Database Marketing and Retail Meets eCommerce with Chris Daly

Chris Daly, an expert in database marketing and retail, discusses various topics related to marketing data, customer segmentation, and customer-generated offers. Chris emphasises the importance of understanding customer value and purpose, as well as the challenges faced by retailers in pricing, targeting, and audience building. Daly also highlights the need for marketing data warehouse services and the potential of machine learning in offer generation. He shares insights on the evolution of e-commerce and the ease of starting an online store. Overall, Daly provides valuable perspectives on the retail industry and offers practical advice for retailers. This conversation covers various topics related to retail strategies and challenges. The main themes include multi-channel strategies, selling on e-commerce sites, white labeling, distribution channels, pricing and service, guarantees in marketing, marketplaces, suppression files for targeted marketing, business intelligence and data analysis, customer relationships, the future of marketplaces, unique branding and customer experience, the role of SQL and data analysis tools, inventory management and discounting, gated discounts and privacy concerns, navigating the retail landscape, and the importance of data-driven decision making.

Takeaways

• Understanding customer value and purpose is crucial for effective marketing and offer generation.
• Proper pricing and markup, as well as controlling inventory and making your own products, can significantly impact profitability.
• Challenges in retail include audience building, digital ads, and the need for marketing data warehouse services.
• Machine learning can enhance offer generation and customer targeting in e-commerce.
• Starting an online store requires knowledge of marketing, data analysis, and customer behavior. Implementing multi-channel strategies can lead to success in retail.
• Consider selling products on similar e-commerce sites and explore white labeling opportunities.
• Diversify distribution channels and consider having a physical store.
• Focus on pricing and service to attract and retain customers.
• Guarantees can be powerful marketing tools.
• Utilize suppression files for targeted marketing.
• Invest in business intelligence and data analysis tools.
• Be cautious of the challenges and limitations of marketplaces.
• Build strong customer relationships and avoid over-reliance on marketplaces.
• Stay informed about antitrust concerns in the retail industry.
• Create a unique brand and prioritize customer experience.
• Leverage SQL and data analysis tools for better insights.
• Manage inventory and discounting strategies carefully.
• Consider gated discounts and address privacy concerns.
• Adapt to the changing retail landscape and navigate challenges.
• Explore white labeling and private labeling opportunities.
• Make data-driven decisions to drive success in retail.

Chapters

00:00 Introduction and Background
01:01 Early Career and Introduction to Data in Marketing
01:27 Working with Marketing Databases
02:37 Current Work with Database Marketing and Customer Generated Offers
04:04 Discussion on Contribution Margin
06:19 Lack of Knowledge of Metrics in Retail
07:29 Importance of Growth and Funding in Small Retailers
09:14 Segmentation and Customer Portfolio Management
10:41 Understanding Customer Value and Purpose
11:40 Variable Expenses and Customer Behavior
12:56 Customer Generated Offers and Counter Offers
19:23 The Importance of Customer Data and Analytics
20:37 Challenges in Retail and E-commerce
24:16 The Need for Marketing Data Warehouse Services
26:31 Issues with Pricing and Targeting in Retail
27:00 Importance of Proper Pricing and Markup
28:53 Challenges in Audience Buildin

Transcript

0:33

Thanks for having me, Nathan. Thanks for having me. I appreciate it. It should be a lot of fun. Try not to bust your chops too much. It's coming, you know it is. Yeah, so I'm one of the older guys, I guess, if you want to put it that way. I started my career in 1991, so probably before most of you were born, and did sales and marketing work for a little while, got my MBA. It was in an MBA program I got introduced to the importance of data and marketing, and I started working on marketing databases. Finished my MBA, ended up at a company called Alliance Data here in town. And they happen to be managing the marketing data warehouse for a very, very large retail client. They had 85 million consumers, 2 billion SKU item records. And my job was to comb through all that data to help them do all of their campaigns, all of their marketing campaigns. A lot of it was direct mail, some of it was email down the road as we went forward. And we did all the analysis of that, too. So we helped them figure out what offer structures they should be using. We helped them understand the campaigns. They did all the creative work. We did all the segmentation targeting. And then all the ad hoc would be, well, what was that? Type of information. We also did some modeling of data, response models, spend models. There was some persona modeling going on to help them figure out how to target and communicate to customers. So after that, I've spent about 25 years working with retailers. Really enjoy the space. It's a fun space. It's an interesting space. It's a difficult space. Probably. I don't know. I'm trying to think of a business that's harder than retail to be honest with you just because of the inventory aspect. That can be really, really tricky. So I love this space. Uh, and I've been working on, I have an agency that does a little bit of work with database marketing. We help people build. databases in the cloud so they can analyze their customers. That's where a lot of this stuff comes from. That's why Nathan's gonna be shooting at me for this one. And then I also have a couple of other small businesses I'm working on right now. So but one of those is a fun one too. It's about customer generated offers, but we'll get to that later. Okay. It's a good one. Yeah. You know, I... Yeah, so I've talked to the folks at Store Hero before, and I saw what they're doing, and there's a couple thoughts around it. One of the things that I'm hearing a lot of in Contribution March in particular is you have to be first order profitable. And I keep trying to stab that one in the heart. I don't like that idea. And there's a big variety of reasons for that. I don't think contribution margins completely wrong. I think there's variable expenses that can go into that you don't really want in contribution margin and I don't think marketing is necessarily responsible for that so part of it is getting, yeah the business should focus on it but marketing not as much. If you take on too much ownership of products you'll start looking at, you know. product expenses, et cetera, not really spending a lot of time on consumers. And so there was a guy who posted this the other day. I think he's going to smack me when he reads that comment that I put on there. But he was talking about contribution margin at a product level. And I'm like, the next time that you go to a bank and you can deposit a product into the bank, you let me know because I'm switching banks. But you can't deposit contribution margin into the bank. You can deposit cash. So we tend to talk a lot about cash. What cash are you? delivering, is it at a level that covers your expenses or not, and what expenses do you want to include in that? So there's a lot of variability in it in my mind. We've always gone towards what markup have you been maintaining? That's kind of where we cut off. That includes COGS, so we've got the cost of being sold in there, but we'll stop at an MNU number and say, here's the goal. And we can set those goals, we can set them at segment levels. We don't ever set a goal to say, we want 70% across everybody. because we already know that everybody doesn't do 70% MMU. We know that. And so what we do is we try and set the expectations of how do we target people and then have the offers follow the MMU instead of doing things like, here's 20% off. I don't care for those. They may hit your contribution margin, but they're gonna screw up a few other things in your segmentation. So that's kind of my perspective on it. I don't think it's bad, and I do agree with one thing that you said in particular. I didn't realize how many retailers don't know their own metrics. There's a lot of them. And to make you feel good, it's not necessarily small ones either. There are larger retailers where you're like, wow, you don't know that, do you? And so it's a little surprising when you see that, but it's a lot of education that's going on there for sure. You know, I think there is. I think there's I mean when you're I Mean I've had I've had an online retail business before I ran it for five years couldn't make enough money at it Shut it down Contribution margin was one of the things we looked at but at the time we were so small we're trying to grow So see him wasn't really there. So there's a there's a point where you're just trying to grow And you're trying to fund that growth to a lot of these companies that are these small retailers They're they're not funding growth from you know a VC or a bank or they're funding it And they're funding it from whatever revenues they can generate from their products right out. And so when you look at how segmentation works within a customer portfolio, there are customers who are going to deliver excess cash because they're buying at your selling price. They don't use discounts. They're buying well ahead of your contribution margin target. There are customers who consume a ton of discounts and they're buying well below your C&T target. And then there's the people in the middle. Right? And as long as you get most of the people to the side, you'll be able to build a decent business. You probably start focusing on it more. I would say around three, four million dollars, five million dollars, then you really start focusing on it more. You're still refining. There's a lot of room to grow too. So it depends on the merchant, it depends on what you sell too. If you have a lot of inventory, there's a lot of dropshippers who can hit those numbers, so that's a different type of retail, so it depends on. Okay, so yeah, so it goes into again, and I literally just posted this today, a little earlier today, I was showing new customers that you were acquiring and when you look at the new customers and say, wow, they're sitting at 60%, maintain market was what I used, that seems like a good number, overall the pretty profitable customers not so bad. Then you just simply apply a quintile model and split them out and say, let's look at the top. 20% of sales etc. And all of a sudden you look at it go. Oh my god You know most of that sales came from top quintile one and the people on quintile five We're actually not profitable. We lost money, but they moved the most number of units and this is where You go. Okay, if I do profit first, I would not have those people they were 40% of the units that were sold were below your targets. So if you stop trying to go after those people, the economies of scale that you have with your cost of goods sold goes away a little bit because you don't sell those units or you have to find more customers at the very, very top, which is a tricky prospect to do. And that to me is where I'm like, don't constrain yourself in there where you say if you're not profitable, I don't want you because there's a purpose for every customer. This is what I was writing today. There's a purpose for every customer. Those customers on the bottom, do not deliver profits really ever. They usually suck them out. But they move inventory and they move cash and they get cash out of inventory. But right now there are retailers in the US sitting on like $900 billion in retail inventory. Ask Nike, ask Adidas how much inventory they're sitting on right now and they can't get rid of it. And that's what the purpose is for those people. The other people at the top have a purpose of delivering profits and cash and people in the middle do a little bit of both. And so when you understand that, It informs your offer structure and how you want to go about them. If you sit down and say, I want to do profitable at a certain level for each segment, that might be better because there are still going to be people who are going to want discounts. There are people who just won't shop without a discount. A lot of people think that things are overpriced anyways. So they're certainly out there. There was a piece of research I read last year that said 90% of Americans look for discounts before they start shopping. And 65% are doing it while they're shopping online. So that's probably me going, is there a discount around here? You're looking around outside. So, and that to me is that don't cage yourself in there's some customers I don't want. You probably want them, you just have to know how to use them. And I think that's the big point I'm trying to get to. Not just in cost of goods sold, in some of your other variable up-x too, right? Let's say you're ordering boxes and you get boxes for, I don't know, 50 cents a box. That's if you ordered 5,000 boxes, but if you now only order 1,000, you're not getting them for 50 cents a box. You've increased your expense and now you have to raise your prices. So it does cycle through. There is an element of customers that, I don't wanna say you stomach, you kind of almost enjoy them. We have a client. I call them the bottom feeders, which I was like, that's not nice, it's not nice at all. Let's just call them the bargain savvy. And so we call them the bargain savvy. They're very savvy shoppers, they're not gonna shop without a deal. And there are times where you just say, I need to get rid of this, it's time to deal. And off they go and they come and take it. And that is their purpose. There are other people that as soon as you list a product, they'll buy it right there, sign in, see, no discount needed. And that is their purpose. Understanding that on your file will help you a lot. and scaling quickly. It is. There's a couple different things that we're trying to do with it and one of them was People are terrible the offers like for me like one of the worst offers you could do is clearance where Just say hey, it's 70% of in fact, we went shopping a while ago I think it's right before the holidays and I walked past a store that was a well-known high-end brand for certain apparel and it was like Take 90% off and I was like, holy crap. You have 90% off of your window and I was like, okay, that's different Everybody sees like this pen, you know, some people look this kind of go it's a cross pen It's a nice pen like I'd pay $20 for it. Someone said pay a dollar for it and They're both right. And that's the point, right? They both see different value in the pen and allowing them to assess what value it is and say can I live with that? Is part of the plan right? It's part of the way you go If you find more people who value 20 bucks, good for you. You're gonna make more money. If you find people who value it at five bucks, not gonna make as much profit, but you can move more pens, and these people up here become more profitable. So right, that's the deal, and that was part of what customer generated offers is, is that people will go to market, they're like, here's 20% off, here's 30% off. I never do those, I don't like them. And the reason why is it says, I don't know you, just buy whatever you want. And when I have certain targets, this is when I think, Val. I'm about to tell this one pretty hard, but I really should, when I show it to them, was the idea of incremental units, where if you know the average selling price of an item in a basket, you can calculate thresholds where you increase discounts to have them add an extra item. So, your basket might be $49. In order for you to get the discount, you have to spend $50. The next item is still $14, so you've now spent $64. to get the extra $5 in discounts or whatever it is. That incremental unit methodology works very, very well. You saw it at Body Works, you saw it at For Seeker, you saw it at Express, that was us. We were doing all those things. And we did it at a segment level because we knew the bargain savvy, they spent like eight bucks, we're like, well listen, if you'll just spend 25, you'll get $10 off. And so they got those and other people got something else. It's that idea in customer generated offers. Let them offer. Someone told me that the number of abandoned carts is about 80 billion dollars in the US alone I believe that's the number and part of it is they just go I can't afford that and So part of what we're trying to see is can we intercept them from losing and say would you like to make an offer? For this to see if we can catch some of those people and see if they'll convert and we give merchants control You know that the number one thing that merchants told us because we've been wearing this now for two years They said we need to be able to control this there products we can do this on, products we can't do it on. We're like, okay. So now it's down to a product level and a consumer level. But when you think about it, it's buying and selling. It's the haggling that used to be and is prevalent in markets all around the world. It's not online. And so we're really starting to see some interesting results from it, so we're excited about that. So it's kind of fun. Yep. Yeah, and I think that's part of what we're doing, because in our application, what we're going to do is, over time, we're going to apply machine learning to say, here's what the settlement range is for this pen. You have prices from $20 down to $12. This is the range. The median price is here. These customers shop here. We're going to flag them on your Shopify store. These customers shop here. So now you can figure out what offers you want to do going out to them. You don't necessarily have to have them do CGO. You could just make an offer to them. So there's ways that what we're doing is collecting information for merchants to say, here's what this customer responds to, which will make them more responsive, which is what you're trying to get to. And so we're going to collect that information for them and help them figure that out by scoring their customer files on Shopify. We'll do it on a few other merchants when we get there, but we're not quite there yet. So, and from the consumer perspective, there's a utility in it of, you know, if you've ever thought of a time that you made a great deal out of your car or something you want that would make a good deal there you feel good wouldn't you want your consumers to feel good and if your consumer felt good shopping with you because they felt like they got a good deal do you think they're gonna come back or go somewhere else come back maybe they're gonna want to make another offer and I had retailers asked me well what if they get hooked on I'm like manage your offers manage your margin you can do that we give you the tools to do it so if you have to adjust prices and selling prices because you know you stocked out and you know, you have prices that were too low and you should have raised them up, then you know that information too. The idea is to help merchants sell more, to help consumers find the deals that they want. That's the goal. So it's like being a broker, it's not fun. It's very interesting, it's very interesting to watch too because the very first thing people tell you is, people are gonna ask for like 70% off, and like then you politely decline it. What do you mean we decline it? Like it automatically declines for you, you set a decline threshold. You set a decline, if you say, They ask for 50% off and I can't manage them down to 20% then we'll decline them. But what we're going to build in 2025 is the counter offer. And that's where all the magic is. Counter offer is super magical because you'll be able to say, this is a new customer they've asked for 30% off. I'll give them 20% off, but I'll give them 30% off their next transaction of a hundred dollars more in the next 30 days. Boom, pop it out and see what they take. And that is where it will be really, really magical of how I get that second transaction. fast because that's your goal with a new customer. And so figuring those things out, that's part of what we want to build. So it's definitely a lot of the time that I've spent in retail is all coming into this. yet. Yeah, and what ends up happening is you'll see what is your profitability by product. It'll be in your Shopify store on the product page. You'll see the profitability of that product. You'll see it on the consumer too. Because in the end, the product doesn't generate profits. The consumers do. And when you lose track, I told that guy that, man, I'm just waiting for him to smack me. I wish I was buried in blood. I'm sorry, you don't have a product that makes money. Consumers do. So yeah, I think it's those things, if we can help merchants survive longer, they fail at a very fast rate. We can help them price and sell better, and consumers get what they want, and we're in a great place. Well, so for me, as a database marketer, everything was a segment. And when I talk about segmentation, and some of the campaigns we did, I mean, I remember we did one for Bath and Body Works. It was six million people that we were sending postcards to. Six million. And we did it three times during the holidays. So it was 18 million postcards. In that segmentation, you can get into levels of granularity that makes sense. And so like, you're trying to get people to... improve their performance. There are customers that are improving in value on your portfolio. There are customers who are stable year over year. They've spent the same. There are customers who are declining. Last year they spent 100, this year they spent 50. There are customers who are gone. There are customers who are new and customers who have reacted. Six portfolios in your business. When you look at each one of them, there are things that you want to do. And the people who are growing, I want them to continue to grow. Do I think I can get more transactions or more units out? probably more units that are transacting at high velocity right now. And so when you take those portfolios and you segment them all into quintiles, very simple quintiles, just those, you'll see this huge split of discount utilization, number of times contacted, et cetera. So what you do is you use those tools to say, I'm gonna get like two transactions a year out of Bargain Savvy, it's gonna be. summer clearance and holidays. And so, or maybe January clearance, and you're like, okay, so this is where I've got to manage those expectations, kind of get an extra transaction during the holidays, or kind of get it during the summer. And so you try and target those different behaviors. And the problem that retailers are gonna have is that the vast majority of them don't have the tools to do it. And I've said this many times to Rick Watson, runs a big talk about Shopify in particular for more than anything else I'm like. I don't know why they don't deliver marketing data warehouse services to their customers, because they would be such better merchants if they had it. Because the segmentation, the targeting, and everything would be much faster. And you could do live RFM scores as soon as somebody transaction update their score, it's done. We're going to deliver some of that on our platform. We'll do some of that in some of our paid versions of our platform. There will be response models, spend models, RFM segmentation. All of those things will be flagged in there. But there's also ways for you to sort of use discounts to move them into categories, particularly if you have bundles that are in those that are cross category that can be useful. So it really depends on where that customer is in their life stage with you, because some don't stay there forever, and how they're performing now. Can I really get a bargain-savvy person to spend $200? Probably not. But if I can get them to spend 50, I've doubled their value. Okay, so that's the perspective that I take. And that's where we talk about unit targeting within transactions, just add an extra unit. Maybe you get a discount, but that unit takes you above the threshold of 50, it takes you to 60. And then that was one of the other blog posts up out there, it doesn't cost you$10 to give $10. You know that, if you know anything about markup, you know that most of that $10 is just markup. And you've already had a settlement price in there. That's the other thing that I really spent a lot of time talking about, is use your discounts. If you, oh, and by the way, If you aren't putting them into your pricing, you have made a major, major mistake. Put them in your price. So, yeah. Sorry about that. That was my rant. Oh, it's sad. So I mean, I just told you, right? I worked on a large multi-tenant data warehouse that had 85 million consumers and two billion SKU item records. They have five times the size of that. Why aren't you doing something with that? It boggles my mind. You could double the revenue from your merchants. When they look at it in one segmented campaign, they could lift customer spend by $60,000 a week. It pays for the whole thing. It boggles my mind that they haven't figured it out because they have all the data. And it's in a multi-tenant environment already. So I'm just like, how have I not figured this part out yet? So there's other interesting things that they're tagging on, but the data is already there. I'm just surprised that they haven't done it yet, because that would have real value, particularly when they go after enterprise, when you can give them insights. I mean, I could drop 20 different reports on them, and one in particular, that when they see it, they're like, oh my god. And it's the customer portfolio management. that we do, when I show that to people, they're like, how did you do that? It's magic. It's simple segmentation. I don't do things that are really super complex. Most of it's pretty simple segmentation. But yeah, Shopify and Writx, sorry Shopify, and not very good. That's nice, that's the same. So, I don't think anyone, I don't think anyone did well, to be honest with you. I haven't seen one where I went, damn, that was good. I did see, Before Looker was bought by Google, I actually looked at Looker to embed it into a digital application. That tool was amazing. I was like, you could segment, you could write reports, and you could send those over to Google Analytics as an audience, right from the report. I was like, oh, I think it's cool. And that's not what's embedded there now, so that part's gone. But it was a cool tool. Pricing is number one. I don't think they're doing pricing right. And I can see products and go, that's not priced right. I can just look at it and go, that's not. A lot of them keystone. Keystone is where you basically double your cogs and that's your price. There's things in pricing, and most retailers do this, not all. Most retailers are IMU pricing, initial markup pricing. So you have your cost of goods sold, you have the markup that you want on top of the cost of goods sold. You have discounts that you should be putting in there and allowance for discounts and allowance for shrink There's stuff that's broken stuff that's stolen stuff That's not delivered you should have an allowance for that and put that in there because somebody's bearing the cost of that Do you work to your consumers? And some even put in an allowance for shipping cost if you're doing free shipping you should have an allowance for shipping cost in there because 20 years now shipping is not free period. It's not free It's a lie. It's never free. It's baked in. So it's never gonna be free. Never gonna be free. So if you don't bake those into your pricing, you're off right away. But that's also the markup, right? So imagine having all those things baked in and then you have a consumer who comes in and says, I'm gonna pay $20 for this pen. Hey, guess what? All those are baked in there. Your margin's even higher than what you were anticipating getting, right? Because you have an allowance for free shipping and they didn't even take that. So you made money off of that. You have to put the tools in place in order for you to use the tools and a lot of them don't do that So I think that's one of the problems I don't think they're very good at targeting a lot of retailers start they don't have an audience they think I'm gonna open a store and Things are just gonna fly off the shelves and that's not the case This year a lot of retailers saw We have talked a lot they've seen 40 and 50% drop-off in traffic from the SEO changes this year, and they're just like, oh, that, and now that retargeting is all but gone from Google, and you're now doing remarketing, retargeting only on social platforms, it'll be Facebook. I think, I don't know if Pinterest does it or not, and a few others. It's gonna constrain the resources, so you should expect those prices to increase, because now you have Google, the big dog is out of that fight. So now, the remarketing on this platform should go up in price, would be my guess. And ads in general are expensive. So I think a lot of these guys start, and they don't have an audience. One of my favorite creators on TikTok, I followed, he actually lives in Ohio, he created a brand for shorts, athletic shorts, and he's a short dude. And so he's got, it calls a five nine collector, I think it's five nine, which isn't terribly short. But anyways. So he went through during COVID, he sat down and sewed all of his shorts in his mom's basement. And he learned how to sew, taught himself, but he figured out quality. And so while he's doing it, he's demonstrating quality. That's why his shorts cost 45, 50 bucks. And they were all handmade. And he sold them out every time he listed, sold them out. Never had to run an ad, never had to do anything. So if you have an audience before you start, that's helpful. And it should just be your mom and dad your brothers and sisters in France. That's not being the fights So I think that's one of the other problems. The other thing too is I think that Just a lot of don't understand digital ads. They don't understand email marketing they really don't understand offer orchestration and that type of How to get customers to buy and the more they learn about that the better off they'll be because a lot of times panic and they're like I gotta get money to your point it's Easter and I've got to sell all this stuff and I'm stuck and I'll do 60% off when you could have done 20% or you could have done targeted offers to different people and that would have done better for you so those are probably the three biggest problems it's so easy to start an e-commerce store right now maybe too easy because someone posted I echoed it, but I'm not sure if it's right or not, but I've seen it like five times. 90% of these companies fail within 90 days because at the end of 90 days, your $1 a month for Shopify is over. And they're like, well, they're gonna sell. They shut it down and I'm like, that makes complete sense to me. So I'm waiting for Shopify to say, I've got those 2.4 million sites. How many is Turing every day? So I'm sure there's a big number there that not gonna take one of these though, so yeah. It's toughness. Yeah. It's just like, it's a side hustle. It's going backwards. We're not the way I thought it was selling, you know, sheep wool shoes. Didn't really work out. So I don't, it's just, it's bizarre. So yeah, but I, yeah, at least people are thinking about it and it's a good experience. I mean, if you could learn from where you failed, it's a good thing. It doesn't cost a ton of money, but you know, you really need to know what you're doing, particularly if you're carrying inventory and you're selling someone else's stuff. because you're not going to make the margins on that as much as if you control what you make. There are much bigger margins and you'll see a lot of specialty retailers moving towards that. Target's private label brands are just off the shelf because they make so much money on them. And you're talking the difference between 25% and 75% in terms of margins. Yeah, you definitely want to make your own stuff. Find it and source it yourself. Yeah, I started with retailers. How old are you again? When was your birthday? I'm talking about the four year of counting your prices on high school. It was like the end of the 19th century or something. So yeah, in 2000, that's when we built the data warehouse for our clients. And so I spent a lot of time with retail. So it was kind of fun watching e-commerce take off from its infancy, seeing the initial pages, sites, and just go, wow, that was bad. To 2006, I mean, Shopify didn't really pick up ahead of Steam until about 2012, maybe. Maybe somewhere in there. They'd been around for like six years. WooCommerce, I think, came in 2008, 2009, somewhere in there. There was another one that was out of South Africa that was doing it. I might've been Wu's predecessor, I'm not sure. So, um, yeah, it was very interesting to watch these companies come up and what they're doing and where they're trying to go. Um, it's definitely easier now to do, uh, selling online than ever before. Um, and a lot of the things transfer, but I keep telling people too, when you're in some of these retail online spaces, I call it all retail, because it's all retail. It's just different channels. You have to consider the physical channel because three quarters of all retail sales are in bricks and mortar and I think some of these may trend back there. I think apparel may trend back there just because Returns are now being priced and you have to pay the shipping and everything else. I think some of these will trend backwards towards retail And others, but I think things like beauty care and health and wellness those things are quite keep growing So there's a balance, and if you can figure out that balance, that's where all the money is. Multi-channel ones seem to do best. Yeah, you know, and if you're doing, if you're doing CPG and the direct space to that gets, it gets tricky because now you're talking slotting fees. You took, there's a lot there when you're in someone else's real estate. Um, what I would suggest to you is to, to look at selling some of your products through similar websites. So there may be similar e-commerce sites where you can sell those products and white label them if you can. To me, I don't think people have figured out the white labeling piece where, you know, I'm making this pen says cross and tomorrow it says daily. Hey, we've got daily pens, ooh, they're$25. You know, you can white label stuff if you have that capability. And now you can sell it through other leading websites and it's a different product that's the same stuff. It gives you a cognitive scale in manufacturing, in SKUs, and that's what you're looking for to help your DTC business as well. So you have to think a little bit about. what those distribution channels look like, you may have your own physical store. I believe if you're over a million dollars, you should probably have your own physical store anyways. Just a place to, people could see it and go take away their goods and or clear stuff out. We have a concept that we were building, I worked for a company called Frank Gate and we were talking about building retail stores and everything was cataloging e-commerce for them. And we went round and round and round about, like, why don't we just build a house? And they're like, what? I'm like, well, most of the houses we showcase are multi-million dollar homes, so why don't we just build a million dollar home and put more stuff in it, so people could come and sit on it and experience it and see it. That's very front gate. They look to me and I'm like, it's not a bad idea though. And they're like, no, it's about a million dollars for a build out, so I'm like, yeah. So, did they do it? No, they're still building stores, but it's interesting to me that the things that you can do in retail, you should definitely be thinking about multiple channels. Don't put all your eggs in one basket. So I would say no. So there's always a difference between them. The people who know to put their pricing together the right way also usually have the best service too. They know how to serve customers. People who are just sort of, you know, I'm just gonna double my cost and just throw it out there or just throw on things against the wall. And they're selling a bunch of other people's stuff and that's fine. I had a great example, one of the products I sold, this is so funny, it was this little bunny rabbit. I don't know why I had. I had statues and figurines. My business was about working from home. Uh, it was maybe a little bit too early before people did work from home, but it was really for people in sales who traveled a lot and worked from home. And I realized they didn't live in a cube. They didn't work in a cube. They worked in a nice office at all sorts of pictures and stuff. Yeah. All these personal things, right. And so I was like, let's, let's do that. Let's, let's create a nice space. So I was selling these little cast iron bunny rabbits and I got them from it. It was a cool vendor. I really liked them all, they had some good stuff. And I saw thousands of these things, I was like, holy cow. I started with them when I think I keyed them and when I first started I was like, we'll see what happens. And at like $10 they were gone. I think my cost was two bucks a piece or something like that. And so I was like, okay, I'm gonna raise this. And I kept raising the price to where I was like $25, I'm still selling the same little bunny rabbit. I'm like, okay, there were other people out there who were at $10, but I was still selling a bunch of them because in part I was also saying, hey, we sold X number of units. We sold more or this is our customer guarantee. And I saw this the other day, Frontgate had it actually. It was one of the people that I was looking for to see if they had this. They put in their, I was looking for luxury auto furniture and it said, we have a five year manufacturer guarantee auto products. Which one are you clicking on? The one who's cheaper or the one that just said it's guaranteed? Yeah, you know which one you're guaranteed. If I'm gonna spend $2,500 on an outdoor couch, better be guaranteed. And so there's ways for you to do that. Don't necessarily sit there and go, I'm gonna eat that margin, don't do it. It's a trip to the bottom and you're not gonna win. Plus, plus, this is the other big thing. Customers that they have in their portfolio. Different than the ones you have in yours. They are not the same even if they're buying the same product remember I told you there are people in here who will pay five dollars for this and $20 you have them in your portfolio too, but if you only go to the people who spend five You'll only collect the people who spend five don't do that You might not want to advertise that product that's up to you figure it out Yeah, we'll say the thing you posted something couple weeks ago about suppression files And I was like, yeah, I think it was, I'm pretty sure it was you. And you talked about putting a suppression file into Facebook so that you weren't basically targeting people that are already buying from you. And that's one of the things about database marketing, right, you create suppression files all the time. And you could suppress at a very granular level, an audience that says, hey, all these people bought this pen, they don't need another pen, they need refills. So don't sell them the pen, sell them the refills. And you can change your ads that way, make them more efficient. It's one of the reasons why they need those tools because Shopify is not going to do it from the cart. Okay. Yeah. Well, and there's a good thing about the Google and Facebook platforms is that when they convert, you get the customer and you can remarket to them. Versus the marketplaces where you go to Amazon or eBay and you're not the merchant of record. The merchant of record is whoever does the transaction and it is them. And so you don't get a remarket to them. So when you think about a customer that spent $200 with you through a marketplace and you can't send them an email or market to them at all, that's expensive. And when they do it twice and you pay that fee twice or three times or four times, then you're realizing marketplaces aren't necessarily a good deal either. And so you've got to be really careful and watch what you're doing in those. I know one retop 25% of the businesses from Amazon and I mean, they're paying to reacquire customers every day. I'm like, that sucks. You have got to get control of that customer relationship or your cost to serve them is always gonna be high and you're never gonna, you're gonna have a CAC that's gonna look just ridiculous. That's gonna be a very, very high number. So yeah, it's terrible. So. Right, right. So it's like you lose all that, you lose all of that. And it's, it's yeah. I mean, and this is, I'll be honest with you. It was one of the ideas behind customer generated offers. My wife and I, Marlowe Forks for a retailer, she was telling me about their costs. And I was like, holy, really? And she goes, yeah, that's really high. And I was like, what if they just came and made an offer to you? on your site instead of on Amazon. And they're like, oh, you can't do that. Amazon wouldn't like them. I'm like, well, you can't do that. But customer generated offers could. So I'm like, I can certainly swipe people off those platforms and move them right over. That's not a digital difficulty at all. And she goes, really? I'm like, oh yeah, that's easy. And so that's part of the impetus of customer generated offers is you get the customer. And one of the things about it is we're building this platform. One of the things that we've heard, and we're It's interesting in the B2B SaaS and the B2B Seeks, we're B2B to C. Retailers hate those. They hate percentage because it's 3% on our transactions for processing payments. It's 2% for this and 5% for this. And then all of a sudden they're sitting at 25% and they're like, how am I gonna get to contribution margin? I just gave it a whole way to just get into the market. And I think they don't like that. They don't like the marketplaces. They don't like taking. Percentages they'd rather have flat fees that they can amortize of so that's part of what we're doing We'll probably they're charging a percentage when you acquire a new customer But after that you do whatever you want and off you go, so we're gonna try and get the flat prices there So that's to me. It's it's those things that eat at those merchant margins so fast and if you have them on marketplaces Yeah, you're getting good quality customers But you have to pay to get them multiple times So yeah kind of losing out and it's really hard. I mean, you can't remarket to them. You do have the data. I mean, it does end up in your data warehouse. So I'm just saying, it's part of an audience. You're not really marketing to them. You're just learning about them. So there's ways you can use it, but yeah, it's tricky. And I'm waiting to see if that lasts because I know that Amazon's got some litigation coming in about being forced to put the lowest price on Amazon or something like that. I think there's litigation from the FTC. So yeah, there's a lot of moving parts in retail. I mean, I was joking about this the other day that in 2000, you go to retail, you had a spreadsheet and you had a couple of things that you sold. But today your tech stack is like this long. It looks like a CVS receipt. You're like, holy cow. We have so much tech to do things. And a lot of the tech is, and this is why I think people like Shopify, a lot of the tech is to do one thing. And so when you go to Shopify, you can turn on Google ads, you can turn on Facebook ads, you can turn on Amazon, you can turn on Etsy. You don't have to plug all this crap in. And I think they'd like that a lot, so we'll see. But from a merchant perspective, if you're on those marketplaces, you've gotta find a way to kinda get them back to you. Or you're gonna spend a lot of money that's gonna make it very hard to make money off them. So, tricky, right? It's just... Yes. And their flag is from you. Thank you, guys. Exactly. I We don't care if people at the bottom tier, we don't want them shopping here because we're not marking down a $2,500 outdoor sofa, not really. And that worked for them, but as you move towards that space, it's hard to get off of that space when they have all the data. And so that'll be interesting to see because one of the things that everybody said that Shopify should do is create a marketplace. You have all the data, why don't you do it? Just open up one of your own stores and just stick it everywhere in it. you've got multi-tenant, you can figure it out, go. And so they're like, well, we're not doing that, like, liar. You know, you're connected to Amazon and you don't want to irritate them, but you know you were doing it a little bit with Google shopping for a while and that ended. So I see more of these happening, but for me it's the consumer utility, and that is the big part of what we're doing with the customer generating offices. What is the utility for the consumer? One, their ability to make a good deal for themselves. Two, the ability to control their information. And three, the ability to find merchants that they like and not have to go to the same places all the time and to get the best search possible. So we're trying to find utility for them as well. We told a VC that we were the PayPal of customer generated offers. And they're like, I think I understand what that is. I'm like, okay, good. So yeah, if you can figure those things out, then you're in a good space. And Amazon figured it out. Costco kind of figures it out with their... program but yeah it's weird and it's hard I mean if you're a merchant once you're stuck on it it's very hard to get off yeah there's not easy solutions and it's and you could spend a bunch of money marketing for them which is very frustrating so yeah it's terrible right I shouldn't laugh but it's Um, Giuseppi's. That's my answer. Giuseppi's. There's Olive Gardens everywhere, but I go to Giuseppi's. Why? Because Olive Garden doesn't compare even close to Giuseppi's. What will happen in those marketplaces? They'll never get to the level of service of a Giuseppe's food is divine. Like that guy, he's so good for sure. His Italian food is so good. And I make Italian food. He makes it much better. I love Giuseppe's. I never go to Olive Garden. That's a marketplace. That one's not, that's the way I look at it. Will that happen? There's probably going to be some consolidation, but I also think that There's already the rumblings of antitrust coming because they have extreme market power and they can prove a case that it's injuring merchants. I mean, they can prove that. My wife has told me that her company, they forgot to respond to a customer servicing for like 24 hours. We got lost somewhere in there and they got shut down. It was like $20,000 a day. They can hurt you very quickly. And so I think they should be very mindful of that because that is really easily a case of antitrust. You're like, well, it's good for the consumer. I'm like, yeah, but you're hurting the merchant too. And so that's where you're kind of anti-competitive in practice. So I have to watch out. Do I believe there's more of these coming? Yeah, probably. But I don't think people will get as much utility from them. I think, I actually think Amazon is peaked. I think they're kind of where they're at. Amazon Prime will continue to go in price until people stop spending money on it And it's weird because now you have like movies and stuff. It's weird what everything said it's a disease, right? So but yeah, I think I'll be more marketplaces I just I Think people will just get tired of it and I don't think that they necessarily see the best services from them it's kind of big box retail right all the big box retailers are struggling and I think big box e-commerce will struggle as well at some point. They're struggling right now with the shipping, because it's not free, and they know it's not free. It's never been free. And the cost for it has gone up, and that will continue to go up. So we'll see. It's a very, very good place to be. But no, I still think individuals will have their stores. I mean, I look for those places. I don't look for big box. If I can avoid it, I prefer the smaller places. I get better service. I get people. Right? You get people. You actually park to people. Come on. Would you go to a nice Italian restaurant? You'd go to a chain. Tell me the truth. Right. And I think that's, I think a lot of people are there. I think they're convenient at times. And I think at other times they're irritating. And for me, it's like, if I wanted to find replacements for this, it'll take me like three or four days to get it. I can just walk over to the store and pick them up now. So I'd rather get them now because I need them now because I don't plan ahead for replacement in my pen. So yeah, interesting space. Information and what you're doing with the information. I know 20, $30 million brands that don't have databases to figure out what's going on. You're relying too much on the tech stack that is point, click, drag, drop. Don't, they're good, they're not that good. I have yet to meet a single tech platform that could build the customer portfolio management as we reported today. And when I show it to people, they're just like, wow. In one page, you can see value creation, value loss. on your platform across your portfolios in one place. You just look at it and go, you're doing well here, you're not doing well here, you're lost here. Oh, by the way, this was $30 million walked out your door last year. They're like, what? Like, these top tier customers are gone. And so when you see those things, it's shocking and stunning, but it's also, I could do something with it. Without that level of business intelligence, you're not gonna be able to get much further because the other ones have it and they're really good at it, really good at it. I mean, I've seen targets, PICapable is pretty good. Walmart has gotten much better. Amazon is the king of that. They have massive data warehouses. They are very good at targeting customers. And they're using machine learning now. So you're going to do it by hand. Their machines are going to do it. Now, we're going to help retailers. As part of our platform is to do some of that work for them to help them specifically to acquire and retain customers. But yeah. Without that, I don't think you're gonna make that Leap so there's interesting. There's the inflection points, too We saw you see this in retail where you would see a retailer get to about 700 million dollars And then they just stopped growing and they'd stopped for like five years and you're like to get to that billion dollar mark what we figured it out was there were 1100 class a moles in the United States and they were in all of them and in order to get to the billion They had a good above that and that's what we were like, oh so You know, unless I have that on the e-commerce, it's more about data and information and your ability to segment and target, push good audiences in Facebook and Google and segment and target those folks. Yeah, if you don't have that, you'll be at a big disadvantage. The database guy, that's just, I mean, it's, it's yeah. The things that we can pop out, we did talk about category indexing, how the customer's indexing different categories. So you can figure out who's gonna be a good customer based on what category they enter on. If my primary product category is jeans that you came in and bought, full price jeans, they're gonna be around for a while because I read those are jeans. I can figure those things out. And so that's where the business intelligence really comes in. And it's, to me, if you're an agency, you would look at adding that in there. What you can do with some of the tools today, particularly that there are platforms that are API platforms. So you could say, connect to this one platform. You can connect to Shopify, Google Analytics, Klaviyo, merge it all over BigQuery, and we can start running business intelligence within a week and have them running. And it looks much better than what GA4 has. and you can really mine down into information. I don't know why people, I guess they just don't know that they can do it. But to me, that's the big benefit of those tools is that you can connect and move that data pretty quickly. And you probably can. It's a- You do it. It's difficult. It's getting expensive. And I mean, I even threw this out there and went, direct mail is almost cheaper. It's almost cheaper to acquire what direct mail is than this. And you're just like, how do we get there again? So it's weird to see the cycle come through. But you think about those channels and how you can communicate it. Because for me, my mailbox is empty. I don't get hardly anything. So when I get an offer, I usually see it and read it. I'm like, oh, nice. And so yeah. when you go where the customers are is what we tell them, but you got to have the data to do it. And a lot of them don't. And it's not tremendously expensive either, if you think about it. It's not even an FTE at that level of sales. It's not even, you might want to hire somebody, but you might use an agency and have an agency add that on as their service to say, we'll sync all your data over here. and do advanced analytics, segmentation targeting, better offers. If you want contribution margin, you can focus on contribution margin. You can do whatever you want. So you gotta have all that information there. That's kind of the goal. And I think most of these companies in this space are probably QuickBooks at this time. And QuickBooks reporting still isn't that good. Nobody has good reporting. You're really gonna kind of have to write that code by hand, which some of them will use. Power BI and those other tools that are out there, but they lack one step in them that you can do when you write SQL. Most people learn SQL in like 30, 60 days. Doesn't take long at all. It's very simple. But once you have it, it applies, and it's a good tool to have. This time next year? What a crappy year 2024 was. And it was rough in the second half because it, you know, I saw the Shopify notes and it was like, you know, Shopify, and I'm like, I'm telling you, that was the top 500 retailers that made that money almost everyone else lost. And cause I talked to a ton of retailers and they're like, no, we're down. We're way down. And it's like, uh, Hollies, we like almost broke even we were close. And it's like, okay. I mean, and that was the biggest selling time of the year. So if you're out there and you're like, sales are in the toilet, you are not alone. There's a lot of people in the same boat. A lot of change in that SEO piece really blew people up, some changes in targeting and now continuing to blow that up on top of constrained consumer spending that doesn't look like it's going to relax anytime soon. It's going to be a tough year. And so you're going to be sitting in an inventory position going, how do I get rid of this? And that will be the impetus will be, I need to do those huge discounts. Don't go below your cogs. That's all I can tell you. Don't go below cogs. At that point in time, you might as well just throw the stuff away. You know, don't below your, but there's gonna be a lot of people stuck with inventory. I think 2024 will be a difficult year. I'd love to see it get better, but I don't see that down the road with things that are going on right now. And in particular in the US, it's the driver of most of consumers and so, and overseas it's worse in some places, so. And I think they'll start, getting accustomed to the new digital reality of privacy. And one of the things that I've been sort of tooling around is will more merchants gate their discounts? The only way you can get the discounts is if you register and sign in. And you know what? They're like, oh no, that makes people go away. I'm like, Amazon makes you sign in to use Amazon Prime. So is it that bad? No, I'm not sure it is. So yeah, it's an interesting thing to think about what might happen to pull people that you know are gonna stick with you. But the cost of acquisition's gonna go up. That's gonna be tricky and hard to manage. So yeah, I think it's gonna be a rough year. But you know, 2025 I think should be a much better year. I think the interest rates and stuff will drop in the second half of the year. Yeah, and that should loosen things up a little bit. It's tough stuff. Tough stuff, right? I wish I had a better answer for you, but... I know. I wanna be real. I'm sorry. Yeah, I mean for sure and I think and to the point of you know going from seven to eight figures If you can't put that business intelligence piece in place To do the things that you need to do to segment target people more efficiently You'll find that the tools to do that fairly expensive But SQL is free. It's you can write that if you learn to do that It's not a bad skill to add or find something you can do it. You can find a contract I'm sure they can write SQL for you on BigQuery until it blew the face. But I think those things will help you navigate the difficulty here, where you can be more efficient with your marketing spend, you can be more efficient with your offers, and drive incremental units not sending out, take 50% off, 40% off, oh my God, the sky is on fire. You can't do that, if you do that, you're not gonna survive, you're gonna. slip down there and just go, I put myself in a bad place. Because it's not clear where that change will come. We know it's coming in the economy, we just aren't quite sure when. And whether or not it'll be a big enough boost to get people really loosened up their wallets. Right now people are just struggling a little bit with, the inflation here is not that it's, our inflation is not high, it's just that the prices from inflation are locked in and they're not going down. So, and that's pinching people. So yeah. It's tricky. It's a tricky time to be a retailer, but you know opening, I mean I know a retailer is open in stores. They were all online for a long time to do catalogs and other open stores. They open stores, people are flocking to them and they're like, so bricks and mortar seems to be doing okay in some places. So it just depends. And that for me, the smaller brands too, the uniqueness of your small brand is a good reason to have a store. People will come to that and they'll get up and just to get out of the house and you can come see what you've got. So think about that. Yes. Absolutely. I mean you can move large volumes of I mean, and I don't know if people know that most of those Generic brands I'm saying manufacturers. It's not like Kroger created a bunch of manufacturing. They didn't those are all coming from the same people That's what white labeling is, you know, same manufacturers. They're just using different names I think I figured that out when I toured with Hager down in Dallas They were a client of ours and I was like, how did you guys? get around and they told us a story from World War one. Well, they manufactured for like all the luxury brands were being manufactured by Hager because Hager during World War one and two had created manufacturing all across the world to support US troops. I was like, I'll be darned. So when they told me all the brands that they did, I was like, okay, so you go the same way. We make the same stuff. So yeah, so that's another way to think about your products. And how can you if you have you know, custom products that you manufacture, how do you make more money off of them? White labeling is certainly, the private labeling is certainly a way to go. It's worth inspecting if you haven't done it before. I hate to be in Debbie Downer at the very end. Sorry about that, I wish I could have given you a better reason. I'm trying to get over it. There's a silver lining in here somewhere. I'm still trying to get over it. But yeah, I do think the more you, don't be afraid of the data, to be more data driven with that and focus on consumers. Someone asked me about this, I don't remember if it was you or not. Somebody was asking me, how would you do it? I'm like, take everything in your P&L and make it by consumer. Every single metric you have in your P&L and then change it per consumer. And you'll look at your business in a different way. Right? So, you know, the more you focus on the work, the better it will be. So, best of luck everybody. 2024 is rolling. All right, you take care. Talk to you soon.