Published on: May 18, 2016
Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.
This week's topic: The first of two conversations about this week's ShopTalk conference, focusing on e-commerce trend-setters, and technology roadmaps they follow.
And now, the Conversation continues...
KC: So, you're at the ShopTalk - the self-described "nextgen commerce event" - in Las Vegas this week, and we'll feature a more detailed look at what you saw and learned there next week. But I get the impression - just from looking at the agenda items and the speakers - that a lot of these folks may be playing this e-commerce game at a different level than a lot of food industry folks, embracing technology in an entirely different way than people in other industries. Is that your sense of it as well?
Tom Furphy: I think so. The agenda is certainly loaded with many trend-setters in e-commerce. Tech companies, investors, retailers and manufacturers from across verticals are here. ShopTalk has gone from an idea to one of the five largest retail shows in less than a year. I think that demonstrates a few things – e-commerce is important to a lot of people, there is a tremendous breadth of innovation occurring now and that brands and retailers feel a high sense of urgency to get it right.
But that doesn’t necessarily mean that all of these folks are doing it better than food retailers. It just means that they’re doing more of it. It’s really a matter of timing. E-commerce has penetrated other retail verticals well in advance of the food business. Even Amazon got into food as one of its last retail categories to capture. I know sometimes we make it sound easy in this column. But e-commerce in food is tough. The low margins, high SKU intensity, high weight to low value ratio of products, expiration and food safety issues all make e-commerce – from customer experiences to profitability - in food very difficult.
Other verticals are more advanced because they are easier and because they lend themselves more favorably to e-commerce. In many verticals, the vast selection, low prices, depth of product information and efficiency of delivery improve the shopping experience over brick and mortar. Because these companies have been at it longer, they are further along the innovation curve. They have launched valuable capabilities and are integrating the tech experience into the store experience. We haven’t gotten there yet in the food industry, but we will. We have to.
Also, there are many business here that have been built because of the capabilities that the technology enables. They were able to start with a clean slate. Some are creating breakthrough models, others are technologies looking for a business models.
Ultimately, this show represents and industry full of companies trying to keep up with or disrupt Amazon. They are the gold standard. Remember, Amazon does almost twice as much business as the next 10 e-commerce businesses combined!
KC: Interesting. I was just reading a piece in the Seattle Times about ShopTalk that said much of the conversation there is about how to compete with the Amazon juggernaut; Scott Thompson, CEO of ShopRunner, is quoted as saying, "You’re crazy if you compete against Amazon and you don’t recognize they are bigger, stronger, faster ... They’re playing their sport on their field with their referees and their fans."
The story also notes - and I think we've talked about this a lot in this space - that while Amazon has disrupted a lot of retail businesses, "its often contradictory business ventures offer different layers of challenge and even opportunity to competitors." Beyond the fact that Amazon offers other retailers the ability to take advantage of its infrastructure to do business online, which probably has both upsides and downsides, there's also an argument that Amazon, by creating so much retail fragmentation, is creating an environment that other retailers can exploit ... if they're fast enough, open-minded enough, innovative enough, and even disruptive enough. Some will be, and some won't be.
So let me ask you this. Going in, what are the two or three things that you are hoping to gain more insights about at ShopTalk?
TF: I’m here with one of my CEP partners, Justin Leigh. We’re going to dig into these companies a little bit to learn more about them. We want to press them to see which ones have solid business models beneath the hype. There has been a lot of venture capital poured into these companies. Companies have raised anywhere from a few million to hundreds of millions of dollars. We want to learn from the founders. We want to understand what they are doing to truly improve the shopping experience.
Also, we have meetings set up with several CPG companies and retailers that will be attending the event. It will be interesting to discuss these companies with them. We want to hear their take on what they are seeing and how it may impact their strategies and technology roadmaps.
This will be a fun week!
KC: Sounds like it ... and I'm glad you're there covering it for MNB from an unusually informed context.
And the Innovation Conversation will continue...
- KC's View: