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Episode 328
November 3, 2023

The Collapse of Convoy

"Everything's dopamine-centric" and today we explore how the industry of logistics and eCommerce are no different. PLUS: Kris Gösser joins us to discuss the rise and fall of Convoy. Listen now!

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"Everything's dopamine-centric" and today we explore how the industry of logistics and eCommerce are no different. PLUS: Kris Gösser join us to discuss the rise and fall of Convoy. Listen now!

We Need More Daring

  • {00:17:03} - “Everything's very dopamine-centric. And it is, it is preying on your like, "I'm going to gamble a little bit. I'm going to spend a little money and see if this is worth it." And sometimes the thing that is worth having spent the time is the dopamine and not the product that you got at the end.” - Phillip
  • {00:28:34} - “I think Shein is the most multiplayer brand because they only produce the things that customers tell them they want. Their just in time manufacturing, their operating model is specifically designed in the same way that software engineering created an operating model around scrum and sprints where you have an agile process that allows you to only make a certain set of features at a time and only focus on those and then move on to the next thing. This is a new operating model for a certain type of a retail business that is fundamentally multiplayer.” - Phillip
  • {00:30:55} - “Overcorrection in design breeds a lot of innovation and copycats come along and then that becomes the trend. And that is, I think, what we're seeing, and what we hope to see actually in a lot of design, especially in website design.” - Phillip
  • {00:44:20} - “Tech-enabled logistics was a fun party while the party was happening. But really this is a story of the fed. And when rates were increased and you saw every industry from banking to telecoms to consumer electronics to whatever, whatever, whatever, that impact is so foundational and central that it shook through every system out there.” - Kris
  • {00:47:37} - “The capital costs just didn't have enough time to pay off. Basically you have all this heavy investment in tech and then when the market's cratered and the market wasn't there anymore, they had all these high costs.” - Brian
  • {00:54:23} - “What's going to happen is you're going to see this kind of knock on effect of the innovations Convoy had, the innovations Flexport has had, the innovations 3PLs are doing, whether it's Shipium or other companies that are software-centric are now going to be able to help improve the industry with a lot of their ideas, a lot of their concepts and just in general help achieve maybe over the next five years, the impact on the industry that a lot of the tech-enabled logistics companies are trying to do.” - Kris
  • {01:03:53} - If someone's not looking at the business holistically, or at least with a modern lens of how technology is actually going to affect the business at every touch point, then it's going to get really hard to focus on the things that will make a meaningful difference.” - Brian

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Phillip: [00:00:00] I cannot see how anyone wants to buy like this, but it is entertaining. I do think that there's a... Yeah, this is 1) weird. If Darwinian evolution can come up with anglerfish and the dodo bird, why not capitalism come up with Box Lady? I have no problem with that.

Brian: [00:00:23] Box Lady is the dodo of commerce.

Phillip: [00:00:27] It's the dodo of commerce. Hello and welcome to Future Commerce, the podcast at the intersection of culture and commerce. I'm Phillip.

Brian: [00:01:37] And I'm Brian.

Phillip: [00:01:38] And achievement unlock. This is the first time I'm doing a podcast with Strep.

Brian: [00:01:44] Or something.

Phillip: [00:01:45] Or whatever. I'll get officially diagnosed tomorrow, but if you're watching on the livestream, every time I swallow, I will make a face. You can see it yourself and my fresh haircut at Still haven't bagged Future Commerce over there, but we're Future Commerce everywhere else. Go give us a follow. Does my voice sound weird today?

Brian: [00:02:09] It sounds pretty good. I think you're doing well. You're doing well.

Phillip: [00:02:13] Eh. Eh. We're doing a little bit of an after-dark here. We haven't done one of these in the evening in a long time. But we got a lot to cover today, Brian. We are, I think, at when our listening audience and our watching audience over at YouTube are finally getting a hold of this episode, it'll be about four and a half, five weeks from our monumental event. Our momentous occasion, of course, that's Muses. That's happening live at Art Basel December 6th, 7th and 8th. We want to see you there. People from all over the eCommerce and retail ecosystem are coming to Art Basel to turn this into an eCommerce and technology event. I see it happening the last three years we've been there. This will be our third year activating at Art Basel. Brian, are you pumped?

Brian: [00:03:01] I'm pumped.

Phillip: [00:03:02] Yeah, I've got an incredible opening party on the 6th. We have Commerce Conversations happening on the 7th, which is a networking event for folks in the eCommerce and retail ecosystem. And that's Commerce Conversations, brought to you by Absolute Web. And of course, the exhibition will be active all three days. We have nine incredible artists and ten amazing installations. We're going to bring you a literal manifestation of art and commerce. This is where commerce and art converge is at Art Basel, and Future Commerce is going to be unveiling our brand new journal for the year December 6th, 7th, and 8th. Come on down to Miami Beach. Book it now. Go to And any other thoughts about that?

Brian: [00:03:47] I'm pumped.

Phillip: [00:03:50] Okay, good. We're pumped.

Brian: [00:03:51] I'll keep saying that.

Phillip: [00:03:53] We're just going to keep saying we're pumped. What have you been up to recently? We've had a lot of salon events. Q4 is kicking up in a big way for us.

Brian: [00:04:01] Yeah, we've got some really cool salons going on. It's been kind of all over the country: Seattle, New York, LA. We're going to be in Austin. It's pretty exciting times. We're doing a lot. And that's all leading up to Muses. So it's been a whirlwind of a Q4 already. I can't even believe how whirlwindy it has been.

Phillip: [00:04:29] And if you have yet to come to one of our salon events, these are a private dinner series that we host where we have conversations with retail and eCommerce leaders talking about the future of commerce. If you have yet to get out to one of those, the easiest way to do that is to go and subscribe to Future Commerce. It's free for now. and get on the list. Make sure you put in, give us a little information about yourself, including your company name, and your title over there. We've had incredible brands in the last few weeks at these salon events in New York. I think we had Chanel and Diptyque, we had Kravet. Wow. Um. Yeah. Diane von Furstenberg. Incredible stuff happening over there.

Brian: [00:05:15] Very fun conversations. Things that you know you're not going to get to talk about in many other contexts.

Phillip: [00:05:23] That's true.

Brian: [00:05:23] And people you're going to meet that you wouldn't meet elsewhere. And honestly food and wine, you probably won't have very often.

Phillip: [00:05:35] That's true. Where are you heading this week? You're going to LA.

Brian: [00:05:37] LA, Austin, Miami. Over the next week and a half, if that.

Phillip: [00:05:43] Week and a half. Yeah. I'll see you.

Brian: [00:05:45] It's less than that. It's like a week.

Phillip: [00:05:45] You'll be down here. Yeah. And what's the venue in LA? Where are you heading?

Brian: [00:05:53] Citrin. It's a Michelin-starred restaurant in Santa Monica. And it looks incredible.

Phillip: [00:06:00] Looks incredible.

Brian: [00:06:01] The wine lineup is insane.

Phillip: [00:06:05] Brian, give us a little taste of what's on the docket.

Brian: [00:06:10] Yeah.

Phillip: [00:06:11] Whet our palates.

Brian: [00:06:12] Yeah.

Phillip: [00:06:13] I can't swallow, but whet my palate.

Brian: [00:06:17] I mean, you could always sip and spit.

Phillip: [00:06:25] I shan't. I shan't. I don't think I'd do that even without Strep. Not anymore. But once upon a time I might have.

Brian: [00:06:35] Oh, yeah. Once upon a time. Once upon a time. Yeah. Well little, little tiny, little tiny taste. We'll be drinking some top-ranked Syrah from California. We'll be drinking wines from 85, I think 83, from 67.

Phillip: [00:06:57] 67? Do we have the budget for that, Brian?

Brian: [00:07:01] I guess so.

Phillip: [00:07:02] We're a bootstrapped and nearly profitable business. I used to say profitable, but these salon dinners, I don't know. If you do want to have the time of your life, you got to get out to dinner with Brian Lange. Brian, you are a host like no other. I'm always impressed. You have an incredible way of hosting an amazing dinner party. And also, I truly thought that I would hate hearing someone read French poetry to kick off a dinner, but somehow you endeared me to it.

Brian: [00:07:32] I love this.

Phillip: [00:07:33] I love your readings.

Brian: [00:07:33] Because I've never actually read French poetry at one of these. {laughterr} But you've said it like 20 times. I definitely read a little Balzac.

Phillip: [00:07:49] I'd say you come strong with the Balzac at our dinners.

Brian: [00:07:52] I do. I brought it more than once.

Phillip: [00:07:55] He's a French novelist. That counts. Okay, well, let's get into the show a little bit here. We have a couple of news items. Of course, later on in the show, you're sitting down with Kris Gösser and you're talking about some really rad stuff. I wasn't there. I probably just given my state shouldn't be here right now, but give us a few minutes and we'll get into the rest of the episode with Kris. Kris is always a great guest.

Brian: [00:08:23] Kris is diving into the collapse of Convoy and the rest of the sort of shipping layoffs and what it all means for the industry. It's pretty crazy.

Phillip: [00:08:36] I mean, you can't really have eCommerce without logistics. And so that's where I think that you're going to have a lot of shakeups happening in the world right now. And I think it's funny, for two and a half, three years now, I've heard people call that say the party's over, but the economy keeps trucking along. In fact, the economy is trucking along at such a rate it continues to baffle folks. We had an incredibly strong consumer spending report most recently that showed a 0.7% year-over-year growth, which does show a slowing in the consumer. But we haven't seen the inversion just yet.

Brian: [00:09:20] We get into that a little bit in the interview. And I think that's what's well no. And I think you're dead on. I think that's actually the weird contrast that we're seeing right now. And Kris shed some incredible light on why we're seeing kind of what we're seeing in that industry versus sort of the strength that we're seeing in retail. Although there are changes in retail. That's the interesting thing. And so definitely stick around for that interview. Kris is just a brilliant mind and has probably provided us with more insight on shipping than we've ever provided to anyone. So it's very cool to have him back on.

Phillip: [00:09:59] That's for sure. Shipping. I mean, our jobs typically in the eCommerce and marketing space, that's an ops problem after they click the complete purchase.

Brian: [00:10:13] It shouldn't be.

Phillip: [00:10:16] We've done the CX CS dance and logistics conversation at least once or twice with all of our partners over the years. I know it shouldn't be, but it's funny. That's how many marketers treat it these days. Anyway, we'll get into that in just a little bit. Speaking of giving up on ecommerce, Home Goods has given up on eCommerce after just 25 months. Home Goods has announced that they are giving up on online shopping to focus on their physical stores. And at the same time, Rite Aid is giving up on their physical stores to focus on reorganizing their monumental amount of debt. But some things aren't looking so bright in certain sectors of the economy. Obviously, TJX and Co, these are retailers that do really well during economic swing cycles. So I find this an interesting retrenching back to doing what you do best.

Brian: [00:11:16] Yeah it is really interesting for Home Goods. You'd think that there would be more focus on Home Goods. And maybe they're having trouble, like just keeping their stores going and keeping them stocked and keeping them focused. But you're dead on that they're a discount retailer. It seems like they would be cleaning up right now in a time where people might be holding back on cash or maybe just not spending quite as much or forced to make cuts. Usually, they may buy down. And so it seems like Home Goods would be able to refocus on digital. But the thing is, digital is hard and it's expensive.

Phillip: [00:12:02] Can I interject a hot take here? I tried to start some beef with Jason Goldberg, who I would say is a friend of the pod, but I'm going to officially announce that Jason and Scot are now frenemies of the pod. That's what I'm going to say.

Brian: [00:12:19] That's a hot take.

Phillip: [00:12:20] I tried to start...

Brian: [00:12:20] We had Jason at one of our salons recently.

Phillip: [00:12:26] In Boston. Yeah, I know, I know.

Brian: [00:12:29] He had a lot of good things to say.

Phillip: [00:12:30] No, I like Jason a lot. Frenemy of the pod, though, would make a great merch t-shirt. What I really need is I wanted someone to start an argument about this because he tended to sort of saddle it in this is what happens when you make an exciting brand boring through eCommerce. And my argument was by nature of you saying that or effectively having said that, but not having really said that, should they have been more daring in their eCommerce? Should they have taken a completely different approach? And this is my hot take. My hot take is maybe the thing that people are looking for is the feeling of the brand, and not necessarily the experience of buying. And what they really need is Home Goods is kind of like a little bit of a gamble. You're going there for an experience, and maybe what they needed was more like a video game and more of an exploratory experience that was a lot less like the Shopify website type thing, the of it all, and we don't need the top rail and we don't need the left filters and we don't need the grid and the responsive web design, what we needed was something drastically different from that. And nobody had the courage to write rather than, I mean how long do you think the eCommerce site took to build? To contract, to build, and to launch, only to be torn down in 25 months? If someone had had the courage to do a drastic overcorrection and eCommerce experience that looked a lot more like a Roblox than it did a website, maybe they could have set a trend and had a deeper level of engagement with at least some sort of customer. I don't know, that's my hot take.

Brian: [00:14:25] No, that's an interesting take. It's like going after a more fanatical base that's spread across the country as opposed to trying to compete with other online discount stores, which is really just done through comparison shopping feeds these days.

Phillip: [00:14:45] Exactly right. If someone wants to go do a hunt for an object, they're that kind of a shopper, they're probably not going to do it on Home Goods. They're going to wait for Home Goods to show up in some deal news site. Yeah. You know, or And they're going to, you know, wait for it to get fed to the home page or be a five star deal. And then they're going to click buy. They're going to immediately click buy. But just clicking and scroll search classic experience doomscrolling on Home Goods. They can do that on Amazon or Walmart. Doomscrolling, we've already got two places to do that.

Phillip: [00:15:28] It's so much more fun to doom scroll on Amazon than it is on I'll tell you that.

Brian: [00:15:36] Is it? I don't know. I don't like doing scroll shopping.

Phillip: [00:15:40] It sounded good when I said it.

Brian: [00:15:42] People love the Doomscroll shop like it's sense essence or something like that? You know, it's a site that's like if you find a steal, it is so unbelievable to you that you're like, "This is really high-end stuff for a really good price," as opposed to just cheap stuff for cheaper prices.

Phillip: [00:16:02] You can get that from Temu.

Brian: [00:16:04] Yeah. Temu.

Phillip: [00:16:05] So these are some really interesting things that are happening right now. I spoke about this a couple of years ago when I did a piece of research for Rightpoint about the growing prevalence of Chinese marketplaces and how customers are exhibiting sampling behavior. They're willing to take a chance on something like a or at the time it was Pinduoduo or Shein was on the come up. It wasn't what it is now two and a half, three years ago when I was, you know, writing these reports and what I was looking at is the sampling behavior that comes with the prevalence of installing an app. So first of all, it wasn't just a website. It was something a little deeper than that. And so there were these experiences and design aesthetics that you could get through an app that you just could not get through a simple website. Now there's a little bit of a maximalism trend in those design aesthetics of these app-based shopping things like "Spin to Win," like everything's very dopamine-centric. And it is, it is preying on your like, "I'm going to gamble a little bit. I'm going to spend a little money and see if this is worth it." And sometimes the thing that is worth having spent the time is the dopamine and not the product that you got at the end. And it's funny. It seems to be working.

Brian: [00:17:24] Or 49 cent t-shirts. On Temu.

Phillip: [00:17:30] It's working. Right. So there was a report out recently that shows from SimilarWeb that Temu's shopping traffic is starting to creep up on shopping traffic. So pure internet traffic that's heading to Temu is, which for those who aren't hip, launched right around, I think, the Super Bowl. So less than a year of doing business here in the United States as they've been scaling up their operations. They're in a heated race and looking to overtake Walmart and its dotcom properties. And I think that's really interesting. Now, first of all, I'm like very cynical that that actually translates to any measurable dollar amount that would displace money that would be spent at like a Walmart online. It is most likely discretionary. And it's displacing other purchases.

Brian: [00:18:29] It's also really low dollar value purchases. Someone's not going to buy something they feel like they might want to return on Temu. They might buy something they feel might return at Walmart. In fact, Walmart sells some pretty high ticket items, but just it's a lot safer because almost everyone has a Walmart near them at some level, and it just feels like they could take a big, bulky, or expensive item into the store and do a return.

Phillip: [00:18:56] Have you shopped on any of these? Have you or your wife or anyone you know, shopped on like Temu?

Brian: [00:20:17] Yeah, yeah, I've talked to people about Temu. I haven't actually shopped on Temu myself. This is going to sound insane, but I kind of feel like I have to draw a line somewhere.

Phillip: [00:20:27] No, I get that. Yeah, yeah.

Brian: [00:20:29] I know I buy from Walmart sometimes.

Phillip: [00:20:33] There's nothing wrong with that.

Brian: [00:20:34] No, there's nothing wrong with that.

Phillip: [00:20:36] I told you this was my year of Walmart, right?

Brian: [00:20:38] It is.

Phillip: [00:20:38] I told you I took my daughter there on her birthday.

Brian: [00:20:40] So I feel like I'm definitely like...

Phillip: [00:20:42] It was like her birthday wish.

Brian: [00:20:42] I'm a hypocrite. There's there's no question.

Phillip: [00:20:46] I don't think there's anything wrong with shopping at Walmart.

Brian: [00:20:47] I buy from Walmart but not from Temu.

Phillip: [00:20:48] I understand drawing the line at Temu.

Brian: [00:20:49] Anyway, here's one more point about that. I think this is really interesting. Temu and Shein, I think they've done really well with clothing. Obviously, Shein, that's been their whole thing. People are a lot more willing to take a gamble on something like clothing that they don't have to rely on. It might not look great, but it's not something that they're not putting it in their body. They're not putting it, like rubbing it into their skin either. It's like something that they're buying and they're kind of wearing. It's the whole in/on/around thing.

Phillip: [00:21:25] Yeah. In you, on you, around you, which we reference a lot.

Brian: [00:21:29] But on top of that, I think it's also all of the other stuff. If you go buy an e-bike from Temu, you're taking a pretty big risk because it might break down or break on you really easily and it might be really hard to fix. So it works in certain categories. That's what I'm getting at. For certain categories, something like that is going to do really well.

Phillip: [00:21:54] I'm sure it will. I guess coming back to the thing I'm trying to say is that the experience that you get on Temu, is what Home Goods should have... It's a little more daring. And you can't compete on price alone. But Temu and Shein and a bunch of others are of a different breed in experiential and dopamine-centric site design, which is what you get by shopping physically at a Home Goods. There's a little bit of a level of immersion that you would never get through a box-based, the web box model, which I think is fundamentally played out and dead and broken. We need more daring. And I don't buy into the... I'm going to give you a totally different way of thinking about this. But perhaps the Home Goods shopping experience should have come through more of like a mobile app or mobile game. So a good example would be, I don't want to out my wife, but she since the pandemic, we've taken to spending a couple hours before bed on the couch, after the kids go to sleep, we're spending a couple hours sometimes we second screen, sometimes I read, sometimes we'll talk, but sometimes we second screen. And when we second screen, Brian, she's playing a game called Gardenscapes or Wildscapes. Have you heard of this? Do you know what I think?

Brian: [00:23:16] I've only heard of it because of Jaci. Yeah.

Phillip: [00:23:19] Gardenscapes is probably exactly what you think if you remember Farmville.

Brian: [00:23:26] It's like Farmville but with gardens. Got it.

Phillip: [00:23:28] Yeah, but more modernized. And the graphics are, it's like shockingly good as far as mobile games go. It's wildly popular. I feel like they should have had a Homescapes. Home Goods should have done a digital goods centric... I'm pretty sure my wife has spent some money on buying digital goods for her digital garden. There's a story in there somewhere. Anyway, I feel like they lacked conviction. They should have done something more daring. That's why they failed. That's my hot take that we spent 21 minutes talking about. Every word is excruciating.  I must believe in this to have drawn this out for 20 minutes. I'm just saying.

Brian: [00:24:14] {laughter} Totally. Well on the lines of a Chinese company coming and providing an incredible eCommerce experience. How do you feel about the recent live stream just the mayhem that we've seen kind of floating around the internet recently? Did you called it the equivalent of a hot dog eating contest?

Phillip: [00:24:38] Okay, no. So can you sort of am radio play by play the video, we'll post it in the show notes. But what is this video?

Brian: [00:24:46] The video is a woman who's flying through items that she's like, check out this item, check out this item. Practically throwing it off the screen. She might as well be throwing it back over her head. Show off an item... You should buy it now. Go go go. And they're like, I've never I mean, I think I've seen a couple other videos like this. This isn't the only one floating around where the live stream mayhem happening in China is something that I can't really... I would never buy from that. Maybe, maybe that's, that's wrong, but I don't get it.

Phillip: [00:25:37] According to thought leaders on Twitter. You will. That is what I keep being told and I refuse. I refuse to believe. If that makes me an old man, then I guess...

Brian: [00:25:49] Maybe I'm just slow at processing information.

Phillip: [00:25:51] I don't think anybody can process any information at this speed, so you're right. But the crazy thing is she has these, like, flat Hermès-style orange boxes that are being handed to her from off the screen. She flips the lid off, shows you what's in the box, and then chucks the box and the lid off-screen. And it's happening so fast. Yes, if this is live stream shopping, it's the hot dog eating contest version of live stream shopping.

Brian: [00:26:20] How many can you get down your wallet as fast as possible?

Phillip: [00:26:25] Exactly. Yeah. Yeah. Instead of your gullet. How can you get down your wallet? You know, the issue that I have with this is it is a hyper-expressed form of capitalism, which makes me kind of love how like crazy and distorted it is. Makes me want to make fun of it. There's obviously a place for it. I don't think people would be doing this or working on this skill that she obviously... She has a skill. She also obviously has a team of people off-screen handing her stuff and catching it when she throws it. It's kind of entertaining.

Brian: [00:27:04] I mean, you don't know if they're catching it, but you definitely know that they're handing it to her. {laughter}

Phillip: [00:27:08] I cannot see how anyone wants to buy like this, but it is entertaining. I do think that there's a yeah, this is 1) weird. If Darwinian evolution can come up with anglerfish and the dodo bird, why not capitalism come up with Box Lady, I have no problem with that.

Brian: [00:27:32] Box Lady is the dodo of commerce.

Phillip: [00:27:35] It's the dodo of commerce. But I do think that it is misplaced or misguided to say that this is the future of shopping. Let's think about things in like, overcorrection. So I had this great opportunity to go and speak at Parsons to the graduate fashion program and with our friend Hitha Herzog, who is a long-time friend, I've known her for 18, 19 years, and now she's a professor over there, and invited me to come and speak about some of these design trends, things that I've been thinking about. And in The Multiplayer Brand, what we talk about is the power that customers have over brands. And one of those things is, well, I asked you before I went and did this talk what is the most multiplayer brand on Earth right now? And it had come up before at our Boston salon. I think Shein is the most multiplayer brand. Why? Because they only produce the things that customers tell them they want, so their just in time manufacturing, their operating model is specifically designed in the same way, Brian, that software engineering created an operating model around Scrum and Sprints where you have an agile process that allows you to only make a certain set of features at a time and only focus on those and then move on to the next thing. This is a new operating model for a certain type of a retail business that is fundamentally multiplayer. So I'm sharing this at Parsons. And they're all graduate students in a fashion program. So they're super jamming on this idea. But in that talk I'm also talking about how design trends tend to converge and overcorrections eventually become the norm. So a good example I use in the slide deck is how the Pontiac Aztek in 2001 was seen as one of the ugliest vehicles that had ever been designed. Do you remember this? Do you remember the Pontiac Aztek?

Brian: [00:29:53] And we've referenced the Pontiac Aztek on the podcast before because I've referenced the 30 Rock episode about it a million times.

Phillip: [00:30:01] Oh, that's true. Oh, and it was always seen as such an ugly piece of design, too, that Walter White in Breaking Bad drives a Pontiac Aztek because you want to feel sorry for him. They want you to feel like, "What a sad sack of potatoes, this guy. He drives the world's ugliest car, too. He's tragically unhip." But in the presentation, I also put it right next to a crossover SUV from BMW today. And they are functionally identical cars, the same silhouette. And it took 22 years for that to happen. But this overcorrection in design that looked really outlandish at the time was a countercultural design choice that became the culture. This actually happens a lot. Overcorrection in design breeds a lot of innovation and copycats come along and then that becomes the trend. And that is, I think, what we're seeing, and what we hope to see actually in a lot of design, especially in website design. I think we're finally breaking out of the mold. And I think that's what we really need is, we'll see over corrections like this live stream that's crazy. Eventually, I don't think everything looks like the livestream. I think they look countercultural to this. It's anything that evokes some sort of feeling, but not necessarily disgust. So I think we converge somewhere, in some happy medium that is somewhat live and somewhat interactive and somewhat immersive and not a static website. But I don't know if it looks like anything we actually have today. I don't know.

Brian: [00:31:54] Yeah, yeah. Amazon just introduced the share with your friend or shop run by your friend feature. I forget what they called it, but basically, you can kind of get a live look at what your friend might think of a purchase you're looking at in the app. And I think that, like you said, opportunities for people to come together to share their voices as a group and do it in a way that might evoke some sort of response or emotion, and who better to provide that than friends or people that you are influenced by for real, not some random person chucking stuff on the internet? That seems at least for the American audience, that seems like it would probably fit a little bit better. But who knows? I know that I don't necessarily fit the mold of every shopper out there.

Phillip: [00:33:00] That's for sure.

Brian: [00:33:00] That is for sure. Maybe everything will swing in my direction, Phillip. That would be wild.

Phillip: [00:33:07] You're the archetype.

Brian: [00:33:08] I become the archetype of the next generation of shopper.

Phillip: [00:33:13] That's funny. God bless. That would be something else. I think as we're looking at the future of commerce, there are other new impacts too. We've seen a tightening labor market. So we we have had a number of labor movements over the last couple of years. I wrote an article back in 2021 for Future Commerce Insiders called Brinkmanship. And I think that that was kind of a bit of a bellwether. It was centered around the Starbucks stores that were trying to unionize at the time. It seemed like that was just the tip of the iceberg. Of course, now we're in the middle of the largest auto strike in our generation. And we're in the middle of SAG-AFTRA still striking today. I think that's the longest strike in history. So labor is having a moment. And so Amazon, reading the room, is getting out ahead of that labor movement that's been coming its way for a long, long time. And they are trialing humanoid robots to according to the BBC news report, "free up staff." {laughter}

Brian: [00:34:31] {laughter} I think it's because they have a hard time keeping people in their warehouses. Sometimes it's a pretty wild environment there. And I think robots and software are not always bug-free. They do cause you trouble. But it's a different kind of trouble than humans, and so it's a lot easier to be predictable with robots and software. And so it seems like that's always kind of been Amazon's whole goal is to be as predictable as possible as they increase in speed.

Phillip: [00:35:12] This isn't new, right? I mean, Amazon has had robots and automation and its warehouse forever.

Brian: [00:35:17] Yes.

Phillip: [00:35:18] I remember 15 years ago seeing a video of how the robots that move racks around. Robots, I think, is the thing that scares people. The fact that it's humanoid and it has a head with eyes, glowing eyes and arms like limbs and backwards knees. That's the thing that I think is scaring people here.

Brian: [00:35:41] It's like Flight of the Conchords. The humans are dead stuff.

Phillip: [00:35:47] {laughter} Yeah, they poison... Yeah. Anyway, so we'll keep it clean today on the podcast, but who better to talk about the way that... So this is how Amazon is going to free up their own issues in their logistics. And you know the growing demands of being more highly available, more consistent for more customers. Not everybody's going to have the ability to deploy robots at scale or even trial them. And that actually, I think might be a great segue, Brian. Let's get to our conversation with Kris Gösser. What do you say?

Brian: [00:36:24] I love it. Let's go talk to Kris. Today I have with me Kris Gösser, CMO at Shipium. I'm super excited to have you back on the show, Kris. Lots to talk about.

Kris: [00:37:29] Yes. Thanks for having me back.

Brian: [00:37:32] And, Kris, just for those who haven't heard prior episodes with you on before, maybe just give a quick update on who you are and who Shipium is.

Kris: [00:37:42] Sure. Yeah. So I'm the CMO at Shipium. I've had the good fortune of being here since pretty much the very start, joining technical Co-Founders Jason Murray and Mack Brown, long-time Amazon vets where Shipium basically takes a lot of the operational software that powered Amazon's Ops stack, and trying to bring it to everyone else who's not Amazon.

Brian: [00:38:05] Yeah. And y'all are very good at that. And I have to add, you've just been an incredible voice, both behind the scenes for Future Commerce and publicly for what's happening in the shipping world. I feel like your thoughts on that are kind of second to none. And so I'm really excited to chat with you right now, because we are in a weird moment in the world of shipping and logistics. And we just saw Convoy shutter fully, and there's been a whole bunch of others that have also kind of cut back. Give us the state of the state. What's the body count right now?

Kris: [00:38:47] Yeah, yeah. So I think for the audience, we'll kind of bring you through three different topics. One is just what's happening? Try to bring people up to speed with a lot of movement lately. And then the second is how did it actually happen? So what confluence of events has led to the current state of the logistics industry? And then Brian and I will pontificate on what this means, potentially for the future of commerce, whether it's eCommerce or retail or 3PLs or whatever. So yeah, I mean, like you said, if it bleeds, it leads. And the body count right now is not good. What we've seen is a massive contraction in what I would call this kind of tech-forward or tech-enabled logistics industry. So you had Flexport, which was the main story for quite a while, but from a numbers point of view, it was 20% layoffs earlier this year, then 30%, then another 20%. And their team size has really cratered. 33% of Flexi, 15% of Freight OS, did 20%, Ship Ops 7%, and then certainly Convoy, the big story of this week, an extremely talented and important startup in the Seattle tech scene, went from 1500 to 500 to 0 in a pretty short time frame with a complete shutdown. So net net is that layoffs are not a new story. This isn't necessarily the novel point to communicate on this particular episode as look at this particular area that's doing layoffs because there's been layoffs everywhere. There's a bit of a mini SaaS recession going on. Retail itself is having a rough time. In general, we have just seen a contraction of labor, of investments, of budget, of all kinds of stuff. But there's a very specific nuance that's happening in the logistics world that matters to the commerce industry. And that's kind of what we're gonna be talking about today.

Brian: [00:40:44] Yeah, and I think this is the key stat. You nailed it. Layoffs happen all the time. This is not unusual. There are sort of ebbs and flows to this sort of world that we're in. The interesting thing is retail is not in a particularly bad spot at the moment.

Kris: [00:41:01] They were their best ever last quarter. All the numbers of Q3 were fantastic, and Q4 is going better because consumers have a lot of money that they're willing to spend. So retail is actually doing kind of fine, which is weird.

Brian: [00:41:13] Yeah. So why? Why now for all of this shipping wildness, all these shipping companies all at once? I think that's the part that's pretty crazy, is that it was not just one of these. There wasn't like the market picking a winner. It was like, oh, all of these companies have to scale back. Why was this?

Kris: [00:41:33] Well, Dan Lewis, the Founder of Convoy, and his leadership team have been telling people that the market's just crushed him. And that's exactly what it was. It's completely true. And it's the same thing across the board, whether it's Flexport or Flexi or anybody else. And so let's kind of break that apart just a little bit. So the way to think about what happened in the 2010s is in many ways it just kind of comes back to finance. Follow the money. And you had an era of free money, which some people call ZERP. I know Phillip loves that term, and you could certainly describe the particular strategies and investments during a ZERP era became pretty ubiquitous across every industry. And logistics was the same. And what ended up happening is a lot of startups had this particular strategy that if you could take an enormous amount of investments, probably venture-based, but certainly private equity flooded into a lot of older companies, too. But if you could take a lot of capital, because capital is free, you could essentially invest that capital into upfront or fixed costs, aka software tech. It requires an enormous amount of R&D, which requires an enormous amount of money. But in this industry of logistics, supply chain, fulfillment, so on and so forth, whatever you want to call it, the general idea was to spread those upfront fixed investments across an operating model that would yield some sort of efficiency or better margin that, in the long run, would make it the much better option in that particular market relative to incumbents that have been around ten, 20, 50, 80 years. That was kind of the general premise. So you saw it across all pieces of the supply chain. Flexport is essentially container freight forwarding to bring imports here and exports there. Convoy was essentially tendering of truckloads, a kind of freight broker concept that's not novel, but the technology that Convoy had in their mind and how to disrupt the industry was definitely novel. But it took a lot of investment. Companies like Shipbob or Deliverr, which was acquired by the Shopify Fulfillment network, those were 3Pls, warehousing things like that that had enormous amount of upfront R&D, capital investments and the list goes on. Flexi, and so on and so forth. That was fine. One way to kind of summarize it is that tech-enabled logistics was a fun party while the party was happening. But really this is a story of the fed. And when rates were increased and you saw every industry from banking to telecoms to consumer electronics to whatever, whatever, whatever, that impact is so foundational and central that it shook through every system out there. And with this particular system what it meant was that the story, the music kind of stopped, for getting that capital to invest into the enormous upfront R&D that was needed. This was bad. Now, what that meant, though, on the other half of the coin, was the way in which all of these tech-enabled logistics companies made money. And the way to think about it is that they did not make money because of their tech. They made money because they're in the logistics industry.

Brian: [00:45:19] Same old model, basically.

Kris: [00:45:23] Yeah, the same old model by which you make money was still the same old model. So Flexport takes a cut of a container that's traveling from Southeast Asia to LAX, right? So they are at the whims of the supply and demand of what's going to happen in the container industry. And when those went really high at the beginning of Covid, Flexport was on a rocket ship. Now that they have sort of cratered, it doesn't matter how good the tech is or the talent of the team that was there, of which it was an extremely talented team. They're not immune to the challenges of the way in which they make money. Same with Convoy. They essentially took a cut of tendering FTL or LTL truckloads and over-the-road and things like that. Well, that's a supply and demand market as any. And if you're primarily making money based off of that, no matter how good the tech was, which was it was top tier here in the Seattle ecosystem. And no matter the talent, which Dan did an incredible job hiring really good people, you are not immune to the cratering of pricing and all that kind of stuff. So when they say the market's crushed them, that's kind of like what it is. Same story for, Shipbob, all the 3PLs are having a tough time right now. And that's really the story is they are not software companies selling their software. They are logistics companies selling logistics that happens to be tech-enabled.

Brian: [00:46:57] It's they got too verticalized. Maybe they should have sold software to the logistics industry.

Kris: [00:47:04] I think a lot of them are definitely getting wise for that because when you look at like say, ShipHero and Shipbob and Stored and all these tech-enabled 3PLs that came about in the last five ish years, they're all now trying to sell their software to each other because they all see it kind of coming that they've invested the R&D into this, frankly, some of them have pretty darn good tech. But what are you going to do if that tech is just to help your internal margins and cost structures?

Brian: [00:47:36] Right. And so the capital costs just didn't have enough time to pay off. I think that's the other part is like basically you have all this heavy investment in tech and then when the market's cratered and the market wasn't there anymore, you had all these high costs.

Kris: [00:47:59] And then labor was the first thing to go as you saw the cuts in the team sizes. And if you get in a really bad scenario like Convoy, then you can even just shut the company down.

Brian: [00:48:12] Because it was like you became a shipping logistics company that just had a whole bunch of capital investment in software and other shipping logistics companies didn't necessarily have that investment, so they could actually operate more efficiently in some ways without having that either debt or just overall investment. So the question is the tech was good, but how much did it improve things? It wasn't enough to make up for how much they had invested.

Kris: [00:48:54] Yeah. I mean, we have this joke at Shipium that is kind of an Amazon joke, which is, you know, if you're unprofitable, you can just make it up in volume. And that's sort of a little bit of what was going on, not to call out particular companies over the other, but generally speaking, a lot of these situations have been the tech investments have not actually yielded the cost structures that they needed to be profitable. And so because they're not profitable, they have to continue to invest into the R&D to try to get to those margins and those cost structures that actually are profitable to then scale or grow. And if you're not profitable, it's difficult to make that up in volume because you just become more unprofitable. And that's kind of where the fed changing the world and money not being free, that's kind of how the musical party stopped.

Brian: [00:49:47] This is the Silicon Valley pizza delivery joke where they put him out of business by ordering more pizzas. They couldn't keep up. Actually, it's kind of the opposite of that, but it's funny. Yeah. Similar idea.

Kris: [00:50:03] So what I think is interesting is that the technology that was actually built across all these companies, Flexi, Flexport, Convoy, and many of them are still businesses that have a real shot to come out of the current recession that we're in software and be successful. But a lot of them did incredible work actually transforming the industry. So I think spiritually, their mission is accomplished, even if some of the business models have been a bit wonky, to kind of fit with the balance sheet and timing and everything else. What Convoy did to trucking is truly extraordinary in terms of the competitors they brought into the market. The vision that they showed the world of how you can innovate with freight. Flexport too, you know, all of the foibles and conflict between Ryan and Dave and everything happened over there. At the end of the day, they have built incredible technology that is truly innovating in the freight forwarding space. And I think it's true in the 3PLs. So when I think about, okay, these investments and the changes and the transformations, this thread of the sweater, if you will, that's been pulled, how does this matter to the future of commerce going forward? I really think what it shows is that software can achieve its promise of innovating, of transforming, and of fundamentally shifting an industry's priors, whether it's their cost structures, the expectations of their customers, whatever the case may be. But it's just the delivery model by which that software is actually consumed that is now going to potentially be changing and is in question because we have these verticalized models, like a Flexport or a Convoy that, because of everything we talked about, are struggling. But there's no reason why the actual innovations that they identified and built technology around can't be packaged as different types of software tools that eventually get to the end customer. So let me give you an example that's a little more in kind of our space. The retail industry is also going through a pretty big contraction. So this is separate from everything we talked about earlier with the logistics companies. But if I just do some cherry picking of headlines... So traditional retailers who have laid off engineering staff in 2023, The Container Store, Jo-Ann, Nordstrom, Lululemon, Dick's, REI, Kohl's, all the brand holding companies have have had major tech layoffs this year. LVMH, VF, Authentic Brands Group, Ascena, Newell. Modern tech. Direct consumer. Zulily. Allbirds. Away luggage, Glossier. They've all had tech layoffs, even Walmart and even Amazon famously, earlier this year laid off thousands of tech employees. And what we're seeing is this general zeitgeist of because money is free, I can then invest this money into things that I think are related to my business. Now that the money's not free, the misalignment of it's not actually my revenue or my profits that are powering the investments of what matters in my company, therefore, these things that don't actually matter to my company are now going away, which includes half of my software engineers or whatever else, because I'm a clothing company. Why am I investing and reinventing the wheel in software related to supply chain issues or AI chatbots or whatever that we want? It just doesn't make sense. This era of DIY is, in my opinion, starting to go away. And this is what we're seeing. That's the linkage here between a VF Corp and a Convoy. So I think the calculus of software is going to change and is going to become much, much, much more valuable across all commerce companies because they're going to look at the unit economics of buying a software subscription to do a thing is so much better than the DIY investments. And I think what's going to happen is you're going to see this kind of knock on effect of the innovations Convoy had, the innovations Flexport has had, the innovations 3PLs are doing, whether it's Shipium or other companies that are software-centric are now going to be able to help improve the industry with a lot of their ideas, a lot of their concepts and just in general help achieve maybe over the next five years, the impact on the industry that a lot of the tech-enabled logistics companies are trying to do.

Brian: [00:54:52] I think that's really astute. You brought up Glossier. I think that's a great example. They were on, I think some modified version of Spree Commerce forever. It was so modified that it might be considered custom at this point, I don't know. And then they've very, very publicly made the move to Shopify, which didn't come without criticism for sure. But the amount of investment they had in tech was very high. Very, very high before. Almost famously high, maybe pridefully high, and I've talked to some of the other brands out there that are becoming more direct to consumer or were early direct to consumer and felt like tech was like a key part of their business. And again, maybe a point of pride. And I bring this up because especially with some of these legacy companies that have built up very large tech stacks, a lot of that has to do with org building. It's politics within a certain org. And you're seeing new leaders come in and be like, "We can do most of this with a piece of tech that's way lighter weight. We need half these people or a third of these people to support this kind of innovative tech." I think your point is dead on. And again, I won't give away sources, but I've talked to someone else that a very large brand who came into an org where their direct consumer tech team was like over 100 people, maybe it was like 200 plus people. And he came in and he was like, "What is going on? Yes, we are a major brand. But this is direct to consumer that we're talking about right now. This is one, not a major part of our business. Retail is still way bigger. And two, all of this technology you built on is built for something that's significantly more complicated than the set of books that we have in a direct to consumer context." And this is just the story that we're seeing across the board, so I think to tie it back to shipping, what I hear you saying, and I think this is a really good point, is that maybe tech shouldn't always be verticalized. Maybe that's a really bad idea unless it's something that's like really, really cutting edge where you find an arbitrage moment where it's like, "Oh, wow, there's not really tech to address this. And we know we can make money or save money in this way. And there's not really something available to do this for us," then it might make sense, but for tried and true stuff, it's like, why not just use the tech that's available and instead of trying to mash up things, whether you're a retailer or you're trying to combine tech plus logistics and 3PL, maybe let's keep certain components best in breed.

Kris: [00:58:23] Yeah, it's going to be interesting to see what shakes out. You know, there's the famous quote, I think, from the CEO of Time Warner back in the 90s that there are only two business models: bundling and unbundling. And when it comes to, I think, this logistics space, you went through an era, it's all about money, and so because of the way finances worked for a good decade, bundling stuff into a more verticalized business model to sell on to people made a lot of sense because you could do it. But now that that has fundamentally changed, I think there's going to have this knock on effect that now maybe unbundling is the right type of model at a macro sense that's going to happen. But I'm glad you brought up the story, because I'll give one more anecdote that you reminded me of as I shared more like broad level thoughts of, say, the next 3 to 5 years. But if you just want to even say January, how is this stuff going to impact the future of commerce of Q1? What I can tell you is that Shipium is up to a couple dozen customers now, and well over half have also laid off engineers within their staff. So we've seen it directly with our customers. And there's another organization that I won't give out names to keep the innocent innocent. But they've been looking to work with Shipium all year. They've gone through three major layoffs. So the engineering staff has essentially gone through three different layoffs between January and now. And as a result, the scoping of working with Shipium and getting to implement with their warehouses, with their carriers, et cetera has passed from engineering team to engineering team as it's gotten smaller and smaller. And now it's to the point where they have one engineering team left at this company, this retailer, and that one engineering company is left with the entire roadmap that was specked out back in January. And they're trying to pick up the pieces and decide a prioritization of what to actually cut as a sunk cost versus what projects will actually have a meaningful impact on the business because they only have so many hourly units in their day that they can deploy to do some sort of engineering. So now it was basically Shipium and some sort of 3D rendering technology to show a shirt on a Gen AI body was essentially another project that was analogous to us on roadmap that a different team, not at all related to ops tech was originally trying to do that the now single team is left with, I'm sharing this single anecdote to say that I think this is definitely a prototype for 2024. I think whether you're talking about a large retailer like Nordstrom or whoever, down to the direct to consumers that are ten years old have gone through kind of boom and bust like Allbirds or are brand new, like a Caraway that have kind of done well the last couple of years post Covid or really anybody. I think you're looking at a scenario where the structure is strategy, but they kind of let the tail wag the dog and instead they said, "Hey, our strategy is our structure and we're going to build out this huge team. Plan this massive roadmap, innovate across all these parts of the business. Now we've contracted down to so many few engineers, so much internal IT is just gone that there's this reprioritization of what's going to actually matter next year." So the software companies, to bring up the point ten minutes ago, the software companies that are easy to buy and implement and use can probably pick up a lot of lift next year because now these teams don't have to necessarily kill roadmap. They can just say actually, instead, we're just going to use this module or plug-in or whatever. But big stuff like Shipium, vis-a-vis other things like warehouse rollouts or whatever, there's going to be this massive reprioritization culling I think that's going to happen in Q1 and Q2.

Brian: [01:02:29] That makes a lot of sense to me. Having worked with different types of retail orgs in the past, seeing that reprioritization happen is definitely something that I've experienced before. I mean, we've been through cycles like this before. The thing that I think has to happen, though, and this is a massive problem actually. Ingrid Milman Cordy, who's the co-host of Infinite Shelf, a Future Commerce podcast, she's been saying this for years. There needs to be some reorg at the top, like KPIs need to be realigned. Retail businesses still are operating in silos that they've operated in for years and years and years, and they've added on to those silos, but they haven't completely restructured. And that's a really hard thing to do. I mean, reorging like that is like you have to give up control probably. If you're in a certain role, you might have to give up part of your org or cut part of your org or play into other people's priorities. But if someone's not looking at the business holistically, or at least with a modern lens of how technology is actually going to affect the business at every touch point, then it's going to get really hard to focus on the things that will make a meaningful difference. And that's the thing that I think is a little scary when these orgs do get cut down. Do you know who gets to pick the projects? The people that are working on them, and whatever they think is the most interesting to them, they'll end up just focusing on that or whatever they feel like they can accomplish or that might make their career look the best. They're going to pick those things. Or maybe it's just someone who kind of just takes the reins and doesn't have any larger look at what the business actually needs. And so in the case of your anecdote, it seems like there are a lot of very off the shelf tools that could get them 90% of what they're looking for on putting a shirt onto an AI-generated body. That should be, like you said, back to your point earlier, there are certain things that should be easy to pick up and just plug in. That last 10% isn't going to be the thing that saves your retail business. I think you've got to look for the ways to really either stand out or save money. And that's going to take, again, a little bit of a reorg. Yeah. What are some last thoughts, Kris, on how this is going to shake out before we wrap it up here.

Kris: [01:05:18] I wouldn't be surprised if similar kind of fate is going to come to some of these other companies that we talked about. I think they all have a fighter's chance to make it out of this, and we're definitely all pulling for them, but I think any business that has some sort of an operational expense that's not related to software is probably going to have a rough next 12 to 24 months. And I wouldn't be surprised if we continue to hear the kind of stories we've been hearing. And so hopefully the audience has a little bit better perspective on why that's happening. And then we'll just kind of see where we all come out as a community after the fact.

Brian: [01:06:03] Love it. Thank you, Kris, again for your insights here. This is super, super... Well, I feel like I learned a lot and I'm sure that our audience has as well. Very, very thankful to have your voice here at Future Commerce and appreciate your ongoing insights.

Kris: [01:06:23] Always. Thanks again, Brian.

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