The Near Memo, Episode 15

Shopify makes the case for local ecommerce with some great stats; Why do consumers desire to buy local but still buy at Amazon?; How did Google win the review wars vs Yelp?

The Near Memo, Episode 15

Part 1 Video: Shopify makes the case for local e-commerce

Part 2 Video (8:44): Why do consumers desire to buy local but still buy at Amazon?

Part 3 Video (15:06): How did Google win the review wars vs Yelp?

Referenced Articles:


Greg: all right. Welcome to episode 15 of the near memo. I'm joined as always by Mike and David I'm Greg, Greg, since I didn't say last names and, um, we're as always, we talk about the most interesting things that happened in the world of, um, local commerce, social media. Um, and there's a ton of news, but we focus in on three particular major items, uh, during this podcast.

And David you're up first, I think.

David: Sounds good. I wanted to talk about the, uh, not super recent, but just very exhaustive, uh, future of commerce report from Shopify. And given that it's coming from Shopify, sort of not surprising that it highlights the ongoing transition from. Offline to online purchases for local and small businesses.

Uh, it seems to me to be a sort of an amalgamation of about six different reports that Shopify has done, uh, over the last year and it takes it, it, it interviews both consumers and, or had surveyed both consumers and businesses, a number of interesting data points. I think for me, the one that jumped out the most, um, which is, you know, clearly a little bit of a sales pitch for Shopify, but, but pretty impressive.

Uh, Shopify is retail merchants replaced 94% of point of sale sales lost in the first six weeks of the pandemic with online sales. So just amazing if you were already using Shopify POS, uh, and had an online version of your store that was ready to go when the pandemic first hit, um, you saw, you know, a fairly minimal disruption to your business.

And I don't know that that's necessarily specific to Shopify. I would, I would think that that would apply. To any business that had a good e-commerce experience that was, you know, previously doing a lot of offline sales that they lost a lot, a lot less business. Uh, during that initial wave of COVID Greg, you were gonna say something.

Greg: No. Well, I, I, I was just going to say, I suspect that 94% number is high, you know, I mean, it may be true for Shopify customers, but I think it's high as a general, you know, as a general matter. That's Shopify calling Mike right now.

David: Thanks for the plug. Yeah.

Mike: Yeah. It's my wife. I have everything shut off, but she's allowed to get through, so

David: yeah, well, we'll have to invite Darren our next, uh, near memo.

Um, so the other, the flip side of that coin I thought was interesting is Shopify, um, almost doubled new signups in, uh, between the first quarter of last year and the second quarter of last year. Uh, they were up something like 71 or 74%. Um, and so, you know, certainly merchants who weren't on an e-commerce experience, uh, you know, we're clearly looking to one of the category leaders, uh, to get themselves online.

So I thought that was pretty interesting. Um, the consumer data, I also thought was interesting. It was not as dramatic of a consumer preference for online during COVID, as I would have predicted, um, young people sort of led the way I want to say two thirds. Uh, one of these stats showed that two thirds of young people sort of preferred the e-commerce experience.

It was less than 50% of folks over 55. Um, and so the generational thing sort of not surprising, but I would say that the extent to which the preference for online, uh, you know, is not, it wasn't pervasive during COVID, uh, is, is kind of interesting. All of these, you know, curbside pickup and making an appointment to shop in store and all of these things, there was a significant, I would say, a significant minority of consumers, uh, express preferences for these, these sort of newer shopping behaviors.

Uh, but it wasn't a majority. And I I'm really curious to see, I hope Shopify does some of these same surveys on some of these same questions, uh, you know, in the second and third quarter of this year of 2021. To be able to compare, you know, how permanent are these sort of behavioral shifts off. I think that that's, that's going to be really interesting.

Um, and then the other piece, which is going to be a segue

Mike: one comment on that, there was an interesting article in retail dive that Greg mentioned earlier, that in terms of best practices around these new, new things, and they noted that buy online and pick up in store where there's some sort of. You order it, and then there's some sort of delivery system in the store, like a dispensary or something has really fallen by the wayside, largely driven by COVID.

But the article, I think the premise of the article was that it's death is probably permanent that's limiting, for example, browsing behaviors that consumers have. So it'll be interesting to see if something like that comes back post COVID or whether curbside is permanently sort of accident from the.

From the choices,

Greg: I would guess. Yeah. You're, you're, you're juxtaposing buy online pickup in store and curbside, I would guess not, uh, that curbside is, is going to totally eliminate buy online pickup in store. But, um, you know, I think retailers will deal with it individually. There was another interesting stat that I saw from the, from the Shopify report that was talking about.

Uh, I tweeted about it earlier. Um, they said that, um, where there was a local delivery option or local pickup option, those, those shoppers converted at higher levels than those doing traditionally commerce with, uh, with an e-commerce shipment to their homes. And I thought that was really interesting as well, because I guess that goes to the immediacy of the, you know, that's kind of like an in store.

In store shopping experience, there's an immediate gratification or you get the product immediately. I also thought it was a good report with lots of really interesting, interesting, um, data. Which, uh, do you, uh, do you want to talk more about the report or should I segue into my topic? I'll say, I'll

David: say one and a half more things.

So just to piggyback on that, you know, uh, availability of local delivery, increasing conversion rate, uh, I guess that's, I would, I would kind of see that as the permanent takeaway from. From COVID sort of shifting behaviors that it may not be, uh, you know, that, that all of these, all of these sort of curbside, curbside pickup, local delivery, these things may not be necessarily table stakes moving forward, but you are going to lose some share of customers just from a lower conversion.

Uh, if you don't offer them as part of your, your checkout or purchase experience.

Greg: Right. And I think the theme of all of those is convenience customer convenience, right? I mean, I think people like the choices, they like the convenience of those options. I, you know, I had a whole foods delivered this morning because I was, you know, just a busy day and I can't get to the store.

I, it doesn't mean I'm not going to go to the store that forever, you know, I'm going to prefer a delivery, but it's a great option to have. Um, as the circumstances dictate,

Mike: do you, same as that multi-varied multitude of delivery options will put stress on a lot of these small businesses. I mean,

Greg: absolutely.

I mean, small businesses are not set up. Even the big, large, they're not set up to do like 10 different things. They can do two things, you know? And so this is the challenge is figuring out what's going to be the most effective. Where w where do they place their bets? You know

David: for sure, but they have to do something.

Right. I know that I've probably gone over my time. So I am going to segue to you briefly, but the other inter really interesting data point was around, you know, there's this desire among consumers to support local and independent businesses. I was shocked at the country level differences in that sentence.

Greg: Oh, I don't remember seeing that. Tell me about

David: that. Spain in the U S we're we're you know, one and two or one, one and three or something like that with 74, 72%. Very high percentage of. Have consumers expressed an interest in supporting small and local businesses. Japan was down at like 25% or something like that.

So it's a really wide range of, of this notion of consumers wanting to support, uh, small and local businesses. And, um, yeah, it was happy that for, for all the businesses that I work with anyway, that, that American consumers kind of have this innate preference for it. Uh, but it's not necessarily true in other parts of the world.

So I'll segue. I mean,

Greg: India. Yeah. I suspect if we, we drilled into that, if there was some kind of qualitative interview component, you'd, you'd see more nuance there, you know, and, and, and the way people may have interpreted questions. I bet you there's more to that story, but, um, consistent with all of that.

My, my, uh, the thing I wanted to talk about this week is what, I'm, what I'm sort of calling the pandemic paradox, which is, as you expressed David, the, the massive growth in e-commerce online, shopping. Uh, that we've seen again and again, from Adobe and from, you know, all the, all the big data sources, um, you know, over 20, 20 triple digit growth.

But then this other thing that you're just talking about, which is this strong preference, emotional preference or independent businesses, small businesses, and. How did these two things kind of co-exist and what's really going on, you know, because people want to buy and keep support their communities, what to buy locally, but are spending tons of money on Amazon.

And it's, it's, it's kind of true in my house too. I mean, philosophically I'm all in with local businesses, but I'm not actually spending that much money with them right now. I'm buying from whole foods. I'm buying from Amazon, um, uh, in, in many cases. And I think. As I said in one of the earlier newsletters this week, I think the reconciliation of that is digital is what Shopify is doing is bringing that kind of convenience and digital tools and digital capabilities to these small businesses.

If you make it easier for consumers to do business with small businesses, they will, but you ha, but that has to, that has to happen. Otherwise they're not going to do it. They'll just default to Amazon, you know?

Mike: I think that there may be another logical explanation for all of this where I live. They're very shy.

There's just not much product choice. I can't find the type of sneaker I need locally. It doesn't matter. I can't order it. What type of sneakers? I need a high support wide nine nines are not that common anymore.

Greg: I thought you were gonna, I thought you were gonna mention some kind of, you know, uh, fashion forward design.

Yeah, no, no, no.

David: With all your work with Aaron Lakey, I thought for sure he could say one of his now a hundred collectible pairs.

Mike: He tells me that's his retirement. I said no way, because you're just going to keep salivate over him. Until your death bed. So he's not gonna ever sell them. So how could it be his retirement anyways, I need a special type of sneaker.

Cause I pronate a lot. Can't find them locally. I buy those from Amazon. And I think that, but if you extend that logic to other commodities and many other products, I think what has to happen is small businesses need to move into areas. Of combinations of product and services of unique offerings of experiences.

And I think in the end, the solution is that they don't compete because you can't really compete with the efficiency of somebody like Walmart or Amazon picking up a product someplace else in the world and delivering it to your door. Yeah,

Greg: it's true. I mean, in fact though, most small businesses are service businesses there.

We, you know, we tend to focus on retail. But the majority of small businesses are services. And so there isn't, you know, that's a kind of a bright line in many cases between product things that can be physical. If

Mike: it's something like jewelry, where every piece is unique, right? Whether you can't, it that's

Greg: a hybrid, that's a kind of a

David: hybrid.

I was going to say so many fashion furniture, jewelry, anything in those kinds of categories. I feel like there's a, there's still a very strong place for, for local businesses to succeed. Um, in many cases you'd want to. Feel and touch and see it up close, um, you know, before you purchase. So, um, you know, there's the whole back to our buy online pickup in store kind of thing.

There's, there's sort of, you know, using online to kind of get people in the door. Um, and then sinking that experience I think is going to be critical. Yeah,

Greg: I totally agree. And one of the other items, uh, in today's newsletter and Friday's newsletter is the idea of sort of bringing the, the store experience online.

Um, it sort of arises in the context of sort of these, uh, fashion related beauty related kind of augmented reality and video demos and interactions with, with humans. Um, but, but I think that's going to be, I think that's kind of consistent with what I'm saying is that you've got to bring. More of your digital.

You've got to bring more, bring the digital game, you know, much, much higher. Um, and, and also the marketing becomes really critical for these small businesses because people will buy from them. If they know they exist. And very often you don't know where you can buy a certain product. You don't know, who's, who's selling something.

So if you give people access to the information, make it visible to them, that will also change their behavior. I mean, one of the reasons why people buy it from Amazon is because they know they can get the thing from Amazon. But if I knew that the bike gloves that I wanted were available, you know, in my neighborhood, uh, I would go down there and get them, you know, I'd call and, you know, Buy them on the phone or something, whatever.

David: I was just going to point, not that it's, you know, not that any small business needs, one more thing to think about, but I really see loyalty programs as you know, that that is a table stake now for a lot of local and small businesses. Just thinking back on your, your whole foods experience you shared, you know, 10 minutes ago, um, you know, you, you have loyalty to whole foods, um, because of your previous in-store experiences and.

That one or one or two times where you actually need something delivered to you that they're top of mind for you because of those, those earlier things. Well,

Greg: but, but also one of the reasons, so one of the reasons why, uh, it's easy to shop from them is because they have my whole frigging shopping history there.

And so creating a shopping list is really fast and I don't even have to, they, they remind me of everything that I bought before. Right. It's an upsell. Bananas and apples and horseradish and hummus and whatever, you know, much

David: healthier than our family.

Greg: Well, I, you know, we, we buy unhealthy stuff too, but, but it's all there and the whole history is there and it's just super easy.

There's, there's just, it's really the path of least resistance. Um, so I think, I think there's a lot of complexity in this conversation, but consumers are ready to buy from independent businesses. If, if they can. Find out who is, can deliver the service of the product and the, the, you know, some of these digital capabilities or the omni-channel stuff is, is made, is made available.

So we've, we've, we're going a little long this week, but that does not mean Mike, that you should shortchange your very interesting and important discussion about Google, um, Google and Yelp and, and the growth of Google reviews, which was a really great article that you can read in our analysis. Sorry.

Mike: So just to summarize the analysis, it was a case study I did of a large, moderately large, uh, fast casual chain in the South Southwest and Southeast areas, United States, over 200 locations.

Uh, and I followed the, the history of their reviews from 2013 to the present across the sites. That they were appearing on a TripAdvisor and Yelp and Google and Facebook. Yeah. And you know, clearly Yelp was struggling in this and Google was clearly dominating in this segment. I had the honor of being criticized for, uh, somewhat by Rand Fishkin.

So obviously it's always nice to be criticized by somebody who has a half million followers. They've got to get his attention again, but. He noted that it doesn't that my article didn't tell the whole story of local reviews. Uh, it doesn't play out some of the things that Google did, uh, you know, in terms of their utilizing their monopoly power to force local businesses to get reviews on Google.

Cool. And I, I felt, I mean, that. Brand's assessment was way too simplistic. And I didn't want the reason I didn't include that in it, because I don't think that it is the driving force of this storyline. I think one is that it's much more complex. There are many markets and I'm doing another piece of research, which shows how it happened, how it was different than a sit-down restaurant.

Um, but so it's more complex than just Google being a bad guy. Um, admittedly, they have a monopoly and they may have used. That monopoly to disadvantage up intentionally. But during the last 10 years, the prevailing legal theory has been the Bork theory, which is really barked in by no matter how you interpret it, that that the consumer welfare was the only consideration and antitrust and the issues of controlling the broader economic and political power.

Business versus business was irrelevant. So Google was operating under the prevailing legal framework and you can't really blame them for maximizing their opportunity in that,

Greg: right? No, that's the, that's the logic of the market and their shareholders will punish them if they don't in fact do that.

Mike: Exactly. So going back and retroactively saying they were bad. Um, in fact, you could argue that Google was actually good. They made it easier for consumers to read reviews, to leave reviews, to get some reserved reviews. And certainly they made it better for business by. Helping businesses with, by sending a gazillion freely?


Greg: th th the, the irony is that in this particular case, monopoly simplifies everybody's life, right? It, it organizes the, the, the, the behavior of businesses in particular, but also. Uh, consumers, it just focus on Google drive. I mean, you did that whole study of the Google only marketing strategy for that restaurant and was quite effective.

And so this, this actually helps the small business owner because they can disregard all the other sites. Right, right.

Mike: And the problem with a logic, which I, if I, and I may be summarizing this incorrectly, if I am Rand, you can correct me. But the Google wasn't monopoly, they use that to disadvantage their competitors.

And therefore they have, they are, uh, they've misused, their monopoly power and are therefore bad. That's the basic of what I considered his criticism. Um, but I guess you just put it out and Google does what Google does, right? This is what businesses do. This is what we've honored in entrepreneurial capitalism, building moats and creating monopolies is an honored activity.

But the problem with. With Rand's criticism, is that what you really need to do is look at the more systemic question of the theory of antitrust. You need to broaden it obviously, but it's hard to broaden it and go back and say they were bad then, and they're not, you know, you need to broaden it to include what they include in Europe and then change it at the systemic level, making clear guidelines.

So Google knows how to behave going forward. If they did in fact, do what brand. Suggested, which is forced businesses to get more reviews on Google, which I find is a really strange argument. Um,

David: as did I, as did I, I think, um, you know, still to this day, many years after this trend was well underway that most businesses don't ask customers for reviews at all.

Um, so, so, um, it's not like, you know, it's not like Google is sort of forcing them, forcing themselves to be the only game in town when it comes to asking for reviews. When most people aren't even doing that. Um, I would also, Mike, I would just echo your, your consumer harm argument. I really don't have any sympathies for Yelp in this particular spot, because as you said, Google not only made it easier for people to leave reviews, their filter is far less penal than, than Yelp says for new new reviewers, which I think is important.

But I also have to think they did consumer research. And if consumers really did want these worn piece length tomes, uh, that Yelp. The spouses, as you know, somehow, uh, indicating that their reviews are higher quality air quotes. Um, you know, I think Google would have enforced that in their own platform, but I think that they've done, they've done a really great job, uh, in my opinion, from a product standpoint of encouraging these sort of shorter form reviews, but also pulling out the, the most germane pieces of each of those reviews, highlighting them with justifications, for example, uh, underneath business names in a three-pack those kinds of things.

And we just haven't seen Yelp, you know, pivot to that sort of more structured, shorter form, a more democratic, small D democratic, you know, review, review Corpus. And I think that that's, you know, that's an example of Google responding to what consumers want as opposed to intentionally harming them. So.


Mike: And as Greg pointed out, consumers want recommendations. They don't want to have to read all these reviews top to bottom, bottom to top and make a decision. They want a recommendation, which whether Google is doing it well or poorly, that's what Google is trying to do with a three pack. They're saying here are the three.


Greg: interestingly years and years ago, I won the first time I met with. Uh, Yelp. I dunno when it was, it was like 2005, maybe Jeremy Stoppelman on, on Mark. On, I think they were on market street in San Francisco. It was a small office. It was in the very beginning. Um, and he, he and I talked about, and I don't, I don't know if this was his word, his, these were his words or if this was of my characterization of what he was saying, that he was talking about yelping at like a, like a food blogging platform.

You know, it was like, it was like akin to it blogging platform for, for foodies, right. People who are really into restaurants that want it to write sort of wax eloquently about their restaurant experiences. And that, that sort of initiated the culture of, of Yelp and the Yelp reviews as being these long form things.

And also the Yelp elite squad, which was one of their early successes that helped propel them. And. Uh, help them sort of win versus competitors at the time. Um, also I think reinforced that, you know, that there was a sort of a Kadra of, of top tier X, you know, elites who were writing these very lengthy reviews that were really not for ordinary people.

They were really for themselves, it was a kind of an insider's experience. Um, and, and that. Some of that has persisted to the present day. And it's kind of out of step with what people need and want, especially on mobile devices, which is where most of their traffic resides

Mike: now. So as a final closing note, I do have another article coming up, which points out that a company like, um, uh, re um, Oh God, I can't even think of it order.

Uh, the reservation company, uh, open table can succeed in this same context where Yelp is tailing. And that, to me demonstrates both the fact that it's more than just the review, the review, isn't just a feat. It's just a feature. It's not the product that Yelp is trying to make it, that you described that the businesses and consumers need something bigger for it to succeed.

And my article will point out that they have succeeded in spite of Google and spite of Yelp, because they've done something that businesses needed. So. Well, I

Greg: mean, in their case, in their case, they, they came out of the gate with this, uh, reservation system and the reviews support, the decision-making support, the reservation system.

It's a different, it's a totally different relationship. Right?

Mike: Exactly. And that's what I'm saying is that, that, that, that review is a feature, not the product and, you know, try to make it the product and in doing so, led them down a path where they could not compete with companies with better ideas, better customer service.

Better execution. And to a large extent, this particular situation is Yelp's fault. Uh, I'd say, I think Google is you can't hold every Google harmless, but I think that this is a dynamic interplay of consumers, businesses, the market, the law, and it doesn't stand up well to rans simplistic critique.

Greg: And thanks to this week's sponsor Google.

That's not a real thing. We don't have any sponsors. There are no spots.

Mike: I'm talking to Jeremy Stoppelman right now. So

David: it might be one of the few, uh, positive Google near memos that. But

Greg: I'm just kidding. I'm just kidding. So, all right. So that was an upbeat note to end on. We got to end as long as they w now that we're why we got some, uh, you know, some positive vibes going here.

All right. So, um, you know, up into the right onward and upward all of that, and yeah. Talk to

David: you guys and thanks everyone for listening. Yep.