<\/a><\/p>\n<\/p>\n\nA weekly podcast with the latest e-commerce news and events. Episode 319 is deep dive into Amazons Q1 2024 results.<\/p>\n <\/p>\nSubscribe<\/strong>:<\/p>\n<span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">?<\/span><span style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" data-mce-type=\"bookmark\" class=\"mce_SELRES_start\">?<\/span><span style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" data-mce-type=\"bookmark\" class=\"mce_SELRES_start\">?<\/span><span style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" data-mce-type=\"bookmark\" class=\"mce_SELRES_start\">?<\/span><span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">?<\/span><\/iframe><\/figure>\n<h3 class=\"wp-block-heading\" id=\"episode-summary\">Episode Summary:<\/h3>\n<p>In this episode, Jason \u201cRetailgeek\u201d Goldberg and Scot Wingo dive deep into Amazon\u2019s first quarter results for 2024, analyzing the company\u2019s performance in various segments such as retail, offline and online sales, marketplace, AWS, and advertising. They also explore the impact of AI on Amazon\u2019s business and provide insights into the company\u2019s future guidance for Q2 2024.<\/p>\n<p>In our latest episode, Jason and Scott cover a range of topics, starting with their reflections on recent events such as May the 4th and Cinco de Mayo. Jason shares intriguing stories from his extensive travels and interactions with listeners worldwide. Scott delves into the intersection of e-commerce and the auto industry, honing in on Carvana. The duo also delves into the U.S. Department of Commerce retail indicators data, shedding light on trends in retail sales and e-commerce growth. The conversation pivots towards Amazon\u2019s recent earnings report, contextualizing it within the realm of AI investments by tech giants like Meta and Alphabet, offering valuable industry insights and analysis.<\/p>\n<p>The discussion continues with a focus on Amazon\u2019s earnings report, zooming in on concerns around AWS amid heightened competition from Alphabet and Azure. The rising trend of AI investments, particularly in data training applications, is explored, alongside the growing popularity of open source AI models due to cost and privacy considerations. Despite a conservative Q2 guidance, Amazon impresses with robust revenue that surpasses Wall Street expectations, particularly in operating income. The retail segment shows exceptional growth, exceeding operating income estimates for both domestic and international divisions. Notably, Amazon\u2019s performance in brick-and-mortar stores, spearheaded by Whole Foods, demonstrates resilience with a 6.3% growth rate. AWS stands out with a 17% growth, dispelling market share concerns and showcasing accelerated revenue growth, illustrating Amazon\u2019s continuous growth potential and innovation prowess.<\/p>\n<p>Scott delves deeper into Amazon\u2019s positive quarterly earnings report, emphasizing the remarkable revenue performance, especially in operating income. Insights are shared on Amazon\u2019s successful agnostic approach to LLM models and the potential advancements in generative AI. The conversation shifts towards the burgeoning ads business at Amazon, underlining its profitability and future growth prospects. Scot also outlines Amazon\u2019s Q2 guidance and the potential impacts of consumer spending patterns on the retail sector, including concerns about changing consumer behaviors and economic pressures shaping market dynamics. Jason complements the discussion with additional perspectives on consumer behavior and economic influences reshaping the market landscape.<\/p>\n<p>Furthermore, we embark on a detailed exploration of supply chain logistics, with a spotlight on Amazon\u2019s expansion into third-party logistics services, revolutionizing traditional retail strategies by sharing proprietary capabilities for wider adoption. Insights from Andy Jassy shed light on Amazon\u2019s logistics business approach. The conversation expands to include how companies like Spiffy are embracing a similar model of sharing proprietary products to drive innovation and revenue growth, showcasing an evolving landscape of retail innovation.<\/p>\n<p>The podcast unpacks the complex world of grocery retail, highlighting Amazon\u2019s experimental forays like Just Walk Out technology and the Amazon Dash cart, while examining the challenges in delineating Amazon\u2019s grocery sector strategy. A comparison is drawn between Amazon\u2019s strategies and those of rivals like Walmart and Target, who are adapting their product offerings to match evolving consumer preferences, offering a comprehensive view of the dynamic retail and supply chain management sphere. Dive into our engaging discussion, explore retail dynamics, and keep a lookout for more insightful content.<\/p>\n<p><strong>Don\u2019t forget to like our\u00a0facebook page, and if you enjoyed this episode please write us a review on itunes.<\/strong><\/p>\n<p>Episode 319 of the Jason & Scot show was recorded on <span style=\"font-weight: 400;\">Sunday, May 5th, 2024.<\/span><\/p>\n<h2 class=\"font-bold pb-4\">Chapters<\/h2>\n<div data-testid=\"chapter-table-of-contents\">\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>The Jason and Scott Show Begins<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Commerce Tools Elevate Show<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Jason\u2019s World Tour Plans<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Where in the World is Retail Geek?<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Amazon\u2019s First Quarter Earnings<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Amazon\u2019s Dominance in E-commerce<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Online Segment Growth Analysis<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Offline Store Segment Analysis<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Spotlight on AWS Performance<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Amazon\u2019s Grocery Strategy<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<h2>Transcript<\/h2>\n<p><strong>Jason:<\/strong><br \/>[0:23] Welcome to the Jason and Scott Show. This is episode 319 being recorded on Sunday, May 5th, 2024. I\u2019m your host, Jason Retail Guy Goldberg, and as usual, I\u2019m here with your co-host, Scott Wingo.<\/p>\n<p>Scot:<br \/>[0:37] Hey, Jason, and welcome back, Jason and Scott Show listeners. It\u2019s been a while, but first, happy Cinco de Mayo, and also a belated May the 4th, Jason. Did you have a good Star Wars day?<\/p>\n<p>Jason:<br \/>[0:49] I did. I did. I feel like Star Wars Day always makes me think of the podcast because I feel like we have spent many of them in my latter life together.<\/p>\n<p>Scot:<br \/>[1:01] Yeah, absolutely. Any exciting new Star Wars experiences or merch?<\/p>\n<p>Jason:<br \/>[1:08] No, I understand you got some vintage merch. merch.<\/p>\n<p>Scot:<br \/>[1:13] It\u2019s not, but they, back when I was a kid, you would go and if you went every week to, I think it was Burger King, you would for the, I think it was Empire. I have the Empire right here. So definitely Empire, but you would get a glass. Now it turns out these were full of lead paint, which would kill you, but that was the downside.<\/p>\n<p>Jason:<br \/>[1:32] Not recommended for drinking.<\/p>\n<p>Scot:<br \/>[1:33] You got a very, yes, I never, being a collector, I never drank out of them. So that\u2019s good.<\/p>\n<p>Jason:<br \/>[1:37] Saved your life right there.<\/p>\n<p>Scot:<br \/>[1:38] Yes, but I did drink out of the Tweety Bird. So that me, me. I\u2019m sure I got some yellow lead paint from a twitty bird glass. Anyway, so they came out with a Mandalorian kind of homage to those glasses and they were at the Hallmark store of all places, not where I usually hang out, but I got to go to a Hallmark store and the little ladies that worked there were, I wish them all an awesome May the 4th. And they looked at me like I was from another planet and it was hilarious. My wife\u2019s like, stop, they don\u2019t know what you\u2019re doing.<\/p>\n<p>Jason:<br \/>[2:07] Wait, they didn\u2019t have a big May 4th section in the Hallmark store?<\/p>\n<p>Scot:<br \/>[2:11] They did. The little ladies didn\u2019t know.<\/p>\n<p>Jason:<br \/>[2:13] The overlap of people that still buy Papyrus cards and celebrate May 4th is probably not great.<\/p>\n<p>Scot:<br \/>[2:21] It was very humbling. It was a humble May the 4th, but I got my glasses and I was happy. I\u2019m happy for you. And then tonight we had tacos for dinner, so I\u2019m hitting all the holidays.<\/p>\n<p>Jason:<br \/>[2:30] I feel like we should have tacos for dinner every night, whether it\u2019s Cinco de Mayo or not, but I\u2019m i am happy for that.<\/p>\n<p>Scot:<br \/>[2:35] We do have a lot of tacos but this was a special single denial edition.<\/p>\n<p>Jason:<br \/>[2:42] Well, very well done, my friend.<\/p>\n<p>Scot:<br \/>[2:44] Thanks. Well, listeners of the pod have been all over me. They\u2019re like, why aren\u2019t you recording? And I said, it\u2019s not me. It\u2019s Jason. It\u2019s Jason. Because you have been traveling<\/p>\n<p>Scot:<br \/>[2:55] the earth, spreading retail geek goodness. Tell us, we are way far behind on trip updates and all the different countries. It\u2019s like you\u2019re playing, do you have like a little travel bingo where you\u2019re just like punching, what is it, 93 countries?<\/p>\n<p>Jason:<br \/>[3:09] I do. They call it a passport. Oh, nice. Yes.<\/p>\n<p>Scot:<br \/>[3:13] That, uh, little book that you get to carry. Yeah.<\/p>\n<p>Jason:<br \/>[3:15] Yeah. Yeah. Yeah. I have been on a lot of trips and it sounds like you and I may be telling complimentary lies because I also, I\u2019ve had an opportunity to meet a lot of listeners in the last, we\u2019ll call it seven weeks and which they\u2019re always super nice. And it\u2019s always super fun to talk to people. And obviously they\u2019re, you know, strangers recognize my voice in line at Starbucks at all these e-commerce shows. And then we strike up a conversation. And then the next question is always, where the heck is Scott? Because they\u2019re always disappointed to meet me and not you. And now the new thing is, and why aren\u2019t you producing more frequent shows? And my answer is always that you\u2019re dominating the world at Get Spiffy and that you\u2019re too busy.<\/p>\n<p>Scot:<br \/>[4:00] Uh-huh. I see. Okay.<\/p>\n<p>Jason:<br \/>[4:02] Well, we\u2019re both very busy.<\/p>\n<p>Scot:<br \/>[4:05] You\u2019re traveling more than I am. I\u2019m busy washing cars.<\/p>\n<p>Jason:<br \/>[4:08] Yes. I think both are fairly true, but I did finish a grueling seven-week stint where I got to come home a couple of times on the weekends, but I basically had seven weeks of travel back to back. In my old life, that would not have been that atypical, but post-pandemic, The travel has been a little more moderate. And I have noticed that I have my travel muscles have atrophied and I don\u2019t really want to redevelop.<\/p>\n<p>Jason:<br \/>[4:35] So the seven weeks was a lot. Please don\u2019t ask me for trip reports for all the commerce events because I kind of can\u2019t remember some of them. They\u2019re all a little bit of a blur. But I was at Shop Talks, I think, since the last time we talked, which is, of course, probably the biggest show in our industry. And that was a very good show. I did get to see a lot of our mutual friends and a lot of fans of the show there. So that was certainly fun. And maybe in another podcast, we can do a little recap of some of the interesting things that came out of Shop Talk. I did produce a couple of recaps in other formats for work clients, so we could certainly pull something together. I also went to a vendor show. One of the e-commerce platforms out there is called Commerce Tools, and they had their annual customer show, which is called Elevate in Miami. So I got a chance to go visit there. They\u2019re one of the commerce platforms that I would say is winning at the moment in the kind of pivot away from the old school monoliths to these new sort of SaaS-based solutions. And commerce tools in particular are kind of pioneers in pushing this actual certification around a more modern earned stack that they they coined mock. And I think I think we\u2019ve had Kelly from from commerce tools on the on the podcast<\/p>\n<p>Jason:<br \/>[5:51] in the past to talk about that. But that was a good show. I got to meet a lot of listeners there. And a funny one, several listeners were like.<\/p>\n<p>Jason:<br \/>[5:59] I would apologize for the, the, our publishing schedule lately. And they\u2019re like, I\u2019m cool with it. I like that. Like you don\u2019t do a show if there\u2019s not something worthwhile. And then, you know, when I do get a show, it\u2019s like a treat. So I don\u2019t know if they\u2019re being honest or not, but that made me feel a little better about some of our, our, our Tardis shows lately. So those, those were good events. I also spent a week in India with some clients and that super interesting, a lot of commerce activity going on there, a lot of different market dynamics than here. So that\u2019s kind of intellectually pretty fun to learn about and see what\u2019s working there that might be working here or what, you know, why things tend to play out differently there. So that\u2019s interesting. And then I have a lot more international trips booked right now.<\/p>\n<p>Jason:<br \/>[6:48] So coming up, I\u2019m going to Barcelona, London, Paris, and Sao Paulo. So if anyone either has any favorite retail experiences in any of of those cities, please send them my way. I\u2019ll be doing store visits in all those cities. And if you\u2019re based in any of those cities, also drop me a line. Hopefully we can do some meetups while I\u2019m out there.<\/p>\n<p>Scot:<br \/>[7:07] Cool. It\u2019s Jason\u2019s world tour. You can do a little pod while you\u2019re there.<\/p>\n<p>Jason:<br \/>[7:12] We have done a bunch of international pods in the distant past. I remember hotel rooms in South Korea and all over the place,<\/p>\n<p>Jason:<br \/>[7:19] Japan that we\u2019ve, we\u2019ve cut shows from. So, so totally could.<\/p>\n<p>Scot:<br \/>[7:23] Yeah. We\u2019ll have to do it. Where in the world is retail geek? That could be the theme song. I just sampled that.<\/p>\n<p>Jason:<br \/>[7:30] Yeah. So besides cleaning the world\u2019s cars, what have you been up to, Scott?<\/p>\n<p>Scot:<br \/>[7:35] Well, it\u2019s kind of funny. My worlds are colliding. So a lot of the analysts that you and I know from the e-commerce world are creeping into the auto world and their gateway drug is Carvana. So in the world of retail, we have Amazon, obviously. Well, Carvana is kind of Amazonifying used cars. They had a bit of a drama kind of situation. They were the golden child of online cars. And then they totally pooped the bed. They did this acquisition. They loaded up with debt. And then after, I think it was 21. So they had a good COVID. They surged. And then the debt got in front of them. Used car prices bop around and they kind of like got in an open door situation where they had bought a lot of cars for more than they were worth suddenly. And then they plummeted and everyone thought they were going out of business, but they have had a resurgence. So it\u2019s causing a lot of the internet analysts to now pick up auto tech or mobility or whatever you want to call it. So it was fun. I got to do a live chat with Nick Jones. He\u2019s been a friend of the show. I don\u2019t think we\u2019ve had him on due to some compliance stuff that his company has rules around, but he\u2019s at this firm JMP and it was kind of wild to talk about, with someone about both Amazon and what we\u2019re doing at Spiffy, which is basically a lot of Amazon principles applied to car care. So it was interesting to have someone reach out and say, hey, I think this is a thing. And everyone tells me I should talk to you about it. And I was like, oh, yeah, I would love to. So it\u2019s kind of fun.<\/p>\n<p>Jason:<br \/>[9:01] That\u2019s very cool. And isn\u2019t it also a thing, I think half the vehicles on the road are now owned by Amazon. So I assume that\u2019s an overlap too. too?<\/p>\n<p>Scot:<br \/>[9:09] Yeah, not half, but a lot are. The number of last mile delivery vehicles are very, very large. And we work with a lot of them, so it\u2019s kind of fun. I started spiffy somewhat to get away from Amazon and still all I can talk about. Nope. So embrace it. I love Amazon. Love me some Amazon, Jason.<\/p>\n<p>Jason:<br \/>[9:29] I\u2019m glad you do. I love them too, but I feel like I spend most of my career You\u2019re unsuccessfully helping people compete with them.<\/p>\n<p>Scot:<br \/>[9:38] Hey, got to play one side of the coin. It\u2019s a gig. You\u2019re going to be more like them or how to fight them.<\/p>\n<p>Jason:<br \/>[9:43] It\u2019s a gig. It is indeed. Yeah.<\/p>\n<p>Scot:<br \/>[9:46] Cool. I thought we are going to talk about some Amazon news. But before we jump in, you have done your magic with your data analysis interns. And I\u2019m sure there\u2019s an LLM and an AI thrown in there. Let\u2019s start with some of the things you\u2019re seeing in commerce trends from the data that\u2019s out there.<\/p>\n<p>Jason:<br \/>[10:07] Yeah. So as everyone knows, I have a little bit too much of an infatuation with the U.S. Department of Commerce retail indicators data. And these guys, you know, publish monthly estimates of retail sales in a bunch of categories. And, you know, we\u2019ve talked about this many times on the show, but broadly over the last several years have been really interesting in retail. 2020, 2021, and 2022 were the greatest three years in the history of retail. Like we mailed like $6 trillion in economic stimulus. People didn\u2019t travel or go to restaurants as much. And so we sold way more goods than ever before. And so those three years, retail grew respectively at like 8%, 14%, and 9%. The 20 years prior, retail averaged about 4% a year in growth. So normally pre-pandemic, you\u2019d expect 4% growth. We had these three, you know, wildly pandemic influence years where we grew really fast. And then last year we finished a little below 4%. So, so we were around, I want to say it was like 3.6%. So it was growth. It would, it would have been in line with pre-pandemic growth, but it certainly felt like a significant deceleration from those heady pandemic years. And so, you know, people are super interested to see how does 2024 play out? Does it?<\/p>\n<p>Jason:<br \/>[11:32] Kind of return to pre-pandemic levels, like what is the new normal?<\/p>\n<p>Jason:<br \/>[11:37] And we now have the first quarter\u2019s data from the U.S. Department of Commerce, and I would call it kind of a mixed bag. If you just look at the raw retail data that the U.S. Department of Commerce publishes, they\u2019re going to tell you that retail grew in the first quarter 2.8%. So that\u2019s a little anemic, right? Compared to historical averages, that\u2019s not a great growth rate. Most of the practitioners that follow this podcast care about a particular subset of retail that the National Retail Federation has dubbed core retail. And so the National Retail Federation pulls gas and automobiles sales out of that number. And gas is a decent size number and it\u2019s very volatile based on the commodity prices of gas. And auto is a huge number that has, as you\u2019re well familiar, its own idiosyncrasies. And so that\u2019s how they justify taking those two out. And if you take those two out and you get this core retail number, retail in the first quarter grew 3.9%. So kind of to align with how the NRF talks about retail, we\u2019ll say Q1 overall was 3.9%, which is very in line with the pre-pandemic historic average. So disappointing by pandemic standards, but kind of traditionally what we would expect.<\/p>\n<p>Jason:<br \/>[13:05] What is unique in that number is.<\/p>\n<p>Jason:<br \/>[13:09] That it\u2019s very bifurcated. There are clear winners and losers, both by categories and specific practitioners. So if you break down the categories, e-commerce is the fastest growing chunk of retail. I\u2019m sure we\u2019ll talk more about that. Restaurants were the next fastest growing categories. And categories like mass merchants and healthcare providers outperform that industry average, every other segment of retail underperformed the industry average. So things like furniture stores did the worst, building materials did really poorly, gas stations did very poorly, electronics did poorly, and side note, electronics have been the worst performer since the pandemic, which is kind of interesting and challenging. So you\u2019ve had this weird couple categories doing really well, a bunch of categories doing really poorly. And then within the categories even, if you look at the public company\u2019s individual earnings calls, what you tend to see is a couple of big players performing really well in overall retail, that\u2019s Amazon and Walmart. And then a lot of other retailers really struggling. So that even that\u2019s like in general merchandise, it\u2019s Amazon and Walmart that are lifting the boats. And it\u2019s folks like Target traditionally that have performed really well are actually struggling at the moment. So the average is kind of hard to follow at the moment.<\/p>\n<p>Jason:<br \/>[14:37] But that is kind of how things play out. And then we have some preliminary e-commerce data, but the actual Q1 e-commerce number that the U.S. Department of Commerce publishes will publish on May 17th. So that\u2019s 12 days from now.<\/p>\n<p>Jason:<br \/>[14:53] And crunching the numbers that we have available at the moment, that growth is likely to come in at somewhere between 8% and 10%. I\u2019m guessing more like 8% or 9% growth. And so that also is twice as good as overall retail, and it\u2019s more than twice as good as brick-and-mortar retail. But that is noticeably slower than the historic e-commerce growth rates pre-pandemic. So kind of file those two numbers away. The overall retail industry is growing at 3.9%. The overall e-commerce industry is growing at about 9%. And then we have our friends at Amazon that dropped their earnings announcement just before May 4th so that they could celebrate May 4th, I think.<\/p>\n<p>Scot:<br \/>[15:39] Yeah, yes, that\u2019s a good setup. And without further ado, let\u2019s talk about Amazon\u2019s fourth quarter. It wouldn\u2019t be a Jason Scott show without a little bit of\u2026<\/p>\n<p>Scot:<br \/>[16:01] That\u2019s right. On April 30th, Amazon announced their first quarter results. And the setup coming into these, so you had the data you talked about, but like to drill in a little bit. We had Meta, the artist formerly known as Facebook, and Alphabet, the artist previously known as Google. They announced and they both basically told Wall Street, AI is the cat\u2019s pajamas and we\u2019re going to spend anywhere between $10 and $40 billion of capital expenditures on it, meaning NVIDIA chips. So it turns out the way to play all this is basically buying NVIDIA. So hopefully you bought some NVIDIA stock. Maybe this is not a stock recommendation or when it\u2019s too late, so\u2026 And also don\u2019t take stock recommendations from podcasters. Anyway, so there was all this angst and people were a little freaked out coming into the Amazon results because Meta was down like pretty substantially, 20 to 30 percent. And Alphabet was also up substantially. You also had Microsoft come in there and they really crushed it. Their Azure is really lighting it up with AI. And they announced that they were going to invest a lot. And there\u2019s this rumor that a $100 billion project, it\u2019s got a name like Starship or something, but it\u2019s not Starship. Spaceship? Stardust? I don\u2019t know what it is. But it\u2019s going to be this mega data center, and they literally can\u2019t find a place to put it because it\u2019s going to consume so much power. So they\u2019re going to have to maybe build a nuclear plant next to it or some wacky thing.<\/p>\n<p>Scot:<br \/>[17:31] Anyway, that was the setup. up. So coming in, Wall Street was very, very concerned about Amazon\u2019s AWS division, which is their cloud computing. Because if Alphabet is building out their infrastructure, and so is Azure, that\u2019s the two biggest competitors for AWS. And is AWS getting its fair share? And is it going to announce that it\u2019s going to have to go build some $40 billion kind of a thing? Also, another Another thing, and I\u2019m kind of curious on if you\u2019re seeing this with your clients, but in the, I follow this, you know, the AI, you can\u2019t do much without seeing AI everywhere. But the part I\u2019m most interested in is what are big enterprises spending money on? This is like your Fortune 500s. They\u2019re all experimenting and really getting into it. And where they\u2019re finding a lot of good use cases is training on their data. So they\u2019ll say, you know, hey, I\u2019m Publisys. How many documents do you think are inside of Publisys? I don\u2019t know, 8 trillion documents. Documents and you know wouldn\u2019t it be helpful just the ones I created and who is this retail geek and he\u2019s he\u2019s created uh you know 90 of those and you know so you know imagine you\u2019re starting new at publicists you\u2019re gonna be like where do I start going through some of these documents for us and if you had a chat bot that was like hey I\u2019ve read all that you know I can navigate you through everything that\u2019s been published or you know whatever I\u2019m certainly you.<\/p>\n<p>Scot:<br \/>[18:50] Providing a very big metaphor, certainly be more divisional and all this kind of stuff. But that\u2019s where big companies are spending the bulk is they\u2019re taking their data in whatever format it\u2019s in, be it a relational database, a PDF, whatever it is, they\u2019re trying to train it. They don\u2019t want it to go up into the, they don\u2019t want to train the LLM so that other people get the benefit of that and can see any confidential data. So that\u2019s really important. So it needs to be gated in these types of things. Because of that use case, open AI is not great because people are very worried. A, it\u2019s very expensive and it\u2019s only an API. So OpenAI hosts itself and you call it through an API.<\/p>\n<p>Scot:<br \/>[19:25] Those API calls are very expensive. They\u2019re getting, as OpenAI has gotten more popular, there\u2019s more latency. It\u2019s taking forever to get answers out of this thing. And a lot of people are very concerned that even though there\u2019s ways to call the API such that it\u2019s in a window and not being trained, that maybe it leaks in there. So because of all these elements, the open source models are becoming very popular. And right around the time Meta announced, they announced their Llama, which has become quite popular. And what\u2019s nice is you can host it wherever you want. And it\u2019s kind of like WordPress, where if you are a serious WordPresser, you can host it somewhere yourself, and you can kind of understand that. Otherwise, there\u2019s other people that will host it for you. But it has the nice feature of you\u2019re just getting the weights and whatnot, and it\u2019s it\u2019s pretty clear, it\u2019s pretty obvious, it\u2019s not training itself on your data. So a lot of people like it because it\u2019s quote unquote free. It\u2019s not an API usage based. It\u2019s a pay once to set it up, pay for some resources type thing and you\u2019re done. And it\u2019s also not going to train on the data. That\u2019s one of many. There\u2019s probably 10 or 20 pretty commercial grade open AIs out there.<\/p>\n<p>Scot:<br \/>[20:38] Okay. So that\u2019s kind of the setup to get to the earnings. things. So from a big picture, this was a really good quarter. Asterix, the guide made Wall Street a little bit nervous. So-<\/p>\n<p>Scot:<br \/>[20:53] And one of our research analysts just said it\u2019s Stargate, which is also a sci-fi series. They must have that on Prime Video or something. There\u2019s probably some callback there.<\/p>\n<p>Scot:<br \/>[21:01] So they beat for the quarter Q1, but then they also kind of tell you what\u2019s going on the next quarter. Amazon doesn\u2019t provide fully your guidance. They just kind of give you a snippet. So when they report one quarter, a quarter, they then tell you what they think the next quarter is going to do. So Wall Street got a little bit ahead of its skis, and the guide for Q2 was below what Wall Street wants. So it wasn\u2019t what we\u2019d call a beat and a raise, which is the current quarter was a beat and the next one they increased. It was a beat and a guide down. So that probably tampered Wall Street. But ever since Jassy came in, Andy Jassy, this has been his MO is to be pretty conservative because Wall Street\u2019s very much an expectation engine. And the more, if you can beat and tamp down expectations, it makes it, it\u2019s a little bit rougher in the short term from a stock price, but it makes next quarter better and then so on and so forth. So it\u2019s a smart way to manage the long-term vibe of the stock, the mindset, the expectations around your stock. Okay. So revenue came in at $143 billion versus Wall Street at $142. So pretty much in line. But most importantly, where Amazon really threw people off was on operating income. Yes, Amazon is profitable. This is the proxy for operating income. True Amazonians would tell you, no, it\u2019s cashflow. We can go into that, but this is kind of the way they report to Wall Street. So this is kind of the standard operating system, if you will. So this is what we\u2019re going to use, but it\u2019s a proxy for cashflow.<\/p>\n<p>Scot:<br \/>[22:28] That was 15 billion for the quarter and Wall Street expected 11. Well, you know, 4 billion on a world of 143 doesn\u2019t sound like much, but between 11 and 15, that\u2019s a very material beat. What is that? Like 38%, something like that.<\/p>\n<p>Scot:<br \/>[22:44] So that was a really nice surprise. And, you know, Amazon goes through these invest and harvest periods and everyone\u2019s been feeling like they\u2019re going to be back in investing which would mean they\u2019re going to start lowering operating income as they invest but it\u2019s actually kind of beating expectations, also this is the fifth quarter amazon has come in at the high end of its guidance or above its guidance since basically you know on operating income and that corresponds with when jassy came in so this is his mo right now is to kind of like beat and lower beat and lower you know exceed expectations tamp them down not get not get ahead of his skis and it\u2019s working really well.<\/p>\n<p>Jason:<br \/>[23:24] Sandbagging for the win. I like it.<\/p>\n<p>Scot:<br \/>[23:26] Yes, it is. Having run a public company, this is a lesson I learned painfully. So that\u2019s something we can talk about over beer sometime.<\/p>\n<p>Jason:<br \/>[23:33] I will book that date. Yeah. And the retail business sort of followed in line with that. They had like some nice growth, but like the real standout number was the improvement in margins and the significant positive operating income from the retail segment. So I think the actual operating income from U.S. Retail was like $5 billion and the Wall Street expectations were 4.3. So again, that was another strong beat. Total revenue, which revenue is not the same thing as retail sales, as we\u2019ve talked about on the show many times, that we would use GMV as a proxy for that. But revenue was $86.3 billion for the quarter, which I think was in line with the analyst expectations.<\/p>\n<p>Jason:<br \/>[24:27] And I think this was the largest operating income that Amazon has ever reported for the retail business. So that was super interesting on the domestic side. Traditionally, domestic has done pretty well and international has been a money loser because, you know, they\u2019ve been less mature. they\u2019ve been investing a lot in growing international and they haven\u2019t had the same kind of margins. This was the first quarter that they reported positive operating income for the international division. So that\u2019s another super encouraging sign for investors that maybe they\u2019ve kind of passed that inflection point on a lot of their international investments that they\u2019ve made in the EU and Japan and the UK, which reminds me is not part of the EU anymore.<\/p>\n<p>Jason:<br \/>[25:13] So so they kind of beat beat international expectations across the board on income. Revenues were lower. So revenues were like thirty one billion dollars, which was below expectation.<\/p>\n<p>Jason:<br \/>[25:25] But they they earned like nine hundred million in operating income. And I want to say the the the Wall Street expectation was like six hundred million. So so again, like a 30 percent beat, which is pretty, pretty darn good. Good. They also, a bunch of analysts have, you know, taken these revenue numbers and they try to back into a GMV number. And I would say the bummer at the moment is there\u2019s a fair amount of variance in the estimates, like different analysts have different models. So I have kind of been putting to a model of the models together and trying to kind of find a midpoint. And like Like based on that, the Amazon\u2019s GMV globally probably went up 11.5% for the quarter. So if you\u2019re comparing this to other retailers or the U.S. Department of Commerce number, overall GMV went up 11.5%. The U.S. was stronger. So the U.S. probably went up at 12.2%. So again, we talked about core retail was up 3.9%. Well, Amazon U.S. GMV was up 12.2%. So, you know, three times faster growth than the retail industry overall.<\/p>\n<p>Jason:<br \/>[26:39] And again, Amazon is mostly e-commerce, very little brick and mortar,<\/p>\n<p>Jason:<br \/>[26:44] which we\u2019ll talk about in just a minute. But even if you\u2019re comparing Amazon to that e-commerce number, if e-commerce comes in at 8% or 9% and Amazon\u2019s at 12%, they\u2019re by far the largest e-commerce player out there and they\u2019re still substantially outgrowing the average, which, you know, is very impressive and should be very scary to every other competitor out there.<\/p>\n<p>Jason:<br \/>[27:08] One analyst kind of put together an estimate of what they thought the earned income contribution from Amazon was for retail and ads together, pulling AWS out. And they had it at $27 billion in earned income if Amazon was just a retail with no AWS. And that puts them right in the ballpark of Walmart that spent off about $29 billion in earned income or operating income. I keep saying earned, but I mean operating income. So, so that is all pretty impressive and simultaneously super scary.<\/p>\n<p>Jason:<br \/>[27:45] Scott, did you drill down into the online segment at all?<\/p>\n<p>Scot:<br \/>[27:49] Yeah. And, you know, what I would tell listeners is picture a block diagram where you have this big, big rectangle, that\u2019s the whole Amazon entity. And, you know, so what we\u2019re going to do is talk about the segments. And the first segment is the biggest one, which is the retail business. And that, that\u2019s what you just.<\/p>\n<p>Jason:<br \/>[28:04] Biggest and best. Wouldn\u2019t you say?<\/p>\n<p>Scot:<br \/>[28:06] Coolest.<\/p>\n<p>Jason:<br \/>[28:07] Coolest. All right.<\/p>\n<p>Scot:<br \/>[28:08] Cool. Okay. Yeah. Yeah. Okay. I\u2019ll, you know, I don\u2019t know.<\/p>\n<p>Jason:<br \/>[28:11] It is for you.<\/p>\n<p>Scot:<br \/>[28:14] Um, I think the whole enchilada, I like the, the way they do this and I\u2019m trying to replicate it. It\u2019s 50. We\u2019ll talk about that in a second. The, so then the, you know, so then another segment is AWS, another segment, I think marketplace should be in some segment, but they don\u2019t break it out. So it\u2019s just kind of in kind of hidden inside of the blob that is retail. So we tease some of that out here on the show. They purposely hide it in there. So no one knows how awesome it is, I think. And then they\u2019ve got AWS ads and a couple other things, but we\u2019ll talk about this. So as you dig into the retail business, there\u2019s a couple of ways to look at it. You can look at it by domestic and international, which Jason just did,<\/p>\n<p>Scot:<br \/>[28:50] or you can look at it by online and physical store. So the online biz grew 7% year over year, which if I remember your stats, well, you don\u2019t have it until may 17th so on may 17th we\u2019ll be able to know how that compared but probably the one you can compare is the offline biz which is the the store comp that they have, And Jason, you saw on that one, what\u2019d you see?<\/p>\n<p>Jason:<br \/>[29:16] Yeah, so physical stores grew 6.3%. So again, like, you know, when we say all of retail grew 3.9%, a big chunk of that\u2019s e-commerce. Brick and mortar probably grew at like two to 3%. So Amazon\u2019s brick and mortar growing at 6.3% is actually super impressive. And it\u2019s kind of interesting, you know, for several years, Amazon has had experiments in a bunch of retail formats. So they\u2019ve had these Amazon Go stores, stores. They had Amazon five-star stores. They had bookstores. They had a fashion store. They\u2019re trying all these things. And of course, the biggest chunk of their stores is they own Whole Foods. And so offline stores for Amazon was kind of a mix of all these different concepts. In the last couple of years, they\u2019ve kind of cleaned house and gotten rid of all those concepts. And so, you know, nominally there\u2019s a few of their own grocery stores called Amazon Amazon fresh open, but the vast majority of online offline retail for Amazon is, is Whole Foods. And for it to be growing at 6.3% in the current climate is, is a really good sign for Amazon. And, and I would say somewhat impressive, you know, on the earnings call, they, they announced that they\u2019re working up a new format for Whole Foods, which is a smaller format store that\u2019s It\u2019s going to open in Manhattan. So I have that on my ticker file to go visit when that\u2019s open.<\/p>\n<p>Jason:<br \/>[30:38] You know, the whole grocery space for Amazon is super interesting, but maybe we\u2019ll talk about that a little bit more later. But I will call out, they did launch a service that there\u2019s been some controversy over. They launched a $9.99 a month grocery delivery service, which essentially lets you have all you can eat free grocery delivery to your home for an incremental fee of $9.99. And they\u2019re spinning that as, you know, a cool new grocery service and enable more people to shop for groceries online. And there are a lot of articles about it, like.<\/p>\n<p>Jason:<br \/>[31:13] They used to have free grocery delivery included in your Prime membership, right? And so they\u2019ve kind of like, I look at the big arc of all this and say, there used to be a lot more free services in Prime that they\u2019ve kind of peeled out. Then they started charging for, and now they\u2019ll let you get it free again for another $120 a year.<\/p>\n<p>Jason:<br \/>[31:32] So interesting things happening with grocery that we could probably talk more about later. But I\u2019m kind of eager to dive into some of these other businesses like AWS.<\/p>\n<p>Scot:<br \/>[31:42] Yeah. So that\u2019s the one that everyone was really waiting on the call to hear how it went. And good news, AWS exceeded expectations. Everyone thought it was going to grow 14% and it came in at 17%. And if Wall Street likes, they like a lot of things, they like beating expectations, that\u2019s important to them. But their favorite thing is ARG. And that is not a pirate day thing, ARG. It is Accelerating Revenue Growth. Wall Street loves that more than anything. And that\u2019s what they delivered for both the ads and the AWS part of the business. And what that means is that as the law of numbers kicks in, so back on the retail business, the only time we see that accelerate is in the fourth quarter and that seasonal acceleration, right? We\u2019ve gotten used to that for decades now. It always happens in the fourth quarter and whatnot. So it\u2019s what you would expect. But this is quite unusual for a relatively mature business. This thing\u2019s $25 billion a quarter. So this is a $100 billion business that accelerated. And so that tells us that there is a lot more wood to chop here. It has not gotten near its addressable market. And it really allayed fears that they were losing massive market share because they\u2019re, quote unquote, behind on AI to Azure, which is Microsoft offering, and then the Google hosting solution as well.<\/p>\n<p>Scot:<br \/>[33:05] That does not seem to be the case. So they did very well. So they came in at $25 billion and Wall Street was expecting $24.6. So that was really, that accelerating is what really made everyone very happy. And then the operating income came in at $9.5, way ahead of Wall Street at $7.5. So another pretty material 20% beat on this component at the bottom line. And this is really interesting. There was some really good language around this. And this has been Jassy\u2019s statement all along, and it\u2019s coming true. His early Amazon\u2019s early play was we\u2019re going to be agnostic on models and it\u2019s kind of like bring your own model we\u2019ll work with anything now with open AI they\u2019re not going to ever host open AI but they\u2019ll they\u2019re not going to stop you from working with it and then they for these open source ones they\u2019ve made it very easy for you to spin up an AWS instance throw a little llama in there and I would make a llama noise if I I knew what they said I guess they make like a sheep sound. So you throw a little alarm in there and it does its thing. And, you know, the benefit of them being agnostic on these LLMs is most likely they have some or all of your data, right? Because they\u2019ve been at this so long that if you\u2019re doing cloud computing versus on-prem, most likely a lot of, if not all of your data is in AWS. Extracting that data, you know, imagine you had terabytes or or what\u2019s the biggest,<\/p>\n<p>Scot:<br \/>[34:31] bigger than terabytes? I always forget this one.<\/p>\n<p>Jason:<br \/>[34:33] Petabytes.<\/p>\n<p>Scot:<br \/>[34:34] Petabytes of data at AWS. They literally have a product that they can send a truckload of hard drives around and get your data. That\u2019s how much data there is that you could never push it across the internet, that there\u2019s so much data. So if they have that data and that\u2019s what you want to train on, you don\u2019t want to have the latency of the internet between your data and the training. So you\u2019d really need the LLM to operate near your data. And this is what they predicted two or three years ago, kind of around the, the, the launch of chat gpt when all this stuff really started to accelerate and it\u2019s coming true so everyone feels a lot better about that then their body language this time a lot of times they were kind of like this is what we\u2019re doing and we\u2019re pretty sure it\u2019s going to work now they\u2019re like it\u2019s working and people really felt relief around this because everyone there was a set of people that believed it but then you know open ai\u2019s pitches nope our lm is going to be we\u2019re spending, billions of dollars we\u2019re going to be so far ahead none of these open source things are going to keep up. If you don\u2019t have us, you\u2019re going to be so far behind, you\u2019ll be like playing with crayons and everyone\u2019s going to be playing with quill pens.<\/p>\n<p>Scot:<br \/>[35:42] So it was really good to see that this is not what\u2019s happening, that people are embracing, enterprises are embracing these open source models. They are in the same zip code performance-wise from results and much cheaper than OpenAI\u2019s offerings. And what Amazon said specifically was very positive around what is It\u2019s kind of abbreviated Gen AI for generative AI. And it\u2019s kind of a way to encapsulate this. And they said that it already is a multi-billion dollar run rate business. And you always have to parse what they say. So multi-billion can be anywhere between 1 and 9.9, right? And you\u2019ll see why I drew 9.9 there.<\/p>\n<p>Scot:<br \/>[36:25] And inside, as part of that big AWS number, and they believe it can be rapidly tens of billions. Billions so they\u2019re basically saying it\u2019s not double digit billions so it\u2019s a single digit million which is where i get one to nine point nine but they basically hinted that that it is growing so rapidly inside of there that it\u2019s gonna be tens of billions and this is why they saw accelerating revenue growth which made everyone happy it wasn\u2019t just people you know moving some more you know loads on or something boring loads around relational databases or something it was the juicy ai stuff so this got everyone so lathered up that three analysts did price increases and they cited that this was one of the reasons the biggest price increase was from sig susquehanna and they put the price up to 220. At the time all this happened the stock was at 175 and today it\u2019s around 185 so it\u2019s been up nicely but 220 is a pretty big big you know even.<\/p>\n<p>Scot:<br \/>[37:20] From where they expect that\u2019s where they\u2019re thinking i think most these guys look at a year to two years as a time horizon on these prices so and that\u2019s the the high i have you know again there\u2019s a wide range some people think it\u2019s going to go down some people think it\u2019s over price so go do your research this is not a stock recommendation but i just thought it was interesting that people get really really excited by by this whole gen ai largely the body language that, and it\u2019s, Amazon doesn\u2019t pound their chest much. So the fact they were, was kind of a new, new way of managing Amazon and Jassy\u2019s pretty conservative. So he must\u2019ve felt pretty good about it, but also that they needed to ally, allay, allay, allay, whatever the right word is, get rid of these competitive concerns everyone\u2019s been talking about.<\/p>\n<p>Jason:<br \/>[38:05] Yeah. It feels like a pretty big prize out there. Jassy and the whole team always talk, Just AWS, even before you get to Gen AI, they always remind everyone, hey, 85% of the workloads are still on-prem. So like this, as big as AWS looks, if the long-term future is 85% of the workloads are on the cloud and only 15% are on-prem, there\u2019s a lot of headroom still in AWS. And then, you know, you add this new huge demand for AI on top of all that. And like this, it\u2019s almost a limitless opportunity. And I want to tie the AI back to retail, though, for just a second, because there\u2019s another bit of news that I haven\u2019t seen covered very much, but is super interesting to me.<\/p>\n<p>Jason:<br \/>[38:51] There\u2019s a particular flavor of AI out there, a subset of generative AI that\u2019s now being called agentic AI. And that\u2019s sort of a clever amalgamation of agent-based AI. And there\u2019s a very famous AI researcher, this guy, Andrew Ng. He\u2019s the founder of Coursera. He\u2019s done a bunch of things. He was the head of Google Big Think, which was one of the first significant AI efforts. And I want to say he was like on People Magazine\u2019s 100 most interesting people list in like 2013 as an AI researcher. So the dude\u2019s been around for a long time. He is one of the biggest advocates for this agentic AI. And the premise is that if you just ask an LLM, you take the best LLM in the world, and you ask it to do something for you, that\u2019s called zero shot. You give it an assignment, and you take the first result you get. It\u2019s a zero shot. You get pretty good results. But if you\u2026<\/p>\n<p>Jason:<br \/>[39:53] Turn that, that LLM into multiple agents and break the task up amongst those agents and potentially agents even running on different LLMs, you get wildly better results.<\/p>\n<p>Jason:<br \/>[40:05] And so his, his research kind of showed that, Hey, if, if Jason goes write a PowerPoint presentation for his client, explaining what\u2019s going on in commerce. And I just give that to the turbo version of ChatGBT 4, I\u2019ll get a pretty good deck. But if I say, hey, I want to create four agents. I want to create a consultant to write the deck and a copywriter to edit the deck and an editor to improve the deck and three people to pretend to be mock customers to poke holes in the deck and have all those agents work on this assignment. I could give that assignment to chat gbt 3.5 and it would actually output a better work product than the the newer more advanced model was by by breaking the job into these chunks and so in retail you think about like this is the idea of assigning higher level jobs to shopping right so instead of saying like going to amazon and saying oh now it\u2019s a ai-based search engine and i\u2019m going to type a long form query into search and get a better result.<\/p>\n<p>Jason:<br \/>[41:09] The agentic AI approach is I\u2019m just going to say to Amazon, never let me run out of ingredients for my kids\u2019 school lunches. And the agent\u2019s going to figure out what is in my school lunches and what my use rate is for those things and what weeks I have off from school and don\u2019t need a school lunch. And it\u2019s just going to do all those things and magically have the food show up. And this is a long diatribe, but the reason it\u2019s relevant is is this dude, Andrew Ng, was named the newest board member at Amazon three weeks ago.<\/p>\n<p>Scot:<br \/>[41:40] Very cool.<\/p>\n<p>Jason:<br \/>[41:40] I did not see that myself. Yeah. And so if you\u2019re wondering where Amazon thinks this is going, like this, in my mind, ties all this tremendous opportunity in generative AI and the financial opportunity in AWS directly to the huge and growing retail business that Amazon runs.<\/p>\n<p>Scot:<br \/>[42:02] Very cool. Oh yeah. I had not seen that. So maybe Wall Street picked up on that. I\u2019m sure. And maybe that was another part of the excitement.<\/p>\n<p>Jason:<br \/>[42:09] Yeah. But all of that is just peanuts compared to the real good business in Amazon, which is the ads business. So again, you know, Amazon used to, to obfuscate their ads business. They\u2019ve for a number of quarters now had to report it as earnings because it\u2019s in their earnings separately, because it\u2019s so material. And it was another good quarter for the ads business. It\u2019s hard to say whether it\u2019s actually accelerating growth or not, because the ads business is very seasonal. So the ad business grew 24.3% for the quarter versus Q1 of 2023. Q4 grew faster. So Q4 grew at 27%, but the 24% growth is much faster growth than other\u2026 Q1 year-over-year growth rate. So however you slice it, it\u2019s a good, robust growth rate. If you add the last four quarters together, you get $29 billion worth of ad sales. There\u2019s lots of estimates for how profitable ad sales are, but there\u2019s no cost of goods for an ad, right?<\/p>\n<p>Jason:<br \/>[43:13] And so it\u2019s very high margin. So if you just assume, I think 60% gross margins is a very conservative estimate. But if you assume 60% gross margins, that means the ad business spun off $29.5 billion of operating income over the last 12 months. And to put that in comparison, AWS is big and profitable as it is, twice as much revenue at over $100 billion now, but it spun off like $23 billion in operating income. So the ad business is a much more meaningful contributor to Amazon\u2019s profits than even AWS.<\/p>\n<p>Jason:<br \/>[43:51] And another way I\u2019ve been starting to think about this is what percentage of the total GMV on the Amazon platform are the ads? And they are now 6.5%. So that\u2019s a very significant new tax. You know, as Amazon has hundreds of millions of SKUs available for sale, no one\u2019s ever going to find your SKU or buy it if you don\u2019t do some marketing on the platform for that SKU. And that\u2019s this 6.5% tax that Amazon\u2019s charging. And in the same way we said, hey, AWS is a really robust business. And then there\u2019s this thing called generative AI that can make it even huger. All of this ad revenue we\u2019re talking about is really coming from their sponsored product listings, which is like basic search advertising on the retail platform. Last quarter, Amazon said, by the way, we have this huge viewership streaming video service called Amazon Prime. And we\u2019re going to start putting ads in the lowest tier version of Amazon Prime. So unless you want to pay more, you\u2019re going to start seeing ads on Amazon Prime. And that\u2019s another huge advertising opportunity that hasn\u2019t been very heavily tapped yet. So the analysts are pretty excited about the upside of Amazon potentially tacking on another $6.5 billion in Prime video ads onto the $50 billion of search ads that they already have.<\/p>\n<p>Jason:<br \/>[45:11] And so ads are a pretty good business to be in, which is why every other retailer is trying to follow suit with their own sort of version of a retail media network.<\/p>\n<p>Scot:<br \/>[45:22] Cool. I imagine you get a lot of calls to talk about that.<\/p>\n<p>Jason:<br \/>[45:25] Oh, yeah. I actually, I\u2019m sick of talking about it. So one nice thing about working at an ad agency is there are now thousands of other experts. You know, I was one of the early guys in retail media networks. Now there are thousands of other experts that are way more credible than me. So I don\u2019t have to talk about it quite as much, but it still, still comes up in every conversation.<\/p>\n<p>Scot:<br \/>[45:43] Very cool. All right. So then that was the basic gist of the corridor from a high level. And then it came to the what\u2019s going on in Q2. So that did come in lighter than folks expected, as I said, and they guided the top line to 144 versus 149. Let\u2019s call it 146 and change at the midpoint. They always do this range kind of thing when they\u2019re doing their guide. And Wall Street was at 150 consensus. So, you know, a tidge below two or three percent below where they wanted. But the operating income guide was above Wall Street. So they\u2019re kind of, we\u2019ll take it. Como si, como sa.<\/p>\n<p>Scot:<br \/>[46:21] So that was, you know, I think Amazon tapping things down. Yeah. Now they did talk a lot about consumers being under pressure. So they said in the, it wasn\u2019t in a Q and a, it was in the prepared remarks and Jassy said it, which is kind of like the more important stuff. And I will say it\u2019s really nice to have the CEO of Amazon back on these calls because Bezos basically ditched them after, I don\u2019t know if, I think he came the first two quarters back in 97 but i honestly can\u2019t remember but he has not gone to the calls and jassy\u2019s been to them all so it\u2019s really nice to hear from the ceo and he answers very candidly i feel you know he doesn\u2019t feel as kind of like robotic as many ceos when they get on here because it is a stressful thing that you\u2019re going to say something wrong, but there was this exchange well first of all he he in his prepared remarks he talked about.<\/p>\n<p>Scot:<br \/>[47:12] I forgot to put the exact language, but he said, we\u2019re seeing a lot of consumers trade down. So they\u2019re seeing, you know, we\u2019re seeing this in the auto industry. Tires is this huge thing where it\u2019s under a lot of pressure right now because people are just waiting. So there\u2019s a lot of this, you know, it\u2019s not showing up in the data that I\u2019ve seen, but there\u2019s, you know, maybe the inflation data, but not the GDP and some of the other unemployment data. But it feels like the consumer is under a bit of pressure here, and they talk about that a lot in the prepared remarks. So I thought our listeners would find that interesting. Jason, before I go into this longish little thing that I wanted to just cover, what do you, did you pick up on any of that consumer stuff? Are you hearing that?<\/p>\n<p>Jason:<br \/>[47:55] Oh, yeah, that\u2019s very common. And remember, in the beginning, I mentioned that there\u2019s this weird bifurcation that some retailers, even in categories, are doing well and others aren\u2019t. And some categories are doing well and others aren\u2019t. That\u2019s super complicated to get to the why. But the most obvious why is that consumers feel like they\u2019re under a lot of economic pressure and are trading down and are deferring certain types of purchases. The easiest way to see this is own brands and private label sales going up and, you know, national brand sales stagnating, see things like chicken protein going up and beef protein going down. You know, there\u2019s lots of examples out there, but the retailers that are best able to follow the consumer as she trades down are tending to do well. And the retailers that only cater to the luxury consumer, the super luxury is still doing fine. They\u2019re somewhat insulated. But the folks that haven\u2019t been as able to cater to the value consumer as much have struggled more. And the non-mandatory categories have struggled more. So Andy\u2019s comments exactly mirror what we\u2019re seeing going on in market dynamics and what other retailers are saying in their earnings. It is slightly weird because if you just look at the macros.<\/p>\n<p>Jason:<br \/>[49:18] It\u2019s objectively, the consumer is doing pretty well. There\u2019s actually a lot of favorable things, but there\u2019s a ton of evidence that the consumer sentiment is that they\u2019re really worried about their household budget and are making, you know, hard, hard financial decisions.<\/p>\n<p>Scot:<br \/>[49:36] Yeah. Yeah. It\u2019s tough out there. Well, hopefully it\u2019ll get better. So one of the questions I want to just kind of pull out some tidbits, because this has been a theme on our pod for a long time and I thought it was really, really interesting. And this is going to get into the weeds of supply chain and this kind of thing. So sorry if that\u2019s not your jam. We like to talk about logistics.<\/p>\n<p>Scot:<br \/>[49:56] Side note to you, Jason, I saw that deep dive we did on Amazon logistics is still like our number one show and all the stats and stuff, which is kind of fun. So someone cares about it. Anyway, one of the friends of the podcast, Yusuf Squally asked a question. He\u2019s one of the analysts and he said, as it relates to logistics, so he\u2019s talking to andy on the call back in september you launched amazon supply chain can you help us understand the opportunity you see there where are you in the journey to build logistics as a service on a global basis and does that require a huge increase in capex a function increase in capex which means huge so jesse said this was a very long answer so i\u2019m going to pull out two snippets you can go read the transcripts can you put a link to that in the show notes absolutely yep yeah so so i\u2019m just gonna give you the the snippet the whole thing is worth reading but it would be like another 20 minutes to do that. But so Jassy starts out and says, I think that it\u2019s interesting what\u2019s happening with the business we\u2019re building in third party logistics. And it\u2019s really kind of in some ways mirror some of the other businesses we\u2019ve gotten involved in AWS being an example. And even though they\u2019re very different businesses, and that we realized that we had our own internal need to build and launch these capabilities.<\/p>\n<p>Scot:<br \/>[51:01] We figured that there were probably others out there who had the same needs we did and decided to build the services out of them so this is this model that really blows the minds of traditional retailers where you know so walmart has this huge data you know capability there\u2019s this this urban legend that they know when people are pregnant before they do they can see changes in their habits or they know who all is on weight loss drugs they they see your buying habits so intricately that they can do that that\u2019s a neat capability but they view it as proprietary and And that\u2019s old school thinking.<\/p>\n<p>Scot:<br \/>[51:32] What Amazon does is says, well, that\u2019s a cool capability. Let\u2019s certainly someone else needs it. Let\u2019s open it up. This is one of my favorite things at Amazon. And it\u2019s so counterintuitive that in my current car world, I talk about this and everyone\u2019s like, why are you, we\u2019re doing it a lot at Spiffy. And they\u2019re like, well, why are you doing that? That\u2019s like your proprietary thing. And we\u2019re like, well, that\u2019s just how it should be. And like, this is a better way to do it. And it\u2019s really interesting that still today, Amazon\u2019s built what I say, $100 billion business out of AWS, which has used this and people are, are befuzzled by the whole thing. So I, I thought that was an interesting use case. And then he, he goes into some details there that are pretty obvious for our listeners, like how this is gonna work. But then he basically kind of brings it back around and then he says he wraps up and says, I would say that supply chain with Amazon is really an abstraction on top of each individual block services. And in those services, he talked about all the things that, that, you know, FBA and last mile delivery and buy with a prime. He talks about each of those kind of and how awesome they are. So he\u2019s basically saying Amazon supply chain wraps a bow around all that. And it gives this collective set of business services is growing significantly.<\/p>\n<p>Scot:<br \/>[52:43] It\u2019s already what I would consider a reasonable size business. I think it\u2019s early days. It\u2019s not something we anticipate being a giant capital expense driver. So it\u2019s because they\u2019ve already invested in all this that doesn\u2019t require additional capex. And then he finishes and says, we have to build a lot of the capabilities anyway to handle our own business. And we think it will be a modest increase on top of that to accommodate third-party sellers.<\/p>\n<p>Scot:<br \/>[53:05] But our, there\u2019s a typo in the thing. Our third-party sellers find very high value in us being able to manage these components for them versus having to do it themselves. And they save money in the process. So I thought that was a really interesting, interesting. So they\u2019re really leaning into this supply chain. I think that ultimately they\u2019ll open this up to more consumers where you can send Aunt Gertrude in Detroit something from Chicago for three bucks a package and just throw it in an Amazon box, maybe a return box, and it kind of makes it way cheaper than you can FedEx it. I think that\u2019s coming, but it\u2019s really interesting to see. The way they think about things and his articulation of it was very crisp,<\/p>\n<p>Scot:<br \/>[53:45] and I really enjoyed that. I was geeking out on that when I was listening to the call.<\/p>\n<p>Jason:<br \/>[53:50] Yeah, for sure. That actually came up in some of the conferences I was at that he, you know, Jeff Bezos famously wrote this memo a long time ago about kind of being an object oriented, company and having all these building blocks that people could easily access and use internally and externally. And, and that this was kind of Andy Jassy doubling down on that. Yeah. It\u2019s Biffy is an example of that. Like you inventing some cool products that make it your jobs easier. And then you\u2019re selling those products to, to your potential competitors.<\/p>\n<p>Scot:<br \/>[54:20] Yeah. So two examples, we have some devices we\u2019ve developed for ourselves. One is a tire tread scanner. So it does 2D and 3D tires, tire tread scans. It\u2019s called Easy Tread. And we developed it for ourselves because we touch 3,000 cars a day right now and we wanted to measure the tire treads. And the state of the art is a Bluetooth needle. And it\u2019s, you know, you have to lay on your back. The cars are on the ground for us most of the time. So you have to like get underneath there, measure three things, and then it Bluetooths to a phone. Then you have to take it, the data entry, it doesn\u2019t have an API. Then you have to like take what it measured and then now cut and paste it into something else. It\u2019s kind of, kind of redonkulous in our world. So we developed a solution for that and we\u2019re selling it externally. And then the big, the big one is from day one, this has been the plan is we\u2019ve built a ton of software for Spiffy. So we\u2019re, you know, we\u2019ve got 400 technicians, 250 vans doing all kinds of services across the US and there\u2019s no operating system for that. So we, there\u2019s no like Salesforce for that or Shopify. So we had to go build our own. And so we\u2019ve built, you know, route optimization specific to this parts integration, fitment integration, VIN lookup, all these things that are required integration with tire suppliers, oil filter suppliers, oil suppliers, parts suppliers, all these things. So we have like 150 things we\u2019ve integrated with and pulled in from all over the place.<\/p>\n<p>Scot:<br \/>[55:44] And then labor management, all the reporting that comes along with it, all that stuff. And we\u2019re starting to license that out as its own platform to anyone that wants to do auto services. And so these dealerships and large auto service companies are coming to us and finally saying, this seems kind of obvious now that we need to provide the ability to go to our customers. They call it at their curb. They use a different language than we do. But basically what you and I would call mobile, you know, last mile delivery of the service. And we\u2019re starting to license that out. And it\u2019s a lot like AWS, right? So we had to build this for our retail business, which is doing the services and now we\u2019re licensing it out a lot AWS and we have this device business. So it\u2019s been, I would not have, it comes intuitively to me now. Cause I\u2019ve been, you know, basically living this lifestyle for 20 years and watching Amazon do it, But it\u2019s been fun to kind of build a company with this mindset of we\u2019re going to take these things we build and give them to other, not give them, but sell them to other people. And then that makes them better. And they help us pay for all the R&D that we\u2019ve done on it.<\/p>\n<p>Jason:<br \/>[56:48] Yeah, that\u2019s very cool. And that gives listeners a very tangible example of why we haven\u2019t been able to podcast quite as frequently as we\u2019d like.<\/p>\n<p>Scot:<br \/>[56:56] Yes.<\/p>\n<p>Jason:<br \/>[56:56] I do, at the risk of making this the world\u2019s longest episode of our show, I do have a geeky add-on to the supply chain conversation. Yeah. So a lot of these services that they\u2019re adding to specifically what they call supply chain with Amazon are around importing services, because an increasingly high percentage of all the stuff Amazon sells is.<\/p>\n<p>Jason:<br \/>[57:20] Amazon is taking care of importing it, right? And most often from China, but from all over the world and taking care of all that logistics and getting it ready to sell and deliver via the world\u2019s most impressive last mile to consumers in America. And there\u2019s tons of complicated, high friction touch points and processes to flow all those goods. Well, the big competitors out there to Amazon at the moment that we\u2019ve talked about ad nauseum on the show, like Shein and Timu, had this kind of direct from China model where they\u2019re putting all the goods on 747s, flying them over, and they\u2019re taking advantage of this loophole in the postal treaty called the de minimis provision to not pay taxes or duties or have all these goods inspected that they ship into the U.S. and U.S.<\/p>\n<p>Jason:<br \/>[58:07] Businesses have been complaining it\u2019s unfair. There\u2019s like all kinds of talk about it. We\u2019ve done shows on this and I\u2019m sure we\u2019ll do others. So here\u2019s the new thing in supply chain.<\/p>\n<p>Jason:<br \/>[58:15] All the people that have been complaining about this are now doing it because guess what\u2019s happened? A bunch of these companies have been born that now help every other brand in the world take advantage of the de minimis provisions to near shore their goods. So you\u2019re a footwear manufacturer, you make your shoes in Vietnam, Instead of shipping them to the U.S. On a pallet and paying taxes and duties, you ship them on a pallet to Mexico, and then you send them individual parcels across the border from Mexico into the U.S. and never have to pay taxes or duties on the stuff. So I don\u2019t know if that will last in the long run, but that\u2019s a very disruptive, significant change happening in the whole world of e-commerce supply chains as we speak. That\u2019s pretty interesting. Interesting. Had you gotten wind of that yet?<\/p>\n<p>Scot:<br \/>[59:07] No, no. That\u2019s all new to me. Thanks for sharing.<\/p>\n<p>Jason:<br \/>[59:09] Yeah. That\u2019s probably how you\u2019re going to have to start getting your spiffy stuff into the country now too. I won\u2019t, I won\u2019t, we won\u2019t go there. But the one other piece that did not come up in the earnings call, but a controversy around Amazon since our last show is news articles came out that Amazon was de-installing its Just Walk Out technology from its grocery stores. So Amazon had built Just Walk Out into several of these Amazon Fresh stores and they built it into Whole Foods. And if you know the history of Just Walk Out, this was the original intention of Just Walk Out was was to do it for grocery stores, but it was too hard at first. So they, they started with these little convenience stores and now they had scaled it up and everyone thought that was the future. And, you know, in the last eight weeks they announced, yeah, we\u2019re, we\u2019re uninstalling it from the grocery stores. It\u2019s not a good fit. And the articles that came out both started out saying that, but then they pretty quickly extrapolated from that to say, Amazon\u2019s giving up on just walkout technology.<\/p>\n<p>Jason:<br \/>[1:00:09] And it was a scam anyway. It was a bunch of, it was thousands of people in India that were just watching the cameras and doing the work. It wasn\u2019t really AI or technology doing it. And then Amazon had to quickly go into a PR spin cycle and they sent reps out. They\u2019re like, you know, guys talking on a bunch of podcasts about, no, no, no, we\u2019re not abandoning Just Walk Out. We just learned that it\u2019s not a good use case for grocery and all the SKUs and all the weight-based SKUs in a grocery store. So we still think there\u2019ll be lots of good use cases for Just Walk Out, but that\u2019s not gonna be the grocery innovation that we actually think the grocery innovation is the Amazon Dash cart.<\/p>\n<p>Jason:<br \/>[1:00:51] And the India thing just turns out that like when you\u2019re training LLMs, you do have humans look at the LLMs results to improve them, right? Like it\u2019s a natural, you know, appropriate part of the, the LLMs and Amazon was probably doing that, but they do have a lot of technology around these just walk out. But so it became this whole thing is Amazon abandoning grocery is Amazon abandoning, just walk out.<\/p>\n<p>Jason:<br \/>[1:01:16] Andy has made it clear. They\u2019re still going after grocery. He said in the earnings call that we\u2019re, you know, we\u2019re doing really well in growing at the non-perishable side of grocery, which is all he, he, he even mentioned this antidote. He said when the general merchants first started trying to get into grocery, which is code for Walmart, that Walmart started trying to sell groceries in 1990, that at first what they sold was shelf stable, non-perishable stuff, paper towels. And they got pretty good at that. And Amazon\u2019s point is we\u2019re really good at that and do really well at that.<\/p>\n<p>Jason:<br \/>[1:01:49] We\u2019re not very good at fresh, frozen and perishable yet. And we still have to figure that out, but we do have this new model, Amazon Fresh concept in Chicago called V2 and we like the results so far. And we\u2019ll hope to refine that and scale that one day. And it\u2019ll be interesting whether the unique value prop is dash cards. When the technology guys from Amazon said, hey, we\u2019re de-installing Just Walk Out, they kind of hyped up these dash cards, which are these smart shopping carts.<\/p>\n<p>Jason:<br \/>[1:02:22] I\u2019m by no means I\u2019m writing Amazon off as a grocer, but I am very skeptical and cynical about these dash cards. I live in Chicago, so I\u2019ve been able to visit the stores that have them. And, you know, a typical store has six of these dash cards and they have 50 to 100 shoppers in the store. So it just, it, it doesn\u2019t, they\u2019re not scaling it to try to be, you know, a good solution for all the shoppers. And one of the main things you try to use a shopping cart for in a store is to get your 60 grocery items to your, the trunk of your car. And two problems with the dash cart is it doesn\u2019t fit 60 grocery items and you\u2019re not allowed to take it out into the parking lot. So I still think, I think there\u2019s some work to do still on the dash carts, but all this sort of came new ahead leading up to the earnings call this year. So I did, I did want to mention that, I don\u2019t know. Are you optimistic about Amazon Grocery, Scott?<\/p>\n<p>Scot:<br \/>[1:03:17] They haven\u2019t quite figured it out yet. I think they\u2019re still kind of lost. Seems like they\u2019re leaning in. The $9.99 thing is really just Whole Foods, right?<\/p>\n<p>Jason:<br \/>[1:03:28] No, it\u2019s unclear. Amazon delivers groceries from two models, from what they call Amazon Fresh and Whole Foods, and they put too much work on the consumer. The consumer has to decide in advance which one they\u2019re ordering from, and you can only get part of the products from each thing. Yeah, I hate that.<\/p>\n<p>Scot:<br \/>[1:03:44] It\u2019s like whenever I find stuff, it\u2019s split in there and I just give it. And then it\u2019s kind of like, what are you doing? And I\u2019m like, I\u2019m just trying to find stuff I want. And I want this granola and this thing. And it\u2019s like, well, you can\u2019t do that. I\u2019m like, well.<\/p>\n<p>Jason:<br \/>[1:03:57] Yeah, you can only get that Hook\u2019s cheddar cheese from Whole Foods, but you can only get the Doritos from Amazon Fresh. And you didn\u2019t opt in to either of those. So it\u2019s confusing. It\u2019s a mess at the moment. And again, grocery is a huge part of retail and it\u2019s the highest frequency retail. So, you know, if you care a lot about knowing the data about consumers, you want to win in grocery. But it\u2019s it\u2019s also very different. Like Andy Jassy has said in past calls, we understand we\u2019re the only way to win in fresh and imperishable is to have a lot more product, a lot closer to customers. And that\u2019s why, you know, we might need physical stores. And Amazon has proven they\u2019re really good at fulfillment and these hub and spoke delivery models. They have not won at brick and mortar retail. And, you know, we were looking before the show, Whole Foods is a little bit bigger than when Amazon bought them. But, you know, Amazon hasn\u2019t really like, you know, poured gas on Whole Foods in any meaningful way either.<\/p>\n<p>Scot:<br \/>[1:04:57] Yeah. So they need to figure it out. Not a very day one kind of experience. Yeah.<\/p>\n<p>Jason:<br \/>[1:05:02] We\u2019ll have to do another show, but across the parking lot from Amazon, there has been some other retail news. A big one was, you know, Walmart\u2019s invested billions of dollars in healthcare clinics. And they announced this month that they\u2019re closing the healthcare clinics, which is super interesting. At the same time, Amazon is actually ratcheting up their pharmacy business. So they\u2019re now offering same-day delivery of pharmacy goods in two cities and expanding to six more cities. So that\u2019s the healthcare industry is really following all that stuff. We could talk about that. And one that I think every listener should follow really closely, Walmart launched a new owned brand this year. The biggest brand launch Walmart\u2019s done in 20 years called Better Goods, which is elevated premium food products sold by Walmart. We talked earlier about the consumer climate\u2019s really favorable to these higher value store brands. And if you look at the companies that are performing the best in grocery, it\u2019s the companies that own their own brands. It\u2019s Trader Joe\u2019s, it\u2019s all the\u2026 Costco\u2019s the largest CPG in the United States of America. Costco\u2019s bigger globally.<\/p>\n<p>Jason:<br \/>[1:06:08] Kirkland is bigger globally than Unilever. And so super interesting that Walmart is kind of making its first significant entry in that in a long time. And then the retailer that historically has been doing the best of that is Target, who\u2019s been struggling as of late. And what they launched most recently last month is a new brand that\u2019s competing with dollar stores called Dealworthy that has the lowest price point products that Target\u2019s ever offered. So we talked about the consumer being stressed and Target not necessarily having a good answer for that. This Dealworthy brand seems like their big effort to try to catch that value consumer that they historically haven\u2019t captured. So lots of stuff in this world of own brands, which if you\u2019re a competitor to Amazon, the best way to compete with them is to sell stuff that they don\u2019t have. So that\u2019s a super interesting space as well. We\u2019ll have to do a show about that coming up.<\/p>\n<p>Scot:<br \/>[1:07:01] Yeah. Yeah. Thanks for sharing that. We\u2019ll keep an eye on it.<\/p>\n<p>Jason:<br \/>[1:07:04] Yeah. And with that, we\u2019ve blown past our allotted time. So people complain we didn\u2019t podcast enough. So we gave you two podcasts in one show.<\/p>\n<p>Scot:<br \/>[1:07:12] Yeah. Careful what you wish for, folks. Boom.<\/p>\n<p>Jason:<br \/>[1:07:16] But hopefully you enjoyed this and we still would love that five-star review. Again, if you live or have familiarity with any of those global cities I\u2019m visiting coming up, please drop me a line. And thanks everyone for sticking with us. And thanks everyone for all the kind words and comments that we\u2019ve both heard this quarter. Until next time, happy commercing.<\/p>\n<p>\u00a0<\/p>\n<\/div>\n<p><p><a href=\"https:\/\/dmsretail.com\/online-workshops-list\/\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-496\" src=\"https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90.png\" alt=\"Retail Online Training\" width=\"729\" height=\"91\" srcset=\"https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90.png 729w, https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90-300x37.png 300w\" sizes=\"auto, (max-width: 729px) 100vw, 729px\" \/><\/a><\/p><br \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A weekly podcast with the latest e-commerce news and events. Episode 319 is deep dive into Amazons Q1 2024 results. Subscribe: ????? Episode Summary: In […]<\/p>\n","protected":false},"author":1,"featured_media":1121,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[],"class_list":["post-12458","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-podcasts"],"_links":{"self":[{"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/posts\/12458","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/comments?post=12458"}],"version-history":[{"count":0,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/posts\/12458\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/media\/1121"}],"wp:attachment":[{"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/media?parent=12458"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/categories?post=12458"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/tags?post=12458"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
A weekly podcast with the latest e-commerce news and events. Episode 319 is deep dive into Amazons Q1 2024 results.<\/p>\n
<\/p>\nSubscribe<\/strong>:<\/p>\n<span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">?<\/span><span style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" data-mce-type=\"bookmark\" class=\"mce_SELRES_start\">?<\/span><span style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" data-mce-type=\"bookmark\" class=\"mce_SELRES_start\">?<\/span><span style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" data-mce-type=\"bookmark\" class=\"mce_SELRES_start\">?<\/span><span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">?<\/span><\/iframe><\/figure>\n<h3 class=\"wp-block-heading\" id=\"episode-summary\">Episode Summary:<\/h3>\n<p>In this episode, Jason \u201cRetailgeek\u201d Goldberg and Scot Wingo dive deep into Amazon\u2019s first quarter results for 2024, analyzing the company\u2019s performance in various segments such as retail, offline and online sales, marketplace, AWS, and advertising. They also explore the impact of AI on Amazon\u2019s business and provide insights into the company\u2019s future guidance for Q2 2024.<\/p>\n<p>In our latest episode, Jason and Scott cover a range of topics, starting with their reflections on recent events such as May the 4th and Cinco de Mayo. Jason shares intriguing stories from his extensive travels and interactions with listeners worldwide. Scott delves into the intersection of e-commerce and the auto industry, honing in on Carvana. The duo also delves into the U.S. Department of Commerce retail indicators data, shedding light on trends in retail sales and e-commerce growth. The conversation pivots towards Amazon\u2019s recent earnings report, contextualizing it within the realm of AI investments by tech giants like Meta and Alphabet, offering valuable industry insights and analysis.<\/p>\n<p>The discussion continues with a focus on Amazon\u2019s earnings report, zooming in on concerns around AWS amid heightened competition from Alphabet and Azure. The rising trend of AI investments, particularly in data training applications, is explored, alongside the growing popularity of open source AI models due to cost and privacy considerations. Despite a conservative Q2 guidance, Amazon impresses with robust revenue that surpasses Wall Street expectations, particularly in operating income. The retail segment shows exceptional growth, exceeding operating income estimates for both domestic and international divisions. Notably, Amazon\u2019s performance in brick-and-mortar stores, spearheaded by Whole Foods, demonstrates resilience with a 6.3% growth rate. AWS stands out with a 17% growth, dispelling market share concerns and showcasing accelerated revenue growth, illustrating Amazon\u2019s continuous growth potential and innovation prowess.<\/p>\n<p>Scott delves deeper into Amazon\u2019s positive quarterly earnings report, emphasizing the remarkable revenue performance, especially in operating income. Insights are shared on Amazon\u2019s successful agnostic approach to LLM models and the potential advancements in generative AI. The conversation shifts towards the burgeoning ads business at Amazon, underlining its profitability and future growth prospects. Scot also outlines Amazon\u2019s Q2 guidance and the potential impacts of consumer spending patterns on the retail sector, including concerns about changing consumer behaviors and economic pressures shaping market dynamics. Jason complements the discussion with additional perspectives on consumer behavior and economic influences reshaping the market landscape.<\/p>\n<p>Furthermore, we embark on a detailed exploration of supply chain logistics, with a spotlight on Amazon\u2019s expansion into third-party logistics services, revolutionizing traditional retail strategies by sharing proprietary capabilities for wider adoption. Insights from Andy Jassy shed light on Amazon\u2019s logistics business approach. The conversation expands to include how companies like Spiffy are embracing a similar model of sharing proprietary products to drive innovation and revenue growth, showcasing an evolving landscape of retail innovation.<\/p>\n<p>The podcast unpacks the complex world of grocery retail, highlighting Amazon\u2019s experimental forays like Just Walk Out technology and the Amazon Dash cart, while examining the challenges in delineating Amazon\u2019s grocery sector strategy. A comparison is drawn between Amazon\u2019s strategies and those of rivals like Walmart and Target, who are adapting their product offerings to match evolving consumer preferences, offering a comprehensive view of the dynamic retail and supply chain management sphere. Dive into our engaging discussion, explore retail dynamics, and keep a lookout for more insightful content.<\/p>\n<p><strong>Don\u2019t forget to like our\u00a0facebook page, and if you enjoyed this episode please write us a review on itunes.<\/strong><\/p>\n<p>Episode 319 of the Jason & Scot show was recorded on <span style=\"font-weight: 400;\">Sunday, May 5th, 2024.<\/span><\/p>\n<h2 class=\"font-bold pb-4\">Chapters<\/h2>\n<div data-testid=\"chapter-table-of-contents\">\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>The Jason and Scott Show Begins<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Commerce Tools Elevate Show<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Jason\u2019s World Tour Plans<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Where in the World is Retail Geek?<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Amazon\u2019s First Quarter Earnings<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Amazon\u2019s Dominance in E-commerce<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Online Segment Growth Analysis<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Offline Store Segment Analysis<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Spotlight on AWS Performance<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Amazon\u2019s Grocery Strategy<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<h2>Transcript<\/h2>\n<p><strong>Jason:<\/strong><br \/>[0:23] Welcome to the Jason and Scott Show. This is episode 319 being recorded on Sunday, May 5th, 2024. I\u2019m your host, Jason Retail Guy Goldberg, and as usual, I\u2019m here with your co-host, Scott Wingo.<\/p>\n<p>Scot:<br \/>[0:37] Hey, Jason, and welcome back, Jason and Scott Show listeners. It\u2019s been a while, but first, happy Cinco de Mayo, and also a belated May the 4th, Jason. Did you have a good Star Wars day?<\/p>\n<p>Jason:<br \/>[0:49] I did. I did. I feel like Star Wars Day always makes me think of the podcast because I feel like we have spent many of them in my latter life together.<\/p>\n<p>Scot:<br \/>[1:01] Yeah, absolutely. Any exciting new Star Wars experiences or merch?<\/p>\n<p>Jason:<br \/>[1:08] No, I understand you got some vintage merch. merch.<\/p>\n<p>Scot:<br \/>[1:13] It\u2019s not, but they, back when I was a kid, you would go and if you went every week to, I think it was Burger King, you would for the, I think it was Empire. I have the Empire right here. So definitely Empire, but you would get a glass. Now it turns out these were full of lead paint, which would kill you, but that was the downside.<\/p>\n<p>Jason:<br \/>[1:32] Not recommended for drinking.<\/p>\n<p>Scot:<br \/>[1:33] You got a very, yes, I never, being a collector, I never drank out of them. So that\u2019s good.<\/p>\n<p>Jason:<br \/>[1:37] Saved your life right there.<\/p>\n<p>Scot:<br \/>[1:38] Yes, but I did drink out of the Tweety Bird. So that me, me. I\u2019m sure I got some yellow lead paint from a twitty bird glass. Anyway, so they came out with a Mandalorian kind of homage to those glasses and they were at the Hallmark store of all places, not where I usually hang out, but I got to go to a Hallmark store and the little ladies that worked there were, I wish them all an awesome May the 4th. And they looked at me like I was from another planet and it was hilarious. My wife\u2019s like, stop, they don\u2019t know what you\u2019re doing.<\/p>\n<p>Jason:<br \/>[2:07] Wait, they didn\u2019t have a big May 4th section in the Hallmark store?<\/p>\n<p>Scot:<br \/>[2:11] They did. The little ladies didn\u2019t know.<\/p>\n<p>Jason:<br \/>[2:13] The overlap of people that still buy Papyrus cards and celebrate May 4th is probably not great.<\/p>\n<p>Scot:<br \/>[2:21] It was very humbling. It was a humble May the 4th, but I got my glasses and I was happy. I\u2019m happy for you. And then tonight we had tacos for dinner, so I\u2019m hitting all the holidays.<\/p>\n<p>Jason:<br \/>[2:30] I feel like we should have tacos for dinner every night, whether it\u2019s Cinco de Mayo or not, but I\u2019m i am happy for that.<\/p>\n<p>Scot:<br \/>[2:35] We do have a lot of tacos but this was a special single denial edition.<\/p>\n<p>Jason:<br \/>[2:42] Well, very well done, my friend.<\/p>\n<p>Scot:<br \/>[2:44] Thanks. Well, listeners of the pod have been all over me. They\u2019re like, why aren\u2019t you recording? And I said, it\u2019s not me. It\u2019s Jason. It\u2019s Jason. Because you have been traveling<\/p>\n<p>Scot:<br \/>[2:55] the earth, spreading retail geek goodness. Tell us, we are way far behind on trip updates and all the different countries. It\u2019s like you\u2019re playing, do you have like a little travel bingo where you\u2019re just like punching, what is it, 93 countries?<\/p>\n<p>Jason:<br \/>[3:09] I do. They call it a passport. Oh, nice. Yes.<\/p>\n<p>Scot:<br \/>[3:13] That, uh, little book that you get to carry. Yeah.<\/p>\n<p>Jason:<br \/>[3:15] Yeah. Yeah. Yeah. I have been on a lot of trips and it sounds like you and I may be telling complimentary lies because I also, I\u2019ve had an opportunity to meet a lot of listeners in the last, we\u2019ll call it seven weeks and which they\u2019re always super nice. And it\u2019s always super fun to talk to people. And obviously they\u2019re, you know, strangers recognize my voice in line at Starbucks at all these e-commerce shows. And then we strike up a conversation. And then the next question is always, where the heck is Scott? Because they\u2019re always disappointed to meet me and not you. And now the new thing is, and why aren\u2019t you producing more frequent shows? And my answer is always that you\u2019re dominating the world at Get Spiffy and that you\u2019re too busy.<\/p>\n<p>Scot:<br \/>[4:00] Uh-huh. I see. Okay.<\/p>\n<p>Jason:<br \/>[4:02] Well, we\u2019re both very busy.<\/p>\n<p>Scot:<br \/>[4:05] You\u2019re traveling more than I am. I\u2019m busy washing cars.<\/p>\n<p>Jason:<br \/>[4:08] Yes. I think both are fairly true, but I did finish a grueling seven-week stint where I got to come home a couple of times on the weekends, but I basically had seven weeks of travel back to back. In my old life, that would not have been that atypical, but post-pandemic, The travel has been a little more moderate. And I have noticed that I have my travel muscles have atrophied and I don\u2019t really want to redevelop.<\/p>\n<p>Jason:<br \/>[4:35] So the seven weeks was a lot. Please don\u2019t ask me for trip reports for all the commerce events because I kind of can\u2019t remember some of them. They\u2019re all a little bit of a blur. But I was at Shop Talks, I think, since the last time we talked, which is, of course, probably the biggest show in our industry. And that was a very good show. I did get to see a lot of our mutual friends and a lot of fans of the show there. So that was certainly fun. And maybe in another podcast, we can do a little recap of some of the interesting things that came out of Shop Talk. I did produce a couple of recaps in other formats for work clients, so we could certainly pull something together. I also went to a vendor show. One of the e-commerce platforms out there is called Commerce Tools, and they had their annual customer show, which is called Elevate in Miami. So I got a chance to go visit there. They\u2019re one of the commerce platforms that I would say is winning at the moment in the kind of pivot away from the old school monoliths to these new sort of SaaS-based solutions. And commerce tools in particular are kind of pioneers in pushing this actual certification around a more modern earned stack that they they coined mock. And I think I think we\u2019ve had Kelly from from commerce tools on the on the podcast<\/p>\n<p>Jason:<br \/>[5:51] in the past to talk about that. But that was a good show. I got to meet a lot of listeners there. And a funny one, several listeners were like.<\/p>\n<p>Jason:<br \/>[5:59] I would apologize for the, the, our publishing schedule lately. And they\u2019re like, I\u2019m cool with it. I like that. Like you don\u2019t do a show if there\u2019s not something worthwhile. And then, you know, when I do get a show, it\u2019s like a treat. So I don\u2019t know if they\u2019re being honest or not, but that made me feel a little better about some of our, our, our Tardis shows lately. So those, those were good events. I also spent a week in India with some clients and that super interesting, a lot of commerce activity going on there, a lot of different market dynamics than here. So that\u2019s kind of intellectually pretty fun to learn about and see what\u2019s working there that might be working here or what, you know, why things tend to play out differently there. So that\u2019s interesting. And then I have a lot more international trips booked right now.<\/p>\n<p>Jason:<br \/>[6:48] So coming up, I\u2019m going to Barcelona, London, Paris, and Sao Paulo. So if anyone either has any favorite retail experiences in any of of those cities, please send them my way. I\u2019ll be doing store visits in all those cities. And if you\u2019re based in any of those cities, also drop me a line. Hopefully we can do some meetups while I\u2019m out there.<\/p>\n<p>Scot:<br \/>[7:07] Cool. It\u2019s Jason\u2019s world tour. You can do a little pod while you\u2019re there.<\/p>\n<p>Jason:<br \/>[7:12] We have done a bunch of international pods in the distant past. I remember hotel rooms in South Korea and all over the place,<\/p>\n<p>Jason:<br \/>[7:19] Japan that we\u2019ve, we\u2019ve cut shows from. So, so totally could.<\/p>\n<p>Scot:<br \/>[7:23] Yeah. We\u2019ll have to do it. Where in the world is retail geek? That could be the theme song. I just sampled that.<\/p>\n<p>Jason:<br \/>[7:30] Yeah. So besides cleaning the world\u2019s cars, what have you been up to, Scott?<\/p>\n<p>Scot:<br \/>[7:35] Well, it\u2019s kind of funny. My worlds are colliding. So a lot of the analysts that you and I know from the e-commerce world are creeping into the auto world and their gateway drug is Carvana. So in the world of retail, we have Amazon, obviously. Well, Carvana is kind of Amazonifying used cars. They had a bit of a drama kind of situation. They were the golden child of online cars. And then they totally pooped the bed. They did this acquisition. They loaded up with debt. And then after, I think it was 21. So they had a good COVID. They surged. And then the debt got in front of them. Used car prices bop around and they kind of like got in an open door situation where they had bought a lot of cars for more than they were worth suddenly. And then they plummeted and everyone thought they were going out of business, but they have had a resurgence. So it\u2019s causing a lot of the internet analysts to now pick up auto tech or mobility or whatever you want to call it. So it was fun. I got to do a live chat with Nick Jones. He\u2019s been a friend of the show. I don\u2019t think we\u2019ve had him on due to some compliance stuff that his company has rules around, but he\u2019s at this firm JMP and it was kind of wild to talk about, with someone about both Amazon and what we\u2019re doing at Spiffy, which is basically a lot of Amazon principles applied to car care. So it was interesting to have someone reach out and say, hey, I think this is a thing. And everyone tells me I should talk to you about it. And I was like, oh, yeah, I would love to. So it\u2019s kind of fun.<\/p>\n<p>Jason:<br \/>[9:01] That\u2019s very cool. And isn\u2019t it also a thing, I think half the vehicles on the road are now owned by Amazon. So I assume that\u2019s an overlap too. too?<\/p>\n<p>Scot:<br \/>[9:09] Yeah, not half, but a lot are. The number of last mile delivery vehicles are very, very large. And we work with a lot of them, so it\u2019s kind of fun. I started spiffy somewhat to get away from Amazon and still all I can talk about. Nope. So embrace it. I love Amazon. Love me some Amazon, Jason.<\/p>\n<p>Jason:<br \/>[9:29] I\u2019m glad you do. I love them too, but I feel like I spend most of my career You\u2019re unsuccessfully helping people compete with them.<\/p>\n<p>Scot:<br \/>[9:38] Hey, got to play one side of the coin. It\u2019s a gig. You\u2019re going to be more like them or how to fight them.<\/p>\n<p>Jason:<br \/>[9:43] It\u2019s a gig. It is indeed. Yeah.<\/p>\n<p>Scot:<br \/>[9:46] Cool. I thought we are going to talk about some Amazon news. But before we jump in, you have done your magic with your data analysis interns. And I\u2019m sure there\u2019s an LLM and an AI thrown in there. Let\u2019s start with some of the things you\u2019re seeing in commerce trends from the data that\u2019s out there.<\/p>\n<p>Jason:<br \/>[10:07] Yeah. So as everyone knows, I have a little bit too much of an infatuation with the U.S. Department of Commerce retail indicators data. And these guys, you know, publish monthly estimates of retail sales in a bunch of categories. And, you know, we\u2019ve talked about this many times on the show, but broadly over the last several years have been really interesting in retail. 2020, 2021, and 2022 were the greatest three years in the history of retail. Like we mailed like $6 trillion in economic stimulus. People didn\u2019t travel or go to restaurants as much. And so we sold way more goods than ever before. And so those three years, retail grew respectively at like 8%, 14%, and 9%. The 20 years prior, retail averaged about 4% a year in growth. So normally pre-pandemic, you\u2019d expect 4% growth. We had these three, you know, wildly pandemic influence years where we grew really fast. And then last year we finished a little below 4%. So, so we were around, I want to say it was like 3.6%. So it was growth. It would, it would have been in line with pre-pandemic growth, but it certainly felt like a significant deceleration from those heady pandemic years. And so, you know, people are super interested to see how does 2024 play out? Does it?<\/p>\n<p>Jason:<br \/>[11:32] Kind of return to pre-pandemic levels, like what is the new normal?<\/p>\n<p>Jason:<br \/>[11:37] And we now have the first quarter\u2019s data from the U.S. Department of Commerce, and I would call it kind of a mixed bag. If you just look at the raw retail data that the U.S. Department of Commerce publishes, they\u2019re going to tell you that retail grew in the first quarter 2.8%. So that\u2019s a little anemic, right? Compared to historical averages, that\u2019s not a great growth rate. Most of the practitioners that follow this podcast care about a particular subset of retail that the National Retail Federation has dubbed core retail. And so the National Retail Federation pulls gas and automobiles sales out of that number. And gas is a decent size number and it\u2019s very volatile based on the commodity prices of gas. And auto is a huge number that has, as you\u2019re well familiar, its own idiosyncrasies. And so that\u2019s how they justify taking those two out. And if you take those two out and you get this core retail number, retail in the first quarter grew 3.9%. So kind of to align with how the NRF talks about retail, we\u2019ll say Q1 overall was 3.9%, which is very in line with the pre-pandemic historic average. So disappointing by pandemic standards, but kind of traditionally what we would expect.<\/p>\n<p>Jason:<br \/>[13:05] What is unique in that number is.<\/p>\n<p>Jason:<br \/>[13:09] That it\u2019s very bifurcated. There are clear winners and losers, both by categories and specific practitioners. So if you break down the categories, e-commerce is the fastest growing chunk of retail. I\u2019m sure we\u2019ll talk more about that. Restaurants were the next fastest growing categories. And categories like mass merchants and healthcare providers outperform that industry average, every other segment of retail underperformed the industry average. So things like furniture stores did the worst, building materials did really poorly, gas stations did very poorly, electronics did poorly, and side note, electronics have been the worst performer since the pandemic, which is kind of interesting and challenging. So you\u2019ve had this weird couple categories doing really well, a bunch of categories doing really poorly. And then within the categories even, if you look at the public company\u2019s individual earnings calls, what you tend to see is a couple of big players performing really well in overall retail, that\u2019s Amazon and Walmart. And then a lot of other retailers really struggling. So that even that\u2019s like in general merchandise, it\u2019s Amazon and Walmart that are lifting the boats. And it\u2019s folks like Target traditionally that have performed really well are actually struggling at the moment. So the average is kind of hard to follow at the moment.<\/p>\n<p>Jason:<br \/>[14:37] But that is kind of how things play out. And then we have some preliminary e-commerce data, but the actual Q1 e-commerce number that the U.S. Department of Commerce publishes will publish on May 17th. So that\u2019s 12 days from now.<\/p>\n<p>Jason:<br \/>[14:53] And crunching the numbers that we have available at the moment, that growth is likely to come in at somewhere between 8% and 10%. I\u2019m guessing more like 8% or 9% growth. And so that also is twice as good as overall retail, and it\u2019s more than twice as good as brick-and-mortar retail. But that is noticeably slower than the historic e-commerce growth rates pre-pandemic. So kind of file those two numbers away. The overall retail industry is growing at 3.9%. The overall e-commerce industry is growing at about 9%. And then we have our friends at Amazon that dropped their earnings announcement just before May 4th so that they could celebrate May 4th, I think.<\/p>\n<p>Scot:<br \/>[15:39] Yeah, yes, that\u2019s a good setup. And without further ado, let\u2019s talk about Amazon\u2019s fourth quarter. It wouldn\u2019t be a Jason Scott show without a little bit of\u2026<\/p>\n<p>Scot:<br \/>[16:01] That\u2019s right. On April 30th, Amazon announced their first quarter results. And the setup coming into these, so you had the data you talked about, but like to drill in a little bit. We had Meta, the artist formerly known as Facebook, and Alphabet, the artist previously known as Google. They announced and they both basically told Wall Street, AI is the cat\u2019s pajamas and we\u2019re going to spend anywhere between $10 and $40 billion of capital expenditures on it, meaning NVIDIA chips. So it turns out the way to play all this is basically buying NVIDIA. So hopefully you bought some NVIDIA stock. Maybe this is not a stock recommendation or when it\u2019s too late, so\u2026 And also don\u2019t take stock recommendations from podcasters. Anyway, so there was all this angst and people were a little freaked out coming into the Amazon results because Meta was down like pretty substantially, 20 to 30 percent. And Alphabet was also up substantially. You also had Microsoft come in there and they really crushed it. Their Azure is really lighting it up with AI. And they announced that they were going to invest a lot. And there\u2019s this rumor that a $100 billion project, it\u2019s got a name like Starship or something, but it\u2019s not Starship. Spaceship? Stardust? I don\u2019t know what it is. But it\u2019s going to be this mega data center, and they literally can\u2019t find a place to put it because it\u2019s going to consume so much power. So they\u2019re going to have to maybe build a nuclear plant next to it or some wacky thing.<\/p>\n<p>Scot:<br \/>[17:31] Anyway, that was the setup. up. So coming in, Wall Street was very, very concerned about Amazon\u2019s AWS division, which is their cloud computing. Because if Alphabet is building out their infrastructure, and so is Azure, that\u2019s the two biggest competitors for AWS. And is AWS getting its fair share? And is it going to announce that it\u2019s going to have to go build some $40 billion kind of a thing? Also, another Another thing, and I\u2019m kind of curious on if you\u2019re seeing this with your clients, but in the, I follow this, you know, the AI, you can\u2019t do much without seeing AI everywhere. But the part I\u2019m most interested in is what are big enterprises spending money on? This is like your Fortune 500s. They\u2019re all experimenting and really getting into it. And where they\u2019re finding a lot of good use cases is training on their data. So they\u2019ll say, you know, hey, I\u2019m Publisys. How many documents do you think are inside of Publisys? I don\u2019t know, 8 trillion documents. Documents and you know wouldn\u2019t it be helpful just the ones I created and who is this retail geek and he\u2019s he\u2019s created uh you know 90 of those and you know so you know imagine you\u2019re starting new at publicists you\u2019re gonna be like where do I start going through some of these documents for us and if you had a chat bot that was like hey I\u2019ve read all that you know I can navigate you through everything that\u2019s been published or you know whatever I\u2019m certainly you.<\/p>\n<p>Scot:<br \/>[18:50] Providing a very big metaphor, certainly be more divisional and all this kind of stuff. But that\u2019s where big companies are spending the bulk is they\u2019re taking their data in whatever format it\u2019s in, be it a relational database, a PDF, whatever it is, they\u2019re trying to train it. They don\u2019t want it to go up into the, they don\u2019t want to train the LLM so that other people get the benefit of that and can see any confidential data. So that\u2019s really important. So it needs to be gated in these types of things. Because of that use case, open AI is not great because people are very worried. A, it\u2019s very expensive and it\u2019s only an API. So OpenAI hosts itself and you call it through an API.<\/p>\n<p>Scot:<br \/>[19:25] Those API calls are very expensive. They\u2019re getting, as OpenAI has gotten more popular, there\u2019s more latency. It\u2019s taking forever to get answers out of this thing. And a lot of people are very concerned that even though there\u2019s ways to call the API such that it\u2019s in a window and not being trained, that maybe it leaks in there. So because of all these elements, the open source models are becoming very popular. And right around the time Meta announced, they announced their Llama, which has become quite popular. And what\u2019s nice is you can host it wherever you want. And it\u2019s kind of like WordPress, where if you are a serious WordPresser, you can host it somewhere yourself, and you can kind of understand that. Otherwise, there\u2019s other people that will host it for you. But it has the nice feature of you\u2019re just getting the weights and whatnot, and it\u2019s it\u2019s pretty clear, it\u2019s pretty obvious, it\u2019s not training itself on your data. So a lot of people like it because it\u2019s quote unquote free. It\u2019s not an API usage based. It\u2019s a pay once to set it up, pay for some resources type thing and you\u2019re done. And it\u2019s also not going to train on the data. That\u2019s one of many. There\u2019s probably 10 or 20 pretty commercial grade open AIs out there.<\/p>\n<p>Scot:<br \/>[20:38] Okay. So that\u2019s kind of the setup to get to the earnings. things. So from a big picture, this was a really good quarter. Asterix, the guide made Wall Street a little bit nervous. So-<\/p>\n<p>Scot:<br \/>[20:53] And one of our research analysts just said it\u2019s Stargate, which is also a sci-fi series. They must have that on Prime Video or something. There\u2019s probably some callback there.<\/p>\n<p>Scot:<br \/>[21:01] So they beat for the quarter Q1, but then they also kind of tell you what\u2019s going on the next quarter. Amazon doesn\u2019t provide fully your guidance. They just kind of give you a snippet. So when they report one quarter, a quarter, they then tell you what they think the next quarter is going to do. So Wall Street got a little bit ahead of its skis, and the guide for Q2 was below what Wall Street wants. So it wasn\u2019t what we\u2019d call a beat and a raise, which is the current quarter was a beat and the next one they increased. It was a beat and a guide down. So that probably tampered Wall Street. But ever since Jassy came in, Andy Jassy, this has been his MO is to be pretty conservative because Wall Street\u2019s very much an expectation engine. And the more, if you can beat and tamp down expectations, it makes it, it\u2019s a little bit rougher in the short term from a stock price, but it makes next quarter better and then so on and so forth. So it\u2019s a smart way to manage the long-term vibe of the stock, the mindset, the expectations around your stock. Okay. So revenue came in at $143 billion versus Wall Street at $142. So pretty much in line. But most importantly, where Amazon really threw people off was on operating income. Yes, Amazon is profitable. This is the proxy for operating income. True Amazonians would tell you, no, it\u2019s cashflow. We can go into that, but this is kind of the way they report to Wall Street. So this is kind of the standard operating system, if you will. So this is what we\u2019re going to use, but it\u2019s a proxy for cashflow.<\/p>\n<p>Scot:<br \/>[22:28] That was 15 billion for the quarter and Wall Street expected 11. Well, you know, 4 billion on a world of 143 doesn\u2019t sound like much, but between 11 and 15, that\u2019s a very material beat. What is that? Like 38%, something like that.<\/p>\n<p>Scot:<br \/>[22:44] So that was a really nice surprise. And, you know, Amazon goes through these invest and harvest periods and everyone\u2019s been feeling like they\u2019re going to be back in investing which would mean they\u2019re going to start lowering operating income as they invest but it\u2019s actually kind of beating expectations, also this is the fifth quarter amazon has come in at the high end of its guidance or above its guidance since basically you know on operating income and that corresponds with when jassy came in so this is his mo right now is to kind of like beat and lower beat and lower you know exceed expectations tamp them down not get not get ahead of his skis and it\u2019s working really well.<\/p>\n<p>Jason:<br \/>[23:24] Sandbagging for the win. I like it.<\/p>\n<p>Scot:<br \/>[23:26] Yes, it is. Having run a public company, this is a lesson I learned painfully. So that\u2019s something we can talk about over beer sometime.<\/p>\n<p>Jason:<br \/>[23:33] I will book that date. Yeah. And the retail business sort of followed in line with that. They had like some nice growth, but like the real standout number was the improvement in margins and the significant positive operating income from the retail segment. So I think the actual operating income from U.S. Retail was like $5 billion and the Wall Street expectations were 4.3. So again, that was another strong beat. Total revenue, which revenue is not the same thing as retail sales, as we\u2019ve talked about on the show many times, that we would use GMV as a proxy for that. But revenue was $86.3 billion for the quarter, which I think was in line with the analyst expectations.<\/p>\n<p>Jason:<br \/>[24:27] And I think this was the largest operating income that Amazon has ever reported for the retail business. So that was super interesting on the domestic side. Traditionally, domestic has done pretty well and international has been a money loser because, you know, they\u2019ve been less mature. they\u2019ve been investing a lot in growing international and they haven\u2019t had the same kind of margins. This was the first quarter that they reported positive operating income for the international division. So that\u2019s another super encouraging sign for investors that maybe they\u2019ve kind of passed that inflection point on a lot of their international investments that they\u2019ve made in the EU and Japan and the UK, which reminds me is not part of the EU anymore.<\/p>\n<p>Jason:<br \/>[25:13] So so they kind of beat beat international expectations across the board on income. Revenues were lower. So revenues were like thirty one billion dollars, which was below expectation.<\/p>\n<p>Jason:<br \/>[25:25] But they they earned like nine hundred million in operating income. And I want to say the the the Wall Street expectation was like six hundred million. So so again, like a 30 percent beat, which is pretty, pretty darn good. Good. They also, a bunch of analysts have, you know, taken these revenue numbers and they try to back into a GMV number. And I would say the bummer at the moment is there\u2019s a fair amount of variance in the estimates, like different analysts have different models. So I have kind of been putting to a model of the models together and trying to kind of find a midpoint. And like Like based on that, the Amazon\u2019s GMV globally probably went up 11.5% for the quarter. So if you\u2019re comparing this to other retailers or the U.S. Department of Commerce number, overall GMV went up 11.5%. The U.S. was stronger. So the U.S. probably went up at 12.2%. So again, we talked about core retail was up 3.9%. Well, Amazon U.S. GMV was up 12.2%. So, you know, three times faster growth than the retail industry overall.<\/p>\n<p>Jason:<br \/>[26:39] And again, Amazon is mostly e-commerce, very little brick and mortar,<\/p>\n<p>Jason:<br \/>[26:44] which we\u2019ll talk about in just a minute. But even if you\u2019re comparing Amazon to that e-commerce number, if e-commerce comes in at 8% or 9% and Amazon\u2019s at 12%, they\u2019re by far the largest e-commerce player out there and they\u2019re still substantially outgrowing the average, which, you know, is very impressive and should be very scary to every other competitor out there.<\/p>\n<p>Jason:<br \/>[27:08] One analyst kind of put together an estimate of what they thought the earned income contribution from Amazon was for retail and ads together, pulling AWS out. And they had it at $27 billion in earned income if Amazon was just a retail with no AWS. And that puts them right in the ballpark of Walmart that spent off about $29 billion in earned income or operating income. I keep saying earned, but I mean operating income. So, so that is all pretty impressive and simultaneously super scary.<\/p>\n<p>Jason:<br \/>[27:45] Scott, did you drill down into the online segment at all?<\/p>\n<p>Scot:<br \/>[27:49] Yeah. And, you know, what I would tell listeners is picture a block diagram where you have this big, big rectangle, that\u2019s the whole Amazon entity. And, you know, so what we\u2019re going to do is talk about the segments. And the first segment is the biggest one, which is the retail business. And that, that\u2019s what you just.<\/p>\n<p>Jason:<br \/>[28:04] Biggest and best. Wouldn\u2019t you say?<\/p>\n<p>Scot:<br \/>[28:06] Coolest.<\/p>\n<p>Jason:<br \/>[28:07] Coolest. All right.<\/p>\n<p>Scot:<br \/>[28:08] Cool. Okay. Yeah. Yeah. Okay. I\u2019ll, you know, I don\u2019t know.<\/p>\n<p>Jason:<br \/>[28:11] It is for you.<\/p>\n<p>Scot:<br \/>[28:14] Um, I think the whole enchilada, I like the, the way they do this and I\u2019m trying to replicate it. It\u2019s 50. We\u2019ll talk about that in a second. The, so then the, you know, so then another segment is AWS, another segment, I think marketplace should be in some segment, but they don\u2019t break it out. So it\u2019s just kind of in kind of hidden inside of the blob that is retail. So we tease some of that out here on the show. They purposely hide it in there. So no one knows how awesome it is, I think. And then they\u2019ve got AWS ads and a couple other things, but we\u2019ll talk about this. So as you dig into the retail business, there\u2019s a couple of ways to look at it. You can look at it by domestic and international, which Jason just did,<\/p>\n<p>Scot:<br \/>[28:50] or you can look at it by online and physical store. So the online biz grew 7% year over year, which if I remember your stats, well, you don\u2019t have it until may 17th so on may 17th we\u2019ll be able to know how that compared but probably the one you can compare is the offline biz which is the the store comp that they have, And Jason, you saw on that one, what\u2019d you see?<\/p>\n<p>Jason:<br \/>[29:16] Yeah, so physical stores grew 6.3%. So again, like, you know, when we say all of retail grew 3.9%, a big chunk of that\u2019s e-commerce. Brick and mortar probably grew at like two to 3%. So Amazon\u2019s brick and mortar growing at 6.3% is actually super impressive. And it\u2019s kind of interesting, you know, for several years, Amazon has had experiments in a bunch of retail formats. So they\u2019ve had these Amazon Go stores, stores. They had Amazon five-star stores. They had bookstores. They had a fashion store. They\u2019re trying all these things. And of course, the biggest chunk of their stores is they own Whole Foods. And so offline stores for Amazon was kind of a mix of all these different concepts. In the last couple of years, they\u2019ve kind of cleaned house and gotten rid of all those concepts. And so, you know, nominally there\u2019s a few of their own grocery stores called Amazon Amazon fresh open, but the vast majority of online offline retail for Amazon is, is Whole Foods. And for it to be growing at 6.3% in the current climate is, is a really good sign for Amazon. And, and I would say somewhat impressive, you know, on the earnings call, they, they announced that they\u2019re working up a new format for Whole Foods, which is a smaller format store that\u2019s It\u2019s going to open in Manhattan. So I have that on my ticker file to go visit when that\u2019s open.<\/p>\n<p>Jason:<br \/>[30:38] You know, the whole grocery space for Amazon is super interesting, but maybe we\u2019ll talk about that a little bit more later. But I will call out, they did launch a service that there\u2019s been some controversy over. They launched a $9.99 a month grocery delivery service, which essentially lets you have all you can eat free grocery delivery to your home for an incremental fee of $9.99. And they\u2019re spinning that as, you know, a cool new grocery service and enable more people to shop for groceries online. And there are a lot of articles about it, like.<\/p>\n<p>Jason:<br \/>[31:13] They used to have free grocery delivery included in your Prime membership, right? And so they\u2019ve kind of like, I look at the big arc of all this and say, there used to be a lot more free services in Prime that they\u2019ve kind of peeled out. Then they started charging for, and now they\u2019ll let you get it free again for another $120 a year.<\/p>\n<p>Jason:<br \/>[31:32] So interesting things happening with grocery that we could probably talk more about later. But I\u2019m kind of eager to dive into some of these other businesses like AWS.<\/p>\n<p>Scot:<br \/>[31:42] Yeah. So that\u2019s the one that everyone was really waiting on the call to hear how it went. And good news, AWS exceeded expectations. Everyone thought it was going to grow 14% and it came in at 17%. And if Wall Street likes, they like a lot of things, they like beating expectations, that\u2019s important to them. But their favorite thing is ARG. And that is not a pirate day thing, ARG. It is Accelerating Revenue Growth. Wall Street loves that more than anything. And that\u2019s what they delivered for both the ads and the AWS part of the business. And what that means is that as the law of numbers kicks in, so back on the retail business, the only time we see that accelerate is in the fourth quarter and that seasonal acceleration, right? We\u2019ve gotten used to that for decades now. It always happens in the fourth quarter and whatnot. So it\u2019s what you would expect. But this is quite unusual for a relatively mature business. This thing\u2019s $25 billion a quarter. So this is a $100 billion business that accelerated. And so that tells us that there is a lot more wood to chop here. It has not gotten near its addressable market. And it really allayed fears that they were losing massive market share because they\u2019re, quote unquote, behind on AI to Azure, which is Microsoft offering, and then the Google hosting solution as well.<\/p>\n<p>Scot:<br \/>[33:05] That does not seem to be the case. So they did very well. So they came in at $25 billion and Wall Street was expecting $24.6. So that was really, that accelerating is what really made everyone very happy. And then the operating income came in at $9.5, way ahead of Wall Street at $7.5. So another pretty material 20% beat on this component at the bottom line. And this is really interesting. There was some really good language around this. And this has been Jassy\u2019s statement all along, and it\u2019s coming true. His early Amazon\u2019s early play was we\u2019re going to be agnostic on models and it\u2019s kind of like bring your own model we\u2019ll work with anything now with open AI they\u2019re not going to ever host open AI but they\u2019ll they\u2019re not going to stop you from working with it and then they for these open source ones they\u2019ve made it very easy for you to spin up an AWS instance throw a little llama in there and I would make a llama noise if I I knew what they said I guess they make like a sheep sound. So you throw a little alarm in there and it does its thing. And, you know, the benefit of them being agnostic on these LLMs is most likely they have some or all of your data, right? Because they\u2019ve been at this so long that if you\u2019re doing cloud computing versus on-prem, most likely a lot of, if not all of your data is in AWS. Extracting that data, you know, imagine you had terabytes or or what\u2019s the biggest,<\/p>\n<p>Scot:<br \/>[34:31] bigger than terabytes? I always forget this one.<\/p>\n<p>Jason:<br \/>[34:33] Petabytes.<\/p>\n<p>Scot:<br \/>[34:34] Petabytes of data at AWS. They literally have a product that they can send a truckload of hard drives around and get your data. That\u2019s how much data there is that you could never push it across the internet, that there\u2019s so much data. So if they have that data and that\u2019s what you want to train on, you don\u2019t want to have the latency of the internet between your data and the training. So you\u2019d really need the LLM to operate near your data. And this is what they predicted two or three years ago, kind of around the, the, the launch of chat gpt when all this stuff really started to accelerate and it\u2019s coming true so everyone feels a lot better about that then their body language this time a lot of times they were kind of like this is what we\u2019re doing and we\u2019re pretty sure it\u2019s going to work now they\u2019re like it\u2019s working and people really felt relief around this because everyone there was a set of people that believed it but then you know open ai\u2019s pitches nope our lm is going to be we\u2019re spending, billions of dollars we\u2019re going to be so far ahead none of these open source things are going to keep up. If you don\u2019t have us, you\u2019re going to be so far behind, you\u2019ll be like playing with crayons and everyone\u2019s going to be playing with quill pens.<\/p>\n<p>Scot:<br \/>[35:42] So it was really good to see that this is not what\u2019s happening, that people are embracing, enterprises are embracing these open source models. They are in the same zip code performance-wise from results and much cheaper than OpenAI\u2019s offerings. And what Amazon said specifically was very positive around what is It\u2019s kind of abbreviated Gen AI for generative AI. And it\u2019s kind of a way to encapsulate this. And they said that it already is a multi-billion dollar run rate business. And you always have to parse what they say. So multi-billion can be anywhere between 1 and 9.9, right? And you\u2019ll see why I drew 9.9 there.<\/p>\n<p>Scot:<br \/>[36:25] And inside, as part of that big AWS number, and they believe it can be rapidly tens of billions. Billions so they\u2019re basically saying it\u2019s not double digit billions so it\u2019s a single digit million which is where i get one to nine point nine but they basically hinted that that it is growing so rapidly inside of there that it\u2019s gonna be tens of billions and this is why they saw accelerating revenue growth which made everyone happy it wasn\u2019t just people you know moving some more you know loads on or something boring loads around relational databases or something it was the juicy ai stuff so this got everyone so lathered up that three analysts did price increases and they cited that this was one of the reasons the biggest price increase was from sig susquehanna and they put the price up to 220. At the time all this happened the stock was at 175 and today it\u2019s around 185 so it\u2019s been up nicely but 220 is a pretty big big you know even.<\/p>\n<p>Scot:<br \/>[37:20] From where they expect that\u2019s where they\u2019re thinking i think most these guys look at a year to two years as a time horizon on these prices so and that\u2019s the the high i have you know again there\u2019s a wide range some people think it\u2019s going to go down some people think it\u2019s over price so go do your research this is not a stock recommendation but i just thought it was interesting that people get really really excited by by this whole gen ai largely the body language that, and it\u2019s, Amazon doesn\u2019t pound their chest much. So the fact they were, was kind of a new, new way of managing Amazon and Jassy\u2019s pretty conservative. So he must\u2019ve felt pretty good about it, but also that they needed to ally, allay, allay, allay, whatever the right word is, get rid of these competitive concerns everyone\u2019s been talking about.<\/p>\n<p>Jason:<br \/>[38:05] Yeah. It feels like a pretty big prize out there. Jassy and the whole team always talk, Just AWS, even before you get to Gen AI, they always remind everyone, hey, 85% of the workloads are still on-prem. So like this, as big as AWS looks, if the long-term future is 85% of the workloads are on the cloud and only 15% are on-prem, there\u2019s a lot of headroom still in AWS. And then, you know, you add this new huge demand for AI on top of all that. And like this, it\u2019s almost a limitless opportunity. And I want to tie the AI back to retail, though, for just a second, because there\u2019s another bit of news that I haven\u2019t seen covered very much, but is super interesting to me.<\/p>\n<p>Jason:<br \/>[38:51] There\u2019s a particular flavor of AI out there, a subset of generative AI that\u2019s now being called agentic AI. And that\u2019s sort of a clever amalgamation of agent-based AI. And there\u2019s a very famous AI researcher, this guy, Andrew Ng. He\u2019s the founder of Coursera. He\u2019s done a bunch of things. He was the head of Google Big Think, which was one of the first significant AI efforts. And I want to say he was like on People Magazine\u2019s 100 most interesting people list in like 2013 as an AI researcher. So the dude\u2019s been around for a long time. He is one of the biggest advocates for this agentic AI. And the premise is that if you just ask an LLM, you take the best LLM in the world, and you ask it to do something for you, that\u2019s called zero shot. You give it an assignment, and you take the first result you get. It\u2019s a zero shot. You get pretty good results. But if you\u2026<\/p>\n<p>Jason:<br \/>[39:53] Turn that, that LLM into multiple agents and break the task up amongst those agents and potentially agents even running on different LLMs, you get wildly better results.<\/p>\n<p>Jason:<br \/>[40:05] And so his, his research kind of showed that, Hey, if, if Jason goes write a PowerPoint presentation for his client, explaining what\u2019s going on in commerce. And I just give that to the turbo version of ChatGBT 4, I\u2019ll get a pretty good deck. But if I say, hey, I want to create four agents. I want to create a consultant to write the deck and a copywriter to edit the deck and an editor to improve the deck and three people to pretend to be mock customers to poke holes in the deck and have all those agents work on this assignment. I could give that assignment to chat gbt 3.5 and it would actually output a better work product than the the newer more advanced model was by by breaking the job into these chunks and so in retail you think about like this is the idea of assigning higher level jobs to shopping right so instead of saying like going to amazon and saying oh now it\u2019s a ai-based search engine and i\u2019m going to type a long form query into search and get a better result.<\/p>\n<p>Jason:<br \/>[41:09] The agentic AI approach is I\u2019m just going to say to Amazon, never let me run out of ingredients for my kids\u2019 school lunches. And the agent\u2019s going to figure out what is in my school lunches and what my use rate is for those things and what weeks I have off from school and don\u2019t need a school lunch. And it\u2019s just going to do all those things and magically have the food show up. And this is a long diatribe, but the reason it\u2019s relevant is is this dude, Andrew Ng, was named the newest board member at Amazon three weeks ago.<\/p>\n<p>Scot:<br \/>[41:40] Very cool.<\/p>\n<p>Jason:<br \/>[41:40] I did not see that myself. Yeah. And so if you\u2019re wondering where Amazon thinks this is going, like this, in my mind, ties all this tremendous opportunity in generative AI and the financial opportunity in AWS directly to the huge and growing retail business that Amazon runs.<\/p>\n<p>Scot:<br \/>[42:02] Very cool. Oh yeah. I had not seen that. So maybe Wall Street picked up on that. I\u2019m sure. And maybe that was another part of the excitement.<\/p>\n<p>Jason:<br \/>[42:09] Yeah. But all of that is just peanuts compared to the real good business in Amazon, which is the ads business. So again, you know, Amazon used to, to obfuscate their ads business. They\u2019ve for a number of quarters now had to report it as earnings because it\u2019s in their earnings separately, because it\u2019s so material. And it was another good quarter for the ads business. It\u2019s hard to say whether it\u2019s actually accelerating growth or not, because the ads business is very seasonal. So the ad business grew 24.3% for the quarter versus Q1 of 2023. Q4 grew faster. So Q4 grew at 27%, but the 24% growth is much faster growth than other\u2026 Q1 year-over-year growth rate. So however you slice it, it\u2019s a good, robust growth rate. If you add the last four quarters together, you get $29 billion worth of ad sales. There\u2019s lots of estimates for how profitable ad sales are, but there\u2019s no cost of goods for an ad, right?<\/p>\n<p>Jason:<br \/>[43:13] And so it\u2019s very high margin. So if you just assume, I think 60% gross margins is a very conservative estimate. But if you assume 60% gross margins, that means the ad business spun off $29.5 billion of operating income over the last 12 months. And to put that in comparison, AWS is big and profitable as it is, twice as much revenue at over $100 billion now, but it spun off like $23 billion in operating income. So the ad business is a much more meaningful contributor to Amazon\u2019s profits than even AWS.<\/p>\n<p>Jason:<br \/>[43:51] And another way I\u2019ve been starting to think about this is what percentage of the total GMV on the Amazon platform are the ads? And they are now 6.5%. So that\u2019s a very significant new tax. You know, as Amazon has hundreds of millions of SKUs available for sale, no one\u2019s ever going to find your SKU or buy it if you don\u2019t do some marketing on the platform for that SKU. And that\u2019s this 6.5% tax that Amazon\u2019s charging. And in the same way we said, hey, AWS is a really robust business. And then there\u2019s this thing called generative AI that can make it even huger. All of this ad revenue we\u2019re talking about is really coming from their sponsored product listings, which is like basic search advertising on the retail platform. Last quarter, Amazon said, by the way, we have this huge viewership streaming video service called Amazon Prime. And we\u2019re going to start putting ads in the lowest tier version of Amazon Prime. So unless you want to pay more, you\u2019re going to start seeing ads on Amazon Prime. And that\u2019s another huge advertising opportunity that hasn\u2019t been very heavily tapped yet. So the analysts are pretty excited about the upside of Amazon potentially tacking on another $6.5 billion in Prime video ads onto the $50 billion of search ads that they already have.<\/p>\n<p>Jason:<br \/>[45:11] And so ads are a pretty good business to be in, which is why every other retailer is trying to follow suit with their own sort of version of a retail media network.<\/p>\n<p>Scot:<br \/>[45:22] Cool. I imagine you get a lot of calls to talk about that.<\/p>\n<p>Jason:<br \/>[45:25] Oh, yeah. I actually, I\u2019m sick of talking about it. So one nice thing about working at an ad agency is there are now thousands of other experts. You know, I was one of the early guys in retail media networks. Now there are thousands of other experts that are way more credible than me. So I don\u2019t have to talk about it quite as much, but it still, still comes up in every conversation.<\/p>\n<p>Scot:<br \/>[45:43] Very cool. All right. So then that was the basic gist of the corridor from a high level. And then it came to the what\u2019s going on in Q2. So that did come in lighter than folks expected, as I said, and they guided the top line to 144 versus 149. Let\u2019s call it 146 and change at the midpoint. They always do this range kind of thing when they\u2019re doing their guide. And Wall Street was at 150 consensus. So, you know, a tidge below two or three percent below where they wanted. But the operating income guide was above Wall Street. So they\u2019re kind of, we\u2019ll take it. Como si, como sa.<\/p>\n<p>Scot:<br \/>[46:21] So that was, you know, I think Amazon tapping things down. Yeah. Now they did talk a lot about consumers being under pressure. So they said in the, it wasn\u2019t in a Q and a, it was in the prepared remarks and Jassy said it, which is kind of like the more important stuff. And I will say it\u2019s really nice to have the CEO of Amazon back on these calls because Bezos basically ditched them after, I don\u2019t know if, I think he came the first two quarters back in 97 but i honestly can\u2019t remember but he has not gone to the calls and jassy\u2019s been to them all so it\u2019s really nice to hear from the ceo and he answers very candidly i feel you know he doesn\u2019t feel as kind of like robotic as many ceos when they get on here because it is a stressful thing that you\u2019re going to say something wrong, but there was this exchange well first of all he he in his prepared remarks he talked about.<\/p>\n<p>Scot:<br \/>[47:12] I forgot to put the exact language, but he said, we\u2019re seeing a lot of consumers trade down. So they\u2019re seeing, you know, we\u2019re seeing this in the auto industry. Tires is this huge thing where it\u2019s under a lot of pressure right now because people are just waiting. So there\u2019s a lot of this, you know, it\u2019s not showing up in the data that I\u2019ve seen, but there\u2019s, you know, maybe the inflation data, but not the GDP and some of the other unemployment data. But it feels like the consumer is under a bit of pressure here, and they talk about that a lot in the prepared remarks. So I thought our listeners would find that interesting. Jason, before I go into this longish little thing that I wanted to just cover, what do you, did you pick up on any of that consumer stuff? Are you hearing that?<\/p>\n<p>Jason:<br \/>[47:55] Oh, yeah, that\u2019s very common. And remember, in the beginning, I mentioned that there\u2019s this weird bifurcation that some retailers, even in categories, are doing well and others aren\u2019t. And some categories are doing well and others aren\u2019t. That\u2019s super complicated to get to the why. But the most obvious why is that consumers feel like they\u2019re under a lot of economic pressure and are trading down and are deferring certain types of purchases. The easiest way to see this is own brands and private label sales going up and, you know, national brand sales stagnating, see things like chicken protein going up and beef protein going down. You know, there\u2019s lots of examples out there, but the retailers that are best able to follow the consumer as she trades down are tending to do well. And the retailers that only cater to the luxury consumer, the super luxury is still doing fine. They\u2019re somewhat insulated. But the folks that haven\u2019t been as able to cater to the value consumer as much have struggled more. And the non-mandatory categories have struggled more. So Andy\u2019s comments exactly mirror what we\u2019re seeing going on in market dynamics and what other retailers are saying in their earnings. It is slightly weird because if you just look at the macros.<\/p>\n<p>Jason:<br \/>[49:18] It\u2019s objectively, the consumer is doing pretty well. There\u2019s actually a lot of favorable things, but there\u2019s a ton of evidence that the consumer sentiment is that they\u2019re really worried about their household budget and are making, you know, hard, hard financial decisions.<\/p>\n<p>Scot:<br \/>[49:36] Yeah. Yeah. It\u2019s tough out there. Well, hopefully it\u2019ll get better. So one of the questions I want to just kind of pull out some tidbits, because this has been a theme on our pod for a long time and I thought it was really, really interesting. And this is going to get into the weeds of supply chain and this kind of thing. So sorry if that\u2019s not your jam. We like to talk about logistics.<\/p>\n<p>Scot:<br \/>[49:56] Side note to you, Jason, I saw that deep dive we did on Amazon logistics is still like our number one show and all the stats and stuff, which is kind of fun. So someone cares about it. Anyway, one of the friends of the podcast, Yusuf Squally asked a question. He\u2019s one of the analysts and he said, as it relates to logistics, so he\u2019s talking to andy on the call back in september you launched amazon supply chain can you help us understand the opportunity you see there where are you in the journey to build logistics as a service on a global basis and does that require a huge increase in capex a function increase in capex which means huge so jesse said this was a very long answer so i\u2019m going to pull out two snippets you can go read the transcripts can you put a link to that in the show notes absolutely yep yeah so so i\u2019m just gonna give you the the snippet the whole thing is worth reading but it would be like another 20 minutes to do that. But so Jassy starts out and says, I think that it\u2019s interesting what\u2019s happening with the business we\u2019re building in third party logistics. And it\u2019s really kind of in some ways mirror some of the other businesses we\u2019ve gotten involved in AWS being an example. And even though they\u2019re very different businesses, and that we realized that we had our own internal need to build and launch these capabilities.<\/p>\n<p>Scot:<br \/>[51:01] We figured that there were probably others out there who had the same needs we did and decided to build the services out of them so this is this model that really blows the minds of traditional retailers where you know so walmart has this huge data you know capability there\u2019s this this urban legend that they know when people are pregnant before they do they can see changes in their habits or they know who all is on weight loss drugs they they see your buying habits so intricately that they can do that that\u2019s a neat capability but they view it as proprietary and And that\u2019s old school thinking.<\/p>\n<p>Scot:<br \/>[51:32] What Amazon does is says, well, that\u2019s a cool capability. Let\u2019s certainly someone else needs it. Let\u2019s open it up. This is one of my favorite things at Amazon. And it\u2019s so counterintuitive that in my current car world, I talk about this and everyone\u2019s like, why are you, we\u2019re doing it a lot at Spiffy. And they\u2019re like, well, why are you doing that? That\u2019s like your proprietary thing. And we\u2019re like, well, that\u2019s just how it should be. And like, this is a better way to do it. And it\u2019s really interesting that still today, Amazon\u2019s built what I say, $100 billion business out of AWS, which has used this and people are, are befuzzled by the whole thing. So I, I thought that was an interesting use case. And then he, he goes into some details there that are pretty obvious for our listeners, like how this is gonna work. But then he basically kind of brings it back around and then he says he wraps up and says, I would say that supply chain with Amazon is really an abstraction on top of each individual block services. And in those services, he talked about all the things that, that, you know, FBA and last mile delivery and buy with a prime. He talks about each of those kind of and how awesome they are. So he\u2019s basically saying Amazon supply chain wraps a bow around all that. And it gives this collective set of business services is growing significantly.<\/p>\n<p>Scot:<br \/>[52:43] It\u2019s already what I would consider a reasonable size business. I think it\u2019s early days. It\u2019s not something we anticipate being a giant capital expense driver. So it\u2019s because they\u2019ve already invested in all this that doesn\u2019t require additional capex. And then he finishes and says, we have to build a lot of the capabilities anyway to handle our own business. And we think it will be a modest increase on top of that to accommodate third-party sellers.<\/p>\n<p>Scot:<br \/>[53:05] But our, there\u2019s a typo in the thing. Our third-party sellers find very high value in us being able to manage these components for them versus having to do it themselves. And they save money in the process. So I thought that was a really interesting, interesting. So they\u2019re really leaning into this supply chain. I think that ultimately they\u2019ll open this up to more consumers where you can send Aunt Gertrude in Detroit something from Chicago for three bucks a package and just throw it in an Amazon box, maybe a return box, and it kind of makes it way cheaper than you can FedEx it. I think that\u2019s coming, but it\u2019s really interesting to see. The way they think about things and his articulation of it was very crisp,<\/p>\n<p>Scot:<br \/>[53:45] and I really enjoyed that. I was geeking out on that when I was listening to the call.<\/p>\n<p>Jason:<br \/>[53:50] Yeah, for sure. That actually came up in some of the conferences I was at that he, you know, Jeff Bezos famously wrote this memo a long time ago about kind of being an object oriented, company and having all these building blocks that people could easily access and use internally and externally. And, and that this was kind of Andy Jassy doubling down on that. Yeah. It\u2019s Biffy is an example of that. Like you inventing some cool products that make it your jobs easier. And then you\u2019re selling those products to, to your potential competitors.<\/p>\n<p>Scot:<br \/>[54:20] Yeah. So two examples, we have some devices we\u2019ve developed for ourselves. One is a tire tread scanner. So it does 2D and 3D tires, tire tread scans. It\u2019s called Easy Tread. And we developed it for ourselves because we touch 3,000 cars a day right now and we wanted to measure the tire treads. And the state of the art is a Bluetooth needle. And it\u2019s, you know, you have to lay on your back. The cars are on the ground for us most of the time. So you have to like get underneath there, measure three things, and then it Bluetooths to a phone. Then you have to take it, the data entry, it doesn\u2019t have an API. Then you have to like take what it measured and then now cut and paste it into something else. It\u2019s kind of, kind of redonkulous in our world. So we developed a solution for that and we\u2019re selling it externally. And then the big, the big one is from day one, this has been the plan is we\u2019ve built a ton of software for Spiffy. So we\u2019re, you know, we\u2019ve got 400 technicians, 250 vans doing all kinds of services across the US and there\u2019s no operating system for that. So we, there\u2019s no like Salesforce for that or Shopify. So we had to go build our own. And so we\u2019ve built, you know, route optimization specific to this parts integration, fitment integration, VIN lookup, all these things that are required integration with tire suppliers, oil filter suppliers, oil suppliers, parts suppliers, all these things. So we have like 150 things we\u2019ve integrated with and pulled in from all over the place.<\/p>\n<p>Scot:<br \/>[55:44] And then labor management, all the reporting that comes along with it, all that stuff. And we\u2019re starting to license that out as its own platform to anyone that wants to do auto services. And so these dealerships and large auto service companies are coming to us and finally saying, this seems kind of obvious now that we need to provide the ability to go to our customers. They call it at their curb. They use a different language than we do. But basically what you and I would call mobile, you know, last mile delivery of the service. And we\u2019re starting to license that out. And it\u2019s a lot like AWS, right? So we had to build this for our retail business, which is doing the services and now we\u2019re licensing it out a lot AWS and we have this device business. So it\u2019s been, I would not have, it comes intuitively to me now. Cause I\u2019ve been, you know, basically living this lifestyle for 20 years and watching Amazon do it, But it\u2019s been fun to kind of build a company with this mindset of we\u2019re going to take these things we build and give them to other, not give them, but sell them to other people. And then that makes them better. And they help us pay for all the R&D that we\u2019ve done on it.<\/p>\n<p>Jason:<br \/>[56:48] Yeah, that\u2019s very cool. And that gives listeners a very tangible example of why we haven\u2019t been able to podcast quite as frequently as we\u2019d like.<\/p>\n<p>Scot:<br \/>[56:56] Yes.<\/p>\n<p>Jason:<br \/>[56:56] I do, at the risk of making this the world\u2019s longest episode of our show, I do have a geeky add-on to the supply chain conversation. Yeah. So a lot of these services that they\u2019re adding to specifically what they call supply chain with Amazon are around importing services, because an increasingly high percentage of all the stuff Amazon sells is.<\/p>\n<p>Jason:<br \/>[57:20] Amazon is taking care of importing it, right? And most often from China, but from all over the world and taking care of all that logistics and getting it ready to sell and deliver via the world\u2019s most impressive last mile to consumers in America. And there\u2019s tons of complicated, high friction touch points and processes to flow all those goods. Well, the big competitors out there to Amazon at the moment that we\u2019ve talked about ad nauseum on the show, like Shein and Timu, had this kind of direct from China model where they\u2019re putting all the goods on 747s, flying them over, and they\u2019re taking advantage of this loophole in the postal treaty called the de minimis provision to not pay taxes or duties or have all these goods inspected that they ship into the U.S. and U.S.<\/p>\n<p>Jason:<br \/>[58:07] Businesses have been complaining it\u2019s unfair. There\u2019s like all kinds of talk about it. We\u2019ve done shows on this and I\u2019m sure we\u2019ll do others. So here\u2019s the new thing in supply chain.<\/p>\n<p>Jason:<br \/>[58:15] All the people that have been complaining about this are now doing it because guess what\u2019s happened? A bunch of these companies have been born that now help every other brand in the world take advantage of the de minimis provisions to near shore their goods. So you\u2019re a footwear manufacturer, you make your shoes in Vietnam, Instead of shipping them to the U.S. On a pallet and paying taxes and duties, you ship them on a pallet to Mexico, and then you send them individual parcels across the border from Mexico into the U.S. and never have to pay taxes or duties on the stuff. So I don\u2019t know if that will last in the long run, but that\u2019s a very disruptive, significant change happening in the whole world of e-commerce supply chains as we speak. That\u2019s pretty interesting. Interesting. Had you gotten wind of that yet?<\/p>\n<p>Scot:<br \/>[59:07] No, no. That\u2019s all new to me. Thanks for sharing.<\/p>\n<p>Jason:<br \/>[59:09] Yeah. That\u2019s probably how you\u2019re going to have to start getting your spiffy stuff into the country now too. I won\u2019t, I won\u2019t, we won\u2019t go there. But the one other piece that did not come up in the earnings call, but a controversy around Amazon since our last show is news articles came out that Amazon was de-installing its Just Walk Out technology from its grocery stores. So Amazon had built Just Walk Out into several of these Amazon Fresh stores and they built it into Whole Foods. And if you know the history of Just Walk Out, this was the original intention of Just Walk Out was was to do it for grocery stores, but it was too hard at first. So they, they started with these little convenience stores and now they had scaled it up and everyone thought that was the future. And, you know, in the last eight weeks they announced, yeah, we\u2019re, we\u2019re uninstalling it from the grocery stores. It\u2019s not a good fit. And the articles that came out both started out saying that, but then they pretty quickly extrapolated from that to say, Amazon\u2019s giving up on just walkout technology.<\/p>\n<p>Jason:<br \/>[1:00:09] And it was a scam anyway. It was a bunch of, it was thousands of people in India that were just watching the cameras and doing the work. It wasn\u2019t really AI or technology doing it. And then Amazon had to quickly go into a PR spin cycle and they sent reps out. They\u2019re like, you know, guys talking on a bunch of podcasts about, no, no, no, we\u2019re not abandoning Just Walk Out. We just learned that it\u2019s not a good use case for grocery and all the SKUs and all the weight-based SKUs in a grocery store. So we still think there\u2019ll be lots of good use cases for Just Walk Out, but that\u2019s not gonna be the grocery innovation that we actually think the grocery innovation is the Amazon Dash cart.<\/p>\n<p>Jason:<br \/>[1:00:51] And the India thing just turns out that like when you\u2019re training LLMs, you do have humans look at the LLMs results to improve them, right? Like it\u2019s a natural, you know, appropriate part of the, the LLMs and Amazon was probably doing that, but they do have a lot of technology around these just walk out. But so it became this whole thing is Amazon abandoning grocery is Amazon abandoning, just walk out.<\/p>\n<p>Jason:<br \/>[1:01:16] Andy has made it clear. They\u2019re still going after grocery. He said in the earnings call that we\u2019re, you know, we\u2019re doing really well in growing at the non-perishable side of grocery, which is all he, he, he even mentioned this antidote. He said when the general merchants first started trying to get into grocery, which is code for Walmart, that Walmart started trying to sell groceries in 1990, that at first what they sold was shelf stable, non-perishable stuff, paper towels. And they got pretty good at that. And Amazon\u2019s point is we\u2019re really good at that and do really well at that.<\/p>\n<p>Jason:<br \/>[1:01:49] We\u2019re not very good at fresh, frozen and perishable yet. And we still have to figure that out, but we do have this new model, Amazon Fresh concept in Chicago called V2 and we like the results so far. And we\u2019ll hope to refine that and scale that one day. And it\u2019ll be interesting whether the unique value prop is dash cards. When the technology guys from Amazon said, hey, we\u2019re de-installing Just Walk Out, they kind of hyped up these dash cards, which are these smart shopping carts.<\/p>\n<p>Jason:<br \/>[1:02:22] I\u2019m by no means I\u2019m writing Amazon off as a grocer, but I am very skeptical and cynical about these dash cards. I live in Chicago, so I\u2019ve been able to visit the stores that have them. And, you know, a typical store has six of these dash cards and they have 50 to 100 shoppers in the store. So it just, it, it doesn\u2019t, they\u2019re not scaling it to try to be, you know, a good solution for all the shoppers. And one of the main things you try to use a shopping cart for in a store is to get your 60 grocery items to your, the trunk of your car. And two problems with the dash cart is it doesn\u2019t fit 60 grocery items and you\u2019re not allowed to take it out into the parking lot. So I still think, I think there\u2019s some work to do still on the dash carts, but all this sort of came new ahead leading up to the earnings call this year. So I did, I did want to mention that, I don\u2019t know. Are you optimistic about Amazon Grocery, Scott?<\/p>\n<p>Scot:<br \/>[1:03:17] They haven\u2019t quite figured it out yet. I think they\u2019re still kind of lost. Seems like they\u2019re leaning in. The $9.99 thing is really just Whole Foods, right?<\/p>\n<p>Jason:<br \/>[1:03:28] No, it\u2019s unclear. Amazon delivers groceries from two models, from what they call Amazon Fresh and Whole Foods, and they put too much work on the consumer. The consumer has to decide in advance which one they\u2019re ordering from, and you can only get part of the products from each thing. Yeah, I hate that.<\/p>\n<p>Scot:<br \/>[1:03:44] It\u2019s like whenever I find stuff, it\u2019s split in there and I just give it. And then it\u2019s kind of like, what are you doing? And I\u2019m like, I\u2019m just trying to find stuff I want. And I want this granola and this thing. And it\u2019s like, well, you can\u2019t do that. I\u2019m like, well.<\/p>\n<p>Jason:<br \/>[1:03:57] Yeah, you can only get that Hook\u2019s cheddar cheese from Whole Foods, but you can only get the Doritos from Amazon Fresh. And you didn\u2019t opt in to either of those. So it\u2019s confusing. It\u2019s a mess at the moment. And again, grocery is a huge part of retail and it\u2019s the highest frequency retail. So, you know, if you care a lot about knowing the data about consumers, you want to win in grocery. But it\u2019s it\u2019s also very different. Like Andy Jassy has said in past calls, we understand we\u2019re the only way to win in fresh and imperishable is to have a lot more product, a lot closer to customers. And that\u2019s why, you know, we might need physical stores. And Amazon has proven they\u2019re really good at fulfillment and these hub and spoke delivery models. They have not won at brick and mortar retail. And, you know, we were looking before the show, Whole Foods is a little bit bigger than when Amazon bought them. But, you know, Amazon hasn\u2019t really like, you know, poured gas on Whole Foods in any meaningful way either.<\/p>\n<p>Scot:<br \/>[1:04:57] Yeah. So they need to figure it out. Not a very day one kind of experience. Yeah.<\/p>\n<p>Jason:<br \/>[1:05:02] We\u2019ll have to do another show, but across the parking lot from Amazon, there has been some other retail news. A big one was, you know, Walmart\u2019s invested billions of dollars in healthcare clinics. And they announced this month that they\u2019re closing the healthcare clinics, which is super interesting. At the same time, Amazon is actually ratcheting up their pharmacy business. So they\u2019re now offering same-day delivery of pharmacy goods in two cities and expanding to six more cities. So that\u2019s the healthcare industry is really following all that stuff. We could talk about that. And one that I think every listener should follow really closely, Walmart launched a new owned brand this year. The biggest brand launch Walmart\u2019s done in 20 years called Better Goods, which is elevated premium food products sold by Walmart. We talked earlier about the consumer climate\u2019s really favorable to these higher value store brands. And if you look at the companies that are performing the best in grocery, it\u2019s the companies that own their own brands. It\u2019s Trader Joe\u2019s, it\u2019s all the\u2026 Costco\u2019s the largest CPG in the United States of America. Costco\u2019s bigger globally.<\/p>\n<p>Jason:<br \/>[1:06:08] Kirkland is bigger globally than Unilever. And so super interesting that Walmart is kind of making its first significant entry in that in a long time. And then the retailer that historically has been doing the best of that is Target, who\u2019s been struggling as of late. And what they launched most recently last month is a new brand that\u2019s competing with dollar stores called Dealworthy that has the lowest price point products that Target\u2019s ever offered. So we talked about the consumer being stressed and Target not necessarily having a good answer for that. This Dealworthy brand seems like their big effort to try to catch that value consumer that they historically haven\u2019t captured. So lots of stuff in this world of own brands, which if you\u2019re a competitor to Amazon, the best way to compete with them is to sell stuff that they don\u2019t have. So that\u2019s a super interesting space as well. We\u2019ll have to do a show about that coming up.<\/p>\n<p>Scot:<br \/>[1:07:01] Yeah. Yeah. Thanks for sharing that. We\u2019ll keep an eye on it.<\/p>\n<p>Jason:<br \/>[1:07:04] Yeah. And with that, we\u2019ve blown past our allotted time. So people complain we didn\u2019t podcast enough. So we gave you two podcasts in one show.<\/p>\n<p>Scot:<br \/>[1:07:12] Yeah. Careful what you wish for, folks. Boom.<\/p>\n<p>Jason:<br \/>[1:07:16] But hopefully you enjoyed this and we still would love that five-star review. Again, if you live or have familiarity with any of those global cities I\u2019m visiting coming up, please drop me a line. And thanks everyone for sticking with us. And thanks everyone for all the kind words and comments that we\u2019ve both heard this quarter. Until next time, happy commercing.<\/p>\n<p>\u00a0<\/p>\n<\/div>\n<p><p><a href=\"https:\/\/dmsretail.com\/online-workshops-list\/\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-496\" src=\"https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90.png\" alt=\"Retail Online Training\" width=\"729\" height=\"91\" srcset=\"https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90.png 729w, https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90-300x37.png 300w\" sizes=\"auto, (max-width: 729px) 100vw, 729px\" \/><\/a><\/p><br \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A weekly podcast with the latest e-commerce news and events. Episode 319 is deep dive into Amazons Q1 2024 results. Subscribe: ????? Episode Summary: In […]<\/p>\n","protected":false},"author":1,"featured_media":1121,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[],"class_list":["post-12458","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-podcasts"],"_links":{"self":[{"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/posts\/12458","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/comments?post=12458"}],"version-history":[{"count":0,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/posts\/12458\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/media\/1121"}],"wp:attachment":[{"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/media?parent=12458"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/categories?post=12458"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/tags?post=12458"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
Subscribe<\/strong>:<\/p>\n<span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">?<\/span><span style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" data-mce-type=\"bookmark\" class=\"mce_SELRES_start\">?<\/span><span style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" data-mce-type=\"bookmark\" class=\"mce_SELRES_start\">?<\/span><span style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" data-mce-type=\"bookmark\" class=\"mce_SELRES_start\">?<\/span><span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">?<\/span><\/iframe><\/figure>\n<h3 class=\"wp-block-heading\" id=\"episode-summary\">Episode Summary:<\/h3>\n<p>In this episode, Jason \u201cRetailgeek\u201d Goldberg and Scot Wingo dive deep into Amazon\u2019s first quarter results for 2024, analyzing the company\u2019s performance in various segments such as retail, offline and online sales, marketplace, AWS, and advertising. They also explore the impact of AI on Amazon\u2019s business and provide insights into the company\u2019s future guidance for Q2 2024.<\/p>\n<p>In our latest episode, Jason and Scott cover a range of topics, starting with their reflections on recent events such as May the 4th and Cinco de Mayo. Jason shares intriguing stories from his extensive travels and interactions with listeners worldwide. Scott delves into the intersection of e-commerce and the auto industry, honing in on Carvana. The duo also delves into the U.S. Department of Commerce retail indicators data, shedding light on trends in retail sales and e-commerce growth. The conversation pivots towards Amazon\u2019s recent earnings report, contextualizing it within the realm of AI investments by tech giants like Meta and Alphabet, offering valuable industry insights and analysis.<\/p>\n<p>The discussion continues with a focus on Amazon\u2019s earnings report, zooming in on concerns around AWS amid heightened competition from Alphabet and Azure. The rising trend of AI investments, particularly in data training applications, is explored, alongside the growing popularity of open source AI models due to cost and privacy considerations. Despite a conservative Q2 guidance, Amazon impresses with robust revenue that surpasses Wall Street expectations, particularly in operating income. The retail segment shows exceptional growth, exceeding operating income estimates for both domestic and international divisions. Notably, Amazon\u2019s performance in brick-and-mortar stores, spearheaded by Whole Foods, demonstrates resilience with a 6.3% growth rate. AWS stands out with a 17% growth, dispelling market share concerns and showcasing accelerated revenue growth, illustrating Amazon\u2019s continuous growth potential and innovation prowess.<\/p>\n<p>Scott delves deeper into Amazon\u2019s positive quarterly earnings report, emphasizing the remarkable revenue performance, especially in operating income. Insights are shared on Amazon\u2019s successful agnostic approach to LLM models and the potential advancements in generative AI. The conversation shifts towards the burgeoning ads business at Amazon, underlining its profitability and future growth prospects. Scot also outlines Amazon\u2019s Q2 guidance and the potential impacts of consumer spending patterns on the retail sector, including concerns about changing consumer behaviors and economic pressures shaping market dynamics. Jason complements the discussion with additional perspectives on consumer behavior and economic influences reshaping the market landscape.<\/p>\n<p>Furthermore, we embark on a detailed exploration of supply chain logistics, with a spotlight on Amazon\u2019s expansion into third-party logistics services, revolutionizing traditional retail strategies by sharing proprietary capabilities for wider adoption. Insights from Andy Jassy shed light on Amazon\u2019s logistics business approach. The conversation expands to include how companies like Spiffy are embracing a similar model of sharing proprietary products to drive innovation and revenue growth, showcasing an evolving landscape of retail innovation.<\/p>\n<p>The podcast unpacks the complex world of grocery retail, highlighting Amazon\u2019s experimental forays like Just Walk Out technology and the Amazon Dash cart, while examining the challenges in delineating Amazon\u2019s grocery sector strategy. A comparison is drawn between Amazon\u2019s strategies and those of rivals like Walmart and Target, who are adapting their product offerings to match evolving consumer preferences, offering a comprehensive view of the dynamic retail and supply chain management sphere. Dive into our engaging discussion, explore retail dynamics, and keep a lookout for more insightful content.<\/p>\n<p><strong>Don\u2019t forget to like our\u00a0facebook page, and if you enjoyed this episode please write us a review on itunes.<\/strong><\/p>\n<p>Episode 319 of the Jason & Scot show was recorded on <span style=\"font-weight: 400;\">Sunday, May 5th, 2024.<\/span><\/p>\n<h2 class=\"font-bold pb-4\">Chapters<\/h2>\n<div data-testid=\"chapter-table-of-contents\">\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>The Jason and Scott Show Begins<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Commerce Tools Elevate Show<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Jason\u2019s World Tour Plans<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Where in the World is Retail Geek?<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Amazon\u2019s First Quarter Earnings<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Amazon\u2019s Dominance in E-commerce<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Online Segment Growth Analysis<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Offline Store Segment Analysis<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Spotlight on AWS Performance<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"\">\n<div class=\"inline\">\n<div class=\"group cursor-pointer whitespace-pre-wrap hover:underline decoration-dotted underline-offset-4\">\n<p>Amazon\u2019s Grocery Strategy<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<h2>Transcript<\/h2>\n<p><strong>Jason:<\/strong><br \/>[0:23] Welcome to the Jason and Scott Show. This is episode 319 being recorded on Sunday, May 5th, 2024. I\u2019m your host, Jason Retail Guy Goldberg, and as usual, I\u2019m here with your co-host, Scott Wingo.<\/p>\n<p>Scot:<br \/>[0:37] Hey, Jason, and welcome back, Jason and Scott Show listeners. It\u2019s been a while, but first, happy Cinco de Mayo, and also a belated May the 4th, Jason. Did you have a good Star Wars day?<\/p>\n<p>Jason:<br \/>[0:49] I did. I did. I feel like Star Wars Day always makes me think of the podcast because I feel like we have spent many of them in my latter life together.<\/p>\n<p>Scot:<br \/>[1:01] Yeah, absolutely. Any exciting new Star Wars experiences or merch?<\/p>\n<p>Jason:<br \/>[1:08] No, I understand you got some vintage merch. merch.<\/p>\n<p>Scot:<br \/>[1:13] It\u2019s not, but they, back when I was a kid, you would go and if you went every week to, I think it was Burger King, you would for the, I think it was Empire. I have the Empire right here. So definitely Empire, but you would get a glass. Now it turns out these were full of lead paint, which would kill you, but that was the downside.<\/p>\n<p>Jason:<br \/>[1:32] Not recommended for drinking.<\/p>\n<p>Scot:<br \/>[1:33] You got a very, yes, I never, being a collector, I never drank out of them. So that\u2019s good.<\/p>\n<p>Jason:<br \/>[1:37] Saved your life right there.<\/p>\n<p>Scot:<br \/>[1:38] Yes, but I did drink out of the Tweety Bird. So that me, me. I\u2019m sure I got some yellow lead paint from a twitty bird glass. Anyway, so they came out with a Mandalorian kind of homage to those glasses and they were at the Hallmark store of all places, not where I usually hang out, but I got to go to a Hallmark store and the little ladies that worked there were, I wish them all an awesome May the 4th. And they looked at me like I was from another planet and it was hilarious. My wife\u2019s like, stop, they don\u2019t know what you\u2019re doing.<\/p>\n<p>Jason:<br \/>[2:07] Wait, they didn\u2019t have a big May 4th section in the Hallmark store?<\/p>\n<p>Scot:<br \/>[2:11] They did. The little ladies didn\u2019t know.<\/p>\n<p>Jason:<br \/>[2:13] The overlap of people that still buy Papyrus cards and celebrate May 4th is probably not great.<\/p>\n<p>Scot:<br \/>[2:21] It was very humbling. It was a humble May the 4th, but I got my glasses and I was happy. I\u2019m happy for you. And then tonight we had tacos for dinner, so I\u2019m hitting all the holidays.<\/p>\n<p>Jason:<br \/>[2:30] I feel like we should have tacos for dinner every night, whether it\u2019s Cinco de Mayo or not, but I\u2019m i am happy for that.<\/p>\n<p>Scot:<br \/>[2:35] We do have a lot of tacos but this was a special single denial edition.<\/p>\n<p>Jason:<br \/>[2:42] Well, very well done, my friend.<\/p>\n<p>Scot:<br \/>[2:44] Thanks. Well, listeners of the pod have been all over me. They\u2019re like, why aren\u2019t you recording? And I said, it\u2019s not me. It\u2019s Jason. It\u2019s Jason. Because you have been traveling<\/p>\n<p>Scot:<br \/>[2:55] the earth, spreading retail geek goodness. Tell us, we are way far behind on trip updates and all the different countries. It\u2019s like you\u2019re playing, do you have like a little travel bingo where you\u2019re just like punching, what is it, 93 countries?<\/p>\n<p>Jason:<br \/>[3:09] I do. They call it a passport. Oh, nice. Yes.<\/p>\n<p>Scot:<br \/>[3:13] That, uh, little book that you get to carry. Yeah.<\/p>\n<p>Jason:<br \/>[3:15] Yeah. Yeah. Yeah. I have been on a lot of trips and it sounds like you and I may be telling complimentary lies because I also, I\u2019ve had an opportunity to meet a lot of listeners in the last, we\u2019ll call it seven weeks and which they\u2019re always super nice. And it\u2019s always super fun to talk to people. And obviously they\u2019re, you know, strangers recognize my voice in line at Starbucks at all these e-commerce shows. And then we strike up a conversation. And then the next question is always, where the heck is Scott? Because they\u2019re always disappointed to meet me and not you. And now the new thing is, and why aren\u2019t you producing more frequent shows? And my answer is always that you\u2019re dominating the world at Get Spiffy and that you\u2019re too busy.<\/p>\n<p>Scot:<br \/>[4:00] Uh-huh. I see. Okay.<\/p>\n<p>Jason:<br \/>[4:02] Well, we\u2019re both very busy.<\/p>\n<p>Scot:<br \/>[4:05] You\u2019re traveling more than I am. I\u2019m busy washing cars.<\/p>\n<p>Jason:<br \/>[4:08] Yes. I think both are fairly true, but I did finish a grueling seven-week stint where I got to come home a couple of times on the weekends, but I basically had seven weeks of travel back to back. In my old life, that would not have been that atypical, but post-pandemic, The travel has been a little more moderate. And I have noticed that I have my travel muscles have atrophied and I don\u2019t really want to redevelop.<\/p>\n<p>Jason:<br \/>[4:35] So the seven weeks was a lot. Please don\u2019t ask me for trip reports for all the commerce events because I kind of can\u2019t remember some of them. They\u2019re all a little bit of a blur. But I was at Shop Talks, I think, since the last time we talked, which is, of course, probably the biggest show in our industry. And that was a very good show. I did get to see a lot of our mutual friends and a lot of fans of the show there. So that was certainly fun. And maybe in another podcast, we can do a little recap of some of the interesting things that came out of Shop Talk. I did produce a couple of recaps in other formats for work clients, so we could certainly pull something together. I also went to a vendor show. One of the e-commerce platforms out there is called Commerce Tools, and they had their annual customer show, which is called Elevate in Miami. So I got a chance to go visit there. They\u2019re one of the commerce platforms that I would say is winning at the moment in the kind of pivot away from the old school monoliths to these new sort of SaaS-based solutions. And commerce tools in particular are kind of pioneers in pushing this actual certification around a more modern earned stack that they they coined mock. And I think I think we\u2019ve had Kelly from from commerce tools on the on the podcast<\/p>\n<p>Jason:<br \/>[5:51] in the past to talk about that. But that was a good show. I got to meet a lot of listeners there. And a funny one, several listeners were like.<\/p>\n<p>Jason:<br \/>[5:59] I would apologize for the, the, our publishing schedule lately. And they\u2019re like, I\u2019m cool with it. I like that. Like you don\u2019t do a show if there\u2019s not something worthwhile. And then, you know, when I do get a show, it\u2019s like a treat. So I don\u2019t know if they\u2019re being honest or not, but that made me feel a little better about some of our, our, our Tardis shows lately. So those, those were good events. I also spent a week in India with some clients and that super interesting, a lot of commerce activity going on there, a lot of different market dynamics than here. So that\u2019s kind of intellectually pretty fun to learn about and see what\u2019s working there that might be working here or what, you know, why things tend to play out differently there. So that\u2019s interesting. And then I have a lot more international trips booked right now.<\/p>\n<p>Jason:<br \/>[6:48] So coming up, I\u2019m going to Barcelona, London, Paris, and Sao Paulo. So if anyone either has any favorite retail experiences in any of of those cities, please send them my way. I\u2019ll be doing store visits in all those cities. And if you\u2019re based in any of those cities, also drop me a line. Hopefully we can do some meetups while I\u2019m out there.<\/p>\n<p>Scot:<br \/>[7:07] Cool. It\u2019s Jason\u2019s world tour. You can do a little pod while you\u2019re there.<\/p>\n<p>Jason:<br \/>[7:12] We have done a bunch of international pods in the distant past. I remember hotel rooms in South Korea and all over the place,<\/p>\n<p>Jason:<br \/>[7:19] Japan that we\u2019ve, we\u2019ve cut shows from. So, so totally could.<\/p>\n<p>Scot:<br \/>[7:23] Yeah. We\u2019ll have to do it. Where in the world is retail geek? That could be the theme song. I just sampled that.<\/p>\n<p>Jason:<br \/>[7:30] Yeah. So besides cleaning the world\u2019s cars, what have you been up to, Scott?<\/p>\n<p>Scot:<br \/>[7:35] Well, it\u2019s kind of funny. My worlds are colliding. So a lot of the analysts that you and I know from the e-commerce world are creeping into the auto world and their gateway drug is Carvana. So in the world of retail, we have Amazon, obviously. Well, Carvana is kind of Amazonifying used cars. They had a bit of a drama kind of situation. They were the golden child of online cars. And then they totally pooped the bed. They did this acquisition. They loaded up with debt. And then after, I think it was 21. So they had a good COVID. They surged. And then the debt got in front of them. Used car prices bop around and they kind of like got in an open door situation where they had bought a lot of cars for more than they were worth suddenly. And then they plummeted and everyone thought they were going out of business, but they have had a resurgence. So it\u2019s causing a lot of the internet analysts to now pick up auto tech or mobility or whatever you want to call it. So it was fun. I got to do a live chat with Nick Jones. He\u2019s been a friend of the show. I don\u2019t think we\u2019ve had him on due to some compliance stuff that his company has rules around, but he\u2019s at this firm JMP and it was kind of wild to talk about, with someone about both Amazon and what we\u2019re doing at Spiffy, which is basically a lot of Amazon principles applied to car care. So it was interesting to have someone reach out and say, hey, I think this is a thing. And everyone tells me I should talk to you about it. And I was like, oh, yeah, I would love to. So it\u2019s kind of fun.<\/p>\n<p>Jason:<br \/>[9:01] That\u2019s very cool. And isn\u2019t it also a thing, I think half the vehicles on the road are now owned by Amazon. So I assume that\u2019s an overlap too. too?<\/p>\n<p>Scot:<br \/>[9:09] Yeah, not half, but a lot are. The number of last mile delivery vehicles are very, very large. And we work with a lot of them, so it\u2019s kind of fun. I started spiffy somewhat to get away from Amazon and still all I can talk about. Nope. So embrace it. I love Amazon. Love me some Amazon, Jason.<\/p>\n<p>Jason:<br \/>[9:29] I\u2019m glad you do. I love them too, but I feel like I spend most of my career You\u2019re unsuccessfully helping people compete with them.<\/p>\n<p>Scot:<br \/>[9:38] Hey, got to play one side of the coin. It\u2019s a gig. You\u2019re going to be more like them or how to fight them.<\/p>\n<p>Jason:<br \/>[9:43] It\u2019s a gig. It is indeed. Yeah.<\/p>\n<p>Scot:<br \/>[9:46] Cool. I thought we are going to talk about some Amazon news. But before we jump in, you have done your magic with your data analysis interns. And I\u2019m sure there\u2019s an LLM and an AI thrown in there. Let\u2019s start with some of the things you\u2019re seeing in commerce trends from the data that\u2019s out there.<\/p>\n<p>Jason:<br \/>[10:07] Yeah. So as everyone knows, I have a little bit too much of an infatuation with the U.S. Department of Commerce retail indicators data. And these guys, you know, publish monthly estimates of retail sales in a bunch of categories. And, you know, we\u2019ve talked about this many times on the show, but broadly over the last several years have been really interesting in retail. 2020, 2021, and 2022 were the greatest three years in the history of retail. Like we mailed like $6 trillion in economic stimulus. People didn\u2019t travel or go to restaurants as much. And so we sold way more goods than ever before. And so those three years, retail grew respectively at like 8%, 14%, and 9%. The 20 years prior, retail averaged about 4% a year in growth. So normally pre-pandemic, you\u2019d expect 4% growth. We had these three, you know, wildly pandemic influence years where we grew really fast. And then last year we finished a little below 4%. So, so we were around, I want to say it was like 3.6%. So it was growth. It would, it would have been in line with pre-pandemic growth, but it certainly felt like a significant deceleration from those heady pandemic years. And so, you know, people are super interested to see how does 2024 play out? Does it?<\/p>\n<p>Jason:<br \/>[11:32] Kind of return to pre-pandemic levels, like what is the new normal?<\/p>\n<p>Jason:<br \/>[11:37] And we now have the first quarter\u2019s data from the U.S. Department of Commerce, and I would call it kind of a mixed bag. If you just look at the raw retail data that the U.S. Department of Commerce publishes, they\u2019re going to tell you that retail grew in the first quarter 2.8%. So that\u2019s a little anemic, right? Compared to historical averages, that\u2019s not a great growth rate. Most of the practitioners that follow this podcast care about a particular subset of retail that the National Retail Federation has dubbed core retail. And so the National Retail Federation pulls gas and automobiles sales out of that number. And gas is a decent size number and it\u2019s very volatile based on the commodity prices of gas. And auto is a huge number that has, as you\u2019re well familiar, its own idiosyncrasies. And so that\u2019s how they justify taking those two out. And if you take those two out and you get this core retail number, retail in the first quarter grew 3.9%. So kind of to align with how the NRF talks about retail, we\u2019ll say Q1 overall was 3.9%, which is very in line with the pre-pandemic historic average. So disappointing by pandemic standards, but kind of traditionally what we would expect.<\/p>\n<p>Jason:<br \/>[13:05] What is unique in that number is.<\/p>\n<p>Jason:<br \/>[13:09] That it\u2019s very bifurcated. There are clear winners and losers, both by categories and specific practitioners. So if you break down the categories, e-commerce is the fastest growing chunk of retail. I\u2019m sure we\u2019ll talk more about that. Restaurants were the next fastest growing categories. And categories like mass merchants and healthcare providers outperform that industry average, every other segment of retail underperformed the industry average. So things like furniture stores did the worst, building materials did really poorly, gas stations did very poorly, electronics did poorly, and side note, electronics have been the worst performer since the pandemic, which is kind of interesting and challenging. So you\u2019ve had this weird couple categories doing really well, a bunch of categories doing really poorly. And then within the categories even, if you look at the public company\u2019s individual earnings calls, what you tend to see is a couple of big players performing really well in overall retail, that\u2019s Amazon and Walmart. And then a lot of other retailers really struggling. So that even that\u2019s like in general merchandise, it\u2019s Amazon and Walmart that are lifting the boats. And it\u2019s folks like Target traditionally that have performed really well are actually struggling at the moment. So the average is kind of hard to follow at the moment.<\/p>\n<p>Jason:<br \/>[14:37] But that is kind of how things play out. And then we have some preliminary e-commerce data, but the actual Q1 e-commerce number that the U.S. Department of Commerce publishes will publish on May 17th. So that\u2019s 12 days from now.<\/p>\n<p>Jason:<br \/>[14:53] And crunching the numbers that we have available at the moment, that growth is likely to come in at somewhere between 8% and 10%. I\u2019m guessing more like 8% or 9% growth. And so that also is twice as good as overall retail, and it\u2019s more than twice as good as brick-and-mortar retail. But that is noticeably slower than the historic e-commerce growth rates pre-pandemic. So kind of file those two numbers away. The overall retail industry is growing at 3.9%. The overall e-commerce industry is growing at about 9%. And then we have our friends at Amazon that dropped their earnings announcement just before May 4th so that they could celebrate May 4th, I think.<\/p>\n<p>Scot:<br \/>[15:39] Yeah, yes, that\u2019s a good setup. And without further ado, let\u2019s talk about Amazon\u2019s fourth quarter. It wouldn\u2019t be a Jason Scott show without a little bit of\u2026<\/p>\n<p>Scot:<br \/>[16:01] That\u2019s right. On April 30th, Amazon announced their first quarter results. And the setup coming into these, so you had the data you talked about, but like to drill in a little bit. We had Meta, the artist formerly known as Facebook, and Alphabet, the artist previously known as Google. They announced and they both basically told Wall Street, AI is the cat\u2019s pajamas and we\u2019re going to spend anywhere between $10 and $40 billion of capital expenditures on it, meaning NVIDIA chips. So it turns out the way to play all this is basically buying NVIDIA. So hopefully you bought some NVIDIA stock. Maybe this is not a stock recommendation or when it\u2019s too late, so\u2026 And also don\u2019t take stock recommendations from podcasters. Anyway, so there was all this angst and people were a little freaked out coming into the Amazon results because Meta was down like pretty substantially, 20 to 30 percent. And Alphabet was also up substantially. You also had Microsoft come in there and they really crushed it. Their Azure is really lighting it up with AI. And they announced that they were going to invest a lot. And there\u2019s this rumor that a $100 billion project, it\u2019s got a name like Starship or something, but it\u2019s not Starship. Spaceship? Stardust? I don\u2019t know what it is. But it\u2019s going to be this mega data center, and they literally can\u2019t find a place to put it because it\u2019s going to consume so much power. So they\u2019re going to have to maybe build a nuclear plant next to it or some wacky thing.<\/p>\n<p>Scot:<br \/>[17:31] Anyway, that was the setup. up. So coming in, Wall Street was very, very concerned about Amazon\u2019s AWS division, which is their cloud computing. Because if Alphabet is building out their infrastructure, and so is Azure, that\u2019s the two biggest competitors for AWS. And is AWS getting its fair share? And is it going to announce that it\u2019s going to have to go build some $40 billion kind of a thing? Also, another Another thing, and I\u2019m kind of curious on if you\u2019re seeing this with your clients, but in the, I follow this, you know, the AI, you can\u2019t do much without seeing AI everywhere. But the part I\u2019m most interested in is what are big enterprises spending money on? This is like your Fortune 500s. They\u2019re all experimenting and really getting into it. And where they\u2019re finding a lot of good use cases is training on their data. So they\u2019ll say, you know, hey, I\u2019m Publisys. How many documents do you think are inside of Publisys? I don\u2019t know, 8 trillion documents. Documents and you know wouldn\u2019t it be helpful just the ones I created and who is this retail geek and he\u2019s he\u2019s created uh you know 90 of those and you know so you know imagine you\u2019re starting new at publicists you\u2019re gonna be like where do I start going through some of these documents for us and if you had a chat bot that was like hey I\u2019ve read all that you know I can navigate you through everything that\u2019s been published or you know whatever I\u2019m certainly you.<\/p>\n<p>Scot:<br \/>[18:50] Providing a very big metaphor, certainly be more divisional and all this kind of stuff. But that\u2019s where big companies are spending the bulk is they\u2019re taking their data in whatever format it\u2019s in, be it a relational database, a PDF, whatever it is, they\u2019re trying to train it. They don\u2019t want it to go up into the, they don\u2019t want to train the LLM so that other people get the benefit of that and can see any confidential data. So that\u2019s really important. So it needs to be gated in these types of things. Because of that use case, open AI is not great because people are very worried. A, it\u2019s very expensive and it\u2019s only an API. So OpenAI hosts itself and you call it through an API.<\/p>\n<p>Scot:<br \/>[19:25] Those API calls are very expensive. They\u2019re getting, as OpenAI has gotten more popular, there\u2019s more latency. It\u2019s taking forever to get answers out of this thing. And a lot of people are very concerned that even though there\u2019s ways to call the API such that it\u2019s in a window and not being trained, that maybe it leaks in there. So because of all these elements, the open source models are becoming very popular. And right around the time Meta announced, they announced their Llama, which has become quite popular. And what\u2019s nice is you can host it wherever you want. And it\u2019s kind of like WordPress, where if you are a serious WordPresser, you can host it somewhere yourself, and you can kind of understand that. Otherwise, there\u2019s other people that will host it for you. But it has the nice feature of you\u2019re just getting the weights and whatnot, and it\u2019s it\u2019s pretty clear, it\u2019s pretty obvious, it\u2019s not training itself on your data. So a lot of people like it because it\u2019s quote unquote free. It\u2019s not an API usage based. It\u2019s a pay once to set it up, pay for some resources type thing and you\u2019re done. And it\u2019s also not going to train on the data. That\u2019s one of many. There\u2019s probably 10 or 20 pretty commercial grade open AIs out there.<\/p>\n<p>Scot:<br \/>[20:38] Okay. So that\u2019s kind of the setup to get to the earnings. things. So from a big picture, this was a really good quarter. Asterix, the guide made Wall Street a little bit nervous. So-<\/p>\n<p>Scot:<br \/>[20:53] And one of our research analysts just said it\u2019s Stargate, which is also a sci-fi series. They must have that on Prime Video or something. There\u2019s probably some callback there.<\/p>\n<p>Scot:<br \/>[21:01] So they beat for the quarter Q1, but then they also kind of tell you what\u2019s going on the next quarter. Amazon doesn\u2019t provide fully your guidance. They just kind of give you a snippet. So when they report one quarter, a quarter, they then tell you what they think the next quarter is going to do. So Wall Street got a little bit ahead of its skis, and the guide for Q2 was below what Wall Street wants. So it wasn\u2019t what we\u2019d call a beat and a raise, which is the current quarter was a beat and the next one they increased. It was a beat and a guide down. So that probably tampered Wall Street. But ever since Jassy came in, Andy Jassy, this has been his MO is to be pretty conservative because Wall Street\u2019s very much an expectation engine. And the more, if you can beat and tamp down expectations, it makes it, it\u2019s a little bit rougher in the short term from a stock price, but it makes next quarter better and then so on and so forth. So it\u2019s a smart way to manage the long-term vibe of the stock, the mindset, the expectations around your stock. Okay. So revenue came in at $143 billion versus Wall Street at $142. So pretty much in line. But most importantly, where Amazon really threw people off was on operating income. Yes, Amazon is profitable. This is the proxy for operating income. True Amazonians would tell you, no, it\u2019s cashflow. We can go into that, but this is kind of the way they report to Wall Street. So this is kind of the standard operating system, if you will. So this is what we\u2019re going to use, but it\u2019s a proxy for cashflow.<\/p>\n<p>Scot:<br \/>[22:28] That was 15 billion for the quarter and Wall Street expected 11. Well, you know, 4 billion on a world of 143 doesn\u2019t sound like much, but between 11 and 15, that\u2019s a very material beat. What is that? Like 38%, something like that.<\/p>\n<p>Scot:<br \/>[22:44] So that was a really nice surprise. And, you know, Amazon goes through these invest and harvest periods and everyone\u2019s been feeling like they\u2019re going to be back in investing which would mean they\u2019re going to start lowering operating income as they invest but it\u2019s actually kind of beating expectations, also this is the fifth quarter amazon has come in at the high end of its guidance or above its guidance since basically you know on operating income and that corresponds with when jassy came in so this is his mo right now is to kind of like beat and lower beat and lower you know exceed expectations tamp them down not get not get ahead of his skis and it\u2019s working really well.<\/p>\n<p>Jason:<br \/>[23:24] Sandbagging for the win. I like it.<\/p>\n<p>Scot:<br \/>[23:26] Yes, it is. Having run a public company, this is a lesson I learned painfully. So that\u2019s something we can talk about over beer sometime.<\/p>\n<p>Jason:<br \/>[23:33] I will book that date. Yeah. And the retail business sort of followed in line with that. They had like some nice growth, but like the real standout number was the improvement in margins and the significant positive operating income from the retail segment. So I think the actual operating income from U.S. Retail was like $5 billion and the Wall Street expectations were 4.3. So again, that was another strong beat. Total revenue, which revenue is not the same thing as retail sales, as we\u2019ve talked about on the show many times, that we would use GMV as a proxy for that. But revenue was $86.3 billion for the quarter, which I think was in line with the analyst expectations.<\/p>\n<p>Jason:<br \/>[24:27] And I think this was the largest operating income that Amazon has ever reported for the retail business. So that was super interesting on the domestic side. Traditionally, domestic has done pretty well and international has been a money loser because, you know, they\u2019ve been less mature. they\u2019ve been investing a lot in growing international and they haven\u2019t had the same kind of margins. This was the first quarter that they reported positive operating income for the international division. So that\u2019s another super encouraging sign for investors that maybe they\u2019ve kind of passed that inflection point on a lot of their international investments that they\u2019ve made in the EU and Japan and the UK, which reminds me is not part of the EU anymore.<\/p>\n<p>Jason:<br \/>[25:13] So so they kind of beat beat international expectations across the board on income. Revenues were lower. So revenues were like thirty one billion dollars, which was below expectation.<\/p>\n<p>Jason:<br \/>[25:25] But they they earned like nine hundred million in operating income. And I want to say the the the Wall Street expectation was like six hundred million. So so again, like a 30 percent beat, which is pretty, pretty darn good. Good. They also, a bunch of analysts have, you know, taken these revenue numbers and they try to back into a GMV number. And I would say the bummer at the moment is there\u2019s a fair amount of variance in the estimates, like different analysts have different models. So I have kind of been putting to a model of the models together and trying to kind of find a midpoint. And like Like based on that, the Amazon\u2019s GMV globally probably went up 11.5% for the quarter. So if you\u2019re comparing this to other retailers or the U.S. Department of Commerce number, overall GMV went up 11.5%. The U.S. was stronger. So the U.S. probably went up at 12.2%. So again, we talked about core retail was up 3.9%. Well, Amazon U.S. GMV was up 12.2%. So, you know, three times faster growth than the retail industry overall.<\/p>\n<p>Jason:<br \/>[26:39] And again, Amazon is mostly e-commerce, very little brick and mortar,<\/p>\n<p>Jason:<br \/>[26:44] which we\u2019ll talk about in just a minute. But even if you\u2019re comparing Amazon to that e-commerce number, if e-commerce comes in at 8% or 9% and Amazon\u2019s at 12%, they\u2019re by far the largest e-commerce player out there and they\u2019re still substantially outgrowing the average, which, you know, is very impressive and should be very scary to every other competitor out there.<\/p>\n<p>Jason:<br \/>[27:08] One analyst kind of put together an estimate of what they thought the earned income contribution from Amazon was for retail and ads together, pulling AWS out. And they had it at $27 billion in earned income if Amazon was just a retail with no AWS. And that puts them right in the ballpark of Walmart that spent off about $29 billion in earned income or operating income. I keep saying earned, but I mean operating income. So, so that is all pretty impressive and simultaneously super scary.<\/p>\n<p>Jason:<br \/>[27:45] Scott, did you drill down into the online segment at all?<\/p>\n<p>Scot:<br \/>[27:49] Yeah. And, you know, what I would tell listeners is picture a block diagram where you have this big, big rectangle, that\u2019s the whole Amazon entity. And, you know, so what we\u2019re going to do is talk about the segments. And the first segment is the biggest one, which is the retail business. And that, that\u2019s what you just.<\/p>\n<p>Jason:<br \/>[28:04] Biggest and best. Wouldn\u2019t you say?<\/p>\n<p>Scot:<br \/>[28:06] Coolest.<\/p>\n<p>Jason:<br \/>[28:07] Coolest. All right.<\/p>\n<p>Scot:<br \/>[28:08] Cool. Okay. Yeah. Yeah. Okay. I\u2019ll, you know, I don\u2019t know.<\/p>\n<p>Jason:<br \/>[28:11] It is for you.<\/p>\n<p>Scot:<br \/>[28:14] Um, I think the whole enchilada, I like the, the way they do this and I\u2019m trying to replicate it. It\u2019s 50. We\u2019ll talk about that in a second. The, so then the, you know, so then another segment is AWS, another segment, I think marketplace should be in some segment, but they don\u2019t break it out. So it\u2019s just kind of in kind of hidden inside of the blob that is retail. So we tease some of that out here on the show. They purposely hide it in there. So no one knows how awesome it is, I think. And then they\u2019ve got AWS ads and a couple other things, but we\u2019ll talk about this. So as you dig into the retail business, there\u2019s a couple of ways to look at it. You can look at it by domestic and international, which Jason just did,<\/p>\n<p>Scot:<br \/>[28:50] or you can look at it by online and physical store. So the online biz grew 7% year over year, which if I remember your stats, well, you don\u2019t have it until may 17th so on may 17th we\u2019ll be able to know how that compared but probably the one you can compare is the offline biz which is the the store comp that they have, And Jason, you saw on that one, what\u2019d you see?<\/p>\n<p>Jason:<br \/>[29:16] Yeah, so physical stores grew 6.3%. So again, like, you know, when we say all of retail grew 3.9%, a big chunk of that\u2019s e-commerce. Brick and mortar probably grew at like two to 3%. So Amazon\u2019s brick and mortar growing at 6.3% is actually super impressive. And it\u2019s kind of interesting, you know, for several years, Amazon has had experiments in a bunch of retail formats. So they\u2019ve had these Amazon Go stores, stores. They had Amazon five-star stores. They had bookstores. They had a fashion store. They\u2019re trying all these things. And of course, the biggest chunk of their stores is they own Whole Foods. And so offline stores for Amazon was kind of a mix of all these different concepts. In the last couple of years, they\u2019ve kind of cleaned house and gotten rid of all those concepts. And so, you know, nominally there\u2019s a few of their own grocery stores called Amazon Amazon fresh open, but the vast majority of online offline retail for Amazon is, is Whole Foods. And for it to be growing at 6.3% in the current climate is, is a really good sign for Amazon. And, and I would say somewhat impressive, you know, on the earnings call, they, they announced that they\u2019re working up a new format for Whole Foods, which is a smaller format store that\u2019s It\u2019s going to open in Manhattan. So I have that on my ticker file to go visit when that\u2019s open.<\/p>\n<p>Jason:<br \/>[30:38] You know, the whole grocery space for Amazon is super interesting, but maybe we\u2019ll talk about that a little bit more later. But I will call out, they did launch a service that there\u2019s been some controversy over. They launched a $9.99 a month grocery delivery service, which essentially lets you have all you can eat free grocery delivery to your home for an incremental fee of $9.99. And they\u2019re spinning that as, you know, a cool new grocery service and enable more people to shop for groceries online. And there are a lot of articles about it, like.<\/p>\n<p>Jason:<br \/>[31:13] They used to have free grocery delivery included in your Prime membership, right? And so they\u2019ve kind of like, I look at the big arc of all this and say, there used to be a lot more free services in Prime that they\u2019ve kind of peeled out. Then they started charging for, and now they\u2019ll let you get it free again for another $120 a year.<\/p>\n<p>Jason:<br \/>[31:32] So interesting things happening with grocery that we could probably talk more about later. But I\u2019m kind of eager to dive into some of these other businesses like AWS.<\/p>\n<p>Scot:<br \/>[31:42] Yeah. So that\u2019s the one that everyone was really waiting on the call to hear how it went. And good news, AWS exceeded expectations. Everyone thought it was going to grow 14% and it came in at 17%. And if Wall Street likes, they like a lot of things, they like beating expectations, that\u2019s important to them. But their favorite thing is ARG. And that is not a pirate day thing, ARG. It is Accelerating Revenue Growth. Wall Street loves that more than anything. And that\u2019s what they delivered for both the ads and the AWS part of the business. And what that means is that as the law of numbers kicks in, so back on the retail business, the only time we see that accelerate is in the fourth quarter and that seasonal acceleration, right? We\u2019ve gotten used to that for decades now. It always happens in the fourth quarter and whatnot. So it\u2019s what you would expect. But this is quite unusual for a relatively mature business. This thing\u2019s $25 billion a quarter. So this is a $100 billion business that accelerated. And so that tells us that there is a lot more wood to chop here. It has not gotten near its addressable market. And it really allayed fears that they were losing massive market share because they\u2019re, quote unquote, behind on AI to Azure, which is Microsoft offering, and then the Google hosting solution as well.<\/p>\n<p>Scot:<br \/>[33:05] That does not seem to be the case. So they did very well. So they came in at $25 billion and Wall Street was expecting $24.6. So that was really, that accelerating is what really made everyone very happy. And then the operating income came in at $9.5, way ahead of Wall Street at $7.5. So another pretty material 20% beat on this component at the bottom line. And this is really interesting. There was some really good language around this. And this has been Jassy\u2019s statement all along, and it\u2019s coming true. His early Amazon\u2019s early play was we\u2019re going to be agnostic on models and it\u2019s kind of like bring your own model we\u2019ll work with anything now with open AI they\u2019re not going to ever host open AI but they\u2019ll they\u2019re not going to stop you from working with it and then they for these open source ones they\u2019ve made it very easy for you to spin up an AWS instance throw a little llama in there and I would make a llama noise if I I knew what they said I guess they make like a sheep sound. So you throw a little alarm in there and it does its thing. And, you know, the benefit of them being agnostic on these LLMs is most likely they have some or all of your data, right? Because they\u2019ve been at this so long that if you\u2019re doing cloud computing versus on-prem, most likely a lot of, if not all of your data is in AWS. Extracting that data, you know, imagine you had terabytes or or what\u2019s the biggest,<\/p>\n<p>Scot:<br \/>[34:31] bigger than terabytes? I always forget this one.<\/p>\n<p>Jason:<br \/>[34:33] Petabytes.<\/p>\n<p>Scot:<br \/>[34:34] Petabytes of data at AWS. They literally have a product that they can send a truckload of hard drives around and get your data. That\u2019s how much data there is that you could never push it across the internet, that there\u2019s so much data. So if they have that data and that\u2019s what you want to train on, you don\u2019t want to have the latency of the internet between your data and the training. So you\u2019d really need the LLM to operate near your data. And this is what they predicted two or three years ago, kind of around the, the, the launch of chat gpt when all this stuff really started to accelerate and it\u2019s coming true so everyone feels a lot better about that then their body language this time a lot of times they were kind of like this is what we\u2019re doing and we\u2019re pretty sure it\u2019s going to work now they\u2019re like it\u2019s working and people really felt relief around this because everyone there was a set of people that believed it but then you know open ai\u2019s pitches nope our lm is going to be we\u2019re spending, billions of dollars we\u2019re going to be so far ahead none of these open source things are going to keep up. If you don\u2019t have us, you\u2019re going to be so far behind, you\u2019ll be like playing with crayons and everyone\u2019s going to be playing with quill pens.<\/p>\n<p>Scot:<br \/>[35:42] So it was really good to see that this is not what\u2019s happening, that people are embracing, enterprises are embracing these open source models. They are in the same zip code performance-wise from results and much cheaper than OpenAI\u2019s offerings. And what Amazon said specifically was very positive around what is It\u2019s kind of abbreviated Gen AI for generative AI. And it\u2019s kind of a way to encapsulate this. And they said that it already is a multi-billion dollar run rate business. And you always have to parse what they say. So multi-billion can be anywhere between 1 and 9.9, right? And you\u2019ll see why I drew 9.9 there.<\/p>\n<p>Scot:<br \/>[36:25] And inside, as part of that big AWS number, and they believe it can be rapidly tens of billions. Billions so they\u2019re basically saying it\u2019s not double digit billions so it\u2019s a single digit million which is where i get one to nine point nine but they basically hinted that that it is growing so rapidly inside of there that it\u2019s gonna be tens of billions and this is why they saw accelerating revenue growth which made everyone happy it wasn\u2019t just people you know moving some more you know loads on or something boring loads around relational databases or something it was the juicy ai stuff so this got everyone so lathered up that three analysts did price increases and they cited that this was one of the reasons the biggest price increase was from sig susquehanna and they put the price up to 220. At the time all this happened the stock was at 175 and today it\u2019s around 185 so it\u2019s been up nicely but 220 is a pretty big big you know even.<\/p>\n<p>Scot:<br \/>[37:20] From where they expect that\u2019s where they\u2019re thinking i think most these guys look at a year to two years as a time horizon on these prices so and that\u2019s the the high i have you know again there\u2019s a wide range some people think it\u2019s going to go down some people think it\u2019s over price so go do your research this is not a stock recommendation but i just thought it was interesting that people get really really excited by by this whole gen ai largely the body language that, and it\u2019s, Amazon doesn\u2019t pound their chest much. So the fact they were, was kind of a new, new way of managing Amazon and Jassy\u2019s pretty conservative. So he must\u2019ve felt pretty good about it, but also that they needed to ally, allay, allay, allay, whatever the right word is, get rid of these competitive concerns everyone\u2019s been talking about.<\/p>\n<p>Jason:<br \/>[38:05] Yeah. It feels like a pretty big prize out there. Jassy and the whole team always talk, Just AWS, even before you get to Gen AI, they always remind everyone, hey, 85% of the workloads are still on-prem. So like this, as big as AWS looks, if the long-term future is 85% of the workloads are on the cloud and only 15% are on-prem, there\u2019s a lot of headroom still in AWS. And then, you know, you add this new huge demand for AI on top of all that. And like this, it\u2019s almost a limitless opportunity. And I want to tie the AI back to retail, though, for just a second, because there\u2019s another bit of news that I haven\u2019t seen covered very much, but is super interesting to me.<\/p>\n<p>Jason:<br \/>[38:51] There\u2019s a particular flavor of AI out there, a subset of generative AI that\u2019s now being called agentic AI. And that\u2019s sort of a clever amalgamation of agent-based AI. And there\u2019s a very famous AI researcher, this guy, Andrew Ng. He\u2019s the founder of Coursera. He\u2019s done a bunch of things. He was the head of Google Big Think, which was one of the first significant AI efforts. And I want to say he was like on People Magazine\u2019s 100 most interesting people list in like 2013 as an AI researcher. So the dude\u2019s been around for a long time. He is one of the biggest advocates for this agentic AI. And the premise is that if you just ask an LLM, you take the best LLM in the world, and you ask it to do something for you, that\u2019s called zero shot. You give it an assignment, and you take the first result you get. It\u2019s a zero shot. You get pretty good results. But if you\u2026<\/p>\n<p>Jason:<br \/>[39:53] Turn that, that LLM into multiple agents and break the task up amongst those agents and potentially agents even running on different LLMs, you get wildly better results.<\/p>\n<p>Jason:<br \/>[40:05] And so his, his research kind of showed that, Hey, if, if Jason goes write a PowerPoint presentation for his client, explaining what\u2019s going on in commerce. And I just give that to the turbo version of ChatGBT 4, I\u2019ll get a pretty good deck. But if I say, hey, I want to create four agents. I want to create a consultant to write the deck and a copywriter to edit the deck and an editor to improve the deck and three people to pretend to be mock customers to poke holes in the deck and have all those agents work on this assignment. I could give that assignment to chat gbt 3.5 and it would actually output a better work product than the the newer more advanced model was by by breaking the job into these chunks and so in retail you think about like this is the idea of assigning higher level jobs to shopping right so instead of saying like going to amazon and saying oh now it\u2019s a ai-based search engine and i\u2019m going to type a long form query into search and get a better result.<\/p>\n<p>Jason:<br \/>[41:09] The agentic AI approach is I\u2019m just going to say to Amazon, never let me run out of ingredients for my kids\u2019 school lunches. And the agent\u2019s going to figure out what is in my school lunches and what my use rate is for those things and what weeks I have off from school and don\u2019t need a school lunch. And it\u2019s just going to do all those things and magically have the food show up. And this is a long diatribe, but the reason it\u2019s relevant is is this dude, Andrew Ng, was named the newest board member at Amazon three weeks ago.<\/p>\n<p>Scot:<br \/>[41:40] Very cool.<\/p>\n<p>Jason:<br \/>[41:40] I did not see that myself. Yeah. And so if you\u2019re wondering where Amazon thinks this is going, like this, in my mind, ties all this tremendous opportunity in generative AI and the financial opportunity in AWS directly to the huge and growing retail business that Amazon runs.<\/p>\n<p>Scot:<br \/>[42:02] Very cool. Oh yeah. I had not seen that. So maybe Wall Street picked up on that. I\u2019m sure. And maybe that was another part of the excitement.<\/p>\n<p>Jason:<br \/>[42:09] Yeah. But all of that is just peanuts compared to the real good business in Amazon, which is the ads business. So again, you know, Amazon used to, to obfuscate their ads business. They\u2019ve for a number of quarters now had to report it as earnings because it\u2019s in their earnings separately, because it\u2019s so material. And it was another good quarter for the ads business. It\u2019s hard to say whether it\u2019s actually accelerating growth or not, because the ads business is very seasonal. So the ad business grew 24.3% for the quarter versus Q1 of 2023. Q4 grew faster. So Q4 grew at 27%, but the 24% growth is much faster growth than other\u2026 Q1 year-over-year growth rate. So however you slice it, it\u2019s a good, robust growth rate. If you add the last four quarters together, you get $29 billion worth of ad sales. There\u2019s lots of estimates for how profitable ad sales are, but there\u2019s no cost of goods for an ad, right?<\/p>\n<p>Jason:<br \/>[43:13] And so it\u2019s very high margin. So if you just assume, I think 60% gross margins is a very conservative estimate. But if you assume 60% gross margins, that means the ad business spun off $29.5 billion of operating income over the last 12 months. And to put that in comparison, AWS is big and profitable as it is, twice as much revenue at over $100 billion now, but it spun off like $23 billion in operating income. So the ad business is a much more meaningful contributor to Amazon\u2019s profits than even AWS.<\/p>\n<p>Jason:<br \/>[43:51] And another way I\u2019ve been starting to think about this is what percentage of the total GMV on the Amazon platform are the ads? And they are now 6.5%. So that\u2019s a very significant new tax. You know, as Amazon has hundreds of millions of SKUs available for sale, no one\u2019s ever going to find your SKU or buy it if you don\u2019t do some marketing on the platform for that SKU. And that\u2019s this 6.5% tax that Amazon\u2019s charging. And in the same way we said, hey, AWS is a really robust business. And then there\u2019s this thing called generative AI that can make it even huger. All of this ad revenue we\u2019re talking about is really coming from their sponsored product listings, which is like basic search advertising on the retail platform. Last quarter, Amazon said, by the way, we have this huge viewership streaming video service called Amazon Prime. And we\u2019re going to start putting ads in the lowest tier version of Amazon Prime. So unless you want to pay more, you\u2019re going to start seeing ads on Amazon Prime. And that\u2019s another huge advertising opportunity that hasn\u2019t been very heavily tapped yet. So the analysts are pretty excited about the upside of Amazon potentially tacking on another $6.5 billion in Prime video ads onto the $50 billion of search ads that they already have.<\/p>\n<p>Jason:<br \/>[45:11] And so ads are a pretty good business to be in, which is why every other retailer is trying to follow suit with their own sort of version of a retail media network.<\/p>\n<p>Scot:<br \/>[45:22] Cool. I imagine you get a lot of calls to talk about that.<\/p>\n<p>Jason:<br \/>[45:25] Oh, yeah. I actually, I\u2019m sick of talking about it. So one nice thing about working at an ad agency is there are now thousands of other experts. You know, I was one of the early guys in retail media networks. Now there are thousands of other experts that are way more credible than me. So I don\u2019t have to talk about it quite as much, but it still, still comes up in every conversation.<\/p>\n<p>Scot:<br \/>[45:43] Very cool. All right. So then that was the basic gist of the corridor from a high level. And then it came to the what\u2019s going on in Q2. So that did come in lighter than folks expected, as I said, and they guided the top line to 144 versus 149. Let\u2019s call it 146 and change at the midpoint. They always do this range kind of thing when they\u2019re doing their guide. And Wall Street was at 150 consensus. So, you know, a tidge below two or three percent below where they wanted. But the operating income guide was above Wall Street. So they\u2019re kind of, we\u2019ll take it. Como si, como sa.<\/p>\n<p>Scot:<br \/>[46:21] So that was, you know, I think Amazon tapping things down. Yeah. Now they did talk a lot about consumers being under pressure. So they said in the, it wasn\u2019t in a Q and a, it was in the prepared remarks and Jassy said it, which is kind of like the more important stuff. And I will say it\u2019s really nice to have the CEO of Amazon back on these calls because Bezos basically ditched them after, I don\u2019t know if, I think he came the first two quarters back in 97 but i honestly can\u2019t remember but he has not gone to the calls and jassy\u2019s been to them all so it\u2019s really nice to hear from the ceo and he answers very candidly i feel you know he doesn\u2019t feel as kind of like robotic as many ceos when they get on here because it is a stressful thing that you\u2019re going to say something wrong, but there was this exchange well first of all he he in his prepared remarks he talked about.<\/p>\n<p>Scot:<br \/>[47:12] I forgot to put the exact language, but he said, we\u2019re seeing a lot of consumers trade down. So they\u2019re seeing, you know, we\u2019re seeing this in the auto industry. Tires is this huge thing where it\u2019s under a lot of pressure right now because people are just waiting. So there\u2019s a lot of this, you know, it\u2019s not showing up in the data that I\u2019ve seen, but there\u2019s, you know, maybe the inflation data, but not the GDP and some of the other unemployment data. But it feels like the consumer is under a bit of pressure here, and they talk about that a lot in the prepared remarks. So I thought our listeners would find that interesting. Jason, before I go into this longish little thing that I wanted to just cover, what do you, did you pick up on any of that consumer stuff? Are you hearing that?<\/p>\n<p>Jason:<br \/>[47:55] Oh, yeah, that\u2019s very common. And remember, in the beginning, I mentioned that there\u2019s this weird bifurcation that some retailers, even in categories, are doing well and others aren\u2019t. And some categories are doing well and others aren\u2019t. That\u2019s super complicated to get to the why. But the most obvious why is that consumers feel like they\u2019re under a lot of economic pressure and are trading down and are deferring certain types of purchases. The easiest way to see this is own brands and private label sales going up and, you know, national brand sales stagnating, see things like chicken protein going up and beef protein going down. You know, there\u2019s lots of examples out there, but the retailers that are best able to follow the consumer as she trades down are tending to do well. And the retailers that only cater to the luxury consumer, the super luxury is still doing fine. They\u2019re somewhat insulated. But the folks that haven\u2019t been as able to cater to the value consumer as much have struggled more. And the non-mandatory categories have struggled more. So Andy\u2019s comments exactly mirror what we\u2019re seeing going on in market dynamics and what other retailers are saying in their earnings. It is slightly weird because if you just look at the macros.<\/p>\n<p>Jason:<br \/>[49:18] It\u2019s objectively, the consumer is doing pretty well. There\u2019s actually a lot of favorable things, but there\u2019s a ton of evidence that the consumer sentiment is that they\u2019re really worried about their household budget and are making, you know, hard, hard financial decisions.<\/p>\n<p>Scot:<br \/>[49:36] Yeah. Yeah. It\u2019s tough out there. Well, hopefully it\u2019ll get better. So one of the questions I want to just kind of pull out some tidbits, because this has been a theme on our pod for a long time and I thought it was really, really interesting. And this is going to get into the weeds of supply chain and this kind of thing. So sorry if that\u2019s not your jam. We like to talk about logistics.<\/p>\n<p>Scot:<br \/>[49:56] Side note to you, Jason, I saw that deep dive we did on Amazon logistics is still like our number one show and all the stats and stuff, which is kind of fun. So someone cares about it. Anyway, one of the friends of the podcast, Yusuf Squally asked a question. He\u2019s one of the analysts and he said, as it relates to logistics, so he\u2019s talking to andy on the call back in september you launched amazon supply chain can you help us understand the opportunity you see there where are you in the journey to build logistics as a service on a global basis and does that require a huge increase in capex a function increase in capex which means huge so jesse said this was a very long answer so i\u2019m going to pull out two snippets you can go read the transcripts can you put a link to that in the show notes absolutely yep yeah so so i\u2019m just gonna give you the the snippet the whole thing is worth reading but it would be like another 20 minutes to do that. But so Jassy starts out and says, I think that it\u2019s interesting what\u2019s happening with the business we\u2019re building in third party logistics. And it\u2019s really kind of in some ways mirror some of the other businesses we\u2019ve gotten involved in AWS being an example. And even though they\u2019re very different businesses, and that we realized that we had our own internal need to build and launch these capabilities.<\/p>\n<p>Scot:<br \/>[51:01] We figured that there were probably others out there who had the same needs we did and decided to build the services out of them so this is this model that really blows the minds of traditional retailers where you know so walmart has this huge data you know capability there\u2019s this this urban legend that they know when people are pregnant before they do they can see changes in their habits or they know who all is on weight loss drugs they they see your buying habits so intricately that they can do that that\u2019s a neat capability but they view it as proprietary and And that\u2019s old school thinking.<\/p>\n<p>Scot:<br \/>[51:32] What Amazon does is says, well, that\u2019s a cool capability. Let\u2019s certainly someone else needs it. Let\u2019s open it up. This is one of my favorite things at Amazon. And it\u2019s so counterintuitive that in my current car world, I talk about this and everyone\u2019s like, why are you, we\u2019re doing it a lot at Spiffy. And they\u2019re like, well, why are you doing that? That\u2019s like your proprietary thing. And we\u2019re like, well, that\u2019s just how it should be. And like, this is a better way to do it. And it\u2019s really interesting that still today, Amazon\u2019s built what I say, $100 billion business out of AWS, which has used this and people are, are befuzzled by the whole thing. So I, I thought that was an interesting use case. And then he, he goes into some details there that are pretty obvious for our listeners, like how this is gonna work. But then he basically kind of brings it back around and then he says he wraps up and says, I would say that supply chain with Amazon is really an abstraction on top of each individual block services. And in those services, he talked about all the things that, that, you know, FBA and last mile delivery and buy with a prime. He talks about each of those kind of and how awesome they are. So he\u2019s basically saying Amazon supply chain wraps a bow around all that. And it gives this collective set of business services is growing significantly.<\/p>\n<p>Scot:<br \/>[52:43] It\u2019s already what I would consider a reasonable size business. I think it\u2019s early days. It\u2019s not something we anticipate being a giant capital expense driver. So it\u2019s because they\u2019ve already invested in all this that doesn\u2019t require additional capex. And then he finishes and says, we have to build a lot of the capabilities anyway to handle our own business. And we think it will be a modest increase on top of that to accommodate third-party sellers.<\/p>\n<p>Scot:<br \/>[53:05] But our, there\u2019s a typo in the thing. Our third-party sellers find very high value in us being able to manage these components for them versus having to do it themselves. And they save money in the process. So I thought that was a really interesting, interesting. So they\u2019re really leaning into this supply chain. I think that ultimately they\u2019ll open this up to more consumers where you can send Aunt Gertrude in Detroit something from Chicago for three bucks a package and just throw it in an Amazon box, maybe a return box, and it kind of makes it way cheaper than you can FedEx it. I think that\u2019s coming, but it\u2019s really interesting to see. The way they think about things and his articulation of it was very crisp,<\/p>\n<p>Scot:<br \/>[53:45] and I really enjoyed that. I was geeking out on that when I was listening to the call.<\/p>\n<p>Jason:<br \/>[53:50] Yeah, for sure. That actually came up in some of the conferences I was at that he, you know, Jeff Bezos famously wrote this memo a long time ago about kind of being an object oriented, company and having all these building blocks that people could easily access and use internally and externally. And, and that this was kind of Andy Jassy doubling down on that. Yeah. It\u2019s Biffy is an example of that. Like you inventing some cool products that make it your jobs easier. And then you\u2019re selling those products to, to your potential competitors.<\/p>\n<p>Scot:<br \/>[54:20] Yeah. So two examples, we have some devices we\u2019ve developed for ourselves. One is a tire tread scanner. So it does 2D and 3D tires, tire tread scans. It\u2019s called Easy Tread. And we developed it for ourselves because we touch 3,000 cars a day right now and we wanted to measure the tire treads. And the state of the art is a Bluetooth needle. And it\u2019s, you know, you have to lay on your back. The cars are on the ground for us most of the time. So you have to like get underneath there, measure three things, and then it Bluetooths to a phone. Then you have to take it, the data entry, it doesn\u2019t have an API. Then you have to like take what it measured and then now cut and paste it into something else. It\u2019s kind of, kind of redonkulous in our world. So we developed a solution for that and we\u2019re selling it externally. And then the big, the big one is from day one, this has been the plan is we\u2019ve built a ton of software for Spiffy. So we\u2019re, you know, we\u2019ve got 400 technicians, 250 vans doing all kinds of services across the US and there\u2019s no operating system for that. So we, there\u2019s no like Salesforce for that or Shopify. So we had to go build our own. And so we\u2019ve built, you know, route optimization specific to this parts integration, fitment integration, VIN lookup, all these things that are required integration with tire suppliers, oil filter suppliers, oil suppliers, parts suppliers, all these things. So we have like 150 things we\u2019ve integrated with and pulled in from all over the place.<\/p>\n<p>Scot:<br \/>[55:44] And then labor management, all the reporting that comes along with it, all that stuff. And we\u2019re starting to license that out as its own platform to anyone that wants to do auto services. And so these dealerships and large auto service companies are coming to us and finally saying, this seems kind of obvious now that we need to provide the ability to go to our customers. They call it at their curb. They use a different language than we do. But basically what you and I would call mobile, you know, last mile delivery of the service. And we\u2019re starting to license that out. And it\u2019s a lot like AWS, right? So we had to build this for our retail business, which is doing the services and now we\u2019re licensing it out a lot AWS and we have this device business. So it\u2019s been, I would not have, it comes intuitively to me now. Cause I\u2019ve been, you know, basically living this lifestyle for 20 years and watching Amazon do it, But it\u2019s been fun to kind of build a company with this mindset of we\u2019re going to take these things we build and give them to other, not give them, but sell them to other people. And then that makes them better. And they help us pay for all the R&D that we\u2019ve done on it.<\/p>\n<p>Jason:<br \/>[56:48] Yeah, that\u2019s very cool. And that gives listeners a very tangible example of why we haven\u2019t been able to podcast quite as frequently as we\u2019d like.<\/p>\n<p>Scot:<br \/>[56:56] Yes.<\/p>\n<p>Jason:<br \/>[56:56] I do, at the risk of making this the world\u2019s longest episode of our show, I do have a geeky add-on to the supply chain conversation. Yeah. So a lot of these services that they\u2019re adding to specifically what they call supply chain with Amazon are around importing services, because an increasingly high percentage of all the stuff Amazon sells is.<\/p>\n<p>Jason:<br \/>[57:20] Amazon is taking care of importing it, right? And most often from China, but from all over the world and taking care of all that logistics and getting it ready to sell and deliver via the world\u2019s most impressive last mile to consumers in America. And there\u2019s tons of complicated, high friction touch points and processes to flow all those goods. Well, the big competitors out there to Amazon at the moment that we\u2019ve talked about ad nauseum on the show, like Shein and Timu, had this kind of direct from China model where they\u2019re putting all the goods on 747s, flying them over, and they\u2019re taking advantage of this loophole in the postal treaty called the de minimis provision to not pay taxes or duties or have all these goods inspected that they ship into the U.S. and U.S.<\/p>\n<p>Jason:<br \/>[58:07] Businesses have been complaining it\u2019s unfair. There\u2019s like all kinds of talk about it. We\u2019ve done shows on this and I\u2019m sure we\u2019ll do others. So here\u2019s the new thing in supply chain.<\/p>\n<p>Jason:<br \/>[58:15] All the people that have been complaining about this are now doing it because guess what\u2019s happened? A bunch of these companies have been born that now help every other brand in the world take advantage of the de minimis provisions to near shore their goods. So you\u2019re a footwear manufacturer, you make your shoes in Vietnam, Instead of shipping them to the U.S. On a pallet and paying taxes and duties, you ship them on a pallet to Mexico, and then you send them individual parcels across the border from Mexico into the U.S. and never have to pay taxes or duties on the stuff. So I don\u2019t know if that will last in the long run, but that\u2019s a very disruptive, significant change happening in the whole world of e-commerce supply chains as we speak. That\u2019s pretty interesting. Interesting. Had you gotten wind of that yet?<\/p>\n<p>Scot:<br \/>[59:07] No, no. That\u2019s all new to me. Thanks for sharing.<\/p>\n<p>Jason:<br \/>[59:09] Yeah. That\u2019s probably how you\u2019re going to have to start getting your spiffy stuff into the country now too. I won\u2019t, I won\u2019t, we won\u2019t go there. But the one other piece that did not come up in the earnings call, but a controversy around Amazon since our last show is news articles came out that Amazon was de-installing its Just Walk Out technology from its grocery stores. So Amazon had built Just Walk Out into several of these Amazon Fresh stores and they built it into Whole Foods. And if you know the history of Just Walk Out, this was the original intention of Just Walk Out was was to do it for grocery stores, but it was too hard at first. So they, they started with these little convenience stores and now they had scaled it up and everyone thought that was the future. And, you know, in the last eight weeks they announced, yeah, we\u2019re, we\u2019re uninstalling it from the grocery stores. It\u2019s not a good fit. And the articles that came out both started out saying that, but then they pretty quickly extrapolated from that to say, Amazon\u2019s giving up on just walkout technology.<\/p>\n<p>Jason:<br \/>[1:00:09] And it was a scam anyway. It was a bunch of, it was thousands of people in India that were just watching the cameras and doing the work. It wasn\u2019t really AI or technology doing it. And then Amazon had to quickly go into a PR spin cycle and they sent reps out. They\u2019re like, you know, guys talking on a bunch of podcasts about, no, no, no, we\u2019re not abandoning Just Walk Out. We just learned that it\u2019s not a good use case for grocery and all the SKUs and all the weight-based SKUs in a grocery store. So we still think there\u2019ll be lots of good use cases for Just Walk Out, but that\u2019s not gonna be the grocery innovation that we actually think the grocery innovation is the Amazon Dash cart.<\/p>\n<p>Jason:<br \/>[1:00:51] And the India thing just turns out that like when you\u2019re training LLMs, you do have humans look at the LLMs results to improve them, right? Like it\u2019s a natural, you know, appropriate part of the, the LLMs and Amazon was probably doing that, but they do have a lot of technology around these just walk out. But so it became this whole thing is Amazon abandoning grocery is Amazon abandoning, just walk out.<\/p>\n<p>Jason:<br \/>[1:01:16] Andy has made it clear. They\u2019re still going after grocery. He said in the earnings call that we\u2019re, you know, we\u2019re doing really well in growing at the non-perishable side of grocery, which is all he, he, he even mentioned this antidote. He said when the general merchants first started trying to get into grocery, which is code for Walmart, that Walmart started trying to sell groceries in 1990, that at first what they sold was shelf stable, non-perishable stuff, paper towels. And they got pretty good at that. And Amazon\u2019s point is we\u2019re really good at that and do really well at that.<\/p>\n<p>Jason:<br \/>[1:01:49] We\u2019re not very good at fresh, frozen and perishable yet. And we still have to figure that out, but we do have this new model, Amazon Fresh concept in Chicago called V2 and we like the results so far. And we\u2019ll hope to refine that and scale that one day. And it\u2019ll be interesting whether the unique value prop is dash cards. When the technology guys from Amazon said, hey, we\u2019re de-installing Just Walk Out, they kind of hyped up these dash cards, which are these smart shopping carts.<\/p>\n<p>Jason:<br \/>[1:02:22] I\u2019m by no means I\u2019m writing Amazon off as a grocer, but I am very skeptical and cynical about these dash cards. I live in Chicago, so I\u2019ve been able to visit the stores that have them. And, you know, a typical store has six of these dash cards and they have 50 to 100 shoppers in the store. So it just, it, it doesn\u2019t, they\u2019re not scaling it to try to be, you know, a good solution for all the shoppers. And one of the main things you try to use a shopping cart for in a store is to get your 60 grocery items to your, the trunk of your car. And two problems with the dash cart is it doesn\u2019t fit 60 grocery items and you\u2019re not allowed to take it out into the parking lot. So I still think, I think there\u2019s some work to do still on the dash carts, but all this sort of came new ahead leading up to the earnings call this year. So I did, I did want to mention that, I don\u2019t know. Are you optimistic about Amazon Grocery, Scott?<\/p>\n<p>Scot:<br \/>[1:03:17] They haven\u2019t quite figured it out yet. I think they\u2019re still kind of lost. Seems like they\u2019re leaning in. The $9.99 thing is really just Whole Foods, right?<\/p>\n<p>Jason:<br \/>[1:03:28] No, it\u2019s unclear. Amazon delivers groceries from two models, from what they call Amazon Fresh and Whole Foods, and they put too much work on the consumer. The consumer has to decide in advance which one they\u2019re ordering from, and you can only get part of the products from each thing. Yeah, I hate that.<\/p>\n<p>Scot:<br \/>[1:03:44] It\u2019s like whenever I find stuff, it\u2019s split in there and I just give it. And then it\u2019s kind of like, what are you doing? And I\u2019m like, I\u2019m just trying to find stuff I want. And I want this granola and this thing. And it\u2019s like, well, you can\u2019t do that. I\u2019m like, well.<\/p>\n<p>Jason:<br \/>[1:03:57] Yeah, you can only get that Hook\u2019s cheddar cheese from Whole Foods, but you can only get the Doritos from Amazon Fresh. And you didn\u2019t opt in to either of those. So it\u2019s confusing. It\u2019s a mess at the moment. And again, grocery is a huge part of retail and it\u2019s the highest frequency retail. So, you know, if you care a lot about knowing the data about consumers, you want to win in grocery. But it\u2019s it\u2019s also very different. Like Andy Jassy has said in past calls, we understand we\u2019re the only way to win in fresh and imperishable is to have a lot more product, a lot closer to customers. And that\u2019s why, you know, we might need physical stores. And Amazon has proven they\u2019re really good at fulfillment and these hub and spoke delivery models. They have not won at brick and mortar retail. And, you know, we were looking before the show, Whole Foods is a little bit bigger than when Amazon bought them. But, you know, Amazon hasn\u2019t really like, you know, poured gas on Whole Foods in any meaningful way either.<\/p>\n<p>Scot:<br \/>[1:04:57] Yeah. So they need to figure it out. Not a very day one kind of experience. Yeah.<\/p>\n<p>Jason:<br \/>[1:05:02] We\u2019ll have to do another show, but across the parking lot from Amazon, there has been some other retail news. A big one was, you know, Walmart\u2019s invested billions of dollars in healthcare clinics. And they announced this month that they\u2019re closing the healthcare clinics, which is super interesting. At the same time, Amazon is actually ratcheting up their pharmacy business. So they\u2019re now offering same-day delivery of pharmacy goods in two cities and expanding to six more cities. So that\u2019s the healthcare industry is really following all that stuff. We could talk about that. And one that I think every listener should follow really closely, Walmart launched a new owned brand this year. The biggest brand launch Walmart\u2019s done in 20 years called Better Goods, which is elevated premium food products sold by Walmart. We talked earlier about the consumer climate\u2019s really favorable to these higher value store brands. And if you look at the companies that are performing the best in grocery, it\u2019s the companies that own their own brands. It\u2019s Trader Joe\u2019s, it\u2019s all the\u2026 Costco\u2019s the largest CPG in the United States of America. Costco\u2019s bigger globally.<\/p>\n<p>Jason:<br \/>[1:06:08] Kirkland is bigger globally than Unilever. And so super interesting that Walmart is kind of making its first significant entry in that in a long time. And then the retailer that historically has been doing the best of that is Target, who\u2019s been struggling as of late. And what they launched most recently last month is a new brand that\u2019s competing with dollar stores called Dealworthy that has the lowest price point products that Target\u2019s ever offered. So we talked about the consumer being stressed and Target not necessarily having a good answer for that. This Dealworthy brand seems like their big effort to try to catch that value consumer that they historically haven\u2019t captured. So lots of stuff in this world of own brands, which if you\u2019re a competitor to Amazon, the best way to compete with them is to sell stuff that they don\u2019t have. So that\u2019s a super interesting space as well. We\u2019ll have to do a show about that coming up.<\/p>\n<p>Scot:<br \/>[1:07:01] Yeah. Yeah. Thanks for sharing that. We\u2019ll keep an eye on it.<\/p>\n<p>Jason:<br \/>[1:07:04] Yeah. And with that, we\u2019ve blown past our allotted time. So people complain we didn\u2019t podcast enough. So we gave you two podcasts in one show.<\/p>\n<p>Scot:<br \/>[1:07:12] Yeah. Careful what you wish for, folks. Boom.<\/p>\n<p>Jason:<br \/>[1:07:16] But hopefully you enjoyed this and we still would love that five-star review. Again, if you live or have familiarity with any of those global cities I\u2019m visiting coming up, please drop me a line. And thanks everyone for sticking with us. And thanks everyone for all the kind words and comments that we\u2019ve both heard this quarter. Until next time, happy commercing.<\/p>\n<p>\u00a0<\/p>\n<\/div>\n<p><p><a href=\"https:\/\/dmsretail.com\/online-workshops-list\/\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-496\" src=\"https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90.png\" alt=\"Retail Online Training\" width=\"729\" height=\"91\" srcset=\"https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90.png 729w, https:\/\/dmsretail.com\/RetailNews\/wp-content\/uploads\/2022\/05\/RETAIL-ONLINE-TRAINING-728-X-90-300x37.png 300w\" sizes=\"auto, (max-width: 729px) 100vw, 729px\" \/><\/a><\/p><br \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A weekly podcast with the latest e-commerce news and events. Episode 319 is deep dive into Amazons Q1 2024 results. Subscribe: ????? Episode Summary: In […]<\/p>\n","protected":false},"author":1,"featured_media":1121,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[],"class_list":["post-12458","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-podcasts"],"_links":{"self":[{"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/posts\/12458","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/comments?post=12458"}],"version-history":[{"count":0,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/posts\/12458\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/media\/1121"}],"wp:attachment":[{"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/media?parent=12458"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/categories?post=12458"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dmsretail.com\/RetailNews\/wp-json\/wp\/v2\/tags?post=12458"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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