April 1, 2020
Cerritos College Business Week:  Grocery E-Commerce

Cerritos College Business Week: Grocery E-Commerce


[MUSIC PLAYING] This is really a pleasure
to be here today speaking to you guys. I want to lead off
by saying, I mean, I think that the e-commerce
market is changing incredibly fast, and this is the right
time to be talking about this. My particular business,
we’re in groceries, and so I have a
unique perspective on this, in that I’ve
never been in e-commerce but I’ve watched it evolve from
the beginning of consumer CPG companies, consumer packaged
goods companies starting to sell business to
business and business to consumer through
various different ways, and how that’s all becoming
a very, very crowded space, yet these dominant
players are emerging. So we’re going to
talk about that. And the difficulty
that I had, really, the challenge in
talking about e-commerce was keeping this subject
narrow enough, because I really needed to learn a lot about
this to prepare myself for this presentation. And so you learn that there’s
just a vast amount of knowledge and information out there. And so my challenge
was always keeping it very, very specific
and very, very narrow. So I’ll talk a
little bit about what we’ll talk more specifically
about today, but first of all, I just kind of wanted to
lead this conversation off. I want to make it very,
very conversational. Since I am not the expert,
I am certain that there are people in this
room that know a lot more about
e-commerce than I do. I won’t be able to answer
all your questions, I’m sure of that. But if you have them,
you can ask them anyway and we’ll see if we
can think it through. I think where I will lend a
little bit more knowledge, and so forth, is in terms of
the practical application of how businesses are looking,
or which direction do I think that that might go. Because I leave the technical
things to the experts, but I really try to look
at things strategically and decide, where
does my company need to be to not get left
behind or to take advantage or make sure that I’m
changing with the times? And working for a very ancient
company, as you’ll find out, comes with those types of
issues or challenges, I suppose, is being able to
think farther ahead. The company that I represent,
which is Marukan vinegar, it’s represented by these
products here on the table and you can see
them in the slide. This is what we call the
world’s finest rice vinegar. We’re the oldest company in
Japan making rice vinegar. Of course, rice vinegar,
and vinegar in general, is mentioned in an
ancient history. It’s mentioned in the Bible. It’s mentioned even before
that in ancient Greece, where the ancient Greek
philosophers used vinegar to cure as an elixir or
as a medical treatment or as a potion. Vinegar, very simply,
is a fermented alcohol. So since the dawn
of time, they’ve been making alcohol,
some for consumption and for other purposes. And some of that alcohol
naturally ferments, becomes sour. The word “vinegar” is a
French word meaning sour wine. So that’s where the
origin of it comes from. But our company has
been doing in Japan commercially for 370 years. We just celebrated that
anniversary down the street in Paramount back in March. So we’ve been here
for about 45 years. We do have this factory here
in Paramount, where I work, and it’s our US headquarters. There’s two other factories
of Marukan over in Japan, and we recently added
a second US facility outside of Atlanta, Georgia. So I spend quite a bit of
time in Atlanta as well. So talking about my scope today
a little bit, for Marukan, we have about an equal
amount of business in both the grocery and
the restaurant segment, and then we do a little bit of
industrial and export business, but it’s very small. It’s not something
that we’re looking to grow because we focus
our capacity and our efforts on the market here
in the US, and we let the Japan head office
with their two factories handle Japan and Asia. However, my focus today is going
to be on grocery, because I think that’s where
there’s a lot of exciting e-commerce
strategies and plays being put into motion. But I do think there’s also
a tremendous upside for food service, as well, and I’ve
had those conversations with some of the
service providers that we’ve talked to about being
partners with us on e-commerce. So very specifically
today, we’re going to discuss how home
consumers are buying groceries through e-commerce and how
that market’s really changing. This is a little
bit about myself, and this is only meant to
provide a background so that you guys can ask
me some questions. You’ll know more about me
and what I am able to answer and what I may not know. But you can always try me. I’m game for anything. So I started working– I’m going to kind
of go backwards on my personal timeline here. So I began working at Marukan,
it’s going on 12 years ago now. And I began in the
sales department as a national sales manager
there of the American division. At Marukan, we
have two divisions. We sell to what we call
the American division and what we call
the Asian division. The Asian division is
traditional Asian distributors, like Japan Food
Company, Wismettac. Used to be called
Nishimoto Trading. Specific Japanese,
primarily, distributors that focus on
selling Japanese food to a Japanese audience,
and then American kind of became everything else. Call it mainstream, if you will. It wasn’t meant to be
really national in origin. It was more meant
to just classify– it’s the JFC and the guys that
specifically sell Japanese food as the entirety
of their catalog, and then it’s everybody else,
again, kind of where we can. So I did get promoted up
through the ranks there and eventually was leading
both the Asian and the American division. And then in 2013, the owner of
our company, Denzaemon Sasada– he’s also the chairman and CEO. I’m the president and
COO, general manager. They appointed me to that
position, general manager, in 2013 and president in 2014. But prior to that,
I did a little bit of a startup in
the American made beer that was targeting
the Latino market. We thought no better
place to do that than in Southern California. And we took some lumps
in that business, but we learned a lot,
made some friends. Made an exit as clean
as we could and moved on to the next thing, and
that’s one of the things that brought me to Marukan. Prior to that, I worked for
Advantage Sales and Marketing, which was, at that time, the
largest sales and marketing agency. We were like a
contract sales force for larger companies that didn’t
want to employ specialists for every chain account. When you go with a company
like Advantage, or Acosta is now a very large one. Impact Sales is
another very large one. These are national
brokers that have an expert in every
account and every market. So if you want to learn how to
sell more business at Ralphs, there’s a Ralphs expert there
that does nothing but Ralphs, but carries a big
bag full of products. And I was that person for
Unilever Bestfoods, that line which entailed
all of the Lipton, the Lawry’s And I also
represented C&H Sugar, Herdez, another small– well, not so small anymore– Mexican food company. Sweet Baby Ray’s was a barbecue
sauce that I rolled out here. It was the last market in the
US where they were and now it’s a very popular
sauce, so I’m very proud to have that on my resume. And prior to that,
La Victoria foods was a third generation
family business of mine that was actually
helped, in part, to start by my grandfather,
who came over here in the late ’20, early
’30s from Germany, and lived a culmination of his
time in California and Mexico, and doing a lot of importing
and exporting, learning the foods that were
consumed in Mexico, and then realizing that there
was a growing audience here that were looking for things
that they couldn’t get one then when they came to California. So as the bodega stores
started popping up, it kind of gave the
opportunity for La Victoria, with all of its various,
authentic, homemade sauce formulas, to be
commercially made in a bigger and bigger plant. My grandfather,
along with my father, built four different
factories, I think, in various parts of Los
Angeles, and grew that business to what it was in 1994– let’s see, ’98. I joined the company in
’94, but in ’98, we sold it. At that time, I was working as
national sales manager there, but held many positions
in that company, including working my way
up through the plant, which was great because it gave me a
good background in operations, more of what I’m
doing right now. It’s important to understand
how plants run, food plants run, and what is important. Of course, like a lot of
people, maybe in this room, even, bagging groceries
was my first real job. And I’m also happy to have had
that opportunity because that teaches you a lot
about customer service, but also the grocery business
and all of the things that supermarkets carry
and how that’s changing. So why are we talking
about e-commerce today? Why did we choose this topic? I know it’s very
popular, and I already explained I’m not an
e-commerce expert. I want to try to give you the
food industry’s point of view. I think that’s what I can
best relate to you today. Food, actually
groceries, have proven to be a challenge
for e-commerce. It’s the largest
growing consumer category in e-commerce, but it’s
among the least developed also. So the growth potential
is really, very great. And Amazon, who’s the
leader in e-commerce, has been at it for years. I believe they launched
Amazon Fresh in 2007 and still haven’t
quite got it right. They’re still trying
to figure it out. Even after they
bought Whole Foods, they kind of pulled
back out of that. We’ll get into more of
the details of that later. Again, I want to try to keep
the focus on how it’s impacting the food industry,
companies like mine, and maybe others that
you’re familiar with or may go to work for. So the market is changing
more rapidly than ever, and I believe we’re
now at a tipping point. I’ll show you why that is. You guys are familiar with
the concept of tipping point. Malcolm Gladwell wrote
that book years ago and it became a very
popular business book. He’s one of my favorite authors. I recommend him,
if you’re already studying or are very familiar. But Gladwell is really
a genius, and so much of what he talks about relates
to marketing and consumer behavior, that I’m always
very impressed what he writes. I know he’s got a new book
out, and as I go on vacation this weekend, I will
be taking that with me and trying to finish it off. And our own company, Marukan,
is actually faced right now with decisions of what to do. A couple of months ago,
literally, about the time that we agreed that I
would come here and speak about the subject, I was on
my website one day, my company website, and realized, wow. When we click the Buy It Now
button to go test that link, it’s no longer working. Uh-oh. That’s an emergency. That’s an emergency situation. We don’t have an e-commerce
partner or their link is down, or something’s going on. Let’s call them. Call them and, of course,
couldn’t get a hold of them. Couldn’t get a hold of them. I’m not going to name
names or say anything, but when people are
winding down to business, they don’t always get to
call every client of theirs individually to explain
to them what’s going on. And obviously, those calls
wouldn’t go very well anyway. But it put us in
a situation where we said, OK, now we’re looking
for a new e-commerce partner. Obviously, I think it’s
in 2019 and beyond, and of course, this
started several years ago. It’s going to behoove a
company to have a Buy It Now feature on their web page. I think that’s kind of a
starting point these days for commerce, in general, to
give consumers that option. So we want to learn how
to be able to do that. So a lot of my research
that I’ve done kind of went into this presentation. And I hope to learn
from your feedback, so that’s another reason I
want to keep this very two-way, if we can. There’ll be a point to get
to that two-way in just a little bit. I guess I could
start with questions. If anybody has any comments
or anything to say generally, right off the bat? Yeah? So how do you
balance e-commerce, with Amazon, all these
other companies that are delivering food
that was traditionally picked up in person, with
environmental concerns? You’ve got all these trucks
and everything on the road now. Yeah, that’s a great point. I think that is a big concern. People aren’t thinking it is
through as clearly as yourself. It does create a lot of waste. I found some of that in
the research that I did. If you guys are looking
for a hot topic on that, that would be a great one. I would encourage
you to go research the waste in e-commerce,
value that versus the traditional supply chain. See if it’s better or worse. I would bet that over time,
it’s going to get better. I think that initially, the
customer service priority is so high, because if
it doesn’t meet that bar, e-commerce would fail. It’s clearly meeting that bar. People are happy with
it to the point where it’s now catching on fire. They’re going to have to start
altering their behavior now and shipping. Great point. Great question. Yes? It’s a huge concern, obviously,
here in Southern California. We still have smog. Yeah. And some of the worst
air in the country. It’s like a water balloon. Oh, sorry. It’s like a water balloon. At the port, all
this trade coming in, but there’s a consequence
with the environment. Yeah, sure. I would bet that it’s
going to get better, but questions need to be asked
and solutions need to be found. There’s no question about that. I have seen the cardboard waste. I’ve looked at
some studies, and I don’t recall the exact numbers. I didn’t build
them in the slide. But waste is a big concern. So yeah, keep that in mind. That would be an
awesome research topic for a lot of you guys that have
maybe environmental science minors. Like I have three
kids in school. That wasn’t part of my
bio, but one of them is an environmental science
major and another one is an environmental science
minor, a major in business. So they would ask
the same question, so I think it’s right on point. So I’m going to go ahead
and move on through because I think it’ll
prompt more questions. But I really wanted
to try to give a brief history of e-commerce. It’s hard to do because
e-commerce is 40 some years old now. It’s hard to believe. It really kind of picked
up steam and went along. So I’ll try to go
through this quickly. Bear with me. Some of this is a little
bit interesting and amusing. I’ll go ahead and date myself. It’s kind of neat. I started the same
year as e-commerce. I was born in 1971. So I’m 47 this year. I’ll be 48 this week. Something called the ARPANET
was used for the first time, and that stood for
Advanced Research Project. It was a department of the
DOD to basically create a private internet before
there was the internet. And it was tested out at
several research universities. And students between
Stanford and MIT, which is back in
Boston, actually arranged a sale to test the
system and see if it worked. And an author, John
Markoff, in his book What the Dormouse Said,
kind of described this as this was the seminal
act of e-commerce. It was the very first thing
that we ever transacted over a computer-based network. Do you have any guess
at what they sold? Food. Food? Good guess. It was cannabis, of course. [LAUGHS] I mean, you know, naturally. So anyway, the book, the
seminal act of e-commerce, the What the
Dormouse Said book is kind of about the
counterculture, how the ’60s counterculture
influenced the internet. And so I haven’t read
the book, but I find it to be kind of interesting. It’s going to go probably
onto my reading list so I can learn more about
the early days of this. In 1979, Michael
Aldrich was in the UK, and he demonstrated the first
online system over there. You’re going to see
a lot of incidences of very advanced
tech, and especially related to the internet,
coming from the UK. I would say that the UK was
probably the first tech center hub of the internet. Followed in ’81,
Thomson Holidays UK is the first business to
business online system to be installed. That prompted, in 1983, the
California State Assembly to say, hey, you know what? There’s a lot
going on with this. We’d better start
to get ahead of this and understand what’s coming. Infrastructure is going
to need to change. Laws are going to
need to change. Resources should be applied. Probably organizations
or committees need to be developed. And so they had this meeting
at Volcano, California. I thought I knew every
place in California. I had to look that one up. That’s really out there. I mean, if you were trying to
not be found in California, there’s about a population
of about 160 people and it’s up in the
middle of the Sierras. But looks beautiful. I’m sure there’s
great biking there. In 1984, a large company in the
UK, again, Gateshead, Tesco– Tesco is the largest
supermarket chain in the UK– is the first B2C
online shopping system. Mrs. Snowball 72, somebody with
an early private email account, becomes the first known
online shopper in the world. And in ’84, CompuServe over
here launches Electronic Mall in the US and Canada. It’s the first comprehensive
e-commerce service here. By ’89– now I’m
graduating high school– Sequoia Data Corp.
introduced Compumarket, the first internet-based
system for e-commerce. Sellers and buyers are
posting items for sale. So now it’s kind of C2C. And now they’re taking your
credit card through the email. Now, keep in mind,
it’s not secure yet, so it’s still very risky
and very experimental. It wasn’t until ’90
that Tim Berners-Lee writes the first web browser,
www, the World Wide Web. And that’s, again, another
UK internet pioneer who was putting us on the
global standard for how we would do e-commerce
and all internet computing in the future. I mentioned this 1992 event
of Book Stacks Unlimited in Cleveland, opening a
commercial sales website, selling books online with
credit card processing. I mention that because
I believe that must have been some of the
inspiration for Bezos with Amazon, who comes along
just a couple of years later. Netscape then releases
the navigator browser, which contains a feature that
makes transactions secure, which is obviously super
important to moving e-commerce along. By ’95, CompuServe
UK buys a book to demonstrate that
the system works. They demonstrate the
CompuServe UK shopping center. And this is UK’s first
national online retailer. There’s nine major
retailers on there, including Virgin Atlantic,
which was the old world record stores back then, and Tesco was
involved, the large supermarket chain. ’95, Jeff Bezos launches Amazon. The same year, eBay is founded
by computer programmers based as an auction website. Nowadays, over 90%
of sales on eBay anymore are actually
not auction. They’re just for sale. So they’ve become very much just
a regular e-commerce site, not really the auction site that
they were intended to be. And I think that they’ve
definitely lost their way. They’ve got left in
the dust by Amazon, who decided to build
the infrastructure, the fulfillment centers,
behind the fulfillment and the e-commerce, getting
it vertically integrated. EBay’s kind of just remained
a service, a site, a platform. In ’99, Alibaba Group. That could be a whole
separate conversation of e-commerce in China. It’s obviously a huge
global, dominant market. I’m going to keep the
focus of the conversation today to the US
e-commerce business, but it’s notable that Alibaba
was formed in China in ’99. Also of note,
business.com, a website, sold for $7 and 1/2
million to eCompanies, which purchased it
a couple of years earlier for about $150,000. The reason that I
mention this is it’s kind of an important lesson. If you can own the domain
of the thing that you sell, that’s a brilliant move. It’s something
that we discovered and we’d be able to do
a couple of years ago. And Marukan, when we redid our
website about five years ago, discovered that ricevinegar.com
was just sitting out there for us, and we went and picked
it up for only about $2,500. So I think, much to my
competitors’ dismay, here I am at a trade
show with my new website, ricevinegar.com, and
they’re like, oh, man. I just love seeing
the look on their face when they recognize that
I bought that domain. But it’s interesting
what happens here a little further down the road. In ’99, e-commerce
sales start to boil and they reach a
$150 billion level. This is globally. A year later or so, we
have a dot com bust. Booms and busts, they’re part
of the normal market flow. But what this particular
bust did, I think, was it separated some of
the winners from the losers, allowed some of the
more dominant companies to buy some of the lagging
ones, and narrowed it down and made the strong
survive, so to speak. So it was during this time
that eBay has the largest user base of any e-commerce site. Alibaba actually
achieved profitability. That was probably
something that wasn’t possible before that bust. And I believe they
were the first ones to achieve profitability. eBay then goes and acquires
PayPal for $1.5 million, so they integrate that
secure payment system into their platform. And then Amazon becomes
profitable just a couple of years later. Oh, and by the way, that
same business.com web address now sells for the $345 million. But it’s more interesting, I
think, to see who it sells to, the phone book company. They basically had to trade
their business and say, we’ve got to go a
different direction. We’ve got to get
into something else. Now, I don’t know how successful
business.com is today. I know that it does a
lot of business services and legal forums and things. I don’t know that much about it. Hopefully, it was
worth the investment. But I can tell you it’s doing
better than the phone book is. So you may have noticed there,
I cited Wikipedia a lot. And as you guys know–
you’re research students, you write papers– you got to be careful
with Wikipedia. I tried to only take out
those milestone points in time where it referred back and
I could definitely verify that that event happened. But there were a
few things that I noticed were missing
from that timeline that I think are
really important. In 1998, Google came along. Google’s a giant. For what they’re lacking
in e-commerce capability, they more than make up for
in having our information, collecting and utilizing
that data information. It’s a search engine, but it’s
much, much more than that. I remember when
it first happened, and this is right
before the dot com bust. Values of these stocks were
going higher and higher and higher and people were
investing so frantically, they didn’t know
where to put money. Anything they could
get their hands on. They were buying, buying,
buying, driving prices way up. The critics, people
like Warren Buffett, were saying, if I don’t
understand how it makes money, I’m going to stay away from it. And some of that, I
think, contributed. Obviously, that’s just
one man’s opinion, but he’s a very important
man in the stock market. And I think that people
did realize that things got a little bit overvalued. But very soon after
that, Google proved it could make money as
an advertiser, utilizing that information and
getting it to the people that they could benefit
and the businesses that could benefit the most from it. Also during this time of
e-commerce explosion, in 2004 Facebook is launched
or invented. It opens to the public
in September of 2006. These two companies are now
the two leading advertisers in the world, are
the media companies that earn the most
revenue from advertising. Very interesting. I have a slide at the
end that quantifies that, but I’ll just touch on it now. In 2006, Amazon launches
Fulfilled by Amazon, FBA. So they basically
split their company and say, no longer are
we selling e-commerce for ourselves and fulfilling
it, but we’ve got this warehouse and it’s vast. It’s more space than we need. In fact, we’re going to
plan to build more of them. We’re going to let
everybody else come in here and share space, too. So if they’re trying to sell
and do what we’re doing, rather than compete with them,
we’re going to do it for them and take a fee. So that was
earth-shattering, because I think the mentality of
most businesses at the time would be, try to
squash the little guy. Try to squash the little guy. Amazon just opened up
and said, come on in. We want you to partner with us. And by doing so,
they created what they call in business a moat. Made it very, very difficult
for the next competitor to try to do the same thing. In 2007, the first generation
Apple iPhone came out. Most e-commerce shopping is
done on a cell device now. And at the time when
this device came out, a lot of the old-school phone
companies, the Palm Pilots, the Blackberries, if you
remember your parents talking about those things, were
saying, oh, the PC guys will never be able
to launch a phone. And what they didn’t realize was
that the PC guys weren’t really launching a phone,
they were launching a PC that fits in
your pocket, it just happens to have the
phone on it as an app. And all of those other
apps made it so expandable that it’s now the easiest
device to use in our lives, probably even easier than
our cars and everything else that we own. So greatly, greatly
helped on the e-commece. And then I would say it almost
looks like, about 10 years post the dot com post, There Is
another kind of revival, and the dominant companies
then start gobbling people up. There was a period
between 2010 and ’11 where Google acquired two
companies per month on average. So yeah, over 50 companies. Well over 50 companies
got absorbed into Google. A lot of it was
products, a lot of it was services and
sites, and just ideas that they acquired and
purchased and took ownership of. And they didn’t stop there. They were doing a lot
of buying before that and they continued to do a lot
of acquisitions up to this day. So these, Amazon, Apple,
Facebook, and Google, commonly called the
“Big 4” tech companies. Now, this is where I
really have to say, this is where we’re
narrowing it down into my scope of
the presentation. So thanks for bearing with
me through all that history and all that hubbub, all this
ancient history 10 years ago. More recently, going
back about three years, these big three
developments are what I think is going to change
e-commerce for grocery. It’s already been changed
for electronics and household goods and pet food, almost
as far as it’s going to go. Obviously, it’s going to
continue to go farther, but the boom has been seen. The explosion has
happened, and now we’re kind of reaching
that plateau where they’re growing steady, double
digit figures every year. Double digit growth
in grocery is really going to mean
something, and it’s going to lead to some hyper
double digit growth, which is going to bring everybody in. These three events, I think, are
contributing to that the most, and I want to go into depth
on these a little bit. So in 2016, there is
Walmart purchases jet.com. May have been the
number three or four, at the time,
e-commerce platform, but they buy it
for $3.3 billion, probably because Jet
is starting to get lost in all of the traffic of
Amazon, Alibaba, and everybody that they have to
compete against. So they buy it for
somewhat of a song, and they use it to improve
the platform for walmart.com. Let’s take a look at
what that that looks. I think before we look
at the bullets on that, we have to understand
who the players are. So Amazon over here–
there’s the bullet point– has lost a little
bit of market share. This is a year ago and this
is current, pretty recent information here. So Amazon remains huge and
all others remain huge. But these other
second place guys are all vying for
more of this share. They’re not going
to get it from here because this is so fragmented. This is a lot of sellers. A lot of these guys
are FBA clients that are selling the
product at Amazon, but this is their own line. Instacart is a grocery service
provider, delivery service provider. Walmart, you can see
in the last year, has jumped, tripled
their business. Chewy, which is pet food,
vertically integrated, is increasing. Kroger’s increasing,
and I mentioned that. Even Target is increasing. So everybody’s kind of going
for the piece of the pie here. It’s two years ago comparison
to current, I apologize. There we are. So they’re using it to prove
the platform for walmart.com. That was, in my estimation,
the simplest way to describe that purchase. Most analysts agree that
Walmart paid too high a price for jet.com, because
really, what they did was they took on their
senior management staff. The people knew how
to write the programs and optimize the platform. And they took the
tack of it, of course, and they integrated a lot
of it into the backbone of what walmart.com is. I think they were
trying to bolster their in-house e-commerce
with that tech know-how. Marc Lore, the jet.com
founder, is now the president of Walmart’s
US e-commerce business. In my opinion,
Walmart would have had to spend a lot
more than $3 billion to get to where they
are today if they’d started three years ago
without purchasing the jet.com platform. We also talked about the Amazon
purchase of Whole Foods Market. John Mackey, president
of Whole Foods Market– it’s been around for a long
time, 25, 30 years at the time. No, longer than that. Somebody asked him
in an interview, what’s going to happen when
Amazon tries to get into food? He said, that’s going to be
Amazon’s Waterloo, obviously referring to Napoleon’s famous
defeat in, I believe, 1815. Lo and behold, two
years later, he’s got to call Jeff Bezos his boss. That transaction was
worth $13.7 billion, and it raised all
kinds of questions. I’ll remember being in my office
the week that that happened, and when that all went
down, the news was so big. And people started to
speculate, does Amazon really want to own stores? These guys are supposed to
be the non brick and mortar company. Stores, that’s the old
way of doing things. You want delivery. So why would they do this? Do they really
want to own stores? Well, they do, and
they don’t, also, and it’s mostly that they don’t. But the value was there. They needed to
build in integration for grocery e-commerce
that wasn’t there before. Buying Whole Foods gives them
a first, best customer type of relationship with a
supermarket chain that had 450 stores across
the United States, all of the major
markets, places where Amazon was already very strong. To understand why
they did this, it helps to understand
their mission, going all the way back to
1997, and they wrote it in some of their founding
documents of the company at Amazon. They wanted to be the
leading online retailer of information-based
products and services with an initial focus on books. Very specific. But you’ve got to pick up on
its initial focus on books. Didn’t mean that was where
they were going to end. Why would they start with books? Books are almost the
opposite of groceries. There are more books
than you could ever store in a warehouse. I think their commercials
and their advertisements back in those days used
to talk about that. So it’s no wonder they
haven’t had challenges. Books are perfect for
an online retailer, whereas groceries
are lots of problems. Groceries have a shelf life. They go bad. There’s less unique about them. You have choices. If you want to buy
a specific book, you can’t substitute
that book for another and say, well, this isn’t
exactly the same, but read this and you think you’ll like it. It has to be the book
that you’re looking for. With groceries, you’re hungry. Something, almost anything,
can solve that problem. You have lots of choices and all
of them will work as solutions. They refine that mission
statement a couple years later to say that they want
to be the earth’s most customer-centric company, build
a place where people can come and discover anything they
might want to buy online. So anything they might want to
buy online, that’s very broad. That’s the vision of a company
who discovers that, wow, there are really no limits here. We can sell anything. As a matter of fact, maybe
even that’s not broad enough. Because they launched, in
the early 2000s, Amazon Web Services, AWS, to create all
of this backbone internet content, website building, data
storage, data management, all of these services
that Amazon provides. And they said, we can just
drop the whatever people want to buy online
and just say, we want to just be the most
customer-centric company on earth. And that’s their present
mission statement today. So if they’re going to be that,
the Whole Foods purchase was a very small price to
pay to basically say, this is our beachhead that
we have to defend in grocery. So Ben Thompson, I
think, said it best. In a lot of my research,
some of the stuff that he’s written in his
podcast and his blog post is Stratechery. He was one of those guys that
wrote one of those articles right after that happened. And he said, if you
really break down what their mission statement
is, Amazon’s goal is to take a cut of all economic activity. I would say online,
but then, well, maybe not even online,
because everything is online at some point. So with Amazon Web Services,
they get a piece of that as well. So that’s pretty fascinating. That’s why they’re quickly
becoming just a monster. There was too much value
for Amazon to pass up here. That was a brilliant
acquisition. You compare it a year
later to the $3 billion that jet.com got bought for at
Walmart, you almost go, wow. This was a bargain. Now, this is a very
interesting one. Kroger, nation’s largest
supermarket chain, second largest
retailer to Walmart. Walmart’s the largest
company in the world, so obviously, very,
very formidable. $500 billion in sales
revenue that Walmart has per year, making them the
biggest company in the world. Do the math on that
and it’s $15,000 in transactions per
second, 24 hours a day, and it’s growing all the time. Unbelievable. That’s almost a million
dollars an hour. Yeah. But Kroger is number 2. It’s a distant number 2. But in the United
States, they have a little bit less
than $3,000 stores, about 2,500, 2,400 supermarkets. Ralphs and Food for Less
are some of the ones you may be familiar with. And they partnered with
a company called Ocado just last year. Ocado I was fortunate
enough last year to see, and it’s very early. Well, it’s been operating
in the UK for a while. And now I’m coming back to where
that history is showing itself. Because the UK
spent so much time developing the
e-commerce platforms and the website themselves, it
enabled a company like Ocado to start around the
year 2000 and really establish themselves
as the world’s largest online-only grocer. They’re a grocer that
doesn’t have any stores. And that’s now
differentiated from Amazon, who does have stores. And not only do they have
the Whole Foods stores, but they’ve tried
and experimented to open other stores,
like the Amazon Go. You’ve heard of, maybe
in the newspaper, the cash registerless stores,
the stores of the future, where you’ll just be able to
walk in, get what you want, and you walk out, and
it’s automatically going to bill you,
as long you’ve got your payment method in your
pocket and knows who you are. But it is very significant
when the leading supermarket company, at least
for my business, the leading supermarket
company in the United States partners with the largest
online company in the world. They’re trying to do
it both ways, not just one or the other. They have a partnership now to
build 20 warehouses in the US in the next three years. But these are not just
any ordinary warehouse, and that’s what I
want to show you here. This is what an Ocado
warehouse looks like. And obviously, this
is right on YouTube, so you guys can go and
learn more about it and see what the
technology looks like. But it’s several levels or
layers, four or five stories, all of palletized
product that comes off of trucks at the back
of the warehouse, which would be up on the top
right, and then works its way through the system. And what this is what
they call a hive. So they’re building
warehouses in ways now that are filling up the entire
capacity of the warehouse. Not just using the floor,
but building from the floor and going up in the hive,
making it three-dimensional. So products can be automatically
picked by these robots. Each one of these warehouses
has about 1,000 of these robots, I’m understanding. They travel
laterally, vertically, dropping stuff into bins and
picking stuff out of bins, basically moving
product to the other. Color-coded. They operate on a
4G wireless network inside the building
that’s all its own so that these things can
talk to each other and know which
robot is doing what. So they’re assigned to a task. It’s going to make the
closest robot go and pick up whatever it’s near after it
completes its last order. Obviously, everything
is automated. It knows when the batteries
need to be charged and what it has to
do for maintenance. There’s lifts underneath
that bring these crates up. These crates are
then lowered down, packed into an
actual grocery order that somebody has made at
home, either on their phone, and they’re going to now try to
beat this thing home from work. Good luck, because it’s
probably to be on your doorstep by the time you get there. It’s been very
successful in the UK. Now, the UK is not
the United States. We have our challenges here
with geography, distance. Things have to
travel a long way. And there we are. Things after travel a long
way to get where they are. Nobody can probably do
that better than Kroger, because there’s stores
in almost every market. About half the states,
or 35, I think, states are covered by a
Kroger-branded supermarket. So once these
warehouses are built up, I feel like they’re going
to be very vertically integrated to
service the consumer, either through stores
or through e-commerce. So I’m going to
tie this up here– we’ve given a lot
of information– by giving you the
manufacturers’, the distributors’
or the wholesalers’, and the retailers’
perspective of what’s happening in
e-commerce and what’s going to drive it to
change even further, why I feel like we’re at the
cusp of a change right now. Almost every grocery
manufacturer, like myself, with a market for
their product is being delivered through
e-commerce one way or another. These products, I’m
testing it all the time. I’m going on when I hear about
a new e-commerce platform, wondering if they
sell my product, wondering who they’re
getting it for. It’s very difficult
to find out, but these are questions that I even have
to answer for myself and say, do I need an e-commerce partner? Right now, if I
get one, it looks like we’ll just be competing
with a lot of people that are already buying my product
from somebody I’m selling it to, and figuring out how to get
it on Amazon or some other way. So I can kind of
choose to compete or I could choose to not
compete and let it go back. But what I don’t want to
do is get left behind. If my competitor, who sells
another type of rice vinegar, finds out a better way sooner
than I do, then I’m at risk. Does e-commerce level
the playing field, maybe not favoring the top
brand and making it easier for a smaller brand to get in? I think, to some
extent, that it does, but I also think that if you
have a good store presence, consumer awareness
and brand image is already high, then
it’s going to put you higher up in the category
rankings and the Google searches and other things, and
that’s where Google and Amazon, with the backend
that they’ve built to optimize these searches. Now, a lot of the
controversy that’s happening right
now with Amazon is that they say, well, I wonder
if Amazon’s really playing fair. Do they favor certain
sellers over others? Is it going to become a pay
to play type of a scenario. And I think, indeed, to
some degree, that it is. There’s no doubt. More people suspected this after
the purchase of Whole Foods because Whole Foods also
provides a rice vinegar in a private label
Amazon-branded packaged, basically. So Amazon is doing
a lot of tests with their own private brand. They call them Own brands. Of course, then the
Whole Foods label has an Own brand, so to
speak, with 365 label that the consumers,
some, already recognize as a high
quality, good product. And so is it possible that
they would optimize that ahead of a competitor’s product? Well, I would. I mean, let’s be honest. So that’s another
challenge that we have to figure out how to defeat. Lesser known brands
can develop faster if they are well marketed online
and have attractive features and benefits. I think that’s
the key, is you’re going to have to tell a
story better than others do of why you need this
one over this one. People are using
Amazon for research. They’re going there
for information to do the shopping to compare. It truly is shopping. It’s not just buying. It does penalize the
slow and the inflexible. One of the potential
e-commerce partners that I’ve already talked to
looks at this glass package and says, wow. These Amazon fulfillment
centers are very high-tech. Kroger is building 20 of these
Ocados in the United States. There are 300 Amazon
fulfillment centers throughout the world, most of
which are in the United States. A glass bottle product that’s
packed by somebody else and coming through their
system, it scares them to death, because if this
falls out, breaks, goes through the tape on
the bottom of the box, that line could go down
for just 10 minutes and they could not ship
10,000 units that day as a result of a little bit
of a delay on the line time. So they can’t afford to be
cleaning up messes in there. They have to make sure
everything’s very secure. And to your point, sir,
this is a big problem, is they overprotect
the packaging. So yeah, there is a
lot of cardboard waste, a lot of extra plastic
that goes into there. They ask, oh, can you put
it in a plastic bottle? If you can, it’s a slam dunk. No, don’t want to put
in a plastic bottle. Not as recyclable. Not as user-friendly. We think of our
product like a wine, so we want it to be
in a glass bottle, not in a plastic bottle. So there are some penalties
to be paid for the inflexible. We have to get
through those hurdles. A product like this one, which
is harder to find in stores– this product is
probably in 50% or 60% of American supermarkets. This one might only be in 5%. So when a consumer
loves this product but it’s harder
to find in stores, they’re going to expect
to pay more for it. I’ve seen this out there for
$30 sometimes, a bottle, when it should not be more
than $5.99 in a store, and you can go to Whole
Foods and find it for that. So Amazon just hasn’t
figured that one out yet. That’s what the e-commerce
partner will help me do, market that lesser selling
item, and that’s where that thing has
the bigger opportunity. So yeah, I do think that
there is, not only for brands, but for products
further down the sales list within a
company, you can you can optimize your
selling more by just going more e-commerce focus
on the slower moving items. A couple of predictions
that I made, about the time that these
mergers were happening, was that someday
there might only be two stores, Walmart,
where you go to shop, and Amazon, where
you go to order. And then it turns
out Walmart buys Jet and Amazon
buys a Whole Foods, and now they’re
kind of commingled. We’ve demonstrated what
Kroger’s done to counterpunch. I think that there will
be more, obviously, and we’ll talk about that
a little bit as well. Another prediction I made– I think this is one of the
smarter things I’ve ever said– if you’re not Alexa’s
favorite brand, she’s not going to give the
second place brand much credit. Alexa, buy me rice vinegar. You’re going to need to be
optimizing Google search. So from the time we
re-engineered our web page a few years back, I
built in a lot of SEO. I didn’t do it, obviously. We asked for it to be
really SEO-optimized. That’s really a standard
requirement these days for the website. We have to watch out for the
Amazon monopoly pay to play. I think that these
other competitors who are getting a lot
better at e-commerce are going to help
us through that. But also, you’ve got to remember
that Amazon’s philosophy has been to let everybody
in and everybody play. Because they can
beat people by taking costs out of the
system for themselves. These e-commerce partners
I’m talking to are saying, you can deliver to Amazon’s
fulfillment centers if you want to. You can quote them
a delivery price, but they’re happy to pick up
as long as they’re picking up quantity because there’s trucks
all over the road and nobody has lower rates,
and I believe that. I’m not going to
challenge you on that one. Like I said, I
think that the goal for most of our manufacturers,
and our ultimate perspective, is we just want to do it better
the other guy is doing it. So this gives you
an idea, before we go into a wholesale
perspective, of what categories sell the most. And we’ll look at
this very quickly. Vitamins. Pet supplies are up there. Home and personal care
is way up the list, conditioners, fragrances. Currently, only 3% of edible
grocery sales, food, globally, are sold online. Well, it might be a
little bit higher, but it’s probably no more than
4% if you just look at the US, because there are some
countries where Ocado, the UK, has really got it rolling and
it’s doing well over there. Experts are saying we can expect
a about a 16% compound average growth rate for the
next five years. That’s what they’re saying
that we should expect. Certain categories, I
think, will be higher. Ones with more problems
probably be lower. But I think that
sounds low to me. I think that we’ve proven that
we’ve seen that we’re really on the cusp of this bubble and
it’s going to start to move. From the wholesalers’
perspective, I think, very much
so, it’s currently Amazon and everybody else. And a large chunk
of everybody else is already competing
alongside of Amazon on their own platform. So it makes it very, very
difficult for anybody else to ramp up and get involved. Walmart is trying. With Jet, they’re
very much trying to make walmart.com
fulfillment-based. And where they’re banking
a lot of their growth and their success is on
having stores order at home and pick it up at the store
on their way to their house. They’re going to go with that. Jeff Bezos knows this. Walmart knows this. Lower prices are never
going to go out of style. People are always going to
want to continue to pay more. That’s not going to change. That’s going to be
true for years to come. Walmart’s proven that they’re
very, very good at that, so they’ll figure out a way
to take out costs and make it good for the consumer. We talked about how
Amazon acts as both a competitor and a solution. Being specialized
can be a strength. In other words,
specialty distributors. Our biggest customers at Marukan
are specialty distributors. Like they’re either focused
in the natural food channel to the Whole Foods or
the Sprouts markets, or they focus on the
Japanese consumer that looks for things
that are made in Japan or associated with
companies from Japan. So it’s either ethnic specialty,
health food specialty, vegetarian, vegan. Plant-based is becoming
much, much bigger. Sustainability is
becoming much bigger. So people are
having more reasons than just the product itself to
look in and make the purchase decision. Being a specialized
distributor, maybe that could be where it comes from. The next big thing
could be the company that makes e-commerce green. So as I mentioned,
our e-commerce partner went out of business. They cited the reason
for it, we just couldn’t compete with Amazon. I had a few calls from her
prior to her closing up shop, and just saying, why do you
guys sell Sochi to Amazon? We don’t even sell to Amazon. I don’t think we’re
the only ones. She was frustrated at
seeing other people were able to do it, somehow find ways
to take costs out of the system or bundle the purchase
with other things, sell at lower minimums, and
just basically beat her, and she wasn’t able to survive. It would have been even worse
if we did sell to Amazon and she chose to do it herself. The retailer’s perspective. There’s three types
of grocery chains. The largest ones are
developing their own systems, like Walmart and like Kroger. The midsize ones are
partnering with Instacart. And for the most part,
that’s working very well. A couple of weeks ago, I met
with a hundred-store chain that’s in the Northeast,
north of Boston, in and around Boston area. They told me that adding
Instacart within the past year was like building the
revenue of a new store without building the store. So they replaced one
full store in volume without having to have a
store, employees, or anything. So they’re happy. They’re liking it, and it’s
providing an online consumer e-commerce option for
their loyal customers. Independent stores
and niche grocers, think about the Gelson’s
and the Bristol Farms, or even what’s so
popular around here is the Northgates and the
Hispanic retailers, the El Supers. These guys have
to create a niche. You’re going there because
I really like the salsa, I really like this. And that’s harder for
global e-commerce companies to get their heads around. There’s going to be a lot of
opportunity for local companies to continue to do a
better job merchandising to their customers, because
they understand them better. And so they need to do a better
job on the in-store experience. I think there will
be opportunities where you’ll see
that kind of merge, where those
operators will become better e-commerce sellers. We talked about the store
pick up for Walmart. Fresh produce and meat, that’s
going to be the last frontier. Now, it’s already happening. Ocado is already doing it. Amazon Fresh has existed
here for a long time. It’s basically an
additional subscription to your Prime membership. But even that has
sputtered and they’ve pulled back on it, said,
this is not really working. And in the true style of Amazon,
when something doesn’t really work, they just stop doing
it for a little while until they can figure it out and
they take a different course. They don’t consider
it a failure, they consider it a learning. That’s an amazing
company that, way and I think that the leadership
there is very strong and they’re very determined
to fulfill their mission. We talked about the
challenges here. You’ve got the Rocky Mountains
in the middle of the country, so shipping things
coast to coast is tough. You have to have fulfillment
centers everywhere and stores or last
mile distributors close to your consumer bases. And the human factor
is always in business, the hardest thing to control. E-commerce has
the advantage here because they can replace
humans more easily. Not completely, but more
easily and in more places. A little bit of an eye chart. We’ll go through it fast. But basically, what this says
is if you talk to retailers, wholesalers, and manufacturers,
like myself, the first two categories on product
knowledge, they’ll feel like we have the
advantage over Amazon. On pricing and
product choice, it’ll be more closer to a 50/50. Sometimes Amazon has the
advantage, they do a good job. Sometimes they don’t. On fulfillment and shipping
and user technology, Amazon’s definitely
got the advantage. So we know our own product. Pricing, it’s a toss up. On fulfillment and shipping,
we can’t touch them. That’s basically the lesson
that you learn from them. So what’s going on with
the rest of the Big 4? We talked about Walmart and
we talked about Amazon a lot, talked about Kroger some. But remember, early on, we
mentioned Google and Facebook. These are enormous
platforms and it only makes sense that, at some point,
they always have the ability to enter the market. Google’s a search engine, a data
collection, a service provider that makes most of
its revenue, happens to make most of its
revenue, on advertising now. They’re collecting
ads, ad money, to serve when you’re
doing web searches, or to optimize your
website and get it closer to the top of
the list in searches. That’s where most
of their revenue nowadays is coming from. And they’re the largest
media channel in the world, because they really,
essentially, created a channel. Facebook has followed along. What started as social media
has really become an advertiser. They’re testing a marketplace. I don’t have any of
you have been on it, and there’s less and
less Facebook users all the time, as
people go into Insta and Snapchat and other things. But it’s kind of hokey. It’s kind of wonky and weird. It’s almost like just,
here’s something. Maybe you want to buy it or
maybe you want to look at it. It’s raw. It’s not in a
developed state yet. The other thing I
forgot to mention, that Google is
launching a marketplace. What makes Google different
than Amazon is they realize they’re way too late
to the game on fulfillment. They want to try to do
it through other people’s fulfillment and just surrender
that part of the margin, which is a disadvantage, but
they’ll save all that cost and they won’t be like
Walmart, insisting that they go head to
head, fulfillment center for fulfillment center. One of the interesting articles
I read, and I’ll just add this in, is that if you
go back 20 years ago, Amazon had the 20
fulfillment centers– I may have this backwards– or 10 fulfillment centers,
and Walmart has 20 now. So they have twice as many
as Amazon did 20 years ago, but the thing is it took
Amazon like 10 years to go from 10 to 20. That would have been the best
time for Walmart to jump in. Instead, they were
like 10 years too late. They built their 20
fulfillment centers when Amazon already had 300. So it was just a
mistimed effort, but they tried to catch up
with that Jet acquisition. And then where does
that leave Apple as the other part of the Big 4? Still a hardware
computing company. They extend to media with Apple
TV, iTunes, and cloud storage. But I would not expect your
Apple to just say, you know, we need to be an
e-commerce company. They’re not going
to change that way. Their devices are critical to
this whole operation happening, and I think that’s where they’re
happy to make that space. Here’s a little
example of Google and what I’m talking about. They laid low for
so long, that last four years of only having 30
sellers on their site, and now all of a sudden– and this is why I think that
we’re at the tipping point– when you see this activity over
the last year, year and a half, where now, at the
end of last year, Google’s adding sellers
at a rate of 30 per week, that tells you
something’s happening. A little bit about Facebook
as a media company. This slide actually came
out of another presentation they gave on media
spending and how internet advertising actually
surpassed television in 2018. So fascinating. When you think that they
get $2 and 1/2 million for a Super Bowl spot, all that
little $20 and $50 internet advertising is, in
some, killing it. And it’s not just
the $20 and $50, it’s the thousands and millions
of dollars that the big CPG companies are now saying, this
is what my digital advertising budget needs to be,
because that’s the channel people are paying attention to. A bunch of tech trends. It will be too long to get
into all of these, I think. But you can see that there’s
a lot of things here. 5G technology is upon us. That’s going to speed things up. Automated vehicles,
as obviously, drones are going to make
e-commerce much easier. Alternative energies and
battery technology, blockchain. AI is already being used. What do you think the next
generation’s social media is going to be, because it
won’t be Facebook forever. I mean, there was Myspace
for a while and it left. Probably Facebook, that
could happen someday. So wonder what it will be. I think maybe more interactive. Facebook, what I noticed,
my criticism of it is it’s very static. You look at it, oh,
I’m seeing something that happened some
time ago, but it doesn’t put me in the moment. Maybe something with virtual
reality in the future will put us more in the moment. I want to be there, and
then you know, put the VR on and you can be there. I don’t know. We have to think about
it because it’ll happen. And then at some point,
when you’re there, somebody will sell you
something, [LAUGHS] because that’s just what we do. And then eventually,
these computers are going to become
a part of us. That gets a little
freaky and I really don’t want to talk about it. So I’m going to wrap
it up right there and just open it up
to some questions and see if you guys have
any thoughts or comments. Go ahead. If I were to get into the
e-commerce as a new business, what would be the best
avenues for advertising through the internet,
specifically? And how much does
that investment translate into profits? Really hard to say. There are millions, hundreds of
millions of e-commerce sellers. So it would be
nothing new to say, I want to be an
e-commerce seller. If I was going to be
courageous and bold and enter that
environment– and it might not be a bad idea to do
because it’s kind of low risk. The barriers to entry were
already paid by Amazon. So they’re letting you now
be a part of their platform. You just have to know
that you’re going to compete with their offering. So I think what
you have to do is you have to look for things
that they’re not selling or not selling very well. One example would be this. I’m seeing this out there for
$40 and it should cost $5. So find things like that. I think become a specialist
instead of a massive generalist and you can probably
find areas of success. And I think that’s what
the millions of FBA vendors are doing, or sellers,
are doing on Amazon. Yeah. Anybody else have any comments
or thing to add to that? Anybody in here selling anything
on Amazon right now as an FBI, or have you worked with
anybody, know anybody, want to tell a story? Somebody is, a couple of hands. How about questions for CPG,
food companies, manufacturing. Yeah? Question. Trending lately about
the last mile being a key to Amazon’s
success and really, really making it difficult
for everyone else to catch up, because
when they catch up, Amazon’s already
doing something else. That’s right. Maybe you could so talk about
the next two or three years and what’s happening there. Yeah. His question or comment
is where Amazon’s really getting a competitive
advantage is in what they call the last
mile of delivery to the home. And what they’ve done
to raise the stakes, it’s everybody daring
everybody to deliver it faster. Not only do they want it
cheaper, they want it faster. If you have the
choice of two sites and one can deliver
free in one day and one can deliver free
in two days, same item, you’re going with the one day. So two day used to
be the standard. Now it’s one day Prime. They can’t do it quite
everywhere on everything, but they know when it is,
and they’re adding more items for Prime all the time. So what does Amazon
want to have? Even more important
than low price is selection and selection of
things that are one day Prime. And so they’re doing that, and
you’re seeing the Amazon trucks driving around. And they’re doing
it any way they can, because to fulfill
their mission, they know that they need to
be the most consumer-centric company. So I’ve talked to
people and say, what have your e-commerce
experiences been like? They’re like, well,
for one thing, I got rid of my Costco card. And I was like, wow. That’s a big move. Got rid of your
Costco card, paid the same amount of money for
an Amazon Prime membership. And he says, yeah. And I’m surprised sometimes
when I get a package and it’s one day Prime, but
it’s in the Amazon outer box but the Walmart
packaging on the inside. They don’t even
bother to take it out. They really are
shameless in just saying, we do whatever it
takes to get it to you, even if we have to go
buy it from a competitor. We just want to make you happy. And return policy is another
way they’re competing. People were afraid
to buy clothes online for a long, long time,
and that’s really gone away because they’ve taken
the risk out of it. They’ve made clothing
buying and other hard goods buying a lot easier. But yeah, the main battlefield
where these guys are competing is on Prime delivery,
one day shipping. Yes, in the back? I just have a question
to add onto that. As people are raising awareness
about the conditions by which Amazon, like delivery
and also the warehouses and also about packaging
and [INAUDIBLE] and stuff like that, do you
think that Amazon is going to change the way they
do things whenever this awareness continues? I do. I hope so, yes, and I do
think they are going to. I think they’re going to have
to, because otherwise, the risk of the– it’s not just a bad PR problem. It’s a problem problem. You can’t pollute the earth. You can’t waste the resources on
getting it a little bit faster. So people do have to analyze
that for it to make sense. Yeah. It seems to me that
more and more people are starting to think about
the actual cost of the thing. First is how fast
it’s getting to me or how cheap it’s going to be. Start thinking about, OK, what
are the consequences beyond me getting this thing quicker? And I don’t know, but it seems
that the way things are going, it’s going to
spread a little bit. So it’ll be interesting to
see how Amazon reacts to that. I think that you are right. I think that there are
people, particularly groups of people
of the population, that’s very concerned with it. But think about, going back
30 or 40 years ago, to FedEx. FedEx was a business
school project that got launched, where the
instructor famously failed the founder of FedEx saying,
this will never work. You can’t deliver mail to every
zip code in the United States the next morning. And they figured out a
way to do it with the hub and spoke technology. Walmart used that same type
of hub and spoke technology. They have, I believe,
48 fulfillment centers across the US just on
groceries, so multiple and in different
states, but they’re all around the locations. And it puts their trucks
within a certain 100, 150 mile proximity of everywhere
they have to get product to the store the next morning. So they can be really
tight on inventory. They never have to
overextend their purchasing. Those models really
follow each other, and it laid down the
basis for the strategy of how can Amazon do this. But I think your point,
maybe to a bigger point, is just because you can
doesn’t mean you should. Yeah, we can get it there and we
can prove that we delivered it next morning, and here it is
wrapped up in all this stuff and it’s maybe not the best way. The other thing is the
no shipment minimums. When shipping minimums
go down, that really contributes to the problem. So maybe Walmart will
start to catch on to that and say, hey, people that
are picking up in their cars are picking up larger orders. They’re not going, oh, I
forgot a bottle of this. Well, just Instacart
it on over here. Or have it shipped Prime,
from a packaging standpoint, even worse. But people who got the whole
shopping list and they’re going to Walmart to pick it
up on their way home, or on Saturday or Sunday
when they’re not busy, can do a lot of
good to save that. I mean, we’re in California. We’re already doing a lot
with charging for bags and making it a habit
where I know people are bringing in reusable bags now. So I think a lot of the
stuff that’s happening is really great, and
I think e-commerce is going to have to listen. Yeah? Well, I think the bigger
question is social responsibility from the
companies rather than– oh, thank you– from the companies themselves. I mean, if you consider
that in the last, what, 20 or 30 years,
everybody wants it quicker. I appreciate convenience. I appreciate technology. I order from Amazon,
all that, OK. But there’s a price to be paid. Especially I keep
going back to this here in Southern California,
and California in general, with the environment being as
bad as it is, people get killed on the freeways from
18-wheelers hauling cargo out of the port of LA in Long Beach. Especially right now,
Christmas is coming and all the stuff
is coming in, or has come in, we’re just flooding the
streets and the freeways, Uber, Lyft, Amazon. Is that part of
the conversation, the social responsibility? Well, I don’t know. [LAUGHS] I suspect that it is. And what I suspect is–
because you touched on another problem, which
is the transportation, all of these trucks,
all of these cars, maybe even drones
and automated cars. It almost seems like
there needs to be a separate commercial
freeway system. If the public is going to
continue to drive cars, then do we want to
continue to have them on the same road
with automated cars? Now, I’ve seen some
reports from experts that say, there will
be automated flying cars before there’s
automated driving cars, because putting automated
cars on the road with manually driven cars is a big
problem, and manually different trucks and
commercial vehicles. So I think that you’re
probably going to see– you saw the Ocado warehouse
and the smart design that went into that,
well, it doesn’t just stop at the loading
dock, believe me. We just built a facility, and I
was paying very close attention to how close we were to the main
street, how hard it was going to be to get into the driveway. And I think when
you start talking about going into these
very congested areas, like Manhattan and northern New
Jersey, where they’re always debating and having these
discussions about where the next Amazon fulfillment
center is going to be– it’s great, it
creates so many jobs. Yes, but there’s probably
going to be some allowances for there’s dedicated
lanes for those trucks to get off the freeway, get
through that distribution center, and get out of the
public’s way fast as possible, making it less of a nuisance. I mean, we’ve dealt with this
with airports in the past. Some better than others. LAX is not a prime example,
but they’re fixing it. So it just it takes a
long time to catch up. I noticed you talked about,
in your very beginning, you were a bagger. You started as a courtesy clerk. That’s right. I think the grocery industry
has been, historically, an area where you can start
as a bagger with very limited and work your way up and
learn the skills as you go. With so many really
big changes happening in this industry, what
skills do you think are going to be most
important for these guys as they’re entering
the workforce and are trying to find
those jobs in a very different landscape than
it was 30 years ago? Understanding and being
able to communicate with people, in my
opinion, is by far the most important skill. People will always be here. We can’t completely
eliminate us. And also, understand the
consumers’ behavior as well, be able to deal
with their issues. So being able to
relate to people, be able to communicate,
listen and understand. The people skills
is very important. I can’t really say it enough. I mean, people skills
lead to leadership skills. Leadership skills are what
get you promoted and make you more successful in your career. I think early on, you
become a specialist with an eye on
the bigger picture so you understand where you fit. A good piece of advice that
one of my college professor gave me– because I was a community
college person myself. I went to Fullerton and
then transferred to USC. Just got the undergrad
and stopped there in business and marketing. But one of my USC
professors, a great piece of advice that I’ll
never forget is, go to work for a big
company while you’re young. Learn what it’s like to be
part of a really big machine, and try to understand
where you fit in that part. Stay in your lane, but
really try to understand it. And then becoming a specialist
as early in your career so that you know the
most in the company about a particular
subject or subjects. That gets you promoted. People skills get
you into leadership. OK. How are we doing on time? Do we have time for a couple
more, or any comments? We’re right there. We’re right there. OK, perfect. Well, I’ve enjoyed having you. I’ve enjoyed being here. Truly an honor, guys. [APPLAUSE] Thank you. [MUSIC PLAYING]

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