We welcome Tim Ahlenius, VP of Strategic Initiative at American Eagle, on today’s podcast. We will discuss how Q4 looked both in the UK and in the USA. We address our biggest concern around packaging materials shortages and stock.
AL: Hi Tim how you doing?
TIM: Good Al how you doing?
AL: Yeah good thanks good good, well I hope you had a good christmas and a happy new year.
TIM: Thanks I did and I hope yours was well
AL: Yeah all good all good so we uh we caught up before Christmas or I think just at the beginning of November last time and we both had some interesting views on what was going to happen in the in the run-up to Christmas and what q4 was going to look like so as agreed it’d be I thought it’d be great to have a catch up and hear what happened on in America and what you saw in the Q4 and I can share with you what we saw in the UK and into Europe.
I think one of our biggest concerns when we last caught up was the aid old challenge around whether there was going to be enough packaging materials and cardboard shortage but also stock, so it’d be great to hear what you heard from, it’s all from your side in the end.
TIM: Yeah absolutely so yeah we talked about the cardboard shortages and
and just I would say one of the bigger ones I also started noticed was the increase in energy prices right so that’s affecting the cost of both manufacturing and shipping, and I think that’s one that a lot of businesses you know you expect some fluctuation there but as that started to increase that was one that was a concern going into q4, not only the cardboard side of it, from a shipping perspective but I would just say you know, the global computer ship shortage of just manufacturing components I know a lot of car dealerships who are without product because they don’t have the chips for in the car’s, shipments being delayed for other technology devices as well because of the lack of computer chip manufacturing and just the impact there so there’s definitely some things in going into Q4 that just I think attributed to a potential smaller increase in e-commerce spending that we saw, and we can talk about that more later as well but I think those are some of the bigger concerns and then lastly and especially here in the us is just we’ve had some really strange stories about delivery drivers and just a shortage of delivery drivers as well I know all the big shipping logistical providers are you know really trying to hire the driver side but then they ended up with drivers who just didn’t want to work and were dumping packages into ravines and just driving away and leaving them there and so it’s just a really weird impact that honestly, I’ve never seen really reports of before.
AL: All of the above, I think has been seen this side as well so I think last time we caught up we were just going through a challenge around fuel price increases so obviously making
how much it was costing to put fuel in a van to then be the end of my delivery was we were starting to see couriers put surcharges in place which was interesting
um the cardboard shortage I think yeah I think people started to feel the pinch on that a bit but it but it wasn’t massive but I agree with you the energy price and I think what we’re really
seeing at the beginning of this year is an impact from inflation you know the cost to land the goods now with the container prices which I know we’ve talked about before but containing prices still ten times or more of what they used to be so to land those goods in from china I think is it or wherever is expensive increasing energy costs you say just to run the warehouses but interesting on the delivery driver because for me and I think we’ve had a conversation on it maybe not on a podcast but how much of a reflection that last mile delivery is on your brand which is quite hard for you to control that you could have done a great acquisition
piece, great website conversion pick pack dispatch was really good but then the courier threw over a fence or just left it by the back door but it wasn’t protected it was pouring with rain
you know and then, the box was just absolutely soaking it’s just so out of your control but it has a massive impact in my opinion, on how your business is perceived the likelihood of someone repeat purchasing and then puts huge demand on customer service as well.
TIM: oh, absolutely and that last mile delivery is definitely one that even the attitude of the
drivers and the delivery team can impact you we just had a couch delivered yesterday
and one of the guys was great my wife said and he was like oh yeah we’ll fit this in it’s you know an eight slightly over eight foot couch and it was pretty easy into a front room through the front door and one guy was like “oh I don’t know if we can get this in here, I don’t know if we’re gonna be able to fit this in” and she goes it was so weird the contrast between the two where one is like “oh yeah we’ll deliver this” and we’ll succeed in what we’re doing for
you and the other one was just so negative about the whole thing and that perception you know obviously led her to tell me about it but I mean that is a brand perception that isn’t controlled right now to your point and you know they fortunately arrived within and ahead of
the time window which was nice for the delivery because nowadays we’re getting like three-to-four-hour windows not like the one to two it used to be because it’s just not sure what
especially with furniture and I get that but for me it was like they were early which was a great brand perspective, then we had just a good call to confirm it and the customer service able to find it right away didn’t have to wait on hold or anything so there’s aspects that you can control like you talked about but then there’s also the attitudes of the people who deliver it that set a perception for your brand that you have zero control over.
AL: Absolutely yeah I’ve had similar thing where I had to have a new garage door fitted and I
couldn’t recommend them highly enough that the professionalism of the people that came out they explained how they were going to do it fitted it there was even a problem that was outside of their control we had a power cut, and they couldn’t test the door because it was electric but you know nothing was too much hassle they swept up they cleaned after
themselves, you know their precision I compare that to some of the other work that I had done on the house last year and it was painful and it’s still dragging on and you know exactly that and you’re happy it’s got to be the cheapest version of market isn’t it you had a great job done and you’re happy to tell everyone and then you had a terrible job and yeah
everyone as well so I think it’s a tricky one and one we often had a debate with a few
owners on in terms of ‘I appreciate you might save 50 pounds a parcel by using you know a courier that might not be premier league shall we call it, but what’s the impact on the brand and the loyalty and the repeat purchase you know in this country, one of the ones and they all have a blip but there’s one called DPD which typically is pretty robust and it’s good and they send you a text right it’ll be delivered today and they sort of text you again so your driver will be with you but in this hour slot and it and you just feel like it’s important to the business that you bought it from to deliver it properly where there are others you know and they are the ones that just toss it over the hedge and leave it here there and everywhere and so yeah I think yeah it’s a really interesting one we could probably just
dedicate a whole a whole conversation to. From your side across the plethora of
customers you’ve got did Q4 turn out as expected? I suppose and coupled with that
last time we caught up we were sort of debating if black Friday would be as big as expected so if we combine those two.
TIM: Yeah absolutely I would say that Q4, it turned out as expected I know that some had an expectation of growth like, we saw in 2020 but just I knew we wouldn’t match that because we were forced into such a rapid acceleration into e-commerce for so many organizations that depended on retail store um so from the numbers that I’ve been seeing from a US specific
side of things it was anywhere from a you know, 9 to 14% lift depending on the different data
sources that you can look at for 2021 over 2020 for the holiday season now there’s a slight aspect of where you had a lot of brands and organizations who actually started their holiday sales in October in order to meet delivery shipping deadlines for on time by Christmas just because of the logistical things that we were talking about a little bit ago and just other factors with manufacturing so, you know some of the normal reports that are looked at usually compare just November December from holiday sales perspective now we’re creeping even earlier into a lot of the big brands did October beginning of October even sales and you know pushing people to buy then so that’s where we’re still looking through how to do that true comparison of where more sales were done a month earlier so is it spread out that growth from that report perspective but overall, I think one of the things that we can talk through is that there was an increase no matter what it wasn’t as big as 2020 because it was already people were now all shopping online because of the initial onset of the pandemic but one thing that was really interesting is that I found out and just really on the black Friday side is that, the black Friday single day and I attribute this to the earlier sales and everything,
is it decreased from 9 billion in 2020 to 8.9 billion this year so that to me is just a sign that it was impacted where people didn’t wait for a specific day anymore to do their shopping and I
think that’s just again we’ve trained everyone hey go buy online when you need to and you’re going to be able to get a deal on you know whatever you’re purchasing at that point. I think
that high demand phase lasted longer than previous years in 2020 and it really is we’re starting to see a little bit of a decline from the high demand that we had back then
AL: I would say we saw a similar scenario and I think definitely with a narrative that was
coming around at mid october when there’s this fuel shortage and everyone was sort of panic buying was exactly that or if I want to get this product delivered because I buy it
online you know is there going to be a panic and there was narrative at the time where it was still a challenge getting stock into the country due to the container shortages the organization of the ship so we like you definitely saw people buy I was always sort of fifth of November
is quite an important date over here for fireworks night um so that’s always Christmas shopping would always typically go after that we definitely saw people going I want to buy that gift I know they really want it I don’t know if they’ll still have it in stock later in in Q4 I’m just going to get it now and spread it so we definitely saw the same on a couple of brands still had a really good black Friday even though they were sort of starting to pull back because the stock was becoming tight, but yeah I think a lot of people said you and it’s interesting just coupled with that the growing slight backlash not even slight backlash to
black Friday and the impact on the world and the sustainability piece around that. A
lot you know, there was a couple of brands where it just said we don’t believe in it and we’re just shutting shop for the day, but I think others where they were saying look this is the deal whether you buy it on black Friday or not it’s these are our offers for November, so yeah, we definitely saw a flatter rather than the spike over on black Friday, cyber Monday.
I think interestingly also that the brands didn’t need to do the mega deals
of old I don’t know what you saw but I suppose where stock has been more limited to be able to obtain there isn’t the excess stock to then need to need to or want to discount so margins stayed higher although I imagine margin is being It will be a challenge or did start to costs as you and as usually said higher you know energy costs so I’m sure margin is being squeezed but it definitely for me the discount seemed lower compared to previous years
TIM: Agreed you had some of your typical companies uh stores that are just known for their discounting I think they kept it just so that they didn’t lose some of the normal business but I think that there was a lot more and we saw this even in 2020 due to stock in inventory
the lack of brand loyalty where if you can find it in stock and it can ship before the date that you need it especially with Christmas that was one where we had a lot of people who stopped always shopping at the same place and really looked for where it was and if it was a dollar, you know a few dollars more expensive they’re willing to pay it they weren’t bargain hunting
as much because it was the guarantee of, I will get it on time yeah so, I agree with what you saw as what I saw on our side here in in the US.
AL: Yeah, I mean I would almost go as far to say like 10 to 15 points lighter on discount as a sort of a rule of thumb across a myriad of different customers were just yeah, they just definitely weren’t as deep, and it wasn’t sort of carte blanche it wasn’t site-wide it was like we’ll do some discount on this product as you said almost to like those that are used to being known for their discount they just they didn’t want to lose that, but I’d love to know if they went as deep on the product set as they would have done historically
TIM: Yeah, one thing that I think is interesting is the whole aspect of payments and e-commerce with especially the us side of uh shopping is the BNPL the buy now pay later uh model that has been kind of gaining in popularity the past couple of years what we saw is that a third of US shoppers missed a payment deadline and 50% of those shoppers overspent on their purchases sometimes in multiple BNPL accounts so we’ve got people who are going in because the BNPL companies are not doing background credit checks and everything
like that for people who sign up for accounts low credit consumers are getting
those accounts and getting the promise of “oh I can buy this, but I can pay it later”, well now they’re not paying it what’s surprising is with that and the implementation of that across a lot of brands it’s not going away. BNPL is only going to grow in use and, out of all
those consumers over 62 percent are expected to increase their use of it in 2022.
So it’s going to be an interesting model in in my mind with this BNPL of what’s going to happen when it you know really comes down to are these companies writing off losses for products that were bought with BNPL are they going to go after and try and collect you know this it’s through the BNPL company who say “hey we’re risk-free” but now it’s obviously starting to cause a problem for at least them if they’re taking on all that risk, so that whole
additional payment model I think is going be one to really watch over the next year or two years of just the impact it really has on payment methods accepted and what consumers are growing accustomed to.
AL: I think that’s interesting because like you we’ve seen a lot of movement in that space and typically when the retailers are using that solution, we’re seeing on average you know average order values are higher increasing conversion rate when it’s available
interesting less returns it’s almost like well I’m committing to buy this and pay over a number of months so I’m buying it. But I haven’t heard of the missing payments so that’s really interesting insight from your side. Like you my understanding is if they do miss payments that isn’t on the retailer that’s on the BNPL is to swallow in the year because effectively they’re the ones that arranged the credit but yeah if that becomes an issue you can see it’s going to become a problem. There’s been a bit of a backlash in this country of like is it too easy? Is it scandalous? is it you know it’s like these payday loans and these scenarios there’s a
it’s not it hasn’t got like an organizing authority at the moment over here so it’s not legislated at present I think they’re pushing to drive that forward so you know I think we’re worried
there’s a little bit of loan charging going on to a degree and I know and had some really good conversations with some retailers that morally they feel it’s wrong to be offering these solutions which I absolutely get but at the same time enough and you know we did a
podcast with one of these providers you know if these people are buying it but can’t afford to pay it off by end of month you know credit cards are then charging them a nice 20%, 24%, 25% so, it’s this fine line isn’t it whereas if you can offer them look buy it now and pay it over three months and that helps them with their cash flow in periods of covid furlough or just being smarter with money then it seems to have to be a good solution but as you say there’s always people that go and then push the boundaries, so yeah that’s a really good insight
but you want to watch and hopefully it doesn’t spiral and cause change. Is there anything in Q4 in 2021 that really stood out for you that you would then say definitely want to bake that into my Q4 2022 strategy?
TIM: I would just say that you know the continued growth of e-commerce the customer expectation of being able to buy online from a brand is key because that is something that
Just it’s here to stay it accelerated in 2020 and 2021 we started to see a bit of a refinement of some of the customer experiences, but I think that because of what we talked about earlier with what you can control and can’t control with your brand’s uh perspective with
your consumers with that last mile delivery and just the customer service and the
honestly the lack of workers in some aspects, that’s where the continued focus
is going to be how do we ensure as much as possible that we have a great brand experience without the full control in certain areas. The other big thing I would say and it was really at the very end of the quarter was just you know after well formerly Facebook now called Meta made their big announcement of their push towards the metaverse and what’s there it’s going to be really interesting to see what happens with all these NFTS and all the retailers who are starting to push into the metaverse world and I still don’t believe that the market share is there yet from a consumer perspective but it is growing and I think that as we see potentially the
rumoured apple VR headset this year, is in the rumour mill right now you’ve got continued dedication of growth to it you’re seeing big brands like Nike and Adidas going into that world and starting to put product there. You’ve got H&M who put up a whole VR metaverse
store and announced that, Walmart even announced a potential shopping experience for groceries through virtual reality that’s where I think that we’re starting to see in the end of 2021 Q4 a new directional push and I think it’s going to be the next wave of what e-commerce is going to have to adapt to, when it comes to the new digital experience that hasn’t really been e-commerce focused yet outside of just normal app purchases. It’ll actually
be product purchases and you’ve got now a mixture of both digital products and
real life products and there’s even talk about how to have that digital product purchase be made gifted to someone and they could trade it in for a real life version of the same product. So it’s going to be a very interesting switch for how e-commerce businesses plan for what they do inside of this new reality and that’s me in that virtual reality metaverse world I think it’s still at the very bleeding edge of opportunity, it is not a norm for everyone so don’t just go jumping into it right away but it is going to be something that you do need to keep an eye on because there’s all sorts of different things that are happening there but there’s also too many
different variations of metaverses which one do you go into you can’t go into all of them last I saw there’s a count of over a hundred different ones you could go into. So I think you kind of need to let the let it settle and I think it’s kind of like the you know computer rush back in the 80s 90s where you certainly had all these brands and then they started to kind of consolidate down over time I think we’re going to see the same thing with the metaverses where it’s going to be the same thing there’s so many over 100 now how does that come down and how does e-commerce really play into that overall. That’d be a big one just to watch and then lastly, I would say just the learnings from what we saw with the trends right now in end of 2021 and
Q4 I think that us e-commerce sales will cross a trillion for the first time in 2022, that’s really going to be that next milestone of crossing that threshold.
AL: Which is exciting right do you think really what is it very exciting if it but it’s really got truly into stride I mean I remember Ecom sites back as early as 96 but really it was around to late 90s really around the 2000 so yeah to get to that revenue level that in that speed I think is exciting I think your view on the on the verse the meta verses I think it’s exciting but I’m going to show my age, it’s almost a bit like that do you remember beta max versus VHS you know it’s like which one are you going to go down and it’s almost like you want to let that work its way through to a degree rather than you know I remember people well within 10 years ago people go I need an mdot website you know I’m going to go build a mobile website and I’m going to have my desktop website and pretty quickly we went to responsive and then there’s people like oh I just spent tens of thousands on a mobile version and a desktop version, so yeah it’s that fine line does you want to you want to be leading edge but also it’s trying to really understand which edge is going to take off but yeah what a great way to buy product. What’s the saturation of people with the VR with the appropriate technology to be
able to use these and you know exciting.
TIM: that’s what we are waiting for yeah
AL: It is exciting that apple is going into it because it might mean that somehow they elevate the phones etc to help you in that world which would suddenly make it a massive move forward in the devices available to utilize it.
TIM: Yeah absolutely and I think the exciting thing too for that one trillion
mark is that that was not forecasted to be reached as a milestone until 2024. So I mean we’re two years ahead now because of what acceleration happened in 2020 as well so I think that’s going to be kind of you know just a very interesting aspect of how fast do we now have other
experiences also change that weren’t expected to change as quickly.
AL: Yeah I think I still I mean, I completely agree with you one thing that still lingers in my mind slightly is how successful are the retailers being at converting this the covid cohorts where they acquired lots of new customers because that’s the only way they could shop how successful are they turning those into loyal repeat where applicable customers that buy and buy again and I don’t know if you’re if you’ve seen that I’ve looked at a number of businesses where they’ve acquired really well but I’m not really seeing sort of the building of the lifetime value and the repeat purchase I think they’ve still been sort of very focused on how do we drive more traffic how do we find more new customers rather than that finding that balance of oh and now we’ve got this great customer how do we get them to go on and be a great advocate and buy our product on you on what is a regular basis.
TIM: Yeah I would say that what I have seen here in the US is a bigger utilization of loyalty programs to try and help keep those customers and especially when the inventory problems hit was just you know having the brand and the consumer connect on rewards and overall I mean from a statistical perspective 75 percent of consumers favour companies that offer rewards 56 stay with brands who get them and stay loyal and so I think that’s where a lot of the interesting things around data privacy and what is allowed to be done to truly market to people and there’s a lot of you know disruption right now with the big tech giants and US government who has legislation pending for some more protection around that there’s also an interesting result out of Austria with google analytics you know now being you said it’s not allowed in the EU and it is not protecting privacy the way it’s supposed to. You know there’s going to be some shifts I think around that but at the end of the day while there’s a lot of people pushing on the privacy side, I still don’t see consumers turning off cookies or going in and clearing their cash they want to be known because it’s faster it’s a faster experience for them and I think that that’s going to be interesting to see how you’ve got people who are pushing for something that there’s an aspect to needing some regulation around just to secure data and keep certain things you know private and not just blanketing it out and sharing it everywhere but at the same time if I want to be known to enhance my shopping experience and reduce my effort and increase my efficiency of being able to go in and say hey you know what you know I’ve already bought those products from you don’t keep marketing those same ones to me I want that experience and a lot of people have shown that they also do. So I think that’s going to be interesting to see what that growth is because again customer retention just by increasing that five percent can boost a company’s profits anywhere from 25% to 95% it’s a huge aspect so your existing customers are going to have to be something that you focus on and when you have inventory shortages that’s the first you know crack in the foundation of that relationship that you have to make sure that you mend as quickly as possible.
AL: I complete yeah completely agree I think it’s how you manage customers’ expectations that we’re working with a brand and unfortunately we run out of stock after black Friday and you know it’s not going to come back in until end of February early march but we’ve managed that expectation and people are pre-ordering knowing that they want the product so yeah which is a which is a perfect scenario but I think again it’s just about managing and being upfront and being honest with the customer. Going to your point on cookie I mean obviously it’s meant to be the year that google might still pull that trigger on the cookie change, but I’m with you it’s this real fine line because with that scenario we can’t you can’t personalize a shopping experience you know suddenly they can’t recommend oh Tim you might like this product this product they just suddenly show you oh here’s some women’s trainers you’re like why is that relevant to me? Without that scenario it’s very I think it’s much harder for the retailers to be able to be more accurate and give the consumer a great experience it needs the ability to be able to understand the customer to be able to refine the experience, I think. Do you see it sort of going all one way where they can it’s sort of like no and then customers realize it’s a it doesn’t give them a great experience and then it sort of comes back to a halfway house or?
TIM: So and kind of rephrase that for me just a little bit about the halfway house and
and the aspect of it going out.
AL: So I think it’s like obviously we’re here right now we collect cookies and people in the main aren’t but in theory isn’t it this year that that google supposedly is kicking this you know it’s been delayed a year so then we’re in the story of like no cookies could be collected etc etc etc so then there’s no ability to for the retailer to really understand and then give it a year or 12 months because ‘oh this experience on this website’s rubbish’ and they go well we can’t
TIM: Yep I had to get my golf mine back in it’s winter for me so I don’t get to go out and visit the halfway house as much but uh yeah so we’re definitely starting to see more questions asked by our clients and we’ve been trying to be a little bit more proactive about the upcoming change with cookies however because everything was pushed back from when it originally was all supposed to change of course you get the standard ‘oh good I’ve got time again’ and so people aren’t focusing on making an immediate change for it I think a lot of
it we’re still also waiting to see which we haven’t yet a confirmed direction of what is going to be the next method because there is at least three different methods that were being discussed Google’s was flocked the federated learning of cohorts and they were starting to aggregate some of that data down they were making changes in google analytics with version four. It’s still in beta in a sense where it’s not being forced for everyone to move to and it still is lacking a lot of the features that universal analytics tracking has in the current version that almost everyone is utilizing, so there’s a lot of change that people have to go through for that and a lot of them didn’t want to tackle that immediately and it’s more of a wait and see aspect. I feel a lot are waiting to just see what the true I have to do this versus it’s recommended you do this come down to but we are starting to look at what are ways that we can look at just you know session based without a long-term cookie store how do we ensure that we push people to create my account logins and getting their account actually with the company so that when they are on the site they can log in and now we know them from a different perspective than through just a cookie so there’s a lot of ways that we can already address that in the e-commerce space it’s when they’re the anonymous browser that you only get a certain set of information now and with that, it’s just how do you change your marketing tactics to be more in the moment and encouraging the connection for them to share information so that you can continue a marketing plan to them. How do you get them to share their email or if they do order from you as a guest account encourage the SMS sign up for delivery tracking notifications and now you can also potentially market to them if you give that clarity that hey you approved a market to me through SMS. I think that is where you’re going to start seeing more focus from a lot more brands a lot of the eCommerce platforms started adding some of those features to them, so I look at like Shopify and a few others where you have a bit more of that integrated into an offer or can plug in and turn on so that you can start to capture and do that. So that’s kind of where I think we’re still I would say approaching the halfway house as far as when the change is officially being needed because it wouldn’t surprise me if for some reason it got pushed out again honestly. We’re watching that but it’s also not this we have to change it today
and if we did change it today I feel that it’s like a lot of other things when you jump on the early bandwagon that you might implement one method that then is never the actual end result of what’s going into place.
AL: Well I yeah you only have to look at GDPR in this territory of how some people went sort of whiter than white and then they sort of they went all the way out and then yeah there’s been a regression of oh there’s a middle ground here that’s acceptable and but still conforms to what GDPR wanted so yeah. Wow, it’s going to be an interesting one to watch and see how it progresses.
TIM: Absolutely and it impacts so many areas too I think that’s where everyone is still on the technology platform side I mean look at like all the adobe marketing products at the salesforce marketing products etc they all depend so heavily on the cookie base, that they also have to make changes to their platform so if you’re on one of those main ones or if you’re on a smaller one like I mean, Mailchimp and some of the other platforms that are out there Hubspot etc. What are they doing to make changes and kind of look to follow their lead because again most e-commerce brands are utilizing those toolsets so follow your toolset and what they’re doing because they’re the ones responsible for actually changing that you need to understand it though because as a marketer you need to understand what you have available to you in your different toolsets so you still have to stay on top of it but at the end of the day it’s also how your toolset is then tracking and doing that collection?
AL: Yep, completely agree it never it’s never simple it’s always changing. Tim as ever it’s been great catching up with you and we’ll book another slot very soon.
TIM: Absolutely thanks Al.
AL: Good talking with you.