’re like, inventory, they have a huge inventory problem, this is going to be an issue. And sure enough
I will take credit for that, actually.
And sure enough, a few weeks later, here we are. And I think it’s interesting what true, it said though, like how they they’re willing to take their medicine, I think it did take a lot of courage for them to come out and say this and take this approach, but $15 billion in excess inventory. That is extraordinary. And so I guess my question is like, what is target Do? What do other retailers that Truett mentioned? What is target do? And how much is this going to pack impact some of the other initiatives? Because storing all that inventory is not cheap.
Yeah. And that’s why I want to get that’s why I want to I want to double click into this on on why target? I think you bring up a good point, too, which is like is, you know, target is in a unique position here because of their back to college and their back to school business. And so that makes me think one, they almost had to do it to clear the space for that.
Yeah. Sound like it.
Essentially what they’re saying.
But then Truett, you brought up another point, too, which got me thinking as well, like, yeah, you’re buying that stuff nine months ago. So where and when did you recognise this decrease in demand? And are you going to have the same problem here as you go into back to school back to college again to because you overbought to that level as well? Or how are you thinking about that? So So yeah, I’m curious what you guys what both of you for me and then AMS? I think about that? Because it’s a really interesting question. When you start asking yourself, like, how do we get here to begin with? why did why did retailers in general believe their sales forecasts were going to be so high to validate these levels of inventory? Or was it something fundamental the supply chain and how it was operating? What’s your take?
Yeah, I mean, I’ll say a little bit more. And obviously, charge I’ve been here. I mean, I think it’s a few things. I think one is, given the best institutions with the best customer insights missed this, right. I mean, I think that’s very clear in terms of how rapid the change in customer behaviour was gonna happen. And and you’ve seen all the pandemic winners suffering, right now, as there has been a complete reversal of any of those behaviours. I think the second is the odd, negative impact of having the supply chain promise that target had in terms of bringing goods and faster, provide less low latitude to cancel orders to readjust on the factory side, all those types of things. Given that the charter boats and had everything kind of in time, that’s actually negatively impacting them. I think the third is, it is a good question, right back to school. So what does that mean?
And, you know, on one hand, you could argue, well, the first purchases that families make are always for their children, right? Whether that be you know, basic necessities or food or clothes, right. So that’s, that’s, you know, likely going to happen, but at the same time, with inflation at nine, you know, hovering around nine, that anything is kind of on the table, so you’d have to expect it have some impacted behaviour. And the calculus that target must have made is our probabilities are a lot better in back to school clothing than it is in TV. is in in swimwear and other things that we just totally messed on. Right? Outdoor Furniture, etc. But what’s your thoughts as well.
Good point. Yeah. Chad why don’t you get the final word here.
Yeah, I mean, sure, it’s got a phenomenal perspective, having lived this ad at JC Penney, you know, my analogy and reference is a little simpler. And so being a big a big Seinfeld fan, I couldn’t help like harken back to this like Seinfeld skit where he talks about going to the store, and wondering if you have any milk, right? Because the worst thing is to be without milk. So you get it, you buy it, you go home, you see it in your fridge, and now you have way too much milk. So you’re inviting all the neighbourhood cats over to drink it, you’re washing your face in it, right? Like, you can’t be left without certain, you know, inventory levels for key events. And I think the why target element is interesting.
So if you compare it to, you know, Walmart, which is a little bit more basic goods, right, and just seeing the big swings in certain categories for target being a little bit more fashion oriented, they’re probably a little bit more privy to it. I mean, everyone is feeling the influences, right, the combination of pandemic inspired consumer preferences and surging demand, then you have the deep supply chain bottlenecks and the risk of not fulfilling those needs fast enough. So you overcompensate with inventory. It’s too late demand to stabilise you’re left holding it like it’s a classic bullwhip effect.
But but for me, you know, the question is, and you guys are putting on the right things, is this just everything worked against target and these other retailers because of these anomaly events? Right? Or, you know, are we actually seeing something that’s going to be more episodic versus one time? Right? Like, could it be that retailers demand signals are not as well honed and predictable as they used to be? And and it’s probably not or, and supply chains are built to those more predictable patterns that we’ll never see again, right, like pandemic was a once in a lifetime event of consumer buying behaviour. And then two years later, it’s once in a generation historic inflationary environment. That’s again, creating big shifts in discretionary categories. Like is that it? Are we done? Like, or will the next storm come? And is target and others prepared to weather it?
Yeah, no, I love that point. Chad, I think that’s a great perspective on just how flexible we need to be.
Yeah, and the one thing I’ll say to that I gotta have to cut out the point about clearing through the inventory to make room for groceries is total baloney. Now that I’m thinking about it, and I hadn’t thought about that, until just now, the supply chains are different, the storage space is different. Like the only way it would impact you is if your bathrooms in the stores are so overrun by product. You can’t even take those orders, but but to use that as the rationale here is kind of hooey. I’m just gonna call it like it is because that’s what we do on the show. But I didn’t think about that until Chad just use the Seinfeld milk analogy to like, it just That’s not what’s going on here. So it makes me do wonder, though, again, like, how big is this issue down the road, but we’ll find out?
Well, maybe they could try doing what Simon properties is about to do and make their own holiday to get rid of some of that inventory. So headline number three, once again, According to CNBC three time or this week, David Simon, the Chief Executive Officer of the biggest shopping mall owner in the country, is creating his own shopping holiday. The event is called the National outlet shopping day, Chris just rolls off by Simon Property Group. And it is meant for people seeking out deep discounts. David Simon said, think Amazon Prime Day but for retail outlet centres.
He’s really gonna give himself he’s gonna hold himself at the same level as Amazon. The first iteration runs this weekend at the real estate owners 90 Premium outlet and mills branded outlet properties in the US. True, we’re gonna go to you first on this one. Are you getting packed up, we’re gonna get the family over to the outlet centre this week for the biggest national retail holiday of the year according to David Simon
So I was actually in outlet mall during this during this event. So had a little bit of it on the ground perspective. And I would kind of just summarise, I think it’s A for effort. I think the results are, you know, results to be determined in terms of what this actually does. Look right now. I mean, everything is about value for the customer. So if you look at marketing and look what everyone is saying. It’s deals its lowest price, it’s a lot of pivot into value given what customers are facing. The allemaal should benefit from that. And I think admittedly, there was about a third of the retailers that participated. Okay, David would have wanted on this. The anecdote is the mall was were busy. I think it was about kind of what it normally is on a weekend.
And the, you know, the question I have is, you know, the malls are, are creating this event, but a lot of the retailers because many of these are, these properties are anchored actually by its outlet and off price. And as I was just going through the deals now the off price played. And so really the deals were around some of the outlet, and then I would say the discretionary stuff, right, like the food players and the malls were playing those types of things. So I think for that to be fully impactful, you really need everyone to jump in, right versus just free riding standpoint. And until a TJ Maxx or Burlington or a Ross is gonna say, Okay, well actually do something different from our promotional strategy, which, to my knowledge, they haven’t ever done that. I just don’t see this reaching its full effect.
I tend to agree with you. Yeah, no, I we Anne and I were talking about this before the show, I kind of feel the same way you do. And I’ll take it a little bit further too. I actually think it’s kind of unimaginative, you know. And I would actually argue that Simon, of all the mall operators has been has kind of read that way for me over the last couple years, like, you know, some of the things they’re doing with like buying up old brands and thinking that’s going to help them and all that kind of stuff, which doesn’t make sense to me. And this is just more of the same. It’s like copycat strategy
It makes it easier to do these kinds of promotions if you own all the brands in the outlet centre, I guess.
Yeah, right. But I don’t know that that’s an anchor or an albatross I want to put around my neck. But But yeah, I mean, it’s just, you know, and even the way I’ve made fun of it, but the way you read the tagline, it’s like it doesn’t roll off the tongue. It doesn’t mean anything to anyone nationally. Truett It’s point is dead, right to if you don’t get the retailer’s to play into it, what good is it and you can’t fund that yourself as the mall to be like, here’s 20% off every operator in our mall, every retailer in our malls. It’s just too damn expensive. So like this, this doesn’t have a lot of teeth. Me it lacks imagination. But I don’t know, maybe we’ve convinced you at this point. Because you were kind of holding court against me earlier. I’m seeing curious
Yeah, I still think I still think I’m gonna hold to Truett’s earlier point, which is a forever I think you have to start somewhere. And they are trying to create a unified holiday or experience now. Do they, Have they executed it correctly the first time? No, but very few people do. And so while I think that they were very ambitious in the in the title of this and comparing themselves to the next Prime Day, especially when, especially when you’re only doing the outlet centres like this is not full Mall. This is just outlet centres,
Which is key to call out. And so I think that it’s it’s a test that they’re starting in their smaller centres only 90, and then we may start to see fingers crossed that they learned a lot of things from this all to the points that you Intuit bring up and then how do they really use their leverage as the biggest mall owner in the country to start doing more coordinated efforts that hopefully will snowball into other coordinated efforts at where the mall is acting as the landlord, you know, this landlord, this marketplace type of thinking versus Yeah, I guess on the case of walls,
I guess if I’m glass half full and not glass half empty, coming off a nine hour flight from Amsterdam yesterday. I think I can see what you’re saying Anne like, yeah, maybe it’s just a good first step for them to try to brand themselves nationally. Like maybe it points some holes in that strategy, like we’re talking about, and maybe they improve over time. Chad You’re the marketer here?
Yeah. And you’re the tiebreaker as far as everybody’s concerned on this. So where are you going to fall? No pressure.
Yeah, no, no pressure. Well, I think David Simon should get together with Hallmark because they’re really good at creating holidays. out of thin air, right. So I mean, I agree with a lot of your points. I mean, so you know, I guess just fundamentally, in terms of like, where value based retail sits in this kind of environment. So actually, friend of the show and a&m CRG partner, Dave Ritter recently commented on a piece in retail brew among the kind of retail winners and losers amid rising inflation.
And so you know, Dave’s overall point in that was that these value oriented players show more resilient, storing high inflationary periods because they’re really more set up in ways that preserve their business models, right. And so I’m, I’m I’m not surprised, in a way is true as explaining that, you know, a lot of these folks didn’t really kind of latch on to deeper, you know, discounts and all like, it’s already part of the way that they operate. They’re about value. It’s resonating today. It makes sense. You inherently already kind of have that tailwind as far as what Simon’s creating here, right? Like it’s an awareness building marketing campaign like that, you know, that’s all it is. Right?
He’s saying we’re here. We presumably have full shelves, right? Maybe the stuff the retailers are trying to scrape. We understand times are tough. We’re here to give you a great product a great value like remember the out it. So you know, I don’t see it as a one day outlet extravaganza being the next Prime Day or Singles Day or Black Friday, right? Like it’s a campaign to reacquaint the pinched consumer with a new or renewed shopping option. And that’s okay and good for trying.
No that that’s well said. Well said, Alright, let’s move on to headline number four and to borrow Chad’s, and I pinch me and call me surely and because this this next headline, I don’t know what to make of this. And I’m going to use this conversation I think to kind of formulate my thoughts a little bit on this one. But according to Business Insider, so not CNBC, but Business Insider, beginning on June 28, Sam’s Club will end free curbside pickup for most of its members, Sam’s Club plus or business card members will still enjoy the perk as part of their annual $100 membership. But regular Sam’s Club members will now be charged $4 per order pickup. Loyal, loyal OMNI talk fans will also know that a regular Sam’s Club membership costs $45. So that is a $55 delta between the two. Truett. I’m curious, do you like this move from Sam’s Club? And do you think we’ll see others follow suit?
So I don’t quite understand this one. Really, and the reason I don’t understand it is, you know, if you think about clicking collect, and I think I was just reading through Walmart has such a large as built such a large business from that I think 25% of total click and collect orders are through Walmart. And across their vendors, the this is no longer something that was to test out, right. I mean, is it as initially communicated? It was we’re gonna do it for a limited time. For all customers, no, we’ll go to plus, but that’s been happening for a couple of years at this point is just embedded customer behaviour. So you’re increasing customer friction, they are essentially the only retailer that’s doing us to charge for pickup. Yeah. So they’re carving their own path. And, you know, there are some pandemic behaviours that we have to admit likely won’t change.
And I think that convenience of curbside pickup is one of those. And if you think about their main competitors, I mean, target naturally goes a complete opposite of this, they’re doubling down as much as they can, and adding value to the pickup experience, whether that’s Starbucks or the infrastructure they have, I mean, go to, you know, a few targets and see what they’re doing in the parking lot. It’s building more and more, and really trying to make it a great experience. So from a customer friction standpoint, it’ll be very clear and obvious. And, you know, I guess the the math would have to be what type of migration you would have to the plus programme. But in my experience, doing that, through customer friction isn’t usually a super sustainable path. It’s really not great.
You’re not loving this. So you as a consultant, you’d be you kind of would recommend them probably not pursue this approach if I’m hearing you, right,
Yeah. And I mean, it obviously depends on the intent, but I, you know, the economic it seems like one of those Yeah, economics on paper would probably be more beneficial than what you’ll see in reality. And, and I just, it follows a little bit in the move of try to be a little too cute with the programme.
Yeah, interesting. All right, Chad, I got Chad, I gotta bring you in on this one. So do you are you agreeing with your colleague here? How do you think about this?
So first of all, I appreciate you saying the date, so June 28, is actually my 20th wedding anniversary. So now I know I have to get all of my curbside anniversary gift items from Sam’s ahead.
I thought you were gonna say you’re gonna get your wife business membership to Sam’s Club. Good one with that one Chad.
That 150 bucks
I hope the couch is warm because that’s where you’ll be.
You know, I I, Truett answered from a consumer perspective, which is typically the angle I like to take. So I’ll answer from a business driver perspective and the point on economically how this looks on paper versus reality is a really good one, but but a slight slant, right? So I understand why they’re doing it kind of with caveats. It feels like obviously a course correction right pandemic comes, online orders spike.
Those are more expensive to fulfil lower margin. So you think how do I urge my customers to still satisfy their need for speedy, the most important thing at the time safe delivery, but at a lower cost to us as the retailer so you introduce free curbside pickup, Sam’s rolled that out in June of 2020. Right Think of what was happening in the world then. So that was the big trade off shift from online to curbside. Well, now that in store shopping is meaning Have fleet back, shoot free curbside doesn’t look as hot as an option anymore. So I always say happiness is a function of what you compare yourself to. And when you compare the cost of curbside fulfilment to regular old in store purchases, you’re not as happy. So
Guest store too, right, like a club are different than Target and Walmart. Yes.
100%. So I get the economic drivers. And so they will be successful if that’s the goal in reducing curbside pickup orders. question is where does that shift go? Does it go back in store? Does it go to online and delivery? Does it go to Sam’s plus, which I guess would be their ideal state? But you know, I don’t know. At least, and this is where I think it’s, you know, okay, the test this, I don’t think it’s likely going to Costco because they never took curbside pickup seriously, which maybe you can’t argue as vigorously now.
And so maybe there’s not the competitive threat for them doing this to us. Now. You’re right. That’s interesting, because you have to look at the competitive dynamics to which I hadn’t thought about, which is Costco is really not in curbside all that much. Right. And so you’re not offering it doesn’t put you at a competitive disadvantage. I’m curious. Anne What do you think, though? You’re, you’re kind of the you, well, you hate warehouse club shop. But what do you think about this?
Okay, so I think that while I hated this idea to begin with, and I was into its camp, and I said, like, No, I don’t like this from a customer perspective. I think that it’s really smart for Sam’s Club to do this. I think that you get to test and see what the propensity is for people like me who hate going into the experience are willing to pay, like you asked me the question, we were sitting and you’re up, and you’re like, would you even though it’s different target in Sam’s Club? Would you pay for target curbside service?
And I said, Absolutely, yes, I would, if it was, if it was only the difference of what is it like five more dollars a month, and I can have curbside pickup for the entire year, I can simplify my shopping experience, I absolutely would pay for that. And so I think they’re going to be able to see what the value is of that of that membership, that they’re having a difficult time getting people to get on. And I think that you know, all in all went and all said and done, I think that they’re going to see more traffic to the stores, because the people that aren’t using curbside pickup right now are just going to keep their membership, they’re going to go in stores. And I think then ultimately, you see a sales lift in store of, you know, people going back like Chad’s saying, going back into the stores shopping in a club experience where they they end up picking up, you know, five or six more items than they planned on going in with.
Yeah, I mean, I think I think net net, then. I mean, I think you I think I think I kind of like this, then yeah, guys are bringing up some good points. The competitive dynamic thing is interesting. The competitive and the other part too, is Walmart’s in this conversation as well. Walmart has Walmart plus, which they’re still trying to exploit. And so if they run an experiment and Sam’s Club, we have to keep this in mind, too.
Sam’s CO is one of the best retailers around. Yeah, over the last, you know, five to six years, they have done a great job, especially innovating. So like, you know, to me, you bring up a good point, because if it doesn’t work, then simply put it back. But if it does work, then you’ve got something that you can benchmark and leverage for potentially Walmart plus down the line, like if you want to say, Hey, you want curbside pickup, that’s fine. Keep getting our plus programme, and I can do it for free anymore. That’s interest that that puts me over the edge on this in terms of supporting it, which, yeah, no, I had no idea going into it. Because if you can look at the economics of it, 50 bucks, that’s and $4 in order, that’s 12 orders, you’re placing a year to make the value jump that high. So it looks like they’re thinking actually, that people are they’re trying to push people more in store
In general, then actually trying to push the the upgrade of the membership. So I don’t knowTruett do I do we can do we convince you to? Or where’s your head on this still last word?
Um, those were convincing arguments. I look, the I think the point is well taken in terms of these are these are tests you can run. They’ve, they will have already run this test multiple times they saw the impact you can you can believe that. And, and so I guess we’ll see. I didn’t think about the instore point of driving traffic there.
Yeah. Then the the point that you’re bringing up, though, is great, though. Because yeah, anytime you’re causing friction, you got to be really damn sure this is the right move, which is why I’m still like hedging my bet. I’m like, I’m like 60/40 on my current position, which will probably change by now
And we And we know from experience, though, to that Sam’s Club can turn something around like this in a very short amount of time. If they see the data that this is not working, it’s causing the friction, that Truett’s talking about, you know, they created concierge shopping in six weeks, we’ll see a response from Sam’s Club quickly
And that’s what I love about retail is people think that we’re beholden to these decisions. We’re not you can change them anytime you want, as long as the customers will stick with you, which is a key point.
Okay, we’re gonna go to headline number five.
All right, let’s roll. Let’s keep going Anne.
I cannot believe we’re bringing this back up again. Chris keep we’re gonna keep you down to like a level five throughout this conversation. But headline number five according to an Amazon press release, starting later this year, Amazon customers living in Rockford, California will become the first to receive Prime Air deliveries via drone. So this is how it works. So once onboarded customers and loxford will see Prime Air eligible items on Amazon, they placed the order on Amazon as they normally would, and they receive an estimated arrival time with a status tracker for their order. So pizza delivery Domino’s delivery tracker, but for your Amazon Prime delivery, the drone will fly to the designated delivery location. descend to the customer’s backyard which note has to be in the customer’s backyard?
Hover at a safe type safe height, and it will then safely release the package and rise back up to altitude. The press release noted that Amazon’s drones were 10 years in the making and are different from other drone delivery vehicles because of their “industry leading sensing avoid system that will enable operations without visual observers and allow our drone to operate at greater distances while safely and reliably avoiding other aircraft people pets and obstacles.”
Love that pets is in that quote?
Ah, yes, pets? Well, that’s a real thing. Let’s be honest,
Got to watch out for pets.
Guys, The listeners have heard how we feel about these from the Walmart announcement. So we’re gonna take we gotta we gotta get your opinion. as consultants, you know, is this different than our rants on Walmart Because it’s Amazon. Chad, let’s go to you first.
Yeah, I mean, listen, your your a couple rants on this are historic, in multiple ways, which, you know, is impressive. But you know, I’m trying to look at this differently because Amazon’s name is attached to it. But okay, how is it really right, like, so break down the components of it. So granted, it’s free versus the delivery fee Walmart impose.
You don’t have to pay for the privilege of seeing your package precariously dropped from above, right. But looking at the drone photos, and there were a few of them, the weight limits are probably similar. So it’s still one to one delivery, limited product carrying capabilities. You know, all of this avoidance technology and everything like that. So it doesn’t run into my chimney, my power line, yet another one of these in the air, like, that’s good. So like, I guess it didn’t directly say whether it was human controlled with pilots and all of that. But so that might be a signal. But it did say that they were still working on FAA permission, which I thought was funny. Like, that’s kind of essential.
I mean, they’ll get it but but still, so I don’t know long term maybe maybe there’s like some cost benefit here. You know, environmental benefit, I suppose, of reduced carbon footprint of delivery vehicles, but I mean, look at the barriers to overcome here. Legally safety wise, like public nuisance, right? Like if I don’t opt in, but my neighbour does. I still have drones flying all over my neighbourhood Right? Like
Your neighbour, your neighbour might think it’s like a government drone or something. You never know who your neighbourhood like,
My next door neighbour and my like, we compete for number of Amazon packages delivered during the week, right? Like, I just don’t think the benefits outweigh the barriers over time. So, you know, I’m with you that this falls into a similar kind of, you know, Walmart, drone argument.
PR, it’s PR gloss basically, at this point. Yeah. Anne what do you think, though, because you were in Europe, when this came out, you were kind of like liking this little bit more? Are you with Chad?
Oh, no, I’m not liking this
You are still in the RANT camp.
The only thing that I think is somewhat redeeming about this for me, and where I would judge this differently for Amazon is they’ve been doing this for 10 years. So they’re still working on perfecting this and making it a viable option after 10 years. And based on my understanding, it does not require a pilot to operate. So they’re leveraging their proprietary technology that they talked about, instead of required so that, you know, anyone who doesn’t have a pilot’s licence can operate these drones, which I think makes it more feasible as a as an option. But I still don’t agree but Truett What about you, what where are you? Where do you fall in this camp?
Yeah. Amazon’s proving us wrong time and time again, but I also challenge to see where this leads also, just from a standpoint of I mean, they are thinking within a year, right, they’re thinking 10 to 20 years ahead, but how much? You know what’s the purpose is besides novelty, right? I mean, do they really need to compress shipping times that much further beyond what they’re doing, continuing to build out their logistics network? Um, from a cost standpoint, you know, autonomous vehicles and taking out the labour of drivers seems like that would have probably significantly more impact. And then drones, you’re limited in terms of what you can deliver as well. Lots of safety, safety and regulatory concerns. So it feels like it’s more novel than it’s going to have any impact for any, any kind of the foreseeable future. And it’ll be interesting to see on the sidelines.
Chris your last word as a final word.
No, I’m, I think we all resolutely agree on this one. I mean, I think this is just PR Keeping Up with the Joneses. Walmart released it, they tried to Chad, I thought you brought up some good points to how they were like positioning on the price, which you know, is just going head to head on the marketing with their brand and why it’s a good option, just trying to reinforce the message as they typically do.
But, you know, the last point I would make, yeah, we were in Amsterdam this week. And Holy Hannah, there are a lot of bicycles there. Yeah. And it got me thinking like, if we ever had drones delivering packages to that same degree, Jimmy gall darn drones, there’d be in the sky. And that’s not a world I think anyone wants to live in, especially when you start thinking about like, it’s just a better option to have one too many delivery with electronic delivery vehicles.
So I just don’t see this going anywhere, and anyone that thinks it does on social media. Honestly, I think you’re deluding yourself. I can’t see it any other way. You’re just absolutely deluding yourself. But who knows, maybe I’ll be wrong. 20 years out. But you’re right. It’s gonna be 20 to 30 years out before this is anything but anyway, let’s go to the lightning round.
All right. Sounds good. Truett. We’re gonna start with you. Hudson news just opened an autonomous airport store utilising Amazon’s one POM payment at the Nashville airport. What are your go to airports snacks?
So my go to snacks are sparkling water and in preference. It’s taco Chico.
And then if I have to do Perrier, I will. For some reason, LaGuardia Airport has no sparkling water.
They have many billions of dollars that they spend on the airport and they don’t have the assortment. And then the second thing is belvitas I don’t know if you all eat these I eat these probably like twice a day
oh my god.
So I have literally dozens of packages of Belvitas that kind of like once a month and the chocolate cream form of it if I can find it.
Oh my god now I gotta try those.
Chocolate cream form I just know that mess the cardboard for
you can tell the Truett’s down in Texas too because we only have Perrier. I feel like at most of the airports we have to settle so except Chico hasn’t made its way up here yet. Like I don’t
I know. All right, Chad, question number two. Mark Lori’s food delivery startup wonder just raised $350 million dollars in a series B which is absolutely insane to me. Which buy the company at $3.5 billion. As much as I’d like to talk about that. My question for you is what’s the last thing you ordered from a food truck?
I don’t know what the last thing I ordered was but definitely my best food truck experience. Austin Texas 2am taco truck sitting on the curb then watched Kevin Durant walked down the street all by himself.
Did you offer him a taco?
I did not.
That’s a hard to track expect
Chad doesn’t share food
Especially at 2am on the curb All right, the Truett the new Xbox TV app will allow gamers to stream games on a Samsung Smart TV without a console for the very first time. What in your opinion Truett is the greatest video game of all time.
So this is a pretty easy one it has to be Call of Duty. It’s I played probably through business school six ish hours a day. Ended up being really good to have the headset. Like a lot of trash with younger kids right
40 Year Old Virgin
Truett’s Twitch channels very different than what you’re hearing today on our podcast.
Unortunately, I’ve had to take a hiatus from it but we’d like to get back into Someday.
All right, last one Chad for you Amazon launch virtual Tran for shoes last week. What shoe from your childhood do you most wish would be recreated for you today?
I think it has been so. So I was the biggest Jordan fan growing up but I only had a couple pairs that I remember I think it was the the Air Jordan fours
Which that now the retro four like like the white with the red and the black little thing that comes up those things were sweet. I was actually thinking about getting myself a pair. Not that not that long ago so
Yeah, they’re on the sneakers app all the time. Yeah, no, those things are bomb. I haven’t I don’t have a pair of those.
No, but you just got your child
I did. I got the air trainer one you asked for I was I was at mail and I couldn’t sign up for them. But thank you man for doing that. And I haven’t opened them yet. They just delivered the box me.
The things you do for the business. That’s right. keep you happy.
All right, well, that wraps us up today. A big Happy Birthday to John Cho, Joan van arc and Roseanne, TV sister and ladybirds, mom, Laurie Metcalf. Yeah. And remember, if you can only read or listen to one retail blog in the business making OMNI talk our Fast Five podcast is the quickest fastest rundown of all the week’s top news and our twice weekly newsletter tells you the top five things you need to know each day and also features special content exclusive to us.
And just for you, and we try really hard to make it fit all within the preview pane of your inbox. You can sign up today at www dot Omni talk dot blog. Thanks as always for listening in. Please remember to like and leave us a review wherever you happen to listen to your podcasts or on YouTube Chad. If people want to get in touch with you learn more about a&m What’s the best way for them to do that?
A couple of ways you can visit our website, alvarezandmarsal-crg.com. You can find us on our LinkedIn page which is Alvarez and Marcel consumer and retail group. And of course you can find Truett or I directly on LinkedIn.
Awesome. All right, and thanks to all your Omni talk fans as always, for listening in. Please remember to like and leave us a review wherever you happen to listen to your podcasts or on YouTube. And of course, on behalf of Chad, Truett and Anne, Be careful out there.
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