The Disney Hotel VR Headset

EP306 - Apple WWDC announcement, Generative AI, and Holiday First Look 

Apple previewed a new mixed reality headset called the Apple Vision Pro at it's Worldwide Developers Conference (WWDC) this month. Apple calls the new category spatial computing and we speculate about how it may or may not be a big deal.

We also discuss the latest Echo hardware from Amazon, which is mostly disappointing.

We discuss the rapidly evolving generative AI space and some of the commerce use-cases.

And we take a first look at Holiday 2023.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 306 of the Jason & Scot show was recorded on Thursday, June 8th 2023.

http://jasonandscot.com

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

Jason: [0:23] Welcome to the Jason and Scot show this is episode 306 being recorded on Thursday June 8 2023 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo. Scot: [0:38] Hey Jason and welcome back Jason Scott show listeners well it's been about a month our weekly pot has become a monthly cut pod because our lives have gotten pretty busy here in this postcode world I know you've been traveling a lot what else is new with you. Jason: [0:57] Yeah yeah it's finally feels like summer which I'm very grateful for, a lot of interesting stuff going on in the world of Commerce that keeps me engaged but I feel like the main reason our podcast is slow down is because you are an entrepreneurial mogul. Scot: [1:15] I don't know about mobile but I'll take the entrepreneur piece yeah the day job is a occupying 100 or 99 point, eight percent of my time and I used to be able to use speed like 97 and I could squeeze in more time so I podcast start button but got a there's a lot of cars out there to take care of and we're doing our best to get to all of them. Jason: [1:35] And we are grateful for it I feel like I'm I'm going back in time about six months because we've been on such a leg but I feel remiss. There was a huge accomplishment like six months ago you were named one of the founding members of the. Marketplace Hall of Fame. Scot: [1:57] I saw that yeah yeah. Jason: [2:01] Here's the thing I'm going to say about that I didn't know that much about it and I don't think anyone would be surprised to hear you're a founding member but like. Don't like five names and it was like Jeff Bezos Mar Quarry. And you and Jack Ma I'm like I'm like man you are going to be the best looking dude on that Mount Rushmore. Scot: [2:24] Yeah usually I'm I'm kind of Groucho Marx not sure I want to be in the club but this is one I was very happy to be being is like me and like three or four other billionaires all I'll take I'll take being included in that group. Jason: [2:39] Yeah yeah you don't want to be the fanciest house on the Block so. Scot: [2:42] Yeah I got a yeah I'm I'm excited I'm punching way above my weight on that list for sure. Jason: [2:48] Yeah well so anyway congratulations on that for sure I know and westerners would appreciate it and then while I'm thrilled for summer I've been a little down about one bit of news. Scot: [3:00] What is it Jason. Jason: [3:01] Disney click closed the Star Wars Hotel before you and I got to go there. Scot: [3:08] Yeah I know we could have done a live stream when this thing was announced I was excited and then I saw the price and then I saw the promo video and then I saw the reviews and you could just tell they had totally the totally whiffed on the whole thing it was. It was it wasn't just kind of a hotel you stayed at you had to just do that thing alone you didn't have to but it was so expensive. You're paying like two or three thousand dollars a night which I don't know this gonna be some. Someone in California makes these decisions I guess I don't understand the the tolls of the everyday American or even the higher in Star Wars hand that's a that's a big ask and you know I'm not in the cosplay so I think they had this if we kind of put on our marketing hats they had death by a Thousand Cuts so you had to be a Star Wars fan number one number two you had to be willing to spend 5K on this fancy hotel experience number three had to be in the cause playing and then number for the experiences that people that try to gave it you know at best a. Jason: [4:11] Yeah mediocre. Scot: [4:12] Yeah it felt very Star Trek e which is definitely a problem for Star Wars fans and you know it had a lot of kind of fun Spacey kind of vibe but like not enough Star Wars so yeah but you know. I'll say kudos to them for trying but it was an expensive mistake and I'm sure they can repurpose the real estate it's not like they're gonna I'm not shedding a tear. Jason: [4:36] Real estate has been depreciated I'm sure. Scot: [4:38] I think they'll be okay but yeah you know it is bummer because I was kind of hoping it would work, I've done some other Star Wars experience you'll stuff that was really fun there was there's this group in the UK and they go create movie scenes and industrial areas it's really weird the way it's described is called like underground movies or something like that they did a Star Wars experience that was like amazing where they had a Cantina I guess galaxies Edge is kind of like yeah. As when I mean I haven't been yet but I'm actually going to go this summer so I'm excited about that all. Jason: [5:11] Yeah it's really good you should. Scot: [5:12] Yeah everyone says it's good so that's on my list. Jason: [5:15] Yeah I'm in the same boat like it I don't feel like I'm disappointed that I missed it because I feel like. It sounds poorly executed in poorly conceived but the high-level concept of a. Experiential Star Wars Hotel experience I was super excited about and I hope the fact that this does didn't work isn't going. Like slow down future future ideas on that space because it could have been cool if they did it really well. Scot: [5:44] Yeah yeah I don't put salt down. Jason: [5:47] Onto something more reliable Apple announcements. Scot: [5:51] Yeah this was exciting so I'd love to get your take on the Apple Vision Pro so first of all the the earlier announcements I was kind of like I was getting a little concerned because they're like you know coming up the biggest new feature in Mac OS is a really cool screen saver and then the phone had a new sleep display mode I'm like, we've kind of jumped the shark if this is the big new OS features there were some other ones and I'm being a little bit facetious but there were there were to say there were minor tweaks which is kind of a Fair assessment I think. [6:24] And then they finally gave us that one more thing that we've been waiting for and I went and our crack staff of interns went into the Jason and Scot show vault and you and I and 2016 gave a talk at an in our F / shop dot-org event where we were asked to talk about the future of retail and in there I remember I pulled up the presentation we talked about drones and 3D printing and then we talk about a rvr and at that point in time Facebook they're used to this company called Facebook now you may know them as meta they they had just acquired Oculus and we were speculating would Apple enter the game and turns out we were right but like many of our predictions we were maybe a little early if I've done the math on this right we were about seven years ahead, but I think the wait has been worth it because they definitely swung for the fences on this one and you know the the feature sets and the user interface no one none of us have experience to have read the reviews of folks that have sounds like it I can't wait to get my hands on one and I'm definitely ordering one so excited to hear what you think. Jason: [7:37] Yeah yeah so maybe half a step back Apple tends to do two big events a year they and they do as software announcement and they do a hardware announcement this is normally the software announcement where they detail all the. New releases of the various operating systems for all the devices and they do sometimes, launch devices at this which they did again they launched a number of new configurations of Max and then in like September they announced. The hardware which is up you know generally includes a new phone for October. So you don't necessarily expect a huge new hardware product at this announcement and I was I was kind of with you most of the OS and announcements were very incremental the new. Computers were all like like very very incremental there is like. [8:35] The new 15-inch the the MacBook Air is now a 15 inch. So that's maybe going to be an appealing laptop for people that want to pretty powerful laptop that's super light. But I will say there's a number of small enhancements in the OS has that I'm looking forward to like they their incremental but they did you know call out a number of sort of pain points where like. The autocorrect on the keyboard can often be very annoying and they're going to use a large language model too. Um what you keep your curse words and proprietary language a lot easier and, a few little bits like that and then yeah to your point like at the end they go and one more thing and as I assume most of our listeners know that's magic language at Apple, that's that's the language Steve Jobs used before he pulled the first iPhone out of his jeans pocket or the first MacBook Air out of the manila envelope and you know that language has been used to introduce a lot of apples game-changing products and it frankly hasn't been used very much. In the in the modern era so the mere fact that they started the innocent reduction with an one more thing tells you that Apple thinks this is a. In extra big deal and. I'm with you like I will I'm embarrassed to say somewhere in some ways I will probably buy one I think there's a bunch of. [10:03] Cool things about it like the the hardware achievement is is pretty impressive so this is a. They would be pissed at me describing it this way they invented a new term they call this spatial Computing but it's a it's an AR VR headset and it kind of looks like ski goggles. And you know a lot of people had predicted this and their renderings that weren't too far off but the hardware is beautiful as you would expect from Apple it has a bunch of Premium finishes it is not an accessory that talks to a computer a phone it's a. Computer that you wear in your face and in fact I think it has to M2 chips in it. And in the specs are really high each eye has more than a 4K screen so very high resolution VR headset and the latency, it has this Mode called pass-through mode which means there's cameras in front of it and it can feel like a transparent visor because. The the cameras see outside and then you know project that onto these two 4K screen so it makes it feel like you're seeing through the visor and it's in full color at 4K with less than 12 millisecond latency which is. [11:20] Other VR headsets have a pass-through mode like the Oculus has a black-and-white pass-through mode but the latency is. As much there's a lot more lag and so that creates like all these like motion artifacts and stuff. That this is all very premium high-end Hardware which seems, pretty cool and so the experiences seem cool everyone I've read you know just got to actually try it thanks though I. On your face experience was vastly better than any other a rvr. They had experienced and then they also you know brought in Bob Iger from Disney and who announced that they were doing a bunch of proprietary content for the platform which is a. Another exciting thing right because the these headsets are only as good as the. The content you have for them so all that to me was super favorable the things that they're rightly getting knocked on is you just talked about the price of the Disney hotel being unrealistic they didn't really even mention the price in this announcement but they released it afterwards and it's the base price is going to be over 3500 bucks and if you're blind like I am you're going to have to then buy some prescriptions Iceland's is that screw into it. And so it's an expensive device. [12:43] It also has kind of mirror battery life like the there's a small battery on the device but in order to get a two-hour battery they make you put a battery pack the size of an iPhone in your pocket and connect it via a cable, to the headset and that gets you two hours which frankly isn't even enough time to watch a lot of movies that are out these days. People have talked a lot about it being really heavy. On your face because of all this like you know metal hardware and premium materials that it feels pretty pretty meaningful on your face and then the biggest weird thing to me. In the announcement they made multiple they took multiple occasions to talk about. [13:28] How important what they called presences right so they talked like there's a lot of new features and all the OSS around FaceTime. And making it a more useful meeting thing and and all of those features were around making you feel like you were. More together with the people you are FaceTiming with and when they first show this, this apple Vision Pro experience the first thing they show is video conferencing with other real people and how their faces are floating right in front of you and it you know it's this great presence experience. Except for anyone wearing. This bloody device because guess what you don't get is a picture of the person wearing the device wait what what you get is a. Uncanny valley like semi-realistic Avatar of the person. [14:18] And it just feels like very incongruity us that they're both saying presents a super important and then they're partitioning, anyone wearing this device sort of away from real people and so I that to me is worrisome I got to be honest when I add up all the pros and the cons it feels like people like you and I will buy it, but I kind of suspect that this is going to be more like an apple Lisa than the first Macintosh. Scot: [14:44] It you know but you gotta start somewhere and this is by setting the goalposts hi it's easier to go down than up so you know I can imagine several iterations and maybe it'll take another seven years but at some point I think they'll solve all those things and they'll get the cost way down but. Jason: [15:00] 100% if you look at this as like the entree into a new form of computing I'm totally with you right and and I get I wish I owned one of the a police's but and it did pave the way for the Macintosh so so I'm all down for it I don't think, if you're a retailer at home and you're going like hey do I have to invent some new Commerce experience for the. For the Apple Vision Pro like the answer is no right like and what like unless maybe your Louis Vuitton and you want to get a good press release about being a first mover you know it's unlikely that there's going to be 100 million people sitting in their house wearing this thing on their face all day and wanting to shop on it. Scot: [15:42] Yeah I saw so to last comments on this one I saw One reviewer who's really into a rvr and it was interesting framing he basically said Facebook is going down this path of VR is a social experience and you're using it for meetings and for meeting people which aligns since their social network right and that's part of their DNA where's apples kind of more saying we're heading into a world where we're more alone and you'll you know your increasingly you'll be working for home alone and remote and your you'll you know you'll be interacting with your family with this mask on it's kind of a I don't buy this framing but it's kind of an interesting you know the way it's set up today is very different view of things and then you know then the conclusion was you know for society I hope it's the Facebook silly should be good or else we're all going to be ready player one like sitting in little tiny you know compartments never interacting with each other at a human level and. Jason: [16:38] Yeah no I agree and then ironically like apples Imaging everyone sitting at home except for Apple employees who will get fired and they said. Scot: [16:46] Yeah. Jason: [16:48] Yeah another framing I heard which makes some sense is like they talked about meta really thinking of their device as a gaming platform and it's kind of priced at parity with gaming platforms and the, Partnerships that are leaning into a really gaming Partnerships and it comes with very sort of gaming friendly controllers and things like that and apple is really thinking of this as a compute platform and I think on an implied in their announcement is they Envision a future when. You know we don't we don't own clamshell devices with keyboards that we used hitter. Get our work done and that we're more likely to sit in a comfortable chair with one of these things on our face and be much more productive. Scot: [17:28] Yeah another thing that was interesting this got obscured by the announcement was I've heard a fair amount of Buzz about this roller coaster experience in Japan and I think it's a Nintendo theme park and what you yes. Jason: [17:39] Super Mario Kart and I think they did they just did it in. Scot: [17:43] Yeah. Jason: [17:44] Universal Studios in Los Angeles I believe may not have it. Scot: [17:48] Okay well Apple acquired the company that built this experience for Nintendo and. Yeah so you know kind of putting that together you see all right you got Bob Iger on stage and that was like content on the device but think about this killer you know imagine you go to your next Generation Galaxy Edge experience in your writing some kind of a ride and now they throw some AR part on top of that experience that that would be pretty cool. Jason: [18:14] Yeah I guess so to other random things I thought were mildly interesting normally apple is pretty good about dropping these announcements and then having like. Pretty quick of the ability thereafter and so one weird thing they're announcing this and June and it's not going to be available in told 2024. Um which I you know that feels a little unusual for me and then not surprising at all but like very noticeable. Three words that were not mentioned ever in this announcement were artificial intelligence VR or the metaverse. So they kind of invented their own terms and I think they very intentionally avoided. A variety of stigmas that are attached to some of those those other terms and then I guess the last thing in my head you know there's this company and I think they still exist and they have raised billions of dollars. On a lot of hype around a really high-end AR headset it's this company called magically. And I think like if there's any loser in this whole Space. [19:26] Like if there was any hope of magically surviving think I think this you know this seems like a better product in every way than what magically was promising and wasn't able to deliver. [19:46] Yeah I'm sure there's some IP that's that's interesting to someone I hope so they spent a fortune. Scot: [19:48] Yeah I think they're done they yeah they missed their window and they had these really cool early demos but. Jason: [19:55] Yeah I actually got one we're like literally the it was kind of like old-school Oculus like there's a you know a refrigerator size computer that was Tethered to the. To the screen but it definitely it was not 4K with 12 second latency. Scot: [20:10] Nothing yep and so this is where Apple wins because they can they built their own silk and they built a chip for that latency it's called the R1 or something and so they basically said alright we need to create Hardware that can have this under eight millisecond latency and they just did it and you know that's not everyone can do that. Jason: [20:28] Not many yeah so I thought that was interesting again like you and I will be able to have our little Avatar meetings after this maybe we'll be able to record the podcast in it. Scot: [20:38] Yeah people can watch us look at each other with goggles. Jason: [20:42] I feel like if there's two people that would whose attractiveness would be improved by the goggles and might be us we have faces for podcasting. Scot: [20:47] Yeah yeah I can yeah I'm kind of wondering can you change your eyes you know so those are all simulated so. Jason: [20:54] You have to be able to write like if I can buy blue contacts why can't I have yeah because that that is true for those that didn't see the announcement it can look like the glasses are clear because you can see the where's eyes through the glasses but it's because, there's cameras inside the glasses and there's always screens on the outside of the glasses and so they're they're renderings of your eyes. Scot: [21:16] Yeah I want to I'm going to do a Terminator ice that's what I'm going for. Jason: [21:20] Yeah I'm extra weary about Terminator references in our current AI climb. Scot: [21:25] That's a good Segway. Jason: [21:28] Nice I like it. Yeah so there's lots of AI news like we could do a month of AI shows it feels like the only thing I talk about it work but there's one particular subset of all this AI That's often called generative Ai and I'm going to even say focusing very specifically on the image generation Ai and there's tons of cool stuff that I think you and I have both been playing with. Scot: [21:58] Yeah I'm big into mid-journey and then everyone's done chat G PT but then the big the big thing that's helped me is once it became where you could do the links I've been able to I do a lot of writing and I've been able to accumulate all my writing in a file and then feed it in and say Here's my style analyze this so that it goes to, then I taught to start writing in my style and then that has been a huge game-changer for me that's the first one gives you like a decent draft and then you're kind of find yourself editing a lot but like having it where you can now upload new information either from the web or in a file or a PDF is a been a big game changer for me it's it gets it more like you know 95% weather. Jason: [22:47] Oh yeah I think I've mentioned this before but like there's a small subset of the writing I do that I get to partner with a copywriter so I'll like, give outlines or dictate things to a copywriter in the draft I get back is almost always will written but not remotely in my voice and so it takes me a long time to edit it and give I give the same raw inputs to chechi BT that that I've trained. To know my writing style what I get back is is way closer to use them. Scot: [23:19] Does your copywriter listen to this podcast. Jason: [23:23] Hopefully she does not. Scot: [23:25] Okay good. Jason: [23:27] Yeah yeah no I you know again there's a whole we again we could do another podcast about whether AI is gonna create or destroy jobs or both but I think like a lot of things there are things that we used to pay people to do that are it's going to be harder to make a living doing, but there's going to be lots of new jobs to write and those copywriters like ought to be the first ones learning how to write good prompts for these for these things, the image ones I've been playing with image generators to I use mid Journey, you know there's an open source one that you can kind of run on your local hardware stable diffusion, that has a lot less constraints it's not quite as high quality of rendering is mid-journey but I'll tell you the new thing that's been fun for me is Adobe announced a generative AI model called Firefly and they already built it in one of their products so the the if you own Photoshop CC you can download a Photoshop beta and it has this feature that they call. [24:28] Excuse me generative Phil and, generative Phil is a legitimate Game Changer there's a bunch of use cases that used to be super time-consuming for designers that that this beta version already like. Makes Child's Play and one of the sort of unfortunate thing mid-journey generates really beautiful images the one thing it doesn't do is, trademark images or copyright images or text right so very often you might generate an image in mid Journey but then you had you'd have to hand it to a good Photoshop artist to put the spiffy logo in it or to put you know and actual image of Scot Wingo in it or something like that. And Adobe Firefly is really good at that use case so like I've actually done a bunch of kind of Blended image where I made an image in mid journey and then, I refined it in the Photoshop beta and it's, it's super fun but man like you know if I'm any kind of designer or graphic artist like I want to get good at this stuff right away because it, I'm not saying is going to eliminate jobs but it's going to change the kind of jobs people need to be good at. Scot: [25:43] Yeah there's been a lot of really cool use cases of the generative AI feature in Photoshop where people would start like with them Nirvana cover you know the little baby swimming naked and then expand it ever bigger than you can like see the rest of the scene what the computer imagines and they're starting to it with memes to it's pretty wild to watch some output of that it's it's like it's a little scary wow it could be, how real it is it feels like it is it's not real obviously because no one knows what's in that rest of that frame. Jason: [26:15] Yeah there's a real world use case where Nike and Tiffany announced a collab product and everyone saw it and thought it was awful. Right like that it just like is just a very like not inspiring combination of Nike shoes with Tiffany branding and a bunch of people then you know went and use these generative AI models to create. Way better looking shit Tiffany Nike shoes and that really happened and then last night I actually watched the Nike are movie which is the movie about the. [26:50] Both of the Air Jordans with them. Matt Damon and Ben Affleck in it awesome movie by the way especially if you grew up in the 80s like there was a lot of fun nostalgia. But in this movie The they get a meeting with young Michael Jordan and his family who are going to come to Beaverton to talk about. In doing a Nike endorsement and and Nikes though Dark Horse like Jordans not interested in Nike and so the the the team after they booked this meeting on Friday afternoon they go to the the one Nike designer in the basement and they say Hey by Monday I need a prototype and a rendering of the world's greatest basketball shoe and this, this guy had a weekend to invent the Air Jordan which he did right and and history is made like you know it made 40 billion dollars for Phil Knight and a couple billion dollars for Michael Jordan so great success but you imagine that if that kind of thing were to happen today, um there'd be a team rendering, a hundred different concepts in these generative AI models and that it have like a way wider variation of interesting ideas to consider. Scot: [28:10] Yeah very cool. Jason: [28:12] So I will say we're starting to see some interesting Commerce use cases the I have seen a bunch of clients that are using generative AI to create or refine product images and in some cases they are literally saving millions of man hours now. You know so maybe you've got you know a huge catalog of products and they're all shot as lifestyle imagery or they're all sot on a particular background and then you now need to sell them in the new Marketplace at Sheehan that didn't exist a year ago. And there's a requirement for white backgrounds. Well you know you used to pay like an army of graphic designers to mask out all these images and change the backgrounds and now that these like generative things can do it. [29:02] Trivially and you imagine pretty quickly that all these images are going to be personalized right so instead of, you know seeing that that product around some you know model family like at some you know random persons Thanksgiving table, you're going to see that that that new food product. At your Thanksgiving table with your family sitting around it and all of these sorts of you know personalized cases as as the imagery the ability to generate imagery on the Fly gets really good, and I've actually never seen a couple of demos from Google of a product they first announced. Last year and then they announced that it's going to be released eminently last month, it's called Google seen exploration in this is a cool AR use case specifically for retail so this is walk into a store hold your phone with the camera on in front of an aisle and it recognizes all of the products on the Shelf using computer vision, and then it overlays all the products with Google ratings and reviews. [30:08] So like giving you a lot of this like valuable digital information that didn't used to exist on the shelf right and you you know they talk about all the use cases like you know you need to buy a highly rated nut free vegan chocolate bar and you're standing in the chocolate aisle and there's a you know a thousand chocolate bars there's no way to search by that right and and with this scene exploration you know you can now do that on the fly in a store and to me that seems like a, pretty cool use case and it's it's going to be built in the phones and then area of your in the OS in the very near future. Scot: [30:50] Yeah I saw a Salesforce they've been going at this very hard in within the Commerce Cloud they announced like 10 features they have one where it will auto-generate your pdp's for you they have one where it will it'll generate tags so like it'll search the description and come up with sizes and colors and and you know kind of like a variance and things out of a description to have another one, there was no actually go create product catalog for you so if you've you've this was a huge thing we had a challenge with it Channel visor is if you're selling if you're selling on Amazon and you're just matching to their Easter eysan you don't really have the rights to that product information so then you can't just copy that and then put on eBay or something like that or your own website so they've got this whole way that you can take that data your your properties which aren't, sentences create the description and then move it to other sections to a lot of really interesting things going on in the intersection of AI and e-commerce. Jason: [31:56] Yeah absolutely so exciting about that and there's going to be I have a feeling we're going to be talking about significant new capabilities on an ongoing basis for the foreseeable future. Scot: [32:06] I remember you'd walked internet retailer and there be ten vendors there that would take your product pictures and add a white background yeah. Jason: [32:15] And that win from like you know people in America doing that to people in India doing that and now it's it's an Nvidia chip doing it. Which side note like you know people keep asking who's winning the who's going to be the one to monetize a eyes are going to be open AI or meta all these small companies we also got the answer to that this quarter it's Invidia. Scot: [32:36] Yeah they're gonna win yes. Jason: [32:39] So for those that don't know nvidia's market cap Nvidia has a chip manufacturer famous for, these high-performance graphic chips that were originally used for gaming and still are and their chips have been extremely useful for training and doing refining training for all these these large language models in AI, and their market cap briefly passed a trillion dollars, um this month I think it dipped like just below a trillion dollars at the moment but to put that in perspective Intel's market cap is like 130 billion dollars. Like so Nvidia the game chip company is eight times more valuable than Intel at the. Scot: [33:25] It's crazy yeah who knows no one had that on their bingo card five years. Jason: [33:29] No I wish that was one of my year beginning predictions. Scot: [33:34] Yeah anything else on a iron. Jason: [33:38] No no did you Amazon 10 announcement last month you follow. Scot: [33:44] Yeah yeah well it wouldn't be a Jason Scott show without some. [34:00] That's right time for some Amazon news Amazon has been unexpectedly quiet so we've got a new CEO basis is out romping around wearing crazy shirts at festivals and living the high life with his girlfriend so, some of that out there other engage did not know that congratulations Jeff I know he listens to. Jason: [34:26] If you're playing bingo it was a 2.5 million dollar diamond. Scot: [34:29] Nice the one thing I saw just to highlight is a lot there's kind of a, this bit of an economic downturn has made many of the video providers get more serious about profitability so we saw both Netflix and Disney add an ad-supported tier and increase their prices and just as we're recording this Amazon announced they're going to do the same thing with prime so they're going to have an add to your 44 Prime but I know you follow the devices I totally slept on this because I was so eager for the Vision Pro tell me about the new devices. Jason: [35:07] Yeah yeah. I would characterize it as disappointing they want some new Echo devices at. The in the middle of May for release on May 31st and you know I have it. An embarrassing amount of these devices controlling smart home features throughout my house and they when I first got them like. [35:37] I seem very I felt very satisfied with them like the the accuracy of the speech recognition and stuff seemed adequate like based on my expectations at the time but I've grown to be very annoyed by them like they really struggle to know which room you're talking to and they're inconsistent about how semantically accurate you have to be like in in this world where Chad gbt is writing all my articles for me you know you just go I, man the speech recognition in this Hardware has to be better and so I was kind of eagerly looking for some new Echoes that have like an llm in them it seemed like Amazon was a first mover here, and so they did announce some new devices but they're pretty boring so they announced a new form factor called the echo pop which is. [36:27] I want by my count their fourth or fifth attempt to build a more premium speaker into an echo and this is like. A more affordable premium speaker which seems like a weird Niche so that wasn't that interesting I don't actually use the echoes. As speakers so much and then they launched a new Echo Show 5 which is. The the echo with the screen it's the smallest screen has 5 inch screen and then they announced some new Echo buds the echo built into the the earbuds which you and I both tried and I don't think we're very enamored by. The. The features are like oh the speaker sounds better than the old speaker the microphone is more accurate than the old microphone and it's 20% faster. [37:15] And so like I bought a couple of these new new Echoes to see if I you noticed a difference and it's. Like it's to me it's mostly imperceptible from the old Hardware so pretty disappointing. Um but app that announcement I will say Andy jassy said that hey the large language model for Echo is coming and you know there. It does feel like Amazon's a little behind and I don't know if this announcement was meant to apologize for that that. Status or whether there really is something that's going to be imminently announced but you know like he he doubled down on their effort to make this the, the most useful personal assistant on Earth and you know part of that is we're going to have a robust large language model that's you know on has a, a similar number of parameters to to open a I or bear door or Lama from from meta, that the Amazons going to release to make these these sneakers smarter so I hope he delivers on that promise. Scot: [38:23] Yeah the there if definitely feels like chat gbt started this new gear for Innovation and feels like apple even with their big announcement there was they worked some AI in there but it just feels like. There's a lot of people speculating do you really need a phone if we're going to head to a device where you can talk to it and these plugins at chat gbt now give it action so you can say hey book me a restaurant reservation the things you would do on your phone you're going to be almost able to do totally by voice soon therefore will you need a phone so there's a lot of you know that's a new would expect Amazon who was ahead on voice now feels like they're behind on a lot of this so it's be really interesting this next year to see who can kind of hang with this and you can't the R&D budgets are gonna go through the roof that's for sure. Jason: [39:14] Yeah and the irony is you know you go back in time and you know all the retailers in America where happily you know shipping two weeks after you place an order in Amazon you know disrupted Everybody by saying like hey you should get your stuff in two days and then one day and then same day right and they they raised the expectations for everyone else it feels like open AI is doing that to Apple and Amazon right now on the on the natural language models. Scot: [39:43] The to the pop did not pop. Jason: [39:46] It did it did not I did that in full disclosure I did not buy a pop because again like I don't I don't so much by them for their speaker Fidelity I mostly buy them to control my lights and stuff. But yeah I like I still have to repeat myself multiple times and some rooms to just turn stuff on and it's frustrating. Scot: [40:06] Yeah so this one was one I wanted to bounce off of you I'm a CNBC junkie and I was watching the other day and Target stock had a big Miss and the folks on, Talking Heads were saying that in their earnings release they really called out this shoplifting as a. [40:24] A problem and they took a one right off of something like 500 million dollars so I'm sure everyone has seen the videos where you know this is just new organized crime kind of wave going on especially in big cities where you'll see. 20 people go in a store and just run out with arm full of stuff it's happening to starting to kind of luxury then then you saw a little lemon and it happens in Apple Stores and now you're starting to see it in every day department stores and drug stores, so I thought that was you know as e-commerce person I was thinking huh that's interesting you know I wonder if and kind of hi Pro some high-profile store closures have followed from the so Nordstrom closed a store and like San Francisco and that's kind of thing so I was thinking is e-commerce person I was kinda thinking well this is interesting this is gonna this is going to benefit Amazon pretty immensely because as the stores have to close due to this crime wave it's going to benefit e-commerce and then Amazon like 60% of e-commerce so they'll just get they'll just absorb a lot of that that that so that the crime is going to have this unintended consequence of getting rid of stores which is bad for for the local environment and then it'll yeah I don't, yeah I don't think they really want to benefit Amazon but they will so I wanted to get your hot take on them. Jason: [41:40] Well first of all just to complete your thought the the brick-and-mortar retailers and the national retail Federation would actually say Amazon's double-dipping on that benefit because they're both. Selling stuff when the the stores closed in the big cities but also most of the Retailer's blame the organized crime on Amazon. [41:59] So the The Narrative is basically that like you know people here's who used to steal from stores, people that needed something and couldn't afford it for whatever reason right so they. Stalled food for their family or you know items they could afford to buy that was individual shoplifting and, employees told stuff employee shrink and there now is this much higher occurrence of organized crime for profit where where people are stealing you know every bottle of shampoo in the Walgreens and one of the reasons these big retailers say that this kind of crime is much larger now is it's way easier to monetize that stuff after you steal it, and the reason they say it's easier to monetize it is you can go sell all of this this still the merchandise pretty easily on Amazon and eBay. Um so that's controversial like the marketplace is due a lot to sort of avoid selling, um song Goods but that one of the premises why there's more organized crime is because. It is easier to fence and monetize this stuff. But here's the thing that's super interesting about that like there for sure is this new kind of crime and it's. [43:22] It's much more newsworthy so when someone drives a truck through the front of an Apple store and then steals all the phones that's going to be on the local news when someone shoplifts pound of cheese, that's not going to be on the local news right or when an employed as a fake return to embezzle 60 dollars from a shirt like that's not as often on the local news so all of these organized crimes get put on the news and on YouTube and things like that more and and a huge problem is. Like it's much more violent people are getting hurt employees and in a few cases the perpetrators are are getting hurt or even killed and so like there is a way higher human cost to this kind of crime and so we have heard a bunch of. Retail CEOs, you know raising the alarm bells and they say two things like oh man our losses are going up this is having a material economic effect on our business we're closing stores partly because of this and you know we're having to change how we do do store operations and and you know all these things they're also saying that police forces are underfunded and you know don't have enough resources to retailers with this problem so they're there in many cases you know asking for more more Municipal support here's the thing though. [44:51] People have always stolen stuff from retailers there's always been a line item on every retards p&l for shrink and for most public companies that's that's a publicly disclosed number and usually, for most retailers and it varies by the type of retailer and the the geography but usually it's one to two percent of Revenue is lost in shrink and so. [45:19] Target's announcement was hey we lost we potentially could lose 500 million dollars in profit this year. And their stock partly went down from because of it like I would argue their their stock also went down for some, PR missteps they made and then also because their revenue is just soft compared to some of their competitors, they probably went down for that shrink because 500 million dollars in profit sounds like a big deal but if you gross up 500 million dollars in profit to product costs, that's one point six billion dollars in shrink at Target in 2022 and they're saying it could be as high as two billion dollars in shrink in 2023 that means that shrink is 1.5 to 1.9 percent of targets Revenue which is below industry averages Walgreens, has made all of these same complaints and last year the Walgreen CFO like in the earnings call said hey this is a huge deal like our shrink could potentially be up 52 percent from before the pandemic. Um and then he did his swing 22 year in earnings and Shrink was lower then then the last two years and he literally had to say like maybe we cried too much. [46:40] So I do think there is this new crime it's very serious like it is a problem and you know I have great empathy for retailers in addressing that and they shrink should be zero like a butt. It's a little bit of a fallacy to say hey there's this new material economic impact from this shrink that didn't exist before because the employee shrink is way down because the the surveillance and the the big data and in the business process has evolved eliminated a lot of that and so the net shrink for a lot of retailers, really isn't as significant now it might be more significant in particular stores and so some of the the closing of these stores, seems at least partially legitimate I will say there's even controversy about that like when, Walgreens has hey we're closing a store in San Francisco because there's too much crime, the San Francisco Police Department rides in and goes that's weird because we got way less complaints from from Walgreens last year than we did three years ago or whatever so there's there's. Room for disputes about all this stuff but organized crime, is definitely an increasingly serious thing that retailers have to deal with but don't immediately by all the hype that it's. That it's some you know New Economic strain that retailers have never seen before. Scot: [48:04] I wonder if there's a bit of a narrative around this shrink number like I you know I'm sure they're reporting it correctly but so I wonder if it has the same store sales effect like let's say Walgreens has to closed in ten stores because the shrink is so bad. That comes out of the numbers right because it's probably a seems to work kind of metric so they probably you know now gold number would improve dramatically but. They've shrunk their footprint like it's probably not capturing that you. Jason: [48:33] Yeah no agreed, all as a Wayne huizenga taught me 30 years ago like it any good healthy retailers should be closing and opening stores every year why there's like you can't if you had the perfect realist real estate in one year it would not be perfect the next year right and so in many cases like they're closing stores in economically you know unfriendly climates for them and that improves their same-store sales numbers and improves their cops right and you know whether they did that for purely economic reasons or they did it because there was more organized crime or to put protect employees or whatever like, um it's not wrong for these retailers to curate their, they're fully in an economic downturn that might mean having fewer stores than last year historically the challenge with that is investors always expect you to grow. And so infect investors don't like the story of what of closing underperforming stores and having better comps if you if your overall Revenue goes down so, you know this is yet another kind of excuse for them to reset expectations with investors I think I think that's totally fair. [49:44] In some cases I will tell you retailers are closing iconic stores that just feels kind of sad like the the, Nordstrom flagship store in San Francisco is has always been a big deal that's closing I lived in Portland Oregon and they had a beautiful REI in the Pearl District which was, like a great super friendly place to live and they're closing that store and they said partly because they didn't feel they could protect employees like. That there is something happening that feels like a bummer and there's a lot of big cities that it feels a lot less fun to go shopping. Than it did a few years ago which which is I do think a legitimate concern. Scot: [50:26] Yeah so I know you're the king of all e-commerce and commerce data what are you seeing in the the reports that have come out since our last pot. Jason: [50:36] Yeah well we've slowed down a little bit on the frequency the podcast so kind of just super brief recap US Department of Commerce data comes out every month so we we have the May report which has data through April next week we'll get the, the May data so January through April sales for all of retail are up 2.4% from last year that, that is down a little bit from historical averages pre-pandemic you'd expect retail to be up about 4% a year so 2.4%. [51:11] Is concerning if you look at it from before the pandemic retail sales are up year-to-date, three thirty six percent from 2019 for example so still by historic standards that's very high but this year feels like a meaningful slowdown in sales from last year and of course as soon as you start talking about this people go well what about inflation so if I normalize this data for inflation year-to-date sales this year are down three percent from last year, which historically doesn't happen even with inflation so that, that is a real concern like it it feels very legitimate that we're seeing a Slowdown in in consumer spending and particularly in inflation-adjusted dollars so I mentioned retail sales since the pandemic are up 36% if you adjust that for inflation there up about 14% so less than half of all our sales growth since the pend or more than half of our sales growth since the pandemic, has been a direct result of unusual inflation more than typical inflation and then you know people always ask us in particular about the e-commerce numbers again before the pandemic the. [52:25] Over the last 20 years e-commerce would average around 12 to 15 percent growth a year retail would average three to four percent growth a year there was a weird transposition in the middle of the pandemic when people you know finally went back to stores for the first time and slow down their e-commerce bending so like for the only time in my lifetime, 20:22 size. Retail sales growing faster than e-commerce briefly that trend has reversed e-commerce is back on top of retail but it's not back to Historic standards so e-commerce year-to-date is up about 7.4% verses 2022 still, you know, you remember in the pandemic people are talking about e-commerce spiking and then regressing to the mean just want to remind our listeners that's not true the US Department of Commerce revised some numbers and e-commerce growth. Has ended up being much more robust than like the Wall Street Journal reported in in in a famous article in 2022 so e-commerce is up about 89 percent since, since 2019 and that means. [53:29] Above and beyond the traditional growth that I would have forecasted for e-commerce we've sold an extra six hundred and seventy five billion dollars since the pandemic started so e-commerce still is the biggest winner in this kind of. Pandemic accelerated spending and it's you know we'll get the cue to e-commerce data and about two months it's going to be interesting to see, how it plays out and whether you know the consumer slowdown persist through the end of the year and holiday or whether we start to get a bounce. Scot: [54:01] Yeah and I know it's June and but you get paid to think about this more than I do so what when clients are saying Jason what are you thinking about holiday 23 Woody tongue. Jason: [54:14] I think on the aggregate I'm not expecting it to be an awesome holiday I think there's even if, the the economy listens up there's it's going to take awhile for consumer spending to come back and I think the overall consumer spending is going to be you know modest there will be growth but it'll be low growth and because inflation will still be unusually high like profitability is going to really be, be strain for this holiday that being said we are likely to see some clear winners and losers so like not everyone's going to kind of match the industry average and we've already had a couple bankruptcies Bed Bath & Beyond used to sell a lot of holiday Goods so retailers are going to fight over you know who wins that customer this holiday and so I do think. You can expect to see some retailers have a really good holiday and you know, I hate to say this for all the small retailers out there but like at the moment the the likely narrative is the biggest best retailers in the ecosystem are likely that too. Disproportionately win holiday so like if I had to guess I would guess Amazon and Walmart are going to have a pretty good holiday at the expense of the rest of retailgeek. Scot: [55:32] Got it well you're a Grinch. Jason: [55:37] Yeah I want to be wrong I want to be wrong on that I want to be right on all my year beginning forecast which I can't even remember what they were. Scot: [55:44] Yeah I'm just kidding you get paid to tell the real. Jason: [55:49] I'd rather I would rather be prepared for soft holiday and then be pleasantly surprised. I almost hesitate to even bring this up because it kind of feels like it always happens but there there are now some potential new supply chain challenges. Perking up so there's there's some labor disputes our friends the teamsters the unload all the boats on the west coast of America like are threatening work stoppages and, you know any disruption in there like has a meaningful impact on how much Goods we have available for holiday and then one I've never heard before in my lifetime, the worldwide drought is having a material impact on the supply chain what there is not is enough water in the Panama Canal. [56:39] And so it turns out the way the locks work they have to pour a bunch of water into the canal to lift the boats and there's less water available so the water costs more so it is more expensive to take a heavy boat through the Panama Canal today than it was a month ago. Because of the price of water which. It makes sense when you hear it but it's not something you would I would have thought of and so at the moment the supply-chain wonks are are talking about like you know we might have some unanticipated, supply chain cost as you know people have to pay for the constrain amount of tonnage that they can lift through the Panama Canal. Scot: [57:23] Wow learn something everyday and I can check that off my box in it. Jason: [57:26] Nice well that's probably a perfect place to end it because we have used up our allotted time but even though we've been a little less frequent than usual, I always look forward to catching up with you and it's been great to chat but I look forward to hearing how our listeners are doing. Scot: [57:44] Yeah and you know what listeners could do to help us out leave a review we would always love your feedback let us know how we're doing and if there's any topics you want to cover and we appreciate you giving us a listen. Jason: [57:57] Scot that's a great idea and until next time happy Commercing.