We are excited to welcome Rick Watson to this week’s episode of the Own Your Commerce podcast. Watson is the CEO and Founder of RMW Commerce Consulting where he supports investors and management teams (B2C, B2B, or Omnichannel) plan, execute, and optimize major digital initiatives. In this episode Watson shares his 20+ years experience in ecommerce and what brands can do to ensure their technology strategy is optimized to deliver results.
Rick Watson has spent 20+ years as a technology entrepreneur in the ecommerce industry, having worked with companies like ChannelAdvisor, BarnesandNoble.com, Merchantry, and Pitney Bowes. While serving as CEO of Merchantry, he led the company to a $30M acquisition by Tradeshift. Watson also directed the cross-border product strategy of Pitney Bowes, a $450M business, comprising Borderfree and the eBay Global shipping program. Today he is the CEO & Founder of RMW Commerce Consulting and hosts The Watson Weekly podcast. Fun fact: he has visited Siberia in Russia 3 times.
Jay: Rick. Thank you so much for coming on the show. You’re a hard mind to track down. You’re busy on every social media platform. Really appreciate you coming on. Thank you for being here.
Rick: No problem. Thank you, Jay. I appreciate being here.
Jay: Rick. Thank you so much for coming on the show. You’re a hard mind to track down. You’re busy on every social media platform. Really appreciate you coming on. Thank you for being here.
Rick: No problem. Thank you, Jay. I appreciate being here.
Jay: I have to say right off the bat. And I mentioned this as we were chatting a little bit before the call, but you’re probably one of my favorite people to follow on LinkedIn. So I’m going to throw that out there right off the bat as a kudos. And first of all for anyone listening. Yes, for those listening follow Rick Watson on LinkedIn. I’m just going to say that right off the bat. You’re unfiltered, you’re honest, but you’re not just unfiltered and honest. You’re very insightful too. And you have a way of seeing things for what they are and not for what maybe brands and people want you to think they are, you get right through to the truth on a lot of matters and you speak it.
And so it’s fun to read. And I was mentioning this to you before the show, but a lot of times your posts, like they make their rounds at our company. Someone will see, and I’ll pace your LinkedIn post and our slack channel. Like, Hey, anyone, see what Rick posted here? And so how did you get to being this guy that posts such interesting content? Who are you and how did you get to this point in your life?
Rick: Yeah, so it’s interesting. I’ve always enjoyed speaking and writing kind of going back earlier on in high school and college. I was on the speech and debate team. I was actually the only engineer on the speech and debate team. So that gives you something like a little bit of a clue into my personality. I kind of have both sides where I enjoy analysis and technology and those sorts of things, which is how I kind of love the digital world. But I also love communicating and working with people and not just solving technology problems for their own sake, but actually make doing something impactful and communicating with people.
So that’s a little bit about my background. I’ve been in eCommerce for the past 20 years. I started back at a company called Channel Advisor in 99, which is really one of the pioneers in e-commerce software market. And really got a lot of education there. Started as a software engineer. That’s my background in electrical engineering and computer science. And so kind of went through engineering and then product management. When channel advisor was 10 or 15 people to when I left 10 years later, there were 350 people. So that kind of success was not a straight line. We definitely had bumps. We went through the 2008 bust recession, like everyone else. And you learn a lot during those times too in regards to people management
Jay: And being in eCommerce during that, like 20 years. I mean, you’ve seen a lot. It’s like, it’s different generations of commerce.
Rick: 100% and seeing 99 and 2000 that early on, you saw the year 99 was basically like last year was, or like 2020 was for e-com, where there’s no stores, it’s only e-com and e-com is like, can’t go wrong. And to me that was like 99. 2000 was a little bit more of the wake up call because four months in you had the .com bubble bust. And all these high flying stocks, like the company we were at. We were at a Yahoo. Yahoo was at like 125. Their stock price was at like 125. And after the acquisition, by the time, six months it expires in the lockup period. Yahoo stock price was at like 10 or something. It was crazy. A lot of value lost at a short amount of time, but moved through a couple of different types of companies, been on brand side and vendor side.
So I spent time Barnesandnoble.com, helping build out their third party marketplace business at a software provider called Merchant Tree, as VP of operations. And then later CEO. So I’ve worked with boards, I’ve had to build organizations, been involved in the sales process for that company, which we successfully sold. And then in supply chain directly at Pitney Bowes global eCommerce team. And then in the last three years, kind of started my own consultancy and really my content as a way, number one is something I enjoy and just to have the freedom to enjoy. I wouldn’t do it if I didn’t enjoy it.
But for anyone in sales and marketing in the audience, I wanted to be able to not rely on other people to generate business. And the way to do that is high quality content that is consistent. And so early on when I started my business, I found LinkedIn to be one of the most effective channels for that. It was just off the charts. For me the ROI versus a blog or Twitter or LinkedIn. For me LinkedIn is the 80, 20 by far
Jay: I agree 100%, it’s on a bit of a resurgent now. If you take the same content, it might depend on your followers, you could say the same thing. But LinkedIn is the place to be right now. It’s TikTok for the younger creatives. It’s LinkedIn for the business professionals. And then you’ve got Facebook and Instagram kind of fallen a way in between there somewhere. But yeah, I couldn’t agree more. There was two things I wanted to dive into there. One is, so just on the 99, 2000 thing, do you think we’re in any type of a similar thing that might happen after the pandemic here? Like we saw more companies IPO in the history of the stock market last year.
I knew the number at one point, but it was like the market cap of the companies that IPO was, it was off the charts. We hit a record high in the S&P 500, like 70 days last year. And I know every time it’s a record high, but that was like a record for within a year. We’re seeing crazy funding and valuations that don’t seem to make sense. And I know there was a little bit of a correction in the last week, but nothing drastic like 2000. Do you think we’re in store for anything like that?
Rick: It’s a good question. I think in the short term, it’s certainly possible. In the medium to long term. It’s not something I’m too worried about. I think we have two things that are happening. Number one, is people, expectations got a little too high after 2020. And I think 2021 was relatively a correction because retail was completely shut down. And Facebook was at its sort of Zeneth of popularity. And so you had two things happen last year. Number one, retail opened back up and Apple took a sledge hammer to Facebook’s business model. And so those two things at the same time hurt e-commerce last year.
It didn’t hurt all the great e-commerce players that had multichannel marketing and great repeat customers and subscription businesses. So it didn’t affect a lot of some people, but others, it definitely affected. So that’s, I think one point. Look every week is different. I mean this week. I mean imagine three weeks ago talking about a World War, and now we’re talking about that and we are in a completely uncertain time and how that affects markets. I like to tell people, I do not give investment advice. I know they are financial analysts that follow some of what I write, but I’m writing about it because I like the strategy and I like figuring out what’s happening. I don’t write it so that I can make more money in the stock market. My investing is totally boring and I do not invest in individual stocks generally.
Jay: Low fee, index funds and just slowly. Yeah, it’s interesting. You probably get. I get a fair amount of them, but I imagine you probably get even more of the calls from all the analysts wanting an hour of your time for 2 to $300 per hour. We’ll pay you for your insights on this area or this area. Did a few of those way back in the day. And do you get a lot of reach outs like that?
Rick: I do. And I think like you, four or five years ago, I did a couple of them and I decided they are totally not worth it because the number of hours you spend coordinating and screening and filling out, I wasted five hours doing this and [07:55 inaudible] hour of my time, it’s not worth it.
Jay: I haven’t done one for years, but I did the same thing, used to do them. And just for those listing, there’s like people doing industry research will reach out to people that they think are thought leaders in an area and ask questions. I was more interested in the questions they were asking. I found that to be telling of what they’re seeing. And so I selfishly wanted to hear what they were asking. So anyways, enough of that, the other thing I wanted to touch on was I noticed you just talked about your love for writing. I don’t know when it was you posted about your daily schedule, you waking up, how much value you see in writing, what is it? You wake up at 5:00 AM?
Rick: 5:30, something like that.
Jay: And you write for a couple hours every day before you, tell me about that.
Rick: I think I might be exaggerating. So some people ask me about this. So I like working out three or four times a week. I work out in the morning. I’ve always been a morning person. So I’ll use that as my caveat. I’m not someone who would just sleep until 10. Like to me sleeping in late is like 7:00 AM. That’s late for me to wake up, even if I have nothing else to do. So that’s kind of the baseline for me. From a writing point of view, literally my routine every morning is I will browse the news. I usually sit down to my desk at about 7:30 and I’ll browse the news for 15 to 20 minutes just to see what’s happening in the world. I might answer a couple, like if there’s any critical I might answer, but I sit in front of LinkedIn and I will probably write for 15 or 20 minutes, is usually what it takes me to produce a post.
Sometimes I have the idea before. Sometimes it’s in the shower. Sometimes it kind of depends. If there was an earnings call or something timely, then it could be something like that. But it doesn’t take me more than half an hour, usually between 10 minutes and 20 minutes to post something like that, based on news that’s happening. To me it’s important to do that before I start the rest of my schedule, otherwise there are two reasons for that for me. Number one, is I think better earlier in the day. If I tried writing that at 3:00 PM every day, even if I would schedule it for the next morning, like the quality would be less because my brain’s already like tired.
Jay: Well there’s data that backs that up. That’s true of everyone. You make better decisions in the morning than you do at night.
Rick: And then second, I would lose similar to the reason why I work out in the morning. I feel like I would just postpone it or not do it later in the day. So I want to make sure, the consistency is so important to me and I am naturally very disciplined. So I’m able to sort of stick with it. And what helps is that I run my own business and I know if I stop marketing, like eventually my business will stop. So it’s almost like I treat it like breathing. You better not stop breathing because I won’t die that quickly, but in six months I’m not going to have as much business as I did prior six months.
Jay: What do you read to stay up on industry news, maybe about world news, like around e-commerce?
Rick: Wow. A lot of things. Number one is I’m in a couple of slacks for e-commerce folks. Second is like Google news has become pretty tuned for me for e-commerce. So that’s kind of my general news source as a baseline. The biggest sources are things like retail dive, supply chain dive, grocery dive, marketing dive, that set of publications. I get those everyday. Business insider is also very good, definitely Holland and Eugene Kim there in particular and Emma Costco, I think is at retail doc I believe still. Those three or four people I think are great. I do read things like retail touchpoints. There’s definitely a couple of other ones that are more minor like Axios is one I read for a lot of fundraising news, Dan Primack in particular, the Dan Primack newsletter, the free one. I don’t pay for anything.
I have a couple of Google alerts that I’ve tuned over the past just to catch anything. And I know they’ve become good when I can catch things before, like for instance, Axios publishes a fundraising announcement in his newsletter. I’m like, oh, my alert must be tuned well now, because I saw this yesterday.
Jay: Yeah. Google alert, I think it’s underutilized. We use it. I use it for, I mean, we track anything related to Bold, but related to also like eCommerce and checkout and just all kinds. But it’s such a powerful tool. Any particular newsletters that you get every day. I mean like retail, morning brew or things like that. I’m going to put all this in the show notes and just compile it as Rick’s list.
Rick: Yeah. I don’t do a bunch of newsletters. Some of them have gone paid. I just don’t pay for a lot of newsletters. I don’t know that’s just the way I am and news is news. And if you want analysis, like get it out there and like start a discussion.
Jay: Yeah. I notice actually people have commented on some of your content. Rick, you should start a paid, you should start. And you’ve said, that’s not how you want to go. You don’t believe in that.
Rick: Yeah. I’ve thought about it more than once. I definitely have thought about it. And I think, never say never, but I’m not planning on it anytime soon. I just think the value is so much and the people you meet it’s just interesting. And you’ll then meet maybe some CEOs over index to investors. What about the person who started eCommerce last year? Like those people want to learn too.
Jay: Yeah. So I want to dive into a couple things. I have a bunch of topics related to some content you posted, which I think is interesting, well, what you do. So I was reading through a bit of your background. So first of all, let’s give some background RMW commerce. You consult, just give me a little bit of background on what that is. And then I’m also really curious about your role with WHP. So first maybe let’s start with RMW commerce.
Rick: RMW Commerce is a boutique e-commerce consulting firm based in New York city. I actually just hired my first employee this year.
Rick: Thanks. And I do a couple of different things. My sweet spot customers are brands and retailers that are looking to digitally transform and taking advantage of these new channels. But lack the internal talent or vision to make it happen. Usually these are well funded companies that have been doing business the same way sometimes for 20, 25 years. Sometimes for 100 years and the internet and eCommerce. I mean, it sounds funny, but have come along in saying like I’ve had people literally on calls tell me that our team is afraid of eCommerce. Like that is a direct quote from some people I talk to and other things are like, we don’t know how to enter eCommerce without upsetting our entire customer base by which they mean [14:50 inaudible].
Jay: You still hear that today?
Rick: Still I hear that. And so as a result for me, there’s a lot that people need to learn. And so, I talk with CEOs, I talk with management teams and I talk with boards. Those are really the sweet spot of the people I like to talk with because as you probably see from my content, I’m not just focused on like conversion rate optimization or selling you a CDP or whatever it is that you unite need in a specific kind of point instance. I love people, process technology, strategy, all those things working together so that you can actually deliver something to a customer. And exceed their expectations. And that’s a lot harder than running an RFP to choose a new eCommerce platform.
Jay: And then with WHP, you were involved with. Give me a little bit of background on them, because I hadn’t actually heard a lot about them, but they work with a lot of large brands and you helped architect. They have kind of, is it like a homegrown e-commerce solution for a few brands or what is the storyline that?
Rick: So I’m not going to go into too much detail about all the specifics about what they’re doing, but here’s my role. I worked with WHP most of 2020, like literally during the pandemic for about a year. And I’m currently an advisor on their digital division, which is called WHP plus. So I’m a member of three or four of their board advisors still today. So essentially they are more or less a private equity firm that acquires good brands that are in bad situations. And their playbook, which is generally public. And I’ve seen Yehuda, who’s the CEO there talk about this over and over. They’re obviously a licensing company. Their job is to make money when brands sell things, but not operate the brands themselves generally, except for marketing. And I think the vision that WHP had, which WHP plus that they published and is very public, is they view digital as something different. Like digital, they view as the beating heart of a brand now. And the heart of brands world has moved from the fifth avenue store or Madison Avenue store as like the flagship to now it’s like your website and all your digital touch points.
They kind of view that as the future, which to their credit is totally true. And so I along with the WHP team helped architect, what they view as their digital platform to help differentiate them as they acquire brands, to make them more efficient, to gain exposure online and to help accelerate their digital growth online because the brands they tend to acquire are under penetrated digitally.
Jay: Okay. So I want to dive into your role with WHP. I found that really interesting because from what it appears is you’re helping brands move from a legacy way of doing commerce into a new way of doing commerce. And we’ve helped in that space too. So I know the challenges. Can you give me a bit of background? What was your role with that and what exactly are you doing with WHP?
Rick: Yeah. So WHP global for those who are not familiar, is essentially a private equity firm that does brand licensing, which what they’re doing is acquiring the IP rights to a brand and then not necessarily operating the business themselves. Usually the operations is handled by licensing partners, but then they collect royalties when things sell that use the brands likeness. And as part of that, they are definitely responsible for marketing promotions, sometimes relationships with retailers and other players. So my role with them and you’ve seen, like one of their first acquisitions a couple years ago was women’s fashion brand and Kline. They actually just, they acquired shortly after that, maybe like right when the pandemic was starting. Joseph Abud. They’ve recently acquired Lato, which is an Italian footwear brand for soccer. And they acquired the large estate in Toys R Us as well. I believe their owners of Toys, R Us.
So they are essentially taking what they believe are good brands in bad situations. And trying to rehabilitate them usually through a couple of different means. The first and foremost of which is, how do we take advantage of eCommerce, both own direct consumer eCommerce and marketplaces? They also obviously have a big international strategy because a lot of these brands are international in scope. For instance, one of the things, a lot of people in the United States don’t know is that despite the fact that all those Toys R Us stores shut down like five years ago or something like that now, they operate in something like a hundred countries. They have stores, Toys R Us stores in, which I didn’t know that. They’re in Canada, they’re in the Middle East, they’re all over the place, that you wouldn’t necessarily know.
And so these brands have a lot of international cache because they were strong US brands generally. And so that seems to be the commonality. And so they were looking for a partner at the time to help them build out a digital platform, which could be used to amplify their brand’s message and develop direct relationships with customers. So for them, that’s primarily direct to consumer eCommerce, which includes marketing, accepting orders, checkout, returns, kind of the full end-to-end process for working with them and their brand partners. And so they build, it’s like anything else, it’s people process technology and WHP plus is a division within WHP that performs all that work with the help of the brands.
Jay: Interesting. So I want to ask you, I reserve the right to ask one self serving question in each episode. I actually use to do this with a ton of guests, but I think you might have some interesting perspective on this and I respect your opinion and insights into things. So part of our thesis at Bold is that what we’re seeing and we believe in the near future, brands shouldn’t necessarily need to migrate eCommerce platforms in an entirety, in like the traditional way they always have, or at least not as much as they historically have. So like a new platform might not always be what they need, but maybe upgraded components of their eCommerce stack. And so part of the way, what we’re doing in the space is built on that thesis, is with Bold checkout, we enable headless API checkout experiences anywhere. While anywhere, everywhere and any way tailored to a number of criteria.
So it’s who the customer is, where they’re coming from? What device they’re on, what they’re buying? Sometimes one click checkout makes sense. Sometimes if it’s B2B, it’s a completely different story. Could be from QR code, could be from social media etc. Well, first of all, given this little elevator pitch on Bold. Hopefully I didn’t screw up our elevator pitch too much, but in your background, working with some of these brands, does that resonate with like that approach with those types of brands and would you agree that that’s kind of where things are going? And I know there’s a lot of debate about this right now on, whether that’s like the monolith, headless versus modular, whatever you want to call it, what are your thoughts around that?
Rick: Yeah. The fun thing about this space is that it’s something that’s still developing and we don’t know what the answer would be because you have the general trends. And you have the response to it, but you also have the incumbents. What we call the incumbents now are also responding to that trend. And so you have a couple of sort of battles happening. If you kind of go back, let’s say 10 years where ATG and Demandware were kind of in their ascendancy. And Demandware was really the first company to prove that a cloud based platform could handle industrial strip eCommerce, kind of at any scale.
And what we saw, I would say starting about five years ago, as some of their original people started to exit after the Salesforce acquisition, was kind of the ascendancy of the Shopify model, which is all right, everyone already knows that Cloud commerce can work, but it just needs to be simple and fast and cheap. And to me, that’s how Shopify really destroyed everyone else. That combined with their partner ecosystem and all those things. They were just good enough for a large swath of the very popular categories, like apparel, like home goods, like something that did not have completely complex requirements. And then from there.
I think the headless market and there are a lot of vendors in this market. Headless basically meaning or component based commerce or whatever name you want to give it. It’s something that isn’t dependent on kind of an all in one provider, which it’s a little bit of misnomer because I have yet to log into a Shopify installation with less than like 15 apps attached to it, including Bold in there. So you have the general trend toward not migrating eCommerce platforms. I think that it’s more or less true. And I think a lot of people are interested in that. I think what some of the players in this space miss, is that they are also not interested in taking a step back with how easy it is. And low total cost of ownership Shopify is, with regards to business users being able to make easy changes, not requiring, not going back to the bad old days of requiring big development teams to make a change to your fricking website, which I’ve seen some of these headless implementations that have gone wrong.
It’s not as easy as every vendor says it is, and it does require careful planning to make sure that you don’t get yourself in trouble with some of these headless platforms. And it’s easier to screw that up than a lot of people think. And so I think there’s that trend. I think headless done right, can be very good and business users can be. But I think it is harder to get right than adopting a monolithic platform, which it’s a little bit harder to screw up because you log in, you spend a weekend, your store is set up. If you want to update a page, now you may not be able to schedule that page or you might lose some flexibility on that. And I’d like to say that Shopify is a very not nice box or prison depending on who you’re talking to, depending on if your needs are served in that box, once you start to get out of that box, then your life becomes a little more difficult.
And it depends on how important that component is for you as to where you’ll have problems. I was talking with a client, where last week, they have over a million skews and you literally go and talk to Shopify, he’s like, yep that’s not for us. So what do you do? Like you’re suddenly in this whole other world where everything is a component and what does that even mean? It’s not like people remove their desire to have things easy and simple for their business users. They just want to solve these other problems that they have too. And so I think Shopify is trying to solve this as well with their online store 2.0. And so they’re responding to this sort of like never re-platform again, by trying to make sure you don’t move off of Shopify.
At the same time, you have all the big headless players, of which Bold is part of this ecosystem, not necessarily eCommerce platform itself, but like a major component in it, that are trying to ensure that they have a place in this world that no organization wants to go through a re-platform and migrate all their customer data to somewhere else. You know what I mean? Or all their catalog to someone else. That’s an extremely painful process.
Jay: Well, I think Shopify’s made some strides in that area too, where most large brands who use Shopify, they don’t use Shopify’s order management system. That’s a component that they use another solution for. They might not use it for content management or for product management or they might have a different blog tool that they use. So in kind of a smaller capacity, they are doing it. Eight years ago, well, we started with Shopify in 2012, and that was not as much the case at all. Like, it was just, you used Shopify in its entirety. I mean, staples is one of our brands and they would be considered a Shopify brand, but they’re very much a component based. They have one solution for their PIM, for their ERP, for their content management.
Shopify is kind of the hub in it. So that might not have been as easy to do, I think maybe like 5 years ago. But I think you’re right. I think you nailed it. I think they each have their uses and their benefits. And you see a lot of brands kind of testing with smaller product lines. It’s quick to launch on Shopify, get a site done, launch it, test a new market, new product line.
Rick: Yeah. It’s so funny because you saw this at a different level 10 years ago. The brands that adopted ATG and WebSphere let’s say 15 years ago, when Demandware came along, Demandware was like the quick implementation solution. It was cloud-based. We’re going to use it for our small markets. We don’t have to go through this big implementation and add it to our WebSphere bill or something like that, just to launch a market that’s less than 5% of our revenue. And I think even if you have this amazing headless solution for your primary market, are you going to launch that same solution in Vietnam or Australia? The answer is probably not 100% of the time all the time because those teams are different and the agency might be different. And the market, your marketing team might be different. And your speed to market might be faster than going back to the central agency or your central development team that is kind of working on that solution.
Jay: Yep. That makes sense. I have a couple notes here on some things you’ve posted over the last month or two that I found interesting. And I know you have a lot of thoughts on marketplaces versus I guess like direct to consumer, like owning your site. What are your thoughts? Is there a model that ultimately wins here?
Rick: It depends on who you are. It depends on what your goals are. A lot of it. If you are a private equity fund that is buying brands that is judged on Ebit and growth, and the brand is something that the average consumer would not be aware or search for, marketplaces can be a fantastic solution for 80% of your revenue. On the other hand, if you are a venture back startup that just raised a hundred million dollars and are expected to be the next great, I don’t know, watch company or shoe company or apparel company, and your evaluations are such that you better own that customer or else you’re not going to have a lot of valuation five years from now, then direct consumer better be your strategy. So to me, those are kind of the two extremes, where on Amazon, 80% of the people that are searching on Amazon aren’t searching for a brand. I think I’ve seen stats similar to that. You also mentioned things in notes, marketplace pulse a site I love from marketplace stats. They do a great job.
Jay: I’ll add that.
Rick: And so if you’re looking for, like, I’m just going to use an example, like floor mats for your car. You’re not searching for a brand you’re just searching for, I just want these things to work. And my [30:33 credit cards] with Amazon and I kind of trust the reviews enough to know that they’re going to work. I mean, there’s obviously still some stuff you need to sort through, and I’m not saying that Amazon or Amazon reviews are true because they are definitely not. But for a lot of brands, you aren’t going to go to a direct to consumer site to buy floor mats, it’s just not going to happen. Like there better be gold played or something. It’s a huge market for products that just fit better on marketplaces because that’s where the consumers are.
However, if your brand is unique and distinctive, and you’re kind of whether it’s staples or all birds or Adidas or Puma, or like just pick a brand that’s like on your desk right now, or even Apple, you need to be both places. And marketplaces are about convenience being where the consumers are, new product introduction and meeting new consumers who don’t know about you. Similar to retail itself and direct consumer is about all of those things, because you can obviously recruit people who are looking for you and maybe discover consumers who aren’t looking for you through like Facebook and discovery and TikTok and those sorts of things. But it’s also about providing the world class brand experience that sets the standard for the rest of the way you want to serve consumers.
Jay: I’ve seen an interesting trend lately with a number of brands and one comes to mind, they’re called liquid death. They’re one of our subscription brands. Fantastic D2C brand, love the team, love the product. I don’t know if you’re familiar with them or not, they make water, but it’s in a can that actually kind of looks like a beer can. They had a super bowl commercial that won a bunch of awards. It’s all these like eight year old kids. It looks like a frat party at college, but they’re all chugging water. And then in walks like pregnant mom and she’s chugging water from the can because it looks like beer, but it’s water. It’s like mineral water. Just a wonderful, wonderful brand. They hired a professional witch that they sent to the super bowl and they bet on the underdog, they bet $50,000 on the underdog, bought a ticket, a seat. And they hired a witch to throw curses and hexes at the other team, the whole game.
And it made tons of rounds all over the internet. Like they probably got more publicity from that stunt than any ad. But anyways long story short, fantastic D2C brand. They’ve got this cult like following, but if you go on their site and you go on their product page and they sell a case of water for, I don’t know what it will be, it’s like $19 or something. And then they have a add to cart. And then right under the add to cart, they have a buy on Amazon button and I’ve started to see a lot more brands do this. And I talked to a couple and they say that they see probably 40% of the people click buy on Amazon.
Even though they came to the site, they know the brand, they have a relationship with the brand. The trust factor with Amazon was so high that they know logistics are so strong. They’re going to get it in two days. If there’s an issue, they’ve returned things. They have their credit cards all in Amazon. It’s more like a trust logistic checkout decision versus anything. And for some over half of the purchases they click. It’s just like when you’re installing an app for your iPhone, if you are on a website, it would be crazy to install it from there, you click on install in the Apple app store, because it adds that trust layer. And then you hear this narrative around, which actually I want to read. Well, first of all, have you seen this trend or do you have any thoughts around this like D2C brands now using Amazon to layer in, like to remove that last layer of friction and trust or any thoughts on that?
Rick: Yeah. I mean, look, Amazon is, it defies a single description? What Amazon is now. It is a wallet like PayPal. It is a discovery engine and like Google because two thirds of consumers are starting their product discovery there. It is a phenomenal logistics company so you trust that it’s going to. And this was certainly true during the pandemic. To me, the most amazing thing about Amazon is I had the statement last year that during the pandemic availability is marketing. And if you unpack that, what it means is in a situation where supply is uneven, just having the product is sometimes enough to sell it. Like consumers are going to find you. If you actually just have it, literally have it. Just have it and advertise that.
And Amazon, the trust is so high that if they say it’s in stock, that it’s actually in stock and not only in stock, but the promise date is accurate and is to a world class standard, that direct to consumer is still so far behind that, to your point that it’s just unbelievable. And I think that trend is only increasing. I was reading something about six months ago that said Amazon as a brand is more trusted than doctors and the military, which is unbelievable. Because if you look at somebody like Meta or Facebook, they’re like worse than like, I don’t know.
Jay: It’s so fascinating. I mean, because when a brand directs someone to Amazon to complete an order, like they’re losing 15% or whatever their commission they pay on. So there must be that much more increase in trust.
Rick: To answer directly to your question. I have started seeing micro sites that are just fronts for Amazon, that are brands. And it’s just fascinating.
Jay: So like a landing page that they drive traffic to with the product, and then buy on Amazon.
Rick: 100%. Because a couple of reasons, number one is you can buy Amazon advertising and direct people to that site and that site can be indexed in Google. And if they know it’s on Amazon when you buy it, to your point, like conversion rates probably goes up because that kind of prime sauce it’s like there’s something to it. It’s hard to ignore the fact. And then this is something that Shopify I think is grappling with as we speak. Is if you buy on Amazon and you know when you’re going to get it, how you’re going to get it, you might think the rules are terrible and you might think the rules are unfair and you might think Amazon kicks off sellers for nefarious reasons, and they’re going to compete with you. But as a buyer, you know that you’re going to get the thing on time.
And you know that if you serve customers better, you’re going to rank higher. You just know it. And in direct to consumer, you don’t know it. And most importantly, buyers don’t know it because if someone says, oh, I’m going to get this thing in seven days, what do most Shopify sites say, oh, you’re going to get it in three to five days. You’re going to get it in five to seven days. Well, which is it? You know what I mean? Like, tell me when I’m going to get this thing. And most brands have no clue how to enable that Amazon top style experience for their buyers.
Jay: Well, it’s not just a wallet, like a wallet pay sure saves time. But it’s a wallet with the trusted shipping, with the known return procedures, with the free shipping, because you’re probably a prime member. It’s package all of that, put it in a button on your site. Like that’s extremely easy to convert. It makes a lot of sense.
Rick: To your point, it’s not just like what PayPal is or what Shop Pay is trying to be. Who’s trying to disrupt PayPal a little bit there.
Jay: So then there’s this narrative of Shopify as in the early days, it was Shopify against big commerce and then Shopify against Magento. And then now it’s Shopify, like the narrative we see all on social media is Shopify against Amazon and they’re arming the rebels. And you had an interesting point. Actually, I just want to read this here. You said it was pot. Is that okay if I read a quote?
Jay: You said it’s potentially zero some thinking. Like, I just want to say too, like I personally know hundreds of people who have a Shopify store and like we have 90,000 brands using our products and the majority of them also sell on Amazon. It’s not one or the other, we’re mutually exclusive. The people I know that sell on Amazon have never thought that it was competing to their store. It’s a channel. And so your quote was in regards to Shopify versus Amazon. You said, who needs, who here? And where is the big opportunity for Shopify to grow? Shopify has always tried to create this narrative against Amazon, painting them as the evil empire. Last year, Shopify even ended its Amazon connectivity, which like any tax discourages sellers from going to Amazon, even though you can still use third party tools, it creates friction. So ultimately if brand building and D2C, are the way forward and D2C revenue has higher margins than marketplace revenue. Shopify should be taking the opposite approach. Explain this to me.
Rick: What I mean is, if I’m Shopify in this. First of all, I always like to take similar topics or topics that everyone is talking about, just like look at them in a different way. And sometimes people get freaked out by that. I’ll take, and this is part of my debate background where I’ll wake up one morning and I’m like, what if everyone’s wrong about this? Like, how about I write about that? And then the next day I’m like, maybe my first idea was right. Maybe I’ll write about that. And people are like, well, I don’t know which one he believes. And this is one of those situations where I think the typical narrative is like, it’s like the Bill Gates style of competition, like if you’re going to go against someone, it has to be like a scorched earth war and you have to be totally against everything this person is doing.
I actually think that it would be totally interesting and completely valid strategically for Shopify to take the approach that we have 3 million stores, like the numbers I’ve seen, Shopify has 3 million websites active now. Nevermind the fact that a whole bunch of them probably churn that Shopify’s not telling you about those. And probably similar for Amazon. They have like 9 million sellers. So let’s say Shopify just use that numbers and the numbers aren’t accurate. I’m sure in any sense, but let’s say Amazon is three or four times Shopify, like whatever those numbers are. And so when I say, who needs who, I’m like if my goal is the longest of the long tail in the eCommerce world, many of them are on Amazon. I mean, there are a lot of them on God Daddy and WooCommerce and all these things, but Shopify’s already winning that war.
The stats say they’re taking a lot of share from eCommerce, but on Amazon, there are a lot of people that are on Amazon that don’t have direct consumer site because it’s too hard. They don’t know about branding. They don’t know about shipping. They don’t know about advertising. Even sometimes, despite the fact that advertising is way more important on Amazon in the past three or four years. That’s not their primary expertise. Their expertise is creating the product. Sometimes with shipping it. Sometimes they just outsource that to Amazon. And so if you’re Shopify and you’re like, we have the best way to sell to any consumer anywhere in the world. And you really believe that and what you should do is say to all of Amazon’s 9 million sellers, why don’t you set up a free Shopify store tomorrow?
We will automatically import all your data and then you’re going to have a website and we embrace everything. We understand everything you are trying to do on Amazon, you can do everything on here on Shopify, but here’s the two differences. Number one, you’re going to own the customer. And two you’re going to come up with a number. 15 to 30 points, more margin. And maybe that’s not true, depends on the brand and this and that, but whatever, but which brands would turn you down if they made that easy? That’s like one interesting question for me. And then two is, if they can’t do that, then Shopify has another problem. And that their message is actually wrong.
Jay: And why doesn’t Amazon give sellers that off ramp? I shouldn’t say offramp because they might continue selling. But I mean, if that’s the evolution or progression of a seller on Amazon, like the guy who makes wooden cutting boards, he doesn’t know how to brand, doesn’t know to build site. So he puts his cutting boards on Amazon. He starts to get some traction. And now he thinks I went through this exact process myself in the year, 2000. This is going to date me a bit. But I started selling online in 98. But back then it was eBay, not Amazon. So I was selling all my products on eBay and I was 18 years old.
And I was honestly like rolling in the money as an 18 year old. And I did that for a couple years. And then I thought every day I didn’t wake up and list more products was the day I stopped making money because I wasn’t building a brand. So then I started building a website and growing it, but it was the same thing. It was just back then. Ebay should have been what Amazon is today, but they went a different path. But why doesn’t, I guess they’ve tried it with Amazon stores, but is Amazon acquiring like a big commerce or something like that? Like something you think would make sense or why?
Rick: So a couple things, number one, they have acquired two stores. Actually one is more, so they acquired a business last year called SCLC. It’s an Australian based eCommerce platform, that’s small. And then they also acquired this Indian company called Per Pool, which is more of a POS. But you also see reports and I don’t know how Eugene Kim gets all this data. He gets all the confidential decks from Amazon and whatnot. Maybe he gets them from Brad Stone who wrote all these Amazon books, that Amazon has been thinking that they gave up too soon in the e-commerce platform market. Like, let’s say you take that as a given and you put that together. And like there are unattributing quotes to Amazon executives, saying that Amazon. Or Shopify made Amazon look like fools for abandoning this market based on the market cap of Shopify or something.
So if you put that together with the fact that Amazon has acquired two of these companies and they have an advertising platform and they have the world’s greatest fulfillment solution, a reasonable person maybe might suspect that Amazon might be working on something. All I’m saying is that it seems totally possible that Amazon is interested in this direct to consumer space. To your point, a business like this for Amazon, I would say Amazon really has two primary businesses. One is kind of everything that’s powered by prime, their marketplace, their retail, even Alexa, all these things are powered by their retail business. Their second major business, which is bigger than the rest of Amazon, if you believe some investors, which is AWS, it’s its own ecosystem. I mean, the fact that you are an AWS customer, it doesn’t get you better rates on the marketplace.
So there’s not like reinforcing flywheel necessarily between those two businesses from a customer acquisition point of view. And I think if you think about, if Amazon were to build an eCommerce platform, it would be more like AWS, it would be like their marketplace, unless they were able to tie in some of their advertising power and their fulfillment power, to make it really cheap, really easy or both or something to be in the Amazon ecosystem. You know what I mean? Otherwise you’re competing head to head with Shopify at their strength, which is to me not something Amazon is likely to do. They’ll probably take their own Amazon way about it. That’s my thoughts on it.
Jay: Yeah, it’s interesting. I sometimes think like what’s more likely, Amazon to get into the e-commerce space or Shopify to get into the marketplace space? But the lines are getting well, not blurred, but Shopify is definitely leveraging benefits of the large number of sellers. We saw it well attempted with their Shopify fulfillment. You see it with shop pay, you see it with shipping rates and any other well shop app tracking orders. Now they’re surfacing some products in there, so it’s not a marketplace, but they’re leveraging, there’s value-added because of the number of sellers. I mean, you definitely know, I’ll put it this way.
Like you definitely know when you’re buying from a Shopify store versus if you buy from any other platform you typically wouldn’t know, like if you’re shopping on a Demandware site, unless you know that, like most Demandware sites look the same, but to the average shopper, you wouldn’t know, but that’s not necessarily the case when you’re shopping on a Shopify site. And that wasn’t the case, like not that long ago. So it’s interesting and people don’t seem to be too perturbed by it. As long as the added value always increases to the merchant. Where do you think that’s going to continue to go?
Rick: I mean, I think a couple of things, number one is they have to keep working on shop app because I think by itself, it’s kind of not enough. I’ve seen recently they’re hiring more engineers on it, including for things like search and discovery. So despite Toby saying we’re not going to be a marketplace, it is entirely possible. They could have marketplace like attributes for all intensive purposes. I think Amazon has tried the eCommerce store thing a couple of times, kind of going back to your eBay 98 days, in 99, they had this thing called Z shops. That completely failed and was a previous incarnation of a store, then before their marketplace, which did so well. Before that they tried to clone eBay with auctions, which also didn’t do very well, around the same time. And they introduced e-commerce platforms. I don’t know, eight years ago. I don’t know where to place it.
And then they got of the business, but that wasn’t the first time they had tried a formal eCommerce platform either. So I think if Shopify is going to become a marketplace, I think it really needs to commit to it. And I think it will hurt them a little bit in their mission of being the best friend of the merchant. Because I think the world has already seen what is the idealized version of a marketplace. It’s what Amazon and Alibaba have built. We know what that looks like. That is the best marketplace in the world from a conversion point of view. If anything short of that is going to be like an Amazon that’s not as good.
And I just don’t think that’s a winning strategy for Shopify to build something like that. And I think Shopify believes that too. And so they need to find their own similar to like, if Amazon were to go into an e-commerce platform, it can’t just like buy big commerce and expect that to do well. They need to do something different that leverages some of their other assets. And I think Shopify needs to think about the same thing, just in reverse.
Jay: And I think that is the path they’re trying to go down and hopefully they continue. So what would you say is, I know we’re running outta time here, but I want to get a couple more quick questions. So the biggest thing Amazon needs to do or continue doing in the next five years to win and biggest thing Shopify has to do maybe in the next five years to win.
Rick: I think Amazon. I think the biggest thing is to ensure that their customer experience stays good. The biggest risk of being the best marketplace that everyone goes to is that it can easily become polluted. And so quality is so super important.
Jay: Yeah. That trust quality, that underlying trust factor.
Rick: Quality of search results. Quality of products. The biggest risk that Amazon has. And it’s really the biggest risk to any marketplace. It’s not the fact that the buyer, isn’t going to pay you, but it’s more like there’s a seller on there that is selling things that aren’t real. So when I was running Barnes and Noble marketplace, every morning, I used to wake up and delete sellers, literally delete sellers that were selling box sets of war rings trilogy for half of what I know Barnes and Noble could get. And over the course of a year, I probably deleted thousands of listings. And I never heard one time from those sellers that, Hey, you deleted my listing, you shouldn’t have.
It’s because they were all fake, 100% of them. And so the biggest risk to any marketplace is either that the content is wrong or misleading or the reviews are wrong or misleading or the seller is not who they say they are, or it’s not going to get there on time or the product doesn’t work like it says, like all those things are to me the biggest risk to Amazon by far because they have nailed all the other things. Like this is what’s left for them to screw up. So that’s the part you worry. And that includes by the way, like populating 90% of pages with ads, which Amazon of 10 years ago would never have done. So that is somewhat of a risk too. I think it’s a little bit lesser risk because I think they’ll probably stop before it gets too late.
I think Shopify, what they need to do is really focus on the needs of their sellers. And I think they need to stick more to software than to logistics. I think there are plenty of things that Shopify can do in their solution. And I think if you saw on Twitter, one of the founders of native, Moise, gave a nice thread back in the time a couple weeks ago, when all this Shopify news was blowing up, that Toby even responded to, about subscriptions and about payments. And it was just a list of things that Shopify needs to work on. I just think there’s a lot of things on the front end that Shopify could improve. Like it doesn’t have a great CMS. It doesn’t have a great edge CD, like this hydrogen and oxygen stuff that they’re working on.
And online store 2.0, they’re working on for a reason because their traditional CMS and [52:39 inaudible] system is getting a little out dated and it needs to be modernized a little bit. And so I don’t think they’re at risk to losing their market position as long as they just need not to drop the ball at all. They need to keep working on it because if they stop, their competition will in a couple of years pass and maybe they pass them now, but Shopify is so huge that they’re not in any danger unless they stand still for three years. You know what I mean?
Jay: Was that native deodorant like that company?
Jay: I didn’t see that thread I’ll have to take a peak.
Rick: It was a cool thread.
Jay: Who do you think is, Hey, there’s been a lot of interesting Twitter threads lately. Seems to be the new new thing to do. So then I always wonder, I mean like the way Shopify disrupted the industry is they came in from the bottom. Like, they came in and they democratized commerce, they had totally plans for $9 and $19. Do you look at like one brand that I just find flies under the radar, I don’t know if it’ll, but like Weebley and like Square acquired Weebley and they say they have like, I don’t know what it is now. I looked a little while ago and it was like 500,000 E-stores. And now if you go to Weebley up on the top, it doesn’t just say Weebley. It’s Weebley eCommerce and it’s Square and Square owns them. I haven’t seen much come from that acquisition yet, but that’s one I’m keeping my eyes on. It doesn’t seem to get as much attention maybe as it should, but that’s one I look at a lot. What are your thoughts on that?
Rick: Yeah, I think what Shopify, the biggest note. Shopify has a couple of things going for it. One of the biggest notes mosts Shopify has is two things. One is their developer ecosystem and their agency ecosystem. And I think a lot of people really underestimate that. And they are so far ahead of the rest of the industry in those two areas for a lot of really smart reasons that they thought about early on. Just kind of why they are where they are today. And for certain sites, I think it works just fine. Just like I can set up a Squarespace site. I can even transact some Squarespace. The broader point you’re making though, I think is a really good one, that I think one of Shopify’s only existential threats is kind of a low-end disruption of the market, is kind of that creator influencer economy, which is like these micro entrepreneurs, who grew up on Instagram and now are growing up on TikTok. And are selling a lot of stuff through their audience.
And they really don’t need Shopify, to be honest with you. If you think about it really hard. They need like a couple of pages and they need fulfillment, that’s what they need. Because they have the audience, they don’t need to like install Shopify and then install 20 apps and then find a freaking agent, like it’s too complicated. And so I think in that segment of the market, which again, not all of those people are going to become brands that you and I have talked about like liquid death and others, but there is definitely a segment of the market that is vulnerable, more vulnerable than other places to low hand disruption.
Jay: Well, it’ll be interesting. I wonder, my kids, when they’re older, will they be logging onto a store to shop or will it be, they’re watching a movie and it’s on Netflix. The one that really boggles me is that Amazon hasn’t monetized prime in some way where you can pause it and you can see all the actors that are on that scene. I’m really surprised. I can’t pause it and see the products that are in that scene and like the purse that that girl has or the shoes that guy’s wearing or the watch. Like to me, these are the places that commerce will happen. It’ll happen in context of what people are doing. There’s no reason to send someone to a website if they see it on Instagram, buy it right there. They see it on TikTok. They see it on Netflix. They see it on. I mean, Netflix could have their own shopping channels. I mean, I don’t think they need the channels. I think they just need to integrate it into the existing experience.
Rick: Yeah. It’s a cool idea. And somewhere an Amazon employees listening to you and incorporating that into a six pager or something.
Jay: There we go. That’ll be the next like AWS. It started from an internal employee. This has been fantastic. I thank you so much for your time. For everyone who’s made it this far in the episode, where can people follow your fantastic content? I highly recommend everyone listening, follow Rick on wherever he tells you to go right now because we enjoy it. His posts make their rounds at Bold. Where would you like to send people?
Rick: Yeah, kind of the home base from a director consumer, I have two places a director consumer site and a marketplace. So direct to consumer is RMWcommerce.com, which is my company. A lot of my content ends up there, as well as you can see the links to my podcast, which you can search for an Apple or Google or whatever podcast you like called the Watson weekly
Jay: Great podcast, by the way.
Rick: Yeah, I appreciate it. Linkedin is another place you can go to search for Rick Watson and I’ll come up to, if you like look for Rick Watson Ecommerce I’ll be in there. Follow me on there.
Jay: No one should rank ahead of you for that. Thank you so much Rick. This has been alot of fun.