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Hello, You are listening to the Omni talk Retail Fast 5 brought to you in partnership with the A&M consumer and retail group Firework, Avalara, Wiliot, TGW and Sezzle. Ranked in the top 10% of all podcasts globally and currently ranked the number one podcast in all retail by feed spot. The Retail Fast 5 is the podcast that we hope makes you feel a little smarter, but more importantly a little happier each week too. Today is January 24th, 2024. I’m your host, Anne Mezzenga.
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And I’m one of your other hosts, Chris Walton.
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And we’re here once again to discuss the most important headlines from the past week that highlight how the physical, digital and human elements of retail are coming together to shape the future. Chris, my friend. We’ve got some, we’ve got some All Star guests today on the podcast.
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We do. It’s my favorite favorite show of the month every month when the A&M folks come on board and chat with us. Anne.
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That’s right. Joining us for their monthly Retail Fast 5 appearance, we have Michael Prendergast and Manola Soler of the Alvarez & Marsal Consumer & Retail Group. Manola, this is round two for you. I have to ask, what did you do to prepare for your return? You’ve got coffee in hand.
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What? What? What’s? What’s on deck for you as we go into your second guest appearance on the Retail FAST 5?
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I mean, listen, I’m just aggressively caffeinating and hoping, hoping for the best, but really excited to be back chatting with you guys. So had had a lot of fun to 1st go around.
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Yeah, so did we. Yeah. And fair play to you and and you and Michael, I mean it’s seven to show everyone how the sausage is made. It’s 7:00 AM in the morning here on Wednesday and we’re we’ve got this candle lit and we are ready to go.
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It’s definitely early today for sure.
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Yes, Michael. Michael, what number is this for you? You’ve made you’ve made several appearances on this show.
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It’s I was trying to think of that. It’s either four or five. It’s been a while. I got super busy second-half of last year, so I kind of took a sabbatical from this. But it’s it’s awesome to be back and see you guys and have some fun talking about retail.
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Well, we will welcome you back with open arms, Michael. Anytime you need to take a break from us and our listeners, we understand we we can be there. It could be a little much at times. Well, I was.
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Listening. I was listening from a distance. I just wasn’t participating as much.
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We’ll take it. We’ll take it.
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Dissipating in mind, right, Michael? Participating in mind, right?
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That was sort of Gen supporting you guys.
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We felt it.
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I’ll take all the Gen support I can get.
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Right now, right. We felt it. Well, Michael, let’s start with you quick. For those listeners who who haven’t met you yet, tell us a little bit about you and your role at A&M.
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So I’m a partner here at A&M in the retail group. I’ve been at A&M almost 6 1/2 years now. I was actually like I think employee number 15 in the retail group and now we’re almost 200. Wow, I was, I was in the industry for over 20 years. So I I spent a lot of time in places like Tommy Hilfiger all about Ralph Lauren, was in the street wear world and then was also CEO of a small cap fast fashion company.
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So I’ve got a pretty deep background in operations of retail. And then while at A&M, I’ve done a ton of transformational work to help companies either turn themselves around or achieve results that they haven’t been able to on their own. I also do a lot of interim work. So last year when I got busy, I was an interim CEO of a company out of the Midwest. So that’s that’s kind of the quick download.
00:03:34
Excellent. So happy to have you, Manola. Let’s hear a little bit of your background, too.
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Yeah, happy to. I’m a senior director with the consumer goods and and retail practice at at A&M. Been almost coming up in four years with the with the firm. My background is a little bit of a mix of consulting as well as industry experience. I started my career in the creative side of the house.
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I’m a fashion designer by by training believe it or not but you know quickly pivoted over to more business oriented aspects. But you know I just I love retail through and through and you know it’s been it’s exciting to have the opportunity to kind of see it end to end and here at A&M I do a lot of work with growth and transformation a lot of focus in apparel and beauty. So yeah.
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Yeah, that’s why, that’s why I love having you guys on because like you know we always joke and we always say we’re the media outlet for retailers by retailers and in a lot of ways you guys are the consultants for retailers that are former retailers and and or have a lot of operational experience in you fashion design background too. So that’s great. So thanks for being here. And before I get started though, I think we we have, we have like some some special programming notes for next week, right?
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We sure do. Omni Talk Listeners, you need to know that next week Omni Talk favorite Ethan Chernovsky will be joining joining us live on LinkedIn on Tuesday at 1:00 PM Eastern to discuss the five questions staring retailers in the face to start 2024. So if you are interested in attending, you want to catch the recap. If Tuesday at 1:00 PM doesn’t work for you, you can head on over to our Omni Talk page on LinkedIn and look at the upcoming Events section to register. It’s going to be a good one.
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Ethan always is a good time.
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Yeah, he’s, yeah, he’s been on, Michael’s been on our show a lot, but Ethan’s been on our show more than anyone else, I think, Right, Anne?
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For sure. For sure. Without a doubt. All right, Chris, that’s all I have. I think we should get to the headlines.
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I think we should too, Ann. It’s you know what? I got a special treat because today’s Fast 5 headlines are brought to you again with the help and support of Shop Talk. Oh my God, it’s starting off.
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It’s starting off again. I’m a highly caffeinated already, as everyone knows all this.
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Call.
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All right. As we have said many times on this show and Shoptalk is without a doubt the best retail event of the year. And this Friday prices are increasing. So do not forget to go to shoptalk.com and get your ticket. Shoptalk does everything better.
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First, the big things and they have the best speakers in retail of which I would include yourself and.
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Oh, and you.
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Well, thank you very much. Thank you. Thank you for that retort. An agenda that is, is necessary learning if you want to stay current in the retail industry, a meet up working program that is completely unmatched and they’ve got the best social events. The week always culminates in a beach party where people like Florida and Nelly have performed in the past.
00:06:33
I had to be very careful to say Florida and not Florida accidentally on that.
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One you not, you nailed it. You nailed it.
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But Shop Talk also takes care of the small things that can really shape your experience. We know because we actually go to this event every year. It’s so nice to have coffee whenever you want it, lounge spaces to relax in, quiet areas to work. It just makes the whole event feel a bit more luxurious than the average retail show. That is why such high quality people go to Shop Talk.
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We’re talking 75% of the attendees are actually director level and above. So if you consider yourself a retail leader, you need to be at Shoptalk. So again, prices increase on Friday. Retails and brands can use our code OMNITALK. That’s Omni talk with to save an extra 10% off current rates.
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They’re running out of VIP tickets. So if you want to apply for those, you better get on it. Go to shoptalk.com and book a ticket right now. All right, in today’s Fast 5, we’ve got news on Walmart shutting down store number 8, Wayfair laying off employees weeks after its CEO encourage people to work longer hours. I’m dying to talk about that one IKEA expanding its plan and order stores and something called Sephora Kids.
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What the heck is that about? But we begin today with big news out of Macy’s and.
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All right, headline 1. Chris Macy’s has rejected a $5.8 billion takeover from its activist investors, according to Bloomberg. Macy’s Inc said Sunday that it wasn’t interested in a bid from our house management company and brigade Capital Management to take over the retailer, claiming that the offer lacked compelling value. The investors made a $5.8 billion offer, or $21.00 a share for the company last month, and our house earlier Sunday threatened to take its offer to shareholders if the department store chain doesn’t step up negotiations. The offer represents about a 19% premium to Macy’s closing price on Friday.
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Also last Thursday, Macy’s said it would lay off about 3.5% of its workforce. Michael, we’re going to go to you first on this one. Do you think that Macy’s was right in rejecting this offer?
00:08:47
We do, actually. I think this is super interesting from a story standpoint. And this is, I want to say, the first chapter, but I actually think it’s the prelude. I don’t even think it’s the first chapter. I think that Macy’s, I’ve obviously been in business with Macy’s for almost 30 years and have done business with them and and watch them closely in going back to the the market stock market crash in 2008, 2009.
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I don’t think Macy’s ever made it out of there. They in our opinion from an operational standpoint, they’ve been a zombie retailer since then. So from a retail business standpoint, they’ve done a fabulous job of off laying their margin damages to the vendor community to help to support them. So at some point their retail business is going to cease to exist and and be a big issue which they’re kind of reaching that precipice. Now however, their real estate is absolutely worth more than what the bid was for the business.
00:09:49
So the 19% premium sounds interesting, but when you take a step back, it actually sounds completely inadequate. Because if you just think of the Herald Square location alone, I think they were quoting that location. And this is going back three years ago or so was worth $ 2 1/2 or $3 billion at least. And then you look at the New York City real estate market and you think to yourself a full block in the true center of Manhattan, like a true end to end 4 corner block. Like how much is that thing worth in the?
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The numbers are probably staggering. Could be double what they what they were offered.
00:10:26
This is so interesting just the like I mean I think it it does hit on the points that we certainly were wondering like is this something is the real estate alone the value here and it sounds like that’s that’s what you’re saying, Michael Manola, anything that you would throw in an ad here?
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Yeah, I mean I I tend to agree I think it feels like a like a low ball offer, right. It’s just you know the the value of the real estate alone is probably significantly more than that, right. So I I I think it’s the right call on too. But to Michael’s point, I think we’re we’re seeing the the beginnings of what’s probably going to be a very long, long story back and forth there, Chris.
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Where where do you fall on this?
00:11:08
I mean, I I agree with both of what Michael and Manola said. I mean, I think the interesting thing to me is that you know Macy’s as a retail operation, it’s hard, I’ve said this on the show many times. It’s hard for me to see how they are worth 20% more 10 years from now than they are today, given what Michael said, because they are, they’re a zombie retailer. You go in the stores, they, they, they actually feel like something out of the zombie apocalypse if you go into the wrong one on the wrong day. But the question then becomes, OK, at what point do the shareholders finally say, cry uncle and say, OK, we’re ready to, we’re ready to get out, we’re ready to cash in, we’re ready, ready to harvest the value here.
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And it sounds like that’s the ultimate question that’s still on the table is what is that inflection .20% given the figures that Michael threw out and you know, what the value of that New York real estate could be in terms of how he summed that up, I thought was brilliant. Just a question of when does it reach that point? And is there a bidder that wants it to reach that point, which actually may be, you know, the toughest thing to come by in my opinion?
00:12:05
Yeah. I mean and it sounds like, I mean my question was like where’s the growth that supports that demand? Obviously it sounds like the real estate market is where the growth is for Macy’s that supports getting or asking of more money. Michael, I I’m curious in closing, like is there any way that Macy’s retail arm you think can stay profitable like or that we could see an increase there? Like could they spin off like Bloomingdale’s or even Macy’s Backstage, which has seen a lot, a lot of growth?
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Like, do you think that’s even an option or is that just going down with the rest of the ship you think?
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Outlook is super negative. I think that the back backstage was sort of an I’ll fated move. I think they were competing in a market that shouldn’t be competing in and it dilutes their presentation in the normal Macy’s stores. They may have a decent growth rate there, but overall long term I I think that’s faulted. I think Macy’s itself it’s it’s just it’s from an era that’s gone by both socially and economically.
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So I think the future is not bright and Bloomingdale’s is interesting. But honestly, I think Bloomingdale’s has kind of caught a cold of the department store malaise as well. It was sort of a gem of department stores. But really, what does the department store mean in the US today? And then what does it mean 10 years from now?
00:13:24
I think it’s a really scary future. So my outlook is pretty negative. I don’t think there’s a lot that the retail business can do. And the other challenge for them is with Jeff Gannett’s retirement and departure. He is the last of a generation that was a tried and true retailer who came up through the ranks and has been there for 25 or 30 years now.
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It’s sort of this new world hybrid of executives that I’m I’m just not. I’m not hopeful for the future.
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Yeah, yeah, I would jump in here too because I think we do need to talk about the layoffs as well. You know, I think Michael’s point too about department stores in general. I was trying to dig out my old Forbes article where I called department stores the horse and buggy of the 21st century because that’s essentially what they are. But but the layoffs is an interesting point too. The outgoing CEOs, an interesting point.
00:14:12
Tony Spring, we’ve talked to some of the people that have been laid off. We’re hearing he’s kind of an old school guy, may not get digital that well. There’s potentially some dissension in the ranks. So. So you don’t you don’t know that this is going to get any better.
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In fact, it could potentially get worse since they went, you know, internal with that higher and Jeff Gannett didn’t blow the doors off anything either, you know, in his tenure, in my opinion. I’ve been very loud about that. So. So I think we got to touch on the fact that you know, this comes in with the backdrop of, you know, pretty pretty sizable layoffs once again.
00:14:43
All right. Quick thing. I mean the interesting thing about Jeff is I actually think he stemmed a lot of the bleeding of the business. So although he didn’t blow the doors off, I think he helped protects from even steeper losses. So all of a sudden you could have this tidal way of coming of of challenging business for them.
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And at some point, the main reason for Macy’s over the course of the past 10 years for all these big vendors was it was a retail access point. However, a lot of these wholesalers now have gotten into the direct to consumer business either with robust.com sites or their own retail outlets. So at what point does Macy’s become less important for them? And and again, it’s it’s going to get ugly.
00:15:29
Yeah. And the way I hear what you just said too, is he was essentially the bilge pump CEO, which tells you kind of why we’re in in in in the world that we’re in now in regards to Macy’s. All right, well, let’s keep rolling. Headline 2 One innovation lab closes while another one opens, and then I have some personal experience with these next two headlines, so we’re excited to talk about this. Opening some old boons.
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Opening some old boons, pouring some salt in, and pouring some salt got the Mortons out, and it’s ready to go. Two companies this week embarked on drastically different approaches when it comes to innovation. According to the Wall Street Journal, Walmart shut down its Store number 8 innovation hub, saying that many of the ideas incubated inside Store number 8 have either quote been adopted by the wider company or shut down as misses. And yet conversely, Target owned Shipt according to Chain Store Age has opened up a new innovation lab where Shipt will conduct experiments and research that includes things like drone delivery and fulfilment personalization. My always favorite, my personal favorite, no pun intended.
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Immersive and immersive shopping experiences in virtual environments such as the Metaverse and gaming platforms. Manola. Oh, I can’t even say that last one with a straight face. What’s your take on Innovation Labs? Are they the right way to drive innovation?
00:16:49
Listen, I think collectively not the most optimistic group on on the innovation lab front. I can’t think of many examples where they’ve been successful in actually delivering A meaningful innovation, right. Kind of disjointed from the business, feels like a thinking of capital, well-intentioned, sounds nice. It’s a great place to talk about AI. Everyone’s trying to you know full AI into something or other but but frankly you know lacks meaningful impact to the to the business, right.
00:17:22
What what does that mean to kind of reach rethink the shopping experience via the metaverse like what does that even mean, right. So I not a huge proponent personally and I haven’t seen many successful cases.
00:17:39
Yeah, I mean you have to wonder like why in a public statement you’re talking about the Metaverse for your innovation lab that that immediately raises an eyebrow and you’re shaking your head already. I haven’t really talked to you about this story. I we kind of talked with Manola and Michael before we started. So I kind of know where their, where their heads at with it. But where, where, where do you come down on innovation labs, having been part of a very big one in your previous career prior to Omni Talk?
00:18:04
Chris I’m going to quote my two of my favorite artists, Justin Vernon and Taylor Swift in the appropriately named song Exile. When we say I think I’ve seen this film before, Chris and I didn’t like the ending. We know from experience especially Chris when Shift is saying that you’re bucketing technology like the Metaverse in with personalization And some of the things that I do think Shift is, is valid in trying to dive deeper into what makes them differentiated from all the other third party logistics providers out there which is the personal shoppers like yes invest in technology to make that shopping experience better for your personal shoppers better for the customers. But as long as it’s bucketed in with things like the Metaverse unfortunately that’s subject to being on the chopping block right away and and you’re tied into other like non ROI increasing innovations like this is not going to bode well. You have to be you have to be championed by the right people.
00:19:03
You can’t be an A separate like tentacle of the business. You have to be part of the the business itself. And so unfortunately, I think Walmart’s doing the right thing here, knocking it out, bringing those people into the business and Shipt. I just, I appreciate them, but I don’t think this is a good move.
00:19:21
Yeah. And you have to believe too that that’s the product managers job, right, is to create new product efficiencies that make the shift experience better. So why do you need an incubation lab to do that? If Metaverse is part of that, that should just be part of their job day-to-day. But Michael, jump in here.
00:19:36
What are your thoughts?
00:19:37
I totally agree with what you’re all saying. I think you cannot force innovation. And when you try to force innovation, you almost get this fake innovation. And as I was thinking of as I was hearing what you were all saying, it kind of I was thinking of like if you want to start a band, you can’t pick 4 baseball players or 4 football players, put them in a garage and say go play music and get me new music. I mean, maybe they can play music, maybe they can play instruments, but you just don’t know.
00:20:10
And I truly think innovation rests in. The people that are driving the business, producing new product, designing new product, and sometimes it comes from really the most unexpected places. So it’s almost like if you set up this Skunk Works type atmosphere, it just feels very forced and then it turns into chasing the bright shiny objects. And that’s what I was hearing when I was reading all of these articles about the announcements. It’s sort of like we’re going after AI, we’re going after computer learning.
00:20:42
You know, customers want to have this ubiquitous access to product and it’s sort of like, OK, yeah, they do, but you can’t force innovation. It has to be sort of a natural occurrence that these outfits I just don’t think are productive and effective.
00:21:02
Yeah, I the points I, I, I agree with everything everyone said. The points I would add to it and you know it was interesting and and I talked to you a little about about this. I wrote an article in Forbes about Forbes about it this morning we interviewed Prathibha Rajashekar, the VP. I can’t remember if she’s SVP or VP of Stores of automation and innovation and stores and DCS at Walmart last week. And as I was doing that interview, what struck me was, holy crap, Walmart’s taking a really smart approach to innovation because they have her existing in the business and it’s her job to drive innovation on this front.
00:21:37
And she, she walked through three areas of innovation with, and it was, and she did it very clearly. ARE SLS, drones, and all of them made a ton of sense and she was incredibly articulate about it. And I said to myself, God, I wonder what this means for store number 8. And then like 2 days later, they’re shutting it down, which the other point it brings up is this is the last bastion of Marc Larc’s imprint on Walmart. I think it’s now been effectively washed away and a lot of store number 8 was started kind of under his guise or his lens from my understanding of it.
00:22:10
And you had a lot of these kind of like skunk works projects that didn’t make a lot of sense. And it seems like Doug Mcmillan’s been smart to wash them away because that’s the most important thing from my experience is to be a truly innovative company, it has to be supported from the top down, from the CEO. And that’s what Macmillan has shown. That’s what Furner shows, That’s what Bezos shows at Amazon. That’s how they go about it.
00:22:30
That’s how they approach that. And so that’s the fundamental lesson here, because you’re right. And I think if you’re on an innovation team, enjoy the fun work now, Enjoy the Metaverse experiments now, because chances are you’re going to be on the chopping block at some point when the board comes through and says, hey, you need to cut costs. And there’s a lot of layoffs going on in the industry, so it’s not a good or safe place to be.
00:22:50
Yeah. All right, let’s go to headline 3. Wayfair has laid off over 1600 employees in its last round of restructuring, according to Retail Dive. The job cuts, which mark the third round of cuts in about 18 months, affect 13% of its global workforce and 19% of its corporate team. The news also comes after a recent memo from the Wayfarer CEO that was leaked to Business Insider near the end of 2023 which said, “working long hours, being responsive, blending work and life is not anything to shy away from there is not a lot of history of laziness being rewarded with success.”
00:23:29
Boy woof.
00:23:32
Michael, I’m going to go to you first on this one. This is a loaded question, but what advice would you have for Waybearer’s CEO as he tries to navigate his way through all of this and tries to wipe the egg off his face? You.
00:23:48
Know he’s got to refocus his efforts. I mean, we do org restructures for a living, basically. It’s one of the major things that we do when I hear the numbers that he’s cut and then the the challenge I hear is 3 cuts within 18 months, something’s not right. They’re either not cutting effectively to where they need to get to and or the business is shrinking and contracting so dramatically, so quickly that the cuts just aren’t enough. And when I when I read through some of his his press releases, it feels like his focus is really not in the right place.
00:24:30
I mean it’s a very specific thing in reorganizing a business. You do it both financially and structurally to support the needs of your current and perceived future business. So from an org cut standpoint, it’s actually one of the most simple things to do as well as the number one rule in in doing org restructures is you don’t want to have to do it again.
00:24:56
You want to do it again, yeah.
00:24:57
And you really want to do it. Get it right, cut as deep as you can and then set yourselves up for at least 2436 months and clearly they’re not doing that. I think his focus is completely misguided because he’s not talking about growth from a top line standpoint, he’s not talking about EBITDA. He’s also not talking about what his customer needs at once are. So for for me, I would almost say leave the the restructuring to the tactical folks and focus your efforts more on how are you going to grow this business, How are you going to stem your losses and then how, how else are you going to make it profitable?
00:25:33
Because one thing I haven’t heard him talk about and I haven’t done a ton of work on this, but I guess I would suggest his focus be on the supply chain and the operational challenges in running a business like Wayfair. That business is highly complex in how you run it profitably from a supply chain standpoint, just based on the nature of the product that they’re offering and the breadth of skews that they’re offering.
00:25:57
Yeah. And I I think you bring up so many good points in that, Michael. I really appreciate your insight too, especially having having gone through reorgs at several organizations. Chris, I know that you are hearing a ton. You posted about this over the weekend on LinkedIn.
00:26:13
You’re hearing a lot from those employees who are have been impacted by this, especially where where do you sit on this and and especially given your experience at home furnishings?
00:26:24
Yeah, I want to, I want to. I’ll touch on that. I want to add on to what Michael said too, because I have, I have met the CEO Shaw a number of times, probably got 567 times in my life, had direct conversations with him. And the one thing I would say about him, he’s very left Brandon, how he thinks about the business. He’s very digital first in his mindset.
00:26:42
And that’ll come into some of my points too. But to Michael’s point about staging the layoffs, I think that’s actually a very digital first approach to how you even go about a corporate restructuring too. Because you’re like, hey, let me test the waters on this. Let me get the sea and see how it goes. Oh, if I need more, I’ll just do it.
00:26:59
The problem with that though is it’s a very impersonal approach to solving the problem. In theory it could work, it might be the best optimal way to do it, but it’s not when you get down to it because of the morale, the impact it has on the organization. So, but I think that’s an interesting lens to to add to what Michael said, but it’s your point. I posted this on LinkedIn this weekend and I looked this morning IA 150 thousand impressions already and here’s what I said. I said, quote Wayfair had a chance to redefine home furnishings retailing for the better.
00:27:28
But their absolute inability to put forth a compelling physical store manifestation of their brand over the past decade should be an indictment of the CEO and the entire leadership team. It’s time to bring some right brain thinkers into this organization and quote because that’s my thing is like how can a company that had the gift of the pandemic screw up this bad to the point where they’re doing multiple rounds of layoffs. I advised them actually directly in 2017 to Shaw and the rest of the leadership team to open up an IKEA like killer store concept. They didn’t do it. They still haven’t done it.
00:28:02
We haven’t seen anything from them and we’ve seen absolutely nothing. We’ve seen bupkis. So my question is, or my thoughts are that when I look back, I step back from this. I think there’s just downright mismanagement here and there’s a lack of a creative vision of where this brand needs to go. And with that said, I think there’s time for it’s, it’s probably getting pretty close to time for leadership change in my opinion.
00:28:20
That’s how you write the shipt.
00:28:21
Yeah. I mean, Chris, I interviewed Fiona Tan, the Chief Technology Officer of Wayfair at Shoptalk last year. And we were talking about, you know, how Wayfair was set to open a store this this past fall like they were.
00:28:33
Opening right?
00:28:34
Yep, they were opening it. She was thinking about it in the right way, where she was like, we want to take this digital experience that you have on Wayfair, that people are that people enjoy, that people like shopping and bring it into a physical space. And and clearly, like Michael was saying, like you were saying like they’re still hamstrung by something. I don’t know if it’s hubris, lack of agility, perfectionism, like cost. It’s really hard to identify what’s happening there.
00:29:01
But in the meantime, I think you’re losing morale of all the people who are there to make this, this stuff happen. You’re if if you’re worried about being, you know, your job being at risk at any given point, I think you’re really challenged to make any of this progress go forward and for the team to be able to think in terms of physical location and enhancing the digital business too. But Manola, I’ll let you have the last word here.
00:29:29
I mean, I I agree with with what what’s been said so far. It feels like death by a million paper cuts with this kind of, you know, trickling of the the now third round of layoffs. And I do think it’s a wasted spike in the pandemic, right. It’s kind of when are you going to see that type of growth and opportunity and probably knock on wood, hopefully never because that would mean we’re all stuck inside again. But but yeah it’s a missed opportunity to kind of rethink what does that mean for the the business in in the future how do they set themselves up for for success to Michael’s point with you know inherently complex supply chain requirements that the category has right.
00:30:10
So I it’s doesn’t seem like continuing to cut in small increments is going to deliver the the change that they need.
00:30:18
Especially with IKEA coming to eat their lunch, which we we’ll talk about soon.
00:30:23
Yeah, you’re right. Yeah, that’s a great, great segue. And yeah, and it’s, it’s sad because like the capital from the pandemic that they should have acquired has essentially been wasted to and they weren’t ready to go on a store concept that they could have where they that they could have used in deployment of that capital to take full advantage and and grow their brand even more. But all right. But before we get to headline 4 and IKEA, I want to ask you a question, Anne.
00:30:44
Yes, I.
00:30:46
Like these? You like these? OK, OK, good. After a chilly, New York NRF Yes, Are you ready for some warmth in our future?
00:30:54
Am I ready? Am I ready? I I joked last week like you got to start planning the next vacation while you’re on the vacation, so you have something to look forward to.
00:31:02
I actually hate doing that. I can’t stand when people do that. It drives me nuts. But but anyway, Anne, Well, if you are well, you should pack up your sunnies and your sun dresses because we’re heading to Palm Springs for eTail West, it’s the 25th anniversary of event It’s happening February 26th to 29th. And they’ve given us a special discount code for our listeners.
00:31:23
And the code OMNITALK20 for 20% off your ticket. We’ll be there last year from the show floor with the help and support of Firework and we hope you will be there too. Go to etailwest.wbresearch.com That’s etailwest-dot-WB Research-dot-Com and use code Omni Talk 22 Register All right Headline 4. IKEA plans to open four more of its plan and order point with pick up locations in the US this year according to Retail Dive. These locations enable shoppers to pick up online purchases as well as talk to sales associates and to order products there.
00:32:07
IKEA plans to open the new stores in Austin, Texas; the Atlanta metro area and also two in the Los Angeles region. And all are in addition to at least three plan and order stores with pickups set to open early this year in Annapolis and Gaithersburg, Maryland; That’s shout out to Gaithersburg for their first time appearance on this show and of course the always present Haiti, Texas Manola. This store concept, when you step back from it, is really nothing new. We’ve seen it before from places like Bonobos, Nordstrom, Local, many others as well.
00:32:41
Do you think IKEA’s taking a different approach, and will it work for them better than it has, say, for their predecessors?
00:32:48
I mean, listen, it’s not a, it’s on its surface, right. It’s not an innovative concept per sec, but I do think it’s well suited to the category, right. I think it’s a little bit different. If you’re going out to buy, you know, a pair of khakis, the immediate gratification of taking it home might be there. There’s very little immediate gratification in schlepping of Billy bookcase home when you weren’t like prepared to do that.
00:33:13
So you know, I think that makes sense. You know kind of have the interaction then either get it delivered or come pick it up at a time where you’re you know kind of prepared to to go ahead and do that. And I think they’ve also done, they had good progress in their kind of online ecosystem which was frankly lacking when the pandemic hit. You know those like $150.00 delivery fees made no sense with the with the price structure of the of their product line now they’ve made a lot of progress or you can get that bookcase delivered for 30 bucks, 50 bucks if you want it delivered tomorrow when you’re in your.
00:33:47
Home, right. So I.
00:33:48
Think they’re kind of piercing together an experience that makes sense for the type of product that they’re that that they’re selling and it doesn’t feel over over engineered, it doesn’t feel like innovation for the sake of innovation, right. If simple concept works and they can execute it but I think it it you know it’s to their to their benefit and lets them tap into you know a new set of of consumers potential.
00:34:15
Yeah, that’s a great point. It’s a it’s a smart way to test and learn. Yeah. Ultimately at the end of the day, that’s a really interesting point. And what do you think?
00:34:21
I want to know, I want anyone to respond with who enjoys going to IKEA and it that it is not a challenge to get there. Like you have to plan that it is not close. If you live in an urban environment, you are renting a car, you are borrowing somebody’s car, you have to drive it, get it stuff, bring it back, order or organize delivery, all these things like with only 52 locations in the US, IKEA is not an easy shopping experience for a lot of people. And I think this opportunity with these stores gives the retailer more exposure and it will be entered into the consideration set for more audiences. Again, stealing some share from Wayfair, you have lower prices that they’re doing across the board which makes it more competitive in that consideration set.
00:35:08
Plus it eliminates every one of the barriers to ordering online before. It’s like, OK, am I going to order this thing from IKEA? It’s less expensive it I can have it Shipt to my house, but if it doesn’t work then what do I do then how do I get it back? Now you have returned and pick up in a convenient location that’s closer to consumers homes. You are booking a time with somebody like we haven’t touched on the fact that, you know you actually get to book a time with an IKEA expert in this in these places where you’re they’re taking you through the maze of IKEA that I might not want.
00:35:41
Like it’s overwhelming to me. So now I have that opportunity and the last point that I’ll made is that I think $50, even though they’re bringing it down like Manila’s taking $50.00 for delivery when you’re an IKEA customer is still a lot of money for a lot of people. So I think that the idea that I can now pick this up and it there’s no charge to me for picking this up and still getting access to those products is brilliant. I named IKEA my retailer of the year last year. I think they’re they’re continuing on that trend.
00:36:10
Yeah, I’m gonna see I’m, I’m conflicted on this one. I’m. I’m conflicted on this one. And we’ve talked about this a lot. Like the thing, the thing, ’cause I disagree with you on what you’re saying.
00:36:19
Yes, that key experience is not something that people want to do, but it’s very efficient for the job you have to get done. And so that’s why you go out there. You spend the time, you go to this megastore. You can get everything you need to furnish your house in one trip.
00:36:32
If you can bring it back to your house.
00:36:34
Well, you, but you can also have it Shipt from the location too, like that’s if you want to.
00:36:38
Pay.
00:36:39
If you want to, yes or you, yes, right. So that is still a valuable, but you still can see the whole thing, you can see the full offering. That’s the thing that I think has to be brought in this equation. So because ultimately what you have here is just a store concept like almost every other furniture store that has ever existed in America, if you get right down to it. So I just wonder if the return on assets is going to be high enough from this versus, you know, is it just a better, more efficient trip for me to get in my car, drive the extra 20 minutes to go to the megastore wherever I happen to have it and do my shopping there?
00:37:13
I don’t know. For those reasons, I’m skeptical. I agree with with Manola, though, that it’s a smart thing to test, to prove wrong. But there’s a lot of things that have to be true for it to work, I think. But but Michael, what do you think?
00:37:26
Here? And then I’ll give Anne the last word, because she’s dying to say something in retort to me. I can tell already.
00:37:31
Two things. The 1st, in response to Anne’s question of what motivates you. I mean, a lot of the motivation is the Swedish meatballs there, right? I mean that’s kind of part of the reason you go to you’re speaking.
00:37:41
From experience, Michael.
00:37:43
Yes. So it’s it is definitely I think it’s both cumbersome and efficient to shop at IKEA. I actually love their expansion. I think what they’re doing is super smart strategically in in getting into this plan and order business. However, I’ve got a huge with IKEA and for me it’s a little controversial but it comes down to their products.
00:38:09
I know it’s more opening price to mid price, but I do think the longevity of their product is terrible and I can’t tell you how many people I’ve talked to that A, complain about putting things together and then B, complain about the longevity and the quality of the product over time that it’s it’s not great. So I think as they continue to expand that is really the main asterisks in their success. I think they’re doing the right thing. But it all comes down to product. If you have a good product, you can have a great business.
00:38:39
If you don’t have good product, you’re going to have the opposite of what grade is. And at what point do they start to expand out, saturate themselves in the market and then have a lot of people start saying, well A, IP is just OK product and does that ever come back and to harm their growth?
00:38:57
Which is also why Wayfair had a tremendous opportunity that they’ve just not capitalized on too, when you think about it from that context. But but and I mean and your point is that there, there’s still a big awareness play or a big availability play here for IKEA. So let’s give you the last word and then take us into headline 5.
00:39:12
Yeah, I think the the only thing I would say is that Chris, your point is valid in that you’re going for the single day trip. I think Michael’s Point’s valid about it’s the quality is maybe not not, not durability, but I think you need to really think about the where the opportunity lies with the next generation and with that entry point consumer who aren’t going. They they don’t want to go on that IKEA trip and now they have the opportunity to get in for some of the smaller items again that they didn’t have before. So I think that you’re looking at stealing share from places like HomeGoods, from some of the other, you know, like other other easy accessible discount furniture places. They’re going to start to steal share because the experience of shopping that retailer is changing, which is what IKEA needs to do in the strategy.
00:40:01
They need to have to capture that next generation of, yeah.
00:40:03
Target Walmart too. So so you’re saying Generation Alpha is non plus and to shop to go to a big mega IKEA store Segway?
00:40:11
Yes, Segway, let’s go to headline 5. Speaking of Generation Alpha, the concept of Sephora kids is starting to stir up some some controversy. According to CBC Canada, the question of why 10 year olds are frequenting Sephora is dividing parents, dermatologists, retailers and social media for groups that rarely are probably brought together ordinarily. But here we are as more children buy into expensive, elaborate skin care and beauty products. The Sephora Kids has over 330 million views on TikTok.
00:40:45
Most of these videos are adults complaining about kids wasting samples, being rude to employees, and spending large amounts of money on products for adults. Manola you were quoted in this article. They they went to the best of the best to get insight here on Sephora Kids. How do you think that retailers like Sephora should be thinking about and strategizing around Generation Alpha?
00:41:08
I mean, I think the whole thing is really funny, right? It’s like I I go through TikTok and I see all these Gen.Zers complaining about children in the in the Sephora’s and I’m like feels like Gen. Z’s starting to get old, you know, just.
00:41:21
Like.
00:41:21
Music’s too loud in here, You know, we can’t what’s happening? So that’s kind of it strikes me as as actually, you know, it’s funny, but if I’m Sephora, I’m happy, you know, because you’re getting that. It’s a new crop of consumers. You’re getting them, you know, in their early stage of kind of entering the, the category, which by the way, I don’t think it’s particularly early Like I remember, you know, I was probably the kid walking in the department stores like, you know, buying Mac lipstick and whatever, you know, when I was around that age. So I don’t think there’s anything particularly, you know, different about the time at which they’re entering the category.
00:42:00
But yeah, if I’m Sephora, it’s, it’s great. You know, it’s a new crop of consumers and an opportunity to do right by them. There’s a responsibility right, to not sell 10 year olds retinol probably. But it’s a great opportunity that you know for for them to kind of get a foothold on that that new cohort of consumers. And it seems like Gen.
00:42:19
Alpha is, you know, indicating that they’re interested in in Wellness and and beauty and kind of that self-care aspect, you know, So if I’m Sephora, I’m really happy. Gen.Zers, you know, now, now they know how it feels, I guess.
00:42:32
Yeah, no, I totally agree. I mean, I think that it’s, if you’re Sephora right, you want that business, every retailer is trying to go after that generation alpha, beta, they want to get it, get that business. I’m wondering and Michael, I’ll maybe throw this question to you because and I’m curious like would of I looked at Victoria’s Secret and when they they kind of created an alcove for PINK for that line that was going towards that next generation. Like, do you think it makes sense for Sephora to almost like carve out a section of the store to really like what The Drunk, Elephant and all these other brands that these younger teens are going after like to kind of give them a space within the Sephora?
00:43:15
Absolutely. I mean, look, this is it’s, I’m obsessed with millennials, Gen. Z and alphas and the whole conversation about the differences between the three. And when you look at the alphas, it’s basically the old tween market that everybody used to talk about. So for me, I’m shocked that people are shocked that this is happening.
00:43:35
It’s sort of a rite of passage 10/11/12. That’s where kids start shopping heavy duty. Clearly young ladies are going into Sephora and and shopping make up. So first of all, yes, absolutely distort to them. But the bigger thing also I think for alpha is this is completely not surprising to me.
00:43:56
This is the first real iPhone generation. Gen. Z had iPhones, but that was a generation where it was like, how old are you going to be when you allow your kid to get an iPhone? Is it 5th grade? Is it 6th grade?
00:44:09
Is it 7th grade? Alpha’s had iPhones a year and a half years old like they were handed iPads, handed iPhones. I’d see them all the time on planes and restaurants. So Alpha is going to be really the first discussion that or first generation that the discussion is going to be completely different because of the influence they have had of this ubiquitous access to anything and everything when they wanted it. So the Sephora thing to me is not shocking at all.
00:44:39
I actually think it’s quite hysterical and I think Alphas and Gen. ZS together are a highly important cohort because of their spending power and how they spent. Like, I don’t even think we’ve seen yet the buying patterns of Gen. Z and Alpha and how to really cater to them, right? I mean, 1015 years ago it was like, OK, if we open a.com site, we’re good because we’re going to capture the young generation, totally not the case today.
00:45:09
Like you could have alphas that have maybe never even been on a website to buy. They’ve only done everything through their phones. And then what are the applications for them also purchasing through social media. So I think it’s it’s a really interesting thing that’s happening.
00:45:25
Yeah. The spending power question is actually a good one because I think that to Manola’s really your point, like as a parent of a of a tween, like if they’re interested in good quality skin care, that’s actually like more of a necessity. I think the makeup stuff is a different story. They can go to the drugstore or or Walmart for that. But I think the skin care, which is what they’re really investing in here is something that I think more parents are saying.
00:45:49
Yes, not the retinol products, but yes, the skin care investment for a young, a young tween does make more sense. But Chris, I’m going to give you the last word here.
00:45:59
Well, I don’t, I don’t think I have too much of that. I mean when when you ask the question at the top like you know how should you be thinking about your strategy around Gen. Alpha. I just go back to like the Harvard Business School and the framework they put in put in our heads, you know ad nauseam which is like whatever strategy taxes you’re going to deploy, you have to be come to with the financial impact, number 12, the legal impact and three, the ethical impact, right. And so you get into some great areas without like the retinol example like Manola brought up.
00:46:21
But but ultimately at the end of the day, I thought your question to Michael was great too, because Ultimate just unleashes great merchandising and marketing like that’s what we’re going to see here. And it’s it’s it’s a really interesting question to try to answer if you happen to have a brand that resonates with that audience. And so we’re going to see all kinds of stuff. We’re going to see the store shift around how they allocate space, how they market the different products inside the store, outside the store, online via apps, via mobile phones. That’s what’s really cool and that’s what’s exciting.
00:46:49
Great point. All right, let’s go to the lightning round, Michael. You’re first here today, Michael. Jeff Bezos, home, where he started Amazon, is on the market in Seattle for a a cool $2.28 million. If you had that kind of money to spend on a home of some historical significance, what would it be?
00:47:10
For years I always thought I’d love because they used to talk about Bill Gates’s house being for sale in.
00:47:14
Seattle.
00:47:15
I always thought I’d love that. But now that you’re asking me, and this has to do with what I watched last night, I would. I would want the The house and The Godfather with the the movie producer, the horse head in the bed. That house is amazing.
00:47:32
Good call, I like.
00:47:33
That one, I think that’s also the Fletch house, if I’m not mistaken. Yeah, I have to check that, but I don’t quote me on that. But I think it might be all right, Manola.
00:47:41
Well, quick question, new Fletch fans or no, have you guys seen the new I?
00:47:44
I like the new one. It’s good. I confess it’s.
00:47:47
Very controversial, Very controversial. Some people are yes, some people are no.
00:47:51
Yeah, I liked it. I thought it was good. I thought it was well done. All right Manola, This one’s always hard for me to say. Swarovski has released a new pair of binoculars that retail for $4800 and can automatically identify 9000 birds via an AI powered system.
00:48:10
What other use case could you devise for such high-powered binoculars?
00:48:15
Wow, that’s that’s interesting. The honestly, first thing that comes to mind is I’d like to be able to know what shoes people are wearing on the streets. One time I was walking in New York and this woman had the perfect the new. It was like New Balance sneakers in the perfect shade of off white. And I didn’t want to be, but like, I didn’t want to be creepy and go up and ask her.
00:48:38
And I was like, it’s fine, I’ll Google it when I get home. Turns out there’s, you know, 30-40 different students. What is it bone? Is it moonshine? Is it what?
00:48:48
Oh, my God. Never bought them. Haunts me to this day. So yeah, maybe that those would have been nice to kind of whip out and know the shade.
00:48:57
Oh, all right. Manola, next question goes to you too. Chris, I don’t know if you know this, but our beloved In-n-out burger is closing its first ever location in Oakland, CA. Yes, citing crime and associate safety as the reason followed the closure. Manola, I want to know, what would your last In-n-out meal consist of?
00:49:16
So confession time it would have to be my my first. I have not had the pleasure and I I feel, you know, I hear the the legend and the the folklore around it and I feel a little bit left out, a little bit of FOMO for sure. But I don’t know what’s what’s good? What’s the?
00:49:36
Yeah, and what would yours be?
00:49:38
Mine would just be a a cheeseburger and a chocolate shake. No fries. No fries.
00:49:46
How do you do that? I’m.
00:49:48
No fries. See, I’m getting like.
00:49:50
Three fries in my last If it’s my last meal, maybe even 4. Michael, what would yours be? Double. Double I.
00:49:57
Would just go in as hard as I could on a deluxe cheeseburger fries if you couldn’t do the milkshake. The milkshake would put me to sleep. I would be don’t put me over there, but then a large Sprite. So you got to get the carbonated soda sugar in there.
00:50:11
Yeah, I’d get a cup of coffee. You’d have to roll me out of that place. All right, last one at UK startup Sear Grills rolled out the Perfecta, a new grill that can allegedly cook foods 10 times faster than what you’re currently working with. Its burners can reach 1652°F and could cook an inch thick rib eye in 90 seconds without flipping the meat. Michael, does the prospect of this grill frighten you or excite you?
00:50:42
Both. I Oh yeah, Both. Yeah. I love the fact that I can do something else quicker in my life, but then I’m like frightened of the fact of, like, how am I not going to burn myself doing this? Like there’s something that’s going to happen.
00:50:56
How is your house not going to start on fire?
00:50:58
Exactly how is because then you know, like in like a paper towel falls on there and then -10 seconds the whole kitchen is on fire. So it’s like, what do you do?
00:51:07
That’s like three times the average degree heat of like a a Weber oven, You know, or a Weber grill. That’s nuts. All right. Anyway, well, that was.
00:51:14
Wonder like, how does that actually really work? Like, is that real? Because the other thing I’d be frightened about is I’d burn everything.
00:51:20
I know, right? And you and you don’t have to flip it. So there must be something cool about the technology. You know, it’s kind of maybe George Foreman asked in a lot of ways. All right, well, that closes us up.
00:51:29
Great show today. Lots of insight. Drop happy birthday today to Matthew Lillard, Carrie Coon, and to the man who asked the very important yet still unanswerable question What do Tigers dream of? The great Ed Helms? And remember, if you can only read or listen to 1 Retail Blog in the Blog in the Business, make it on the Talk, the only retail media outlet run by two former executives from a current top ten US retailer.
00:51:54
Our Fast 5 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 we do it all just for you. And actually, our newsletter is no longer twice weekly. I got to update that and it is now daily.
00:52:12
Yes, you can sign up to get the Retail Daily Minute delivered to your inbox first thing every morning. Thanks as always for listening in. Please remember to like and leave us a review wherever you have to listen to your podcast or on YouTube. You can follow us today by simply going to youtube.com/OmniTalk Retail. Manola If people want to get in touch with you or anyone else at the A&M Consumer and Retail Group, what is the best way for them to do that?
00:52:36
Absolutely the best way is to find us online Alvarez and Mersal Dash crg.com or feel free to reach out to either myself or or Michael on LinkedIn.
00:52:47
Awesome. Well, on behalf of Michael Manola and and all of us at OmniTalk retail, as always be careful out there.
00:52:56
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