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Episode 256
May 27, 2022

Facing the Counterfactuals

What does this era of downturn look like and what can we learn from the history of past economic downturns? Will there be a boom in the creator economy and what do counterfactuals have to do with any of it? Phillip and Brain chat through all this and more. Listen now!

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this episode sponsored by

A Boom to the Creator Economy?

  • Counterfactuals give us a what-if thinking. It’s thinking through scenarios that haven’t happened, but what if they did? They help us analyze our past performance
  • “Counterfactual analysis makes up a lot of like our cause-effect thinking when we're thinking about how to apply a situation in a new context because nothing is ever the same and the pace of change is happening faster and faster.” -Brian
  • The concern that many have right now is where do customer place their loyalty? Will they be more experimental or less experimental? They're going to go to the things that they know and return to defaults
  • There is a demand for growth and demand for goods right now that's being pent up. The demand is there, but it's not being met
  • In a downturn, more money is necessary for all areas of life, causing people to look for another job, side gig, and ways to bring in that extra income. With everything increasing, there will be a people supply as well, which in hand would lead to a boom in the creator economy 

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Brian: [00:01:16] Hello [00:01:00] and welcome to Future Commerce, the podcast about the next generation of [00:01:20] commerce. I'm Brian.

Phillip: [00:01:21] I'm Phillip. We have another great show for you today. We're going to talk about what do you do in an economic downturn? And Brian and I, thankfully, we're old enough to have lived through a couple of these.

Brian: [00:01:34] True. True. More than one. More than two.

Phillip: [00:01:37] Were you working in eCommerce in 2008?

Brian: [00:01:40] I [00:01:40] was in commerce, not eCommerce.

Phillip: [00:01:44] Do you remember what it was like back then?

Brian: [00:01:46] Yeah. {laughter}

Phillip: [00:01:49] Ok. So do I.

Brian: [00:01:50] Actually, I started my career in 2008.

Phillip: [00:01:53] Oh, okay. So as your senior, as your elder [00:02:00], that was my second go around. I remember the economic recession that was post 911 and post dot com. So I started working in eCommerce during the dot coms.

Brian: [00:02:13] 911?

Phillip: [00:02:15] Yeah.

Brian: [00:02:15] How old are you again?

Phillip: [00:02:17] Forty-two this year. And [00:02:20] I was a freelance web dev back then, building shopping carts for all kinds of customers. I was a freelancer. And, you know, there were fat times, there were lean times. But I've witnessed some things that we all tend [00:02:40] to go through in these market cycles, and some of us are fairly new to the industry. I thought we could lend some sage wisdom. So, I don't know what the title is of this. How to Navigate the eComm Downturn?

Brian: [00:02:51] Hold on. Is it an eCom downturn? That's the other question.

Phillip: [00:02:57] It could be an econ, like an [00:03:00] economic, downturn.

Brian: [00:03:01] Yes. An econ downturn. Is it an eCom downturn?

Phillip: [00:03:04] That's the question.

Brian: [00:03:07] The ecom-ony... Oh, that doesn't work at all.

Phillip: [00:03:10] I think there is something that we've not experienced in the lean times. If you think about like the post-housing crisis, GFC, [00:03:20] the Great Financial Crisis. There's something that we didn't have that was pervasive in the culture that we have now. And that is the plastic brain in your pocket. The proliferation of smartphones has like fundamentally changed the way that we do everything and in particular shopping. We also didn't have monoculture [00:03:40] shopping experiences like Amazon in the world. They were there.

Brian: [00:03:45] Wow. Yeah. True.

Phillip: [00:03:46] They were there, but they weren't as prevalent as they are now. And so I think that a lot of what we might witness in eCommerce more broadly has a little bit of a maybe there's an asterisk next to it as [00:04:00] we talk for the next 35, 40 minutes about the things that might happen or the things that we've witnessed that might inform how we navigate the next six months. But the world is fundamentally different from what it was in '08 and '09.

Brian: [00:04:13] It is, yeah. I just talked about this in my counterfactuals piece that [00:04:20] I wrote.

Phillip: [00:04:20] That's actually a really great way to start is maybe unpacking some of that idea of like counterfactuals and sort of how it applies to the way that we think about business and strategy today.

Brian: [00:04:32] Yeah.

Phillip: [00:04:32] So let's start there. You wrote a piece recently for a Future Commerce Insiders that was basically, you [00:04:40] drew a line between this cultural fascination with the multiverse and this idea that counterfactuals actually give us reasoning why we have a cultural fascination with it, and then specifically how that lays into our Future Commerce angle on the world of commerce. [00:05:00] So what are counterfactuals for people that may not know the definition?

Brian: [00:05:04] Yeah. Counterfactuals have to do with "what if" thinking. Like what if George Washington hadn't been our president and instead John Adams was? How different would our country be? Like those types of questions where it's scenarios [00:05:20] that are not real but thinking through what would have happened if they were. And honestly, this is how we do a lot of our analysis of past performance. How [00:05:40] do you determine whether or not something, like what the factors were in making something successful? Well, you think about what would happen if they were done differently. And so looking at an economic downturn such as we're in right now, you and I are looking back [00:06:00] at 2008 and we're thinking about sort of how that played out. And we're thinking about, well, we're looking into the future and we're applying a little bit of a what if scenario like here are lessons learned. If things went this way, then they could go this way. And so I think [00:06:18] counterfactual analysis [00:06:20] actually makes up a lot of our cause-effect thinking when we're thinking about how to apply a situation in a new context because nothing is ever the same and the pace of change is happening faster and faster. And so because of that, learnings [00:06:40] that we pull from 2008, their relevancy is actually pretty low. We're in a completely new environment. [00:06:49]

Phillip: [00:06:49] Oh, it's so true. Yeah.

Brian: [00:06:51] Yeah. But I still, and I said this in the article, I think really thoughtful, more intelligent [00:07:00] counterfactual thinking can provide us with real insights. We just have to understand. The better we can understand the data that we do have and keep it contained, I think that can be a lot better in making judgments about how things could [00:07:20] be in the new scenario. So anyway, I think looking ahead or looking at the now, like how did we get to now and how do we navigate the now has a lot to do with what if scenarios. [00:07:40]

Phillip: [00:07:40] So let's pause and let's make that real because I think that this is so powerful to think about. You broke it down into three sorts of personas of how counterfactuals are used or how they're played out. You put it in like how customers use counterfactuals, [00:08:00] how marketers use counterfactuals, and how business leaders use counterfactuals. Make that real for us. How does a customer inherently think about a purchase and how do counterfactuals play into that and [00:08:20] give us a scenario.

Brian: [00:08:22] Yeah. So a good scenario of this would be someone goes to make an aspirational purchase. They're thinking about it. They see an ad for something aspirational and they think about how it would affect them if they did buy it. And they start to make an analysis to determine if it makes sense for their lives to buy it. [00:08:40] Now, if they're like, "What if the stock market keeps going down, and I have less discretionary income? How is it going to affect me in the future if I made this purchase right now?" That right there is a counterfactual. Now, of course, [00:09:00] there's also another aspect of it, which is if they're looking at a purchase and they say, "Oh, that aspirational purchase actually might help me achieve something in my life. And if I had purchased that in the past, I might be..."

Phillip: [00:09:18] Oh, you're getting ahead. You're [00:09:20] getting ahead.

Brian: [00:09:20] Okay, sorry.

Phillip: [00:09:21] You're blowing it. I'm trying to walk this down the path.

Brian: [00:09:23] I'm blowing it.

Brian: [00:09:24] Keep going. Keep walking down...

Phillip: [00:09:26] Well, you've already said it and everybody knows where you're going with it. My sense in what you're saying, though, is that in this current environment, one way of approaching the mindset, the modality of a decision making [00:09:40] is probably less about the stock market, which is what you said and probably more about is my dollar worth as much now or will prices continue to rise?

Brian: [00:09:49] Right.

Phillip: [00:09:50] So timing of purchase actually drives to immediacy, like, "Will I have more money in the future, or will my money be worth as much in the future? Or [00:10:00] is this gallon of gas going to be more expensive or less expensive in the future?" All of those things actually drive to more immediate decision-making points now than they did a year ago or even two years ago. And if I'm thinking back to 2008, there was a lot of eCommerce conversation [00:10:20] at the time of the non-Amazon variety. The direct to consumer set who were building a lot of FOMO in the prices are about to go up. I remember a lot of the promotions sort of being switching away from "This  [00:10:40]deal ends on Thursday" to "Prices go up next Friday." And it's the same thing as far as in the mind of the consumer. But you're saying in a different way to drive toward immediacy. And so the marketers' playbook shifts a lot. I think also the merchandizer becomes much more important. Not all businesses are going to be able to do this due to [00:11:00] all kinds of supply chain challenges. But kitting and bundling becomes much more important in this time to sell on the fact that we need to stock up so that we can save on certain types of items that we might know and love and consume over and over again. So businesses like Costco become much more important for that. It's not off-price, but [00:11:20] it's maximizing on price. And in the psychology, that calculus of the consumer, of what if... Like "What if prices continue to rise? I need to lock in a price now."

Brian: [00:11:30] Yeah. Huge.

Phillip: [00:11:30] And that's where marketers,  [00:11:33]they're not only selling on the better you that you could have been if you had started using this, which is the example you gave earlier [00:11:40]. It's like rather than the experiential side of selling and the aspirational side of selling, it actually comes much more down to the operational, like how you manage your family budget becomes much more important than the better you that you could have had if you had made this decision long ago. [00:11:59]

Brian: [00:11:59] And I think that's huge [00:12:00] because well, this is a shift in the significance of data. And this is where I think it's about what's most important. That's when counterfactuals actually are valuable is when you can correctly identify what data [00:12:20] is significant and what's not significant. You just called it. Before, a counterfactual might be applied when it comes to someone like getting ahead. Getting something that makes them feel better or appear better or [00:12:40] helps them achieve some particular aspirational goal. But now it's more like, "Okay, a more significant piece of data is oh, wow, if I don't buy this, if I don't stock up on this, my budget's going to get blown."

Phillip: [00:12:59] I [00:13:40] believe that a [00:14:00] good number of consumers in the research that we've done spend money based on what they have right now and the sense that potentially they may not have that in the future. So it's like immediate. It's not just immediate need gratification. It's also like prepping to some...

Brian: [00:14:16] Fear-based. Yeah.

Phillip: [00:14:17] Right. It's fear-based. Right. So not that [00:14:20] marketers have ever used fear to try to drive a sale. That's never happened. But when you're a business leader and you're trying to futureproof your business, you're also engaging in this counterfactual thinking of what if. And what's interesting about that is rather than saying, we can use the word counterfactual [00:14:40] 6000 times in this particular podcast. Another way of thinking about it is do you have a robust playbook for this next phase that we're all about to enter into? And I think that it doesn't just cover marketing. That's the other challenge or problem that I have in the world of like eCommerce-centered content. And I'm using air quotes [00:15:00] for those listening right now. That "eCommerce-centered content" era is very focused on a transaction. Like unbelievably hyper-focused on the transaction. And that's fine in the fat and happy times when we have our [00:15:20] budgets are a little frothy. We have the ability to be experimental with how we deploy our budgets. Maybe inventory forecasting isn't all that great. Wind up with a little bit of a surplus on hand, but we're growing anyway. In the lean times, any one of those miscalculations can actually be mistakes [00:15:40] that can cause real operational challenges for a business and creates then the next phase of uncertainty. Here's a good example. Old Navy. We praised Old Navy on this very show about six months ago for investing in inclusive sizing. [00:16:00] And they went ham on it. There was a press release. It was like Old Navy for all. It's like everybody can come to Old Navy and find something for them size-wise. But what actually wound up happening in the supply chain challenges and in inventory forecasting [00:16:20] and the bell curve of size buying, they actually ran out. They wound up distributing that budget in such a way that they wound up with this inverted bell curve where you have a massive amount of over inventoried, overstocked plus size and petite size, really on either end of the spectrum, [00:16:40] having an oversupply and running out of stock very quickly of the what is the traditional bell curve and sort of those medium sizes that most people would typically buy from. And you know what that winds up doing? It frustrates your core consumer and it drives down the value of that stock to have to blow it out in [00:17:00] clearance, which creates massive problems for liquidity for the business on the other side.

Brian: [00:17:05] So to me, it was a great idea that was poorly executed. That's sort of how I feel about it.

Phillip: [00:17:10] Those kinds of operational challenges, the outcomes become exaggerated in times like this [00:17:20] that we're in right now.

Brian: [00:17:20] Absolutely, yeah.

Phillip: [00:17:21] Because it constrains your ability to execute on your future plans.

Brian: [00:17:25] Don't have inclusive sizing. That's the takeaway for some people.

Phillip: [00:17:29] Oh, that's a terrible takeaway. But that is the takeaway. So it's the stories we tell ourselves inside the business. So this is another thing that I've witnessed. Number two... The oral history of moments [00:17:40] like this far outlive the actual economic impact.

Brian: [00:17:44] Absolutely.

Phillip: [00:17:45] We wind up storytelling to ourselves. We now are beholden to truths that we learned during this time that can actually jade us in a way to make business and operational decisions or even like team architecture. [00:18:00] We just tell ourselves that we've learned something in this time and we wind up sort of creating an oral history in a company inside of a brand or a retailer that sticks around for an unbelievable amount of time, like until basically, those folks turn over inside of the business. Like we learn lessons [00:18:20] in the lean times that actually wind up coloring the way that we execute in the not so lean times, in the fat and happy times. And that's when it's going to get a little bit... I don't believe that we're in for a long term, a multi-year challenge [00:18:40] like we were during the Great Financial Crisis. I don't think this is a two or three-year challenge.

Brian: [00:18:47] Me neither. I'm with you.

Phillip: [00:18:47] We're still actually edging... I think what were the retail sales from the Department of Commerce? I think it was a very marginal growth this year or last quarter.

Brian: [00:18:57] Actually apparently, so I [00:19:00] think according to an article on May 17th and Retail Dive, retail sales were up over 11%.

Phillip: [00:19:09] Year over year?

Brian: [00:19:12] Let's double-check that.

Phillip: [00:19:13] I thought the Department of Commerce was 0.9% growth. Maybe eCom growth was 11. [00:19:20] I don't know. You check that.

Brian: [00:19:21] Yeah, I'm checking.

Phillip: [00:19:22] While you're checking that, the concern that we now have is really where do customers now place loyalties in this time? And are they more experimental or less experimental? I think most folks would say, [00:19:40] "Well, they're probably less experimental. They're going to go to the things that they know and return to defaults." And I think we had forecast that back in Nine by Nine back in last October, saying that 2021 was a year where we began to return to our defaults. It's we're going back to in-store. We're watching foot traffic rise in malls. Shopping centers are starting to [00:20:00] see things pick up. If we're still seeing some retail economic growth and a lot of pent-up demand from post-COVID, then I think what we're really witnessing is consumers are going to still spend money. They're [00:20:20] going to have to spend more of it because things are more expensive.

Brian: [00:20:23] Yes.

Phillip: [00:20:24] We're not in a place yet where we're seeing retail spending shrink. I think that will be the lagging indicator showing that we're actually having come through the midst of consumer uncertainty being at its peak. So [00:20:40] as we were talking in the pre-show, long story short, I believe this is a six-month challenge that we're all going to have to navigate. And by Q4, we will be back into the place of "I think there is some consumer confidence there." Anyway. You checked the numbers. What did it actually come back as?

Brian: [00:20:59] Yeah so actually [00:21:00] retail sales in segments followed by Retail Dive rose 11.3% year over year in April as eCommerce sales rose 24.1% year over year. And so. and they're definitely attributing a lot of this to [00:21:20] prices going up. So inflation and I would agree with that. Absolutely. However, this is not like incredibly discouraging. This is yeah, people are still spending money. Now, that could change. We're seeing some layoffs. We're seeing some slowdowns. [00:21:40] Obviously, the stock market is what it is and by no means are either of us economists, but...

Phillip: [00:21:48] Nor do we play them on TV.

Brian: [00:21:51] Exactly. I concur. I think there's a lot of talk about how [00:22:00] a lot of these losses are paper losses in many ways, not necessarily like real cash losses for households. Unemployment is still low.

Phillip: [00:22:10] And probably getting lower, actually, because a lot of people that had opted out of the workforce are probably, you know, the freelancers set people that are sort of solo artists are doing, participating [00:22:20] in the gig economy, likely will see a lot of that kind of uncertainty as something that's maybe a little risky over the summer, in the fall, potentially, they return to the workforce. We might even see unemployment drive even lower. A really cynical take [00:22:40] is I recently heard this. I don't know. I'm not an accountant, I'm not a lawyer. I'm not an economist. But I am somebody who collects interesting factoids from things that I hear. And one thing that I heard on a podcast recently was a lot of the help wanted job [00:23:00] posting ads and a lot of the digital signage that you'll see is walking into like a fast-food restaurant, for instance. A lot of this is performative. And again, this is hearsay, but there's some growing pressure that a lot of the emergency disaster [00:23:20] loans provided by the Small Business Administration and then other payroll protection program loans provided by the federal government that we're all COVID era closure benefits, so we're paying you basically, "We're economically propping you up and giving you some relief so that you can close [00:23:40] your business so that we can," remember this, "flatten the curve.

Brian: [00:23:45] Yeah.

Phillip: [00:23:46] A lot of those businesses need to still pretend or put out a front that they are unable to hire and that staves off their need to pay that back.

Brian: [00:23:55] That's very cynical. That is very cynical. Regardless of whether [00:24:00] that's true or not, if you look eCom right now, I still see very strong hiring practices.

Phillip: [00:24:08] I put it out on The Senses, just a quick survey of LinkedIn jobs. Linkedin Jobs has over a half a million job openings for eCommerce-centered roles in the United States alone right now. I [00:24:20] can't think of a single business that we work with that doesn't feel constrained by talent. I think the demand for growth is there. There's actually, I believe, a demand for goods that's pent up that just people cannot buy things. I was talking [00:24:40] to a division leader at a very famous hummus company recently. And basically, it's like there's going to be some economic pain in that space, especially in this like, you know, dips and condiments, because not only did they have COVID and supply chain issues and staffing [00:25:00] shortages, but they've had a lot of blight in crops and unfavorable weather. It's like they're just it's an insult upon injury in these parts of in these businesses. They cannot satisfy customer demand. The demand's there. It's just not being met.

Brian: [00:25:17] So. Yeah, yeah, yeah. No, I think that's actually probably really true. [00:25:20] Another thing is like the psychological impact of COVID and there's still a lot of people that are ready to get out and live more, you know what I mean? There's still a lot of psychological sort of comeback right now. And I [00:25:40] don't think we should underestimate that.

Phillip: [00:25:43] Let's talk a little bit about this shift. Okay. We talked a lot about the consumer. We've talked a lot about the marketing. We talked a lot about channels, where people shop. But one thing that happens that I witnessed in '08 and probably not as much in '01 because eCom was in its [00:26:00] nascency. Like it was very, very new. And there was a little bit of a bubble back then as well. I said this earlier, the focus for the software buyer shifts away from aspirational channel development. It's less about [00:26:20] the flashy front end and less about the like "We're future-proofing. We're building for the future. We're planning for our three-year and five-year growth. We're investing right now for it," and it becomes much more focused on "How do I save on costs?" So it's automation, labor displacement offset.

Brian: [00:26:39] The American default, [00:26:40] by the way.

Phillip: [00:26:41] Oh, it's absolutely. Oh, yeah, that's and I'm not telling anything to anyone that they don't inherently already know. But one of those ways is if you were to survey where your tech costs are right now if you're a bean counter,  [00:26:56]there are a lot of businesses who are spending a lot on a [00:27:00] ton of software right now that may not actually be driving an operational return. It's not saving on the bottom line. So I think a lot of software contracts are going to be renegotiated in this time. And I'm thinking specifically like, are you going to invest in switching platforms now [00:27:20] or later? Probably not now. Will you consolidate vendors? Absolutely. [00:27:25]

Brian: [00:27:27] Absolutely. So we talked a little bit about this when we did the episode at RICE, I think. Yeah, actually, it does present a lot of opportunities, I think, for technology companies to consolidate. There [00:27:40] will be opportunities to buy some of these venture-backed startups, maybe get a little bit of a discount, maybe not a lot. But as we see some unsubscribes, the opportunity to see more consolidation in the software eCommerce [00:28:00] software space, I think looks favorable. So this is an opportunity for larger SaaS players to expand product offering, I feel like, especially when it comes to giving [00:28:20] merchants one hand to shake. And we definitely talked about this a little bit already. But the opportunity for one hand to shake technology is high.

Phillip: [00:28:30] Sure. Not everybody listens to every episode. So I don't think it's not worth, you know, not rehashing.

Brian: [00:28:36] True. {laughter}

Phillip: [00:28:36] I do think that there are no [00:28:40] economies of scale in the current platform ecosystem environment in the cloud SaaS platform world. So let me define what I mean here. In '08, owning dedicated hardware and owning [00:29:00] a data center sort of mentality where you have fixed hardware that doesn't scale costs with you was an economy of scale. You were able to make a one-time investment and grow into that investment over time with fixed costs. So that's o [00:29:20]ne thing that has changed dramatically is that theoretically, the cloud era allowed you to sort of take away those upfront costs. But unfortunately, they linearly scale with your business. So cloud, I think if I were to bet, I believe that there's [00:29:40] going to be a lot of folks really rethinking their vendor lock-in in cloud in the next year. I think there's going to be a lot of folks who are really rethinking their cloud managed service contract for platform as a service. Think about things like Adobe or Salesforce and really think about how can we do on-premise there [00:30:00] where we can again like get economies of scale? How can we bring a lot of talent in-house, manage the software and the deployment on our own and take on some of that frustration so that we can save on the software license costs that are scaling linearly with our business and instead move to a model where we have the ability to, as [00:30:20] we grow, it becomes much more margin efficient. You and I both know in enterprise software sales.

Brian: [00:30:27] Right. It's cost scale.

Phillip: [00:30:29] There are, especially in the Shopify set, it's like it will always be 3% of your business.

Brian: [00:32:07] The [00:32:00] only counterpoint I have, and I think I do agree with you, there's going to be at least some trend towards the direction you're talking about. Maybe not. That's going to require a very specific type of business [00:32:20] leader to actually pull the trigger on something like that because it is really intimidating. Running your own, effectively, hardware stack is a different skill set. And the problem is that skill set is really hard to find. So hiring, I think is the one thing that [00:32:40] might hold retailers back from that.

Phillip: [00:32:45] Yeah. Thankfully they're going to have plenty to choose from all of these early-stage startups and NFT projects that are falling through.

Brian: [00:32:52] Well, we'll see if this skill set actually translates. That's the other thing. There's a lot of movement towards [00:33:00] trendy technologies. Hardware is... There are some incredibly talented people out there and they work for Microsoft, Amazon, and Google. And attracting those people away to come work for a retailer is going to be [00:33:20] difficult.

Phillip: [00:33:22] Listen, I'm not saying that they're retailers necessarily. I do think that there is a services economy that will help to drive some of this. In particular, if you are operating a brand, do [00:33:40] you want to be a technologist? I think that's the question. Probably not. But there's somewhere operationally within the business that might say, "Hey, do we need HubSpot at $2000 a month?"

Brian: [00:33:55] Yeah.

Phillip: [00:33:56] It's less about [00:34:00] the front-facing experiential stuff of displacing Shopify and more about what are the other parts? Think about there's so much now that didn't exist before. In eCom back in '08, your shopping cart was your OMS was your fulfillment and label printer. It was everything. And now we have discrete pieces of software [00:34:20] that exist outside of a suite in this composable world where there are small pieces of software that fulfill all of this, and they all have their own platform as a service cost associated with them.

Brian: [00:34:33] Yeah. I mean, we look at what just happened with Glossier, who I feel like...

Phillip: [00:34:40] Tell [00:34:40] me you disagree with me, by the way.

Brian: [00:34:41] No, no, no.

Phillip: [00:34:42] We're allowed to disagree.

Brian: [00:34:44] We are we are allowed to disagree. I agree with you that I think there's going to be some movement towards what you're talking about. But I do think it's going to be a very bold retailer that employs that sort of model. [00:35:00] It's going to require a bold retailer to make that move. Glossier I feel like did kind of what you're talking about, right? They sort of built their model around, I think it was Spree commerce, and I don't know if they even... I know that they migrated to something that was potentially even more custom. [00:35:20] They built a pretty hefty technology team in-house...

Phillip: [00:35:27] They actually acquired their agency. That's what they did.

Brian: [00:35:27] Right. Right. And they just had layoffs in January on the technology team and Emily Weiss just stepped down.

Phillip: [00:35:38] Within hours of recording [00:35:40] the show actually.

Brian: [00:35:40] Yeah, exactly. And there are a lot of things that go into that. I'm not saying it's all on that, but I do think that it requires a very, very highly skilled, highly talented person [00:36:00] to be able to run the kind of stock you're talking about.

Phillip: [00:36:03] You're thinking at a scale that I'm not thinking. Let's delineate this a little bit.

Brian: [00:36:08] Oh so explain. Yeah, because I think scale is required to do what you're talking about.

Phillip: [00:36:12] I think it's the opposite. I think that there are tinkerer small businesses that make up the majority [00:36:20] of installs in the world of Shopify and in a prior era that would have been a WooCommerce build. In a prior era, I know that Shopify is easier, but maybe Shopify is the thing that proves a model of like, [00:36:40] "Oh, this is what our site could look like. This is how our site could be merchandised. This is maybe what the customer path is." Maybe, just saying maybe, there's a smaller business that's in the Sub1 Million category and there's a plentitude of them, hundreds of thousands of them that say, "Why am I paying a Shopify [00:37:00] tax in all of these apps?  It is costing me thousands of dollars a month just to keep my store up and operational. It doesn't make sense for me. Why not look at other alternatives where there's deployed software wherein maybe I'm less nimble, maybe I don't have all the facilities [00:37:20] and all the niceties. Maybe I don't have the fact that I can say, "Hey, I'm on Shopify," but maybe I'm looking for something else." I don't know. Maybe it's Squarespace, maybe it's Webflow. I think that...

Brian: [00:37:35] I don't see Webflow and Squarespace being tinkerer type software. [00:37:40] Webflow, yes. Maybe you're right. I could see that with Webflow. Squarespace, not so much.

Phillip: [00:37:47] I think the transactional side of it is there are things that... All right, let's wait and see. Let's see. Let's see how this all shakes out. When [00:38:00] we talk about Shopify being so dominant, it's not just that they have some stranglehold on the biggest grossing numbers of sites in the world. That's actually not really the case. It's that they own all of the rest of eCommerce. It's just unbelievably easy to go and launch a store. And it could be, you [00:38:20] know, in three, four years we'll look back and say, "Wow, isn't it interesting that GoDaddy came and stepped in with a $20 a month option?" You laugh.

Brian: [00:38:31] I know.

Phillip: [00:38:32] Maybe hard economic times make people do irrational things.

Brian: [00:38:35] Yeah. I mean, GoDaddy does have an eCommerce offering. That's [00:38:40] true.

Phillip: [00:38:40] They sure do. Or maybe they abandon the channel. That's the other thing. Yeah, maybe there's a wholesale channel. Wholesale is not the right word. It's going to make you think about something else. But like, on the whole, there will be channel abandonment. People are just going to say, "Web's not working for me."

Brian: [00:38:57] Get back to in person?

Phillip: [00:38:57] It's Etsy and it's [00:39:00] local commerce.

Brian: [00:39:02] I think you could be right. But I actually think that's a counterargument against what you're saying that with the tinkerers sort of taking over. I think it's more likely like if you hit a certain level of success on Etsy and you have a local [00:39:20] shop, at a certain point, Shopify is just such a natural path. It's almost a no brainer to have your own site, own your brand, and those types of businesses that you're talking about, their product-focused, especially ones that are  [00:39:40]local, they're going to be the ones that I think are most likely to use Shopify to launch their next iteration or their next channel. And even if they just serve local markets with that, I think that that's probably sufficient to do that.

Phillip: [00:39:58] Let's let me [00:40:00] take one more stab at thinking about the ways that people might be questioning their digital investments. Another is I found this and I think I talked about it probably now this is the fifth time I've brought it up, but we did some research last year at Rightpoint, [00:40:20] and there was a report that we put out called Seeking Out and Stocking Up. And in that report, what we found was a lot of customers basically said that there's a missing modality for purchase on most websites. [00:40:40] Like many categories are really given to wanting you to subscribe, which means getting a little bit of a product on some predictable schedule or otherwise over a long period of time. But it's missing out on the folks that want this opportunity to be able to invest [00:41:00] in and basically prep for the future and like spend the money they have now because they want to lock in a price or because they actually really love the product and they want a whole bunch of it. It's the Costco shopper. Very few eCommerce storefronts provide for that facility today. Now you can merchandise it as such, but it actually takes [00:41:20] a lot of work to do so. And so, again, thinking about how you kind of get away from that out-of-the-box experience with an eCommerce platform that really wants you to sell one SKU to one customer or push them down a subscription path. I think that we're going to see a real big departure of that into how we provide more of both. [00:41:40] Subscription, I think might take a hit in lean economic times. People are going to be trimming the fat a little bit. So how do you actually turn that intent to want to be a more ardent supporter of a brand?  [00:42:00]How do you turn that intent into something that is good for the customer and good for the brand? I think we see a lot more merchandising in the way of stocking up on things, and that's kit, bundles and bulk purchasing. Again, all modalities that I think have very different customer journeys and different levels of like product education [00:42:20], and different experience designs than "Here's a product, subscribe to it," "Here's a product, buy onesie, twosie," "Hey, here's free shipping," right?

Brian: [00:42:28] So allow me to shift gears just a tiny bit because I actually just drew something together in my brain from all the things we've been talking about, which I think is kind of interesting. So we talked about how a [00:42:40] famous hummus company was having trouble with production and we talked about inflation and we talked about rising costs and what people are going to do in an economic downturn. One thing I was thinking about... Okay, so [00:42:53] if more money is necessary to buy things, people are going to need more [00:43:00] income. And oftentimes when people need more income, they start to look at second jobs or side gigs or things that they can do to add to their income. And if the rising costs and supply chain issues that we've seen for mass-market companies are causing increased [00:43:20] costs of goods, all of a sudden, actually, local production starts to make a ton of sense because if costs of mass-produced goods are high anyway, normally you don't buy the local option because it costs more. We also are going to potentially have a supply [00:43:40], a people supply as well, like where people are looking to make more money. I actually think we could see a boom in the creator economy yet again coming up here. [00:43:52]

Phillip: [00:43:52] Oh, yeah. Oh for sure.

Brian: [00:43:53] I think that is actually where I would... Shopify's [00:44:00] stock right now is kind of in the tank. We just talked about alternatives for Shopify, but I actually think that like I'm super bullish on more diverse product creation and more local production and yes, local commerce as well at a physical level, but also [00:44:20] that will naturally lead to more eCom as those local creators want to expand to new markets or just add to the customer base they already have.

Phillip: [00:44:30] I mean, eCom being pretty broad, right? It's digitally enabled in some way.

Brian: [00:44:34] Digitally enabled in some way. Totally.

Phillip: [00:44:35] I think in the local commerce space like we just had a Visions Summit, [00:44:40] which if you made it this far into the show, you're going to hear a lot more in the next month or two. So much to be said there.

Brian: [00:44:49] Oh my gosh.

Phillip: [00:44:49] But we did an event around Visions summit at a local coffee shop. And they were telling me, I was just kind of picking their brains and they're running [00:45:00] all of their eCommerce is running through Toast. When are you thinking about the way that local business is activated digitally like there are omnichannel all in one platforms that do so much for them. Number one, over the last two years, [00:45:20] there's been this buy online challenge. You've got to be able to pick up. You've got to be able to order ahead. You want to be able to dive into a whole range of offerings for people that during the pandemic wanted home delivery or they wanted to pick up and buy ahead. It [00:45:40] was the small point of sale vendors like Square and Toast, although Square is not so small, that enabled a lot of that. And these are also their own forms of vendor lock-in. So it's just so interesting to be thinking about the way that those businesses would be activated. They're not going to be activated on Etsy and they're very unlikely to fractionalize [00:46:00] their digital investments by spending on something like Shopify. Just such an incredible way to think about all of this. All right. We're going to shift gears. So much more to come. So many things to be paying attention to. We want [00:46:20] you to lend your voice to this conversation. The best way you can do that is to drop us a line at If you want more episodes of this podcast, you can get it at, and we have a new Future Commerce Salon coming up, one of our dinners where we bring people together from all over and from all kinds of walks of life, and [00:46:40] to talk about the things that are most important to us in our world. And if you want to be on the list to be able to attend one of those salon events or any of our happy hours or dinners, we have a happy hour coming up in LA in just a couple of weeks. Get on the list, and we'll be in the top of your inbox [00:47:00] and extend an invite to you.

Brian: [00:47:03] Yeah.

Phillip: [00:47:03] Last words, Brian.

Brian: [00:47:05] Oh, no, I'm actually I'm still excited about the future. Let's go. {laughter}

Phillip: [00:47:10] I love it. Thank you so much for listening to Future Commerce.

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