Building the Sharing Economy for Retail

time tomorrow. This is so key, Tim in terms of what's going on in the retail sector broadly, but also then what it tells us about the U S. Consumer, so key to economic growth and so key to really kind of what happens in the financial markets. Yeah, I mean remember last week the University of Michigan Preliminary Sentiment Index show that consumers are not ready to tighten their

belts just yet, despite warnings of a looming recession. With another view on retail, we welcome back Shaker not Eroson, executive vice president and chief supply chain Officer at American Eagle. He joins us right now in our Bloomberg eleven three oh studio. Good to have you with us, Shaker, How are you good? Good? Afternoon, Carol lintim new year, Happy new year? Will it be a happy new year? Well, that's what I wanted to start with, Shaker, is you

know where you laugh? You did not answer, But go ahead and we'll talk about supply chain, you know, in detail over the next few minutes. But I want to know what you're planning for. Carol talked about this idea that the consumer, you know, we're getting these new we got retail sales later this week. Uh, and it's key for understanding how the consumers is feeling. But how do you think the consumers doing well? I think the consumers

are definitely m beating all expectations. Like you know, I think, like we all talk about recession, um, but the spend has not like receded yet, like you know, like you know, there's every every retailer out there has experienced good sales during the peak season. UM. And at least that's what the master Card data says. And that's what basically the consumer sentiment is. UM. Like I'm not allowed to talk about. I was just you know, I knew that, but I was just trying to get you. I'm so sorry I

disappointed you, UM. But that said, I think like, um, you know, last year was a year of just in case inventory in the system, primarily because the supply chains were all uh a month before your report you could share anyway, keep going, keep going. So um so we we we definitely um every every retailer had like just in case inventory. Like you know, the supply chaine was slow, unpredictable,

so people actually ended up like carrying more inventory. Like, just to give you some context, eight hundred million square feet of warehouse space in two was used for storing inventory. That number means nothing to me. So it's a cent. It's a cent of space. It sounds like a big number to make it, but it's very free. It's it's allowed. What do they normally hold, Well, you don't have that,

like you know, normally have any of that. Yeah. So so like we should see massive rationalization of inventory this year. People have begun to kind of like ration the inventory back in this because the supply chains are working. The supply chain is getting the product into the country is working.

But basically like there's inflation still like looking us at us from when it gets into the country to the doorstep when you start looking at basically what FedEx and ups have announced they have announced like a six surcharge on every package, which means one pound package that you ship like less than two hundred miles for one pound is going to cost ten dollars. It costs eight cents to bring a unit from China to US. It costs ten dollars to ship a package for one pound because

it's expensive in the US. Absolutely, it's the last mile, it's and that's what makes it expensive very much so. But like you know, we live in a very fragmented system, right, So we live in a very fragmented system because basically, like everyone is sitting in the center of the country and and from a warehousing perspective, distribution and trying to

access the customer. But shake the problem is that unless you're Amazon and you have your own network of delivery drivers, which is by not any means how they all are shipping, how Amazon ships everything, you're all kind of dealing with the same cards. Yes, so, and that's where what we are trying to do with like American Eagle, with particularly quiet platforms is actually solving that very fundamental problem. So we are building a brand new category called collaborative commerce network.

If you look at why the shipping networks work so efficiently. This collaboration, there's this consolidation at the at the port and you know, when it gets into it gets out of the factory, it's one giant shipping network which is bringing the product into the country and it is all interoperable. It's all trade moving on that ship. We don't have a system like that in US. Everyone is actually, can we have a system like that? And we've talked about this with you before. Yes, very much, so very much.

And that's what we've been throughing so far. Like you know, when you when you hear Michael Rimpel talk, who's our chief operating officer. He was on the even on the second quarter called the third quarter call, and he mentioned, it's unprecedented that we spent less money in then we spent. We spent less money in then we spent in. Why Because collaboration works, and collaborations across retailers on supply chain

is the way of the future. So tell us how much can you drill down because we're talking at this high level, which which is fine, but so say so you're collaborating with who or what in terms of moving stuff around. So we have we have fifty brand retailers on our platform, everyone from Sacks, Steve Madden's Fanatics, uh Sacks and so these are large customers who are actually

doing business with us. And and primarily what we're doing is we are aggregating, just like Uber, We're aggregate aiding all of the packages in inventory which is headed in one direction, or fulfilling these packages closest to where people live. But but the thing that I don't get is it's not like I go back to Amazon, because I think it's what a lot of people are familiar with. If you make two separate orders on Amazon, sometimes they show up those two things show up in the same package.

If I order something from American Eagle and something from Steve Madden, those are not going to show up in the same package, right, That's what we're attempting to solve. Are you attempting to attempting in the same package? We are attempting to solve. So we have we we've designed and this is something that we have basically conceptualized design. But you know, you have to get to a certain

scale for distinct to work. But you need sort of like one identifying characteristic from the consumer in order to make sure that you know the tim stant of ex re orders. This is the same as you know my wife who has a different last name, who's ordering this. Yeah right, so so so we we are we are doing like this is fundamentally happened in other industries. We have a concept called merge in transit. So primarily what it means is none of these networks, they're all push networks.

When you when you actually like you know, buy something, you're pushing a package to like Tim's doorstep. The Quiet Platforms, which is a facility close to where you lived him, is able to take packages which are all headed to your door and then give it to one carrier so that one carrier delivers to your door in one one box. And that's essentially what we're building out right now. If you if you listen to Carole Tomy talk, you know, she talked about it, like in a second quarter earnings

earnings call. She said, the cost of last smile to your door, Tim is five dollars and fifty cents on cost spaces. The next package she delivers to your door is sixty cents more. Okay, So Carol, I'm gonna jump in here because I'm seeing this too with Uber for example and Uber eats. If you order something on Uber Eats, they say, okay, you have you know, X number of minutes to add something to your order from CVS for example,

which is along the way. And I'm not using the names correctly, but it totally makes sense because that incremental cost to get that thing to your door is cheap. And imagine, right, you have in the last ten years if you if you revolve the time back and look at it, like what ten years was like you had probably one package from one carrier you know, developed to year door. Now you have ten packages coming from ten different people, but ten different carriers showing up at your door.

We've only got about forty seconds left here, So what's key in making this work? Like, I get it? So what is it that you have? You have to have just a ton of people buy in and help support the infrastructure or what, Yes, it's it's it's this is like like I will put it in the words of what like you know and out of President told this

is going to be game changing. What we're trying to do is going to be game changing because it brings sharing economy to a whole new level at the physical and the digital almost sounds like air the airline industry in the hubs of Like I order a bunch of things, okay, and it all goes to Atlanta and it's put into one little box and then it goes out to me. Box is just a manifestation of collaboration. But you know,

even if you don't put it in one box. But if all the packages which are headed right tim goes to one carrier, you still get the efficiency God delivery provider supply chains. Yeah, and if we just put it all on metaverse and just buy metaverse things like I have my own theory about Metaverse for sure, like you, you still needed physical word to execute on it. Comeback rest soon, Shaker not a Rajan Executive EP Chief Supply chain Officer over to American Eagle. Thank you, Thank you,