Here’s what I learned this week

Quick word before we get started…

If this is your first email, welcome, if you’re an old reader, thanks for sticking around.

I write this newsletter to keep myself consistent as an outlet for my thoughts around ecommerce and the changes that are happening in the background.

This newsletter has morphed into a bit of a combination of summary of initiatives combined with macro trends to be aware of.

That said, if you’re looking for something really strategic, although I don’t talk about it, there’s tons of free info on jonivanco.com and some paid courses that are totally worth more than the price asked, so I’ve been told.

You’ll get enough out of them to scream at me for all the extra work you have to do to improve your stores 🙂 but you’ll have the increases in revenue to fully justify it.

If you haven’t already the free popup course has some really great tips in it that increase signups and revenue overnight, if you’re ready to start with data collection, just reply to this email and we can get you started on a free trial of Formtoro.

But the one bit that I can offer that will make you a better marketer is the Customer Journey Course.

You can learn more about it here: Customer Journey Master Class 

Somewhere in this email will be a reference for you to reply and I’ll give away a subscription for free, so read every word.

Ok now back to our regularly scheduled program.

Shifts impacting ecommerce are just beginning to show

I’ve been pretty vocal about what’s coming from an AI perspective, but I’ve left out the most important part.

AI is modeled on inputs, you can use open source data sets, you can scrape data, you can pay for data, you can collect data directly…

Did you notice the one word used over and over again?

DATA

The biggest problem that I see with data is what people collect isn’t enough for them to build out insightful or competitive models.

I’ve worked with and been around companies that have been designing AI models (really ML back then) since 2017.

The gap, over reliance on unstructured data to make decisions.

For those of you that are unfamiliar with structured data v. unstructured data, here’s a brief primer.

Unstructured data is often unorganized via format from open-ended sources and responses, think reviews, forums, etc.

Structured data on the other hand is set questions with fixed responses or clarifying questions or prompts.

As much as marketers love open ended questions to gain deep insights, Natural Language Processing just isn’t there yet even with AI to give you all the details on unstructured data.

We uploaded reviews and do to the unstructured nature it hallucinates a lot.

But with Structured Data - AI puts us all to shame.

Those that aren’t on the inside of data and data collection don’t understand how close we are to AI taking all our jobs.

I’m not talking about Chat GPT, I’m talking about large data sets without the need to query with prebuilt parameters from really smart people providing expert level reports. (this is what we’re building currently for Formtoro)

I said this months ago, talked about it on LinkedIn too months ago, these tech layoffs aren’t coming from non-record profits or overstaffing during covid.

Instead, what we’re experiencing now is what a lot of industries in engineering and space experienced with the age of computers where workforces were reduced by 90% because the manual calculations and work just weren’t needed anymore.

This is AI today.

If you sell just a service, or do busy work, you have zero moat.

AI is coming for your job.

If you think your advantage is some sort of strategy, you’re also going to lose to AI over the long term. (by long term, probably within 3 years)

AI is replacing most of my job as it relates to Formtoro and reporting. We’ve been working on this for years.

Eventually, it will replace the creation of forms process, with multiple form strategies and automated a/b testing (not immediately, but eventually).

The whole Formtoro platform is essentially my marketing strategy in a product.

When someone says productize your experience, that’s what’s happening.

It’s likely, that in the next few months, you’ll get a good enough version of me in platform to provide you guidance on what to do, on demand, everyday.

To think this journey started more than 4 years ago and we’re nearly there already is crazy. 20 years of experience built into software with greater input capabilities than was ever possible before in 4 years.

This is nuts.

I’m grateful that we had the foresight to understand that with any AI model, the most important factor is access to data and algorithms to produce that data and insights.

We played the long game on this one and I think it’s going to work out well.

That said…

There’s always going to be jobs though that require human coordination that will be safe, but as AI improves, good enough is going to outweigh being great at anything.

But there’s a bigger threat to all ecommerce right now…

US is the biggest consumer market of goods and economic disparity among the population is going to lead to a continued boom for Manufacturer to Consumer Companies and marketplaces.

As a whole people turn a blind eye to things like slave labor, child labor, low wages, outsourced and abused communities, etc.

We’re all selfish.

With that in mind…

Let’s talk about Temu

Last week I hinted that what Temu is doing is the start of the end for most ecommerce that is brandless.

Honestly, it’s the start of the end for most brands as we know them.

There’s been a lot of brands that have died and a lot of those darling VC steroid created brands that IPO’d that have all found their way to the hands of PE for pennies on the dollar.

Temu is about to accelerate this more quickly than we know.

It’s the number one downloaded app.

It’s taken DTC (Direct to Consumer) and moved it to MTC (Manufacturer to Consumer) with a marketplace to provide even greater savings.

It’s a model that Amazon is going to find hard to compete with over the long term if they can find a way to ensure quality control on the platform which I’m confident they will over the longtail.

Too much is at stake not to, but they are coming at a time where fake goods are rampant on Amazon as well.

It’s got a war chest of money that it’s spending annually to grab market share and like I put in last week’s email, Amazon has turned to the same stuff just higher prices, Temu will win out in the long run.

It’s enough that Amazon has started a campaign to court those same suppliers.

The shipping and logistics has improved so much over the past 10 years that I see it being the way forward.

For basic necessities this play will win out.

Also check out the amount of departments stores that are closing, this was a massive distribution channel for brands, and although people still shop in stores (I was in a mall last week), I think these overall shifts will start impacting more and more brands.

Another interesting things I saw in Nordstrom last week, more and more inhouse brands by Nordstrom cutting out the middle brands.

So they are leveraging their distribution network and historic sales data to cut remove brands from the floor and replace with their own brands.

Target does this, Walmart does this, Amazon does this.

It’s a data play to maximize distribution and profit margins.

Physical stores have something interesting going on for them though, people still like to touch and feel products.

Something out of stock or not available in your size, we can order and send to your house.

The new model is using that space as a giant popup shop, as more sales move online, less stock in stores, more brands available, but longer term more direct brands…

You can see where this is headed…

Why pay more if you can just buy direct?

So what do we do?

Well, most stores make all their stuff in just a few countries, mostly China, Bangladesh, Taiwan, Vietnam, India, etc. if we’re being honest, because they invested so much in manufacturing and manufacturing technology you can’t really compete.

The labor is cheaper as well and we have pretty good trade relations with all those countries so they get great rates to import things.

We barely even make the raw materials in the US anymore to even do manufacturing at scale, it’s kind of crazy.

That shift in 1956 was the first time the US had more service economy than manufacturing and it’s steadily increased ever since.

The pandemic allowed corporations, landlords, and everyone else to become more greedy.

You know those restaurants you go to in the states with less workers, that’s the service economy also starting to contract due to discrepancy of wages and technology.

QR code menus and ordering anyone.

So there’s a few things that I think are really interesting about the current consumer market, inflation is up, retro brands are cool, distributors are edging in on making their own products, copying products is super easy to do, and there is still a drive to create by entrepreneurs.

I’m going to share the context of a call last week with a fractional CMO starting a brand in CPG (consumer product goods).

I’ve heard the same thing from a few CPG companies recently.

The old model allowed for competition, the new model doesn’t really allow for much competition.

Unilever isn’t going to go out of it’s way to buy anymore companies.

Neither is Proctor and Gamble.

They don’t have to, they can let a company that’s small figure out a market for them, then they can produce a similar product and kick them off the shelves and tell their retail distributors not to stock them.

That’s the way the modern game is played.

The fact is if you’re in DTC, you should stay small, build profit first and find a way to automate everything, the days of large exits are gone.

It’s also why CVS, Walgreens, and other large chains make the same products for less at all their stores.

DISTRIBUTION

Macro economics

The disparity between haves and have nots is growing as such more pressure will be placed on those that are finding it hard to live day to day on the salaries that they are working for.

OK so this is a bit depressing, we have AI that is going to replace jobs, we have Marketplaces and retail stores and monopolies that can crush competition and distribution at the drop of a hat and outprice upstarts, what should we be doing with our time?

This was the theme of another conversation I had last week with someone looking for a new role in email marketing.

There’s a value shift going on.

Honest Talk

I’ve been wondering about this a lot lately.

I was playing golf with my buddy on Friday, I can’t share all the details but I can assure you that we’re heading into an era where things are about to get really rocky for a lot of people.

Even C-Level Executives at large companies are having their salaries slashed and options pulled right now.

If it’s not AI no one is interested currently.

Because AI replaces salaries which are one of the largest expenses for companies.

It’s why you’ll see mass layoffs for Google and Facebook over the next year.

Their entire ad sales divisions will be replaced with algorithms.

Generative AI tweaks and everything automated.

The playing field will level up for brands, but it might be too late, because the marketplaces can advertise and also cannibalize the market by pushing you to the goods they sell which make them a higher margin.

So as you’re reading this, focus on staying small, being nimble, and recognizing as we covered in last week’s email, we’re not Facebook and viewed as being necessary.

Things may get a bit bumpy for a bit.

I honestly think the real AI isn’t going to come from a startup, it’s going to come from those that already have all the data.

Be the first to send me the name of the 19

The Takeaway

Data is going to be the only thing that matters moving forward.

Structured data will always be better than unstructured.

Start building valuable assets now, not all of them require you to sell anything.

Have a great week!

-Jon

Catch up on past posts: https://ecomwithjon.beehiiv.com/