New co-host, same chaos: Amazon Haul, Nike's DTC regrets, Perplexity AI Shopping, and more

No one will ever accuse me of being fashionable , and when I first met you , chris , I can tell you this now , when was ? it Because we've known each other eight years and you're not my direct supervisor anymore , and you're my favorite American and I know more than one Just saying Okay , that's good , that's important .

But yeah , when I first met you , chris , I was like how to say this ? I thought , to be honest , you were like this very flashy dresser and stuff like that , and I thought you were maybe a bit shallow .

Okay , but that was actually me who was being shallow , because I was judging a book by its cover and , knowing you the past eight years , you're so deep , you're miles deep and you're such a smart guy and I'm really glad to have you as my co-host on the podcast .

Talking about expectations , mate , what are your expectations regarding this new setup now ?

There's also a lot of administrative stuff that was not my strong suit for organizing interviews and stuff like this .

Um , and on the one hand , it's always my favorite like hour of a week is to that when I get to talk to someone really interesting and get paid to do it too by smarter commerce is really great , uh , but on the other hand , it was just a grind after a while . But now I want a format , um , that's just a lot more dynamic and engaging .

Those are really my goals is that the content is a little bit faster paced and a little bit more entertaining . I'd say Awesome , yeah , awesome .

My expectation is that we do it as much unscripted as possible so that you can really surprise me and I surprise you . We might be a bit controversial at times . I would love to do that as well , and everything else . All systems are on . Go , looking forward to it , mate .

Um , and if you , as an audience , have feedback for us what you like , what you don't like , yeah , now's the time to speak up um , let us know . Uh , but on to today's episode . We are going to cover a bunch of topics , including amazon hall , perplexity , shopping , a look at nike's

d2c efforts , where we stand and really looking forward to it . Let's jump right into it .

You can access it in the Amazon app and the idea is that it's basically their answer to Timu , so you can buy things very , very cheap and it'll take a little bit longer to get here . And it's related to this whole de minimis taxation topic , this taxation loophole . Um , I personally think that amazon blinked here .

I think that timu we can talk about how threatening timu really is to amazon's business , but I don't know if this strategy makes sense long term . I don't know what you think about it .

Right , I mean they , they sacrifice the speed of delivery , but the the idea is probably delivery , a slow delivery , or price . Trump's slow delivery . Did I say trump ? Is this okay here ? okay just just okay , got it , but .

But they sacrifice the speed of delivery for cheaper prices and the whole thing , as far as I understand , is somehow based on the idea that they can import products very , very cheaply directly from china . Now my question would be what is the trump administration doing about that ?

Because the diminish , diminish act is , I think , you can import products below 800 US dollars duty-free , as far as I know . So what if this changes ? What does it do to the business model ? Because I can assume that they are losing money with every transaction . They have right .

They didn't waste a lot of time doing that and you can tell they're looking to bring in some revenue into that , into that property , and try to offset it a bit . But , um , we don't know how much they're subsidizing it by . To me it's kind of like we know timu .

There were reports that they were losing 30 per order or something like that back , uh in the day . I don't know if that's still accurate . Um , amazon's losing money on every order and so does timo . Yeah , they both do . And the question you know team was subsidized by this parent company , pdd . Amazon has all kinds of business lines .

Amazon subsidized other business models of theirs for years too . It's not a new thing to them .

They're already onboarding sellers , like you know , local sellers . They're already working hard on building up their local inventory to avoid this whole taxation loophole problem . So if the loophole gets closed that dependency they've been working already for months . They anticipated that this would happen .

They're not dumb , whatever you want to say about the people at TeamValue .

The fulfillment is done by Timo , and then they go somehow upmarket and sell at high prices Exactly . Yeah , this would be a massive threat to Amazon .

If I remember , Timu has like 2% 2.3% market share , which is very small compared to Amazon , but it's a lot of Where's Amazon at oh , very high , I don't want to misquote , but super high , but you know , at least 10 times , I would say , around .

I read something about 100% , but I mean the fact is that they got 2.3% market share within a couple of years , within a couple , yes , and they did that just buying it with ads mostly .

I think the human being always wants to have the best price possible , but also accepting that it's delivered . I know what are we talking about here . Weeks , three weeks , yeah , I mean . And if you look up the amazon numbers , I think last quarter alone they had 40 million customers who used their prime within one day , free shipping .

This was the core value proposition of amazon , and now they are deliberately setting up a new entity which is completely diluting this very unique selling proposition .

But a lot of times I'm ordering something and I don't actually care that much when in a wrap , I think it highly depends on the use case , right ?

I mean , sometimes you get up to 90% discount for products 90% . I mean this can't be sustainable , Even if you have a war chest of billions of dollars . I mean , what's the strategy there ? I mean because they are discounting whole products . Is this something Timo does as well , because I'm not that much into Timo .

So is there a discount on already super cheap products ?

Um , yeah , I mean , amazon is a lot more selective right now . That . So , first off , the order volume on hall is a lot smaller than the main platform , of course um , so yeah , they're losing a lot on these orders , but it's not a huge volume right now . The question is where they want to go with that .

One thing I thought about on my train ride is Amazon could do the same thing . Right , if they are somehow able to transform , let's say , these whole clients who are low-price-seeking clients into loyal classic Amazon customers , then this bet could be a big win for them .

But I think it's a big if , because the classic haul customer I think they are hard to transform into loyal Amazon customer willing to pay more for products .

They're actually hiring here in Europe . They're looking at potentially a worldwide expansion with it . But if Hall doesn't work , why ? What was the ?

From that perspective , If it's really about building a sustainable business model , I think that's the big question , and I don't know how big of a war chest Amazon has , how much they're willing to invest into this . So I would say if it didn't work , the main reason was that it's just not working .

From a admin right now is um , I mean , by the time we this podcast is published , anything I could say ? there'll be something new or some change .

Um , amazon haul and Timu definitely a challenger , incumbent story . Let's look at this topic about perplexity shopping .

. Perplexity shopping ? I'm sure too , but let's just run through it Like what if perplexity shopping takes off ? What do you think about that ?

If someone had asked me , let's say , 10 years ago , maybe even 5 years ago , who is the one company you will never bet against , google would be on top of this list , right ? This is the crazy thing now . Now we really could argue that Google , for the first time ever , has real competition and a real threat to their business model , which is google search .

So for me , that's , that's what I just want to put on front search . The discussion alone is crazy to a certain degree , at least for me . Um , and yeah , I mean what if I think perplexity it's . I think it's not just about perplexity . I think perplexity stands for this new wave of competition .

Yeah , and this new wave of competition are , and this new wave of competition are , I would say , search providers , search platforms , who are way more aggressively and way more open about integrating AI . Google is somehow became a slow company . Another statement couldn't have thought of telling you , saying to you a couple of years ago .

So I think it stands for this new wave of search behavior and AI , integrating AI into the search platforms . This probably will be the one major differentiator for this new up and coming platforms like Perplexity . I think that they have a real shot to eat into market share of Google , which is still crazy . Yeah .

It's that innovator's dilemma . I mean , google has everything to lose here and perplexity has nothing to lose , everything to win , and this is a totally asymmetric thing that's going on there . So what perplexity is doing ? They're integrating um with shop systems like shopify . They're integrating with payment systems like stripe .

Shopify , of course , has its own um , its own payment system in there with ShopPay , but they're also , yeah , basically building up merchant centers so that people can submit structured data to them product data and this is going to allow them to it's in a beta right now , but that you can do a checkout while chatting with it Exactly yes . So it functions .

Way more is mind-blowing , Because the thing that is always missing for me , I mean , actually , Google has all of these assets too . Yes , they have merchant centers . They already have a huge pool of demand and supply AI power , money people brand . They have the payments . If you look at their buy on Google program . It's just almost rebuilding that slightly .

But they won't move first on something like this because it's too threatening to them Absolutely , and this creates an opportunity for perplexity .

How can they embed it in their business model ? Right , and business model is paid search , and I think this is the one major advantage perplexity has , because they have , like you said , nothing to lose . It's an upside for them , and I think we had a similar discussion during one of our lunches . I think Google also is facing somehow a brand reputation stuff .

Right , that the young people are not Googling in anymore .

outside pressure I think it will lead to more innovation again on Google's side , which is a good thing at the end of the day .

Like you know , we talked about Google search being their business model , but Google search , that's , that's the whole thing of what they do , but it's a war to everything else , but it's a war for a subset of all those queries . I mean even something people talk about like chat GPT , taking market share . Is that interesting or not ?

Are they taking the right market share ? Because if people are just going to chat GPT for informational queries and not commercial queries , then it doesn't matter .

I think I saw a really interesting thing I believe it was on Twitter X the other day and I wish I could attribute it , but I don't remember who said it .

It was anecdotal but it was such an interesting idea because they were saying this person was someone like our age and they're saying how their mom loves chat , gpt , and I think that's really interesting because their speculation was that there's actually adoption happening with young people who are kind of AI native and you might think that , like the older folks ,

would lag behind new newfangled technology or something , but actually it is so easy to work with and convenient . Yeah , for sure that there's a part of the market where there's more friction in google search than in chat , gpt or perplexity or other things .

So no doubt we could see this that maybe that last stubborn core could be more people our age who grew up with .

What I would like to conclude on is , yes , google will face significantly more pressure , but I think we have to differentiate here , because I think the pressure they will face is , first and foremost , in their core markets right US , europe what I think Google has as a massive advantage on their side , talking about growth potential .

All the new markets right , india and Co , where basically , the internet adoption is still significantly increasing . Google has one major foot in the door because of Google Maps . We talked about that right . All these highly convenient features Google has . This is the basis they can work from there .

So what I would say is there is a high probability that perplexity and co will eat into market shares in the core markets , but an overall growth story , the overall growth story for google is still intact . It's no financial advice , by the way , but I'm just saying I think they have .

They affect a strong business model and especially looking at the growth potentials in new markets , because they already have this foot in the door . Yeah , with the likes of google maps , the people are used to google there yeah that's what I wanted to say , yeah yeah , totally they .

They have a program called next billion users , um , where they've built um lightweight versions of all their apps that are suitable for , like , local infrastructure and developing markets , and it's no coincidence that Google and Meta these are the people building undersea internet cables across the ocean . There must be a reason , right ?

Yeah , they're like they want these markets to come online and they want them to get started with lightweight versions of the apps and then , as the infrastructure is more robust , get onto the full way versions which can be monetized . Perfect strategy .

I think it's good for everyone here the companies who are advertising on Google , the end consumer , the likes of you , me , the listeners because this will spark innovation again on Google's side , and perplexity will do their thing anyway . So I think it's a good thing in general .

direct consumer strategy and , like you said , nike is a brand that a few short years ago they were on top of the world . You couldn't imagine them doing wrong . It was the Google of the sports manufacturers .

Everyone in every like Wall Street Journal , everyone in the world was writing articles about how fucking smart their strategy is , and now everyone is writing about how stupid their strategy is and how obvious the mistakes are Hindsight bias . Here we go , yeah , yeah , but why don't you dissect that for us a bit ? Why don't we do this ?

I have to say the following although my two favorite sports athletes , roger Federer and Vince Carter , were both with Nike all the time , you were just saying me a Vince Carter gift this morning , by the way .

They were blowing Adidas more or less out of the water , although Adidas did their thing , but the gap between Adidas and Nike was just huge and basically growing . And since 2022 , I mean , it's fascinating the stock dropped by more than 50% , which is unheard of , right . And what I tried to do is I tried to find out what were the reasons behind it .

And the reasons are , with like every issue in our life , manifold . Right , it's multifactorial , but I think there's one major reason which sounds crazy , because everyone loved the strategy until it failed was their extremely aggressive direct-to-consumer strategy and that led to significant home-alls with their business , which is crazy Because , again , everyone loved it .

Everyone thought Nike is the one player who could go down the strategy and really succeed sustainably , and they didn't . And there are very , very interesting reasons behind it .

However , I understood the reasoning behind it , because the D2C strategy just it picked off greatly . I mean just one number In the year 2022 , when they launched the D2C strategy , they crossed 18 billion revenues direct to consumer . Yeah , the DTC strategy , they crossed 18 billion in revenues direct to consumer .

To compare it with the overall revenue of Adidas Adidas crossed 24 billion as a whole . So DTC took off like crazy .

But then something happened which probably we call the black swan the Corona pandemic happened and this changed the buying behavior fundamentally , and that's why I think I understand why , in the short term , the Wall Street was very negative about them . Is it fair ? From a long-term perspective ? I don't think so .

We want to do it directly , and so they wanted to save margin .

They wanted to control the shopping behavior end to end , and it was a genius strategy , because what they basically did is they called it a direct consumer strategy or aggressive strategy I think there was even the term aggressive in there and what they did is they created four major apps , which is basically driving the digital growth right .

Secondly , they were expanding their retail stores flagship store strategy . And the third one is they wanted to connect digital with offline in a very , very unique way , and all three of them were really , really great ideas .

I mean , just to give you an idea , mike , you have this Nike app , right , and Nike knows basically everything about you the products you looked up , the preferences , sizes , which sports you're interested in , everything . If you enter a Nike store , you don't even need a sales guy from nike anymore because everything is qr-based selling you .

You get the information directly by the qr code of the product you want to buy in your app and it's highly individualized content because nike knows everything about you . They even show the cross-sell products you have to look at because you love this product . You can even check out without you know . It's a great idea .

But then the pandemic happened and two things basically led to to a downfall of this d2c strategy . First of all , people became more price sensitive again , which is not a good thing for a d2c strategy , because you want to keep the prices as high as possible . You don't want to have this , this discounts on on your direct to consumer .

And the second thing is just , people were just eager to go to stores again . I mean very , very simple drivers here , which led to massive pressure on their business . And , to be precise here , mike , they were just off the shelves from big retailers like Footlocker , and the shelves were filled with new brands . So Nike was not there .

The people were going back to the stores . They were looking for cheaper products and Nike just couldn't offer this . So these were the main reasons why this on paper genius strategy just failed . And now Nike has to crawl back , just to be clear here , crawl back to Foot Locker .

I mean , they also hired a new CEO who is basically reigniting the partnership with these big wholesalers and retailers , because they have to be in the stores again . That's what the customer wants , and I think it will be an uphill battle .

And actually there's a lot of things that retailers are specialized in and do well .

Costs of the middleman is very short-sighted , because logistics , stock clearance , um , like returns , having a basically an independent discount strategy which is not directly affecting a brand all these things is done by the retailer .

Yeah , and one crazy number I think I don't know where they are at right now , but I think in 2024 they piled up their , their inventory level to 9 billion US dollars . So there's , for instance , a very , very strong fact why Wall Street is critical on them because 9 billion in inventory and you don't have the retail network to clear it .

You cannot . No brand is an island , Not even .

all the time I feel all the time like that . So I will ask now probably two or three stupid questions . The agenda point is influence versus budget . I think it's a very , very interesting topic for retailers in general .

He was on stage presenting a slide , a chart about influence versus budget , about influence versus budget . And then Will Reynolds , also quite known in the scene , ended up posting this online and it was really popular online 400 likes on LinkedIn , a ton on Twitter , and so , first off , we're going to show you what this chart looks like .

But to listeners this might seem petty of me , but it's the least readable chart I've ever seen . It's like a donut chart surrounding a pie chart and there are 14 different segments , which is way too many segments for a pie chart . And to have a donut chart around . A pie chart is a mind bend .

And also one of the charts is in percentages and the other is in absolute values . Um , but I also quickly redrew the chart and we'll share that too , because it's a lot easier to read and talk about .

Uh , but to rand's point , because I also I don't want to be perceived as having a beef with rand fishkin , um , but because he doesn't know there can't be he doesn't know who I am .

But he shows like let's just run through by influence kind of , the top three most influential here are industry websites and blogs . That's changing fast with AI For sure . Social feeds , good YouTube channels , okay . And then he shows how budget is allocated and by far the number one source of spend is Paid search .

Paid search Now , point taken , people don't invest enough on their influence channels . But it's also to me very apples to oranges . If someone thinks that Google search is an influence channel , they're sadly misinformed . I don't think anyone understands the channel that way .

It is a demand capture channel , yes , and I definitely think building up a brand affinity makes a ton of sense certain way , because I think it's trying to say something about Google paid search that isn't entirely true .

And if you don't , if you just throw worms in and you don't have a fishing rod , you are not going to catch any fish . Yeah , it sucks that you have to pay to capture the demand , but you do Because my question would be what can you derive from this ?