WEBVTT - Building the Sharing Economy for Retail

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<v Speaker 1>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Tim Stenovic on Bloomberg Radio. We're delighted to have a

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<v Speaker 1>guest back with us in studio because what's interesting is

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<v Speaker 1>we just talked about earnings, but don't forget we have

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<v Speaker 1>a lot of economic news coming out this week, including

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<v Speaker 1>we'll get a read on the consumer with retail news.

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<v Speaker 1>Retail data should say that's eight thirty am Wall Street

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<v Speaker 1>time tomorrow. This is so key, Tim in terms of

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<v Speaker 1>what's going on in the retail sector broadly, but also

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<v Speaker 1>then what it tells us about the U S. Consumer,

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<v Speaker 1>so key to economic growth and so key to really

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<v Speaker 1>kind of what happens in the financial markets. Yeah, I

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<v Speaker 1>mean remember last week the University of Michigan Preliminary Sentiment

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<v Speaker 1>Index show that consumers are not ready to tighten their

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<v Speaker 1>belts just yet, despite warnings of a looming recession. With

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<v Speaker 1>another view on retail, we welcome back Shaker not Eroson,

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<v Speaker 1>executive vice president and chief supply chain Officer at American Eagle.

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<v Speaker 1>He joins us right now in our Bloomberg eleven three

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<v Speaker 1>oh studio. Good to have you with us, Shaker, How

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<v Speaker 1>are you good? Good? Afternoon, Carol lintim new year, Happy

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<v Speaker 1>new year? Will it be a happy new year? Well,

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<v Speaker 1>that's what I wanted to start with, Shaker, is you

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<v Speaker 1>know where you laugh? You did not answer, But go

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<v Speaker 1>ahead and we'll talk about supply chain, you know, in

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<v Speaker 1>detail over the next few minutes. But I want to

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<v Speaker 1>know what you're planning for. Carol talked about this idea

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<v Speaker 1>that the consumer, you know, we're getting these new we

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<v Speaker 1>got retail sales later this week. Uh, and it's key

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<v Speaker 1>for understanding how the consumers is feeling. But how do

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<v Speaker 1>you think the consumers doing well? I think the consumers

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<v Speaker 1>are definitely m beating all expectations. Like you know, I think,

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<v Speaker 1>like we all talk about recession, um, but the spend

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<v Speaker 1>has not like receded yet, like you know, like you know,

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<v Speaker 1>there's every every retailer out there has experienced good sales

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<v Speaker 1>during the peak season. UM. And at least that's what

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<v Speaker 1>the master Card data says. And that's what basically the

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<v Speaker 1>consumer sentiment is. UM. Like I'm not allowed to talk about.

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<v Speaker 1>I was just you know, I knew that, but I

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<v Speaker 1>was just trying to get you. I'm so sorry I

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<v Speaker 1>disappointed you, UM. But that said, I think like, um,

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<v Speaker 1>you know, last year was a year of just in

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<v Speaker 1>case inventory in the system, primarily because the supply chains

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<v Speaker 1>were all uh a month before your report you could

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<v Speaker 1>share anyway, keep going, keep going. So um so we

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<v Speaker 1>we we definitely um every every retailer had like just

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<v Speaker 1>in case inventory. Like you know, the supply chaine was slow, unpredictable,

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<v Speaker 1>so people actually ended up like carrying more inventory. Like,

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<v Speaker 1>just to give you some context, eight hundred million square

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<v Speaker 1>feet of warehouse space in two was used for storing inventory.

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<v Speaker 1>That number means nothing to me. So it's a cent.

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<v Speaker 1>It's a cent of space. It sounds like a big

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<v Speaker 1>number to make it, but it's very free. It's it's allowed.

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<v Speaker 1>What do they normally hold, Well, you don't have that,

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<v Speaker 1>like you know, normally have any of that. Yeah. So

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<v Speaker 1>so like we should see massive rationalization of inventory this year.

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<v Speaker 1>People have begun to kind of like ration the inventory

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<v Speaker 1>back in this because the supply chains are working. The

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<v Speaker 1>supply chain is getting the product into the country is working.

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<v Speaker 1>But basically like there's inflation still like looking us at

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<v Speaker 1>us from when it gets into the country to the

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<v Speaker 1>doorstep when you start looking at basically what FedEx and

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<v Speaker 1>ups have announced they have announced like a six surcharge

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<v Speaker 1>on every package, which means one pound package that you

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<v Speaker 1>ship like less than two hundred miles for one pound

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<v Speaker 1>is going to cost ten dollars. It costs eight cents

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<v Speaker 1>to bring a unit from China to US. It costs

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<v Speaker 1>ten dollars to ship a package for one pound because

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<v Speaker 1>it's expensive in the US. Absolutely, it's the last mile,

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<v Speaker 1>it's and that's what makes it expensive very much so.

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<v Speaker 1>But like you know, we live in a very fragmented system, right,

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<v Speaker 1>So we live in a very fragmented system because basically,

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<v Speaker 1>like everyone is sitting in the center of the country

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<v Speaker 1>and and from a warehousing perspective, distribution and trying to

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<v Speaker 1>access the customer. But shake the problem is that unless

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<v Speaker 1>you're Amazon and you have your own network of delivery drivers,

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<v Speaker 1>which is by not any means how they all are shipping,

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<v Speaker 1>how Amazon ships everything, you're all kind of dealing with

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<v Speaker 1>the same cards. Yes, so, and that's where what we

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<v Speaker 1>are trying to do with like American Eagle, with particularly

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<v Speaker 1>quiet platforms is actually solving that very fundamental problem. So

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<v Speaker 1>we are building a brand new category called collaborative commerce network.

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<v Speaker 1>If you look at why the shipping networks work so efficiently.

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<v Speaker 1>This collaboration, there's this consolidation at the at the port

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<v Speaker 1>and you know, when it gets into it gets out

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<v Speaker 1>of the factory, it's one giant shipping network which is

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<v Speaker 1>bringing the product into the country and it is all interoperable.

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<v Speaker 1>It's all trade moving on that ship. We don't have

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<v Speaker 1>a system like that in US. Everyone is actually, can

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<v Speaker 1>we have a system like that? And we've talked about

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<v Speaker 1>this with you before. Yes, very much, so very much.

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<v Speaker 1>And that's what we've been throughing so far. Like you know,

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<v Speaker 1>when you when you hear Michael Rimpel talk, who's our

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<v Speaker 1>chief operating officer. He was on the even on the

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<v Speaker 1>second quarter called the third quarter call, and he mentioned,

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<v Speaker 1>it's unprecedented that we spent less money in then we spent.

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<v Speaker 1>We spent less money in then we spent in. Why

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<v Speaker 1>Because collaboration works, and collaborations across retailers on supply chain

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<v Speaker 1>is the way of the future. So tell us how

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<v Speaker 1>much can you drill down because we're talking at this

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<v Speaker 1>high level, which which is fine, but so say so

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<v Speaker 1>you're collaborating with who or what in terms of moving

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<v Speaker 1>stuff around. So we have we have fifty brand retailers

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<v Speaker 1>on our platform, everyone from Sacks, Steve Madden's Fanatics, uh

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<v Speaker 1>Sacks and so these are large customers who are actually

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<v Speaker 1>doing business with us. And and primarily what we're doing

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<v Speaker 1>is we are aggregating, just like Uber, We're aggregate aiding

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<v Speaker 1>all of the packages in inventory which is headed in

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<v Speaker 1>one direction, or fulfilling these packages closest to where people live.

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<v Speaker 1>But but the thing that I don't get is it's

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<v Speaker 1>not like I go back to Amazon, because I think

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<v Speaker 1>it's what a lot of people are familiar with. If

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<v Speaker 1>you make two separate orders on Amazon, sometimes they show

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<v Speaker 1>up those two things show up in the same package.

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<v Speaker 1>If I order something from American Eagle and something from

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<v Speaker 1>Steve Madden, those are not going to show up in

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<v Speaker 1>the same package, right, That's what we're attempting to solve.

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<v Speaker 1>Are you attempting to attempting in the same package? We

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<v Speaker 1>are attempting to solve. So we have we we've designed

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<v Speaker 1>and this is something that we have basically conceptualized design.

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<v Speaker 1>But you know, you have to get to a certain

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<v Speaker 1>scale for distinct to work. But you need sort of

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<v Speaker 1>like one identifying characteristic from the consumer in order to

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<v Speaker 1>make sure that you know the tim stant of ex

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<v Speaker 1>re orders. This is the same as you know my

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<v Speaker 1>wife who has a different last name, who's ordering this.

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<v Speaker 1>Yeah right, so so so we we are we are

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<v Speaker 1>doing like this is fundamentally happened in other industries. We

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<v Speaker 1>have a concept called merge in transit. So primarily what

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<v Speaker 1>it means is none of these networks, they're all push networks.

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<v Speaker 1>When you when you actually like you know, buy something,

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<v Speaker 1>you're pushing a package to like Tim's doorstep. The Quiet Platforms,

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<v Speaker 1>which is a facility close to where you lived him,

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<v Speaker 1>is able to take packages which are all headed to

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<v Speaker 1>your door and then give it to one carrier so

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<v Speaker 1>that one carrier delivers to your door in one one box.

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<v Speaker 1>And that's essentially what we're building out right now. If

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<v Speaker 1>you if you listen to Carole Tomy talk, you know,

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<v Speaker 1>she talked about it, like in a second quarter earnings

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<v Speaker 1>earnings call. She said, the cost of last smile to

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<v Speaker 1>your door, Tim is five dollars and fifty cents on

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<v Speaker 1>cost spaces. The next package she delivers to your door

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<v Speaker 1>is sixty cents more. Okay, So Carol, I'm gonna jump

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<v Speaker 1>in here because I'm seeing this too with Uber for

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<v Speaker 1>example and Uber eats. If you order something on Uber Eats,

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<v Speaker 1>they say, okay, you have you know, X number of

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<v Speaker 1>minutes to add something to your order from CVS for example,

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<v Speaker 1>which is along the way. And I'm not using the

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<v Speaker 1>names correctly, but it totally makes sense because that incremental

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<v Speaker 1>cost to get that thing to your door is cheap.

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<v Speaker 1>And imagine, right, you have in the last ten years

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<v Speaker 1>if you if you revolve the time back and look

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<v Speaker 1>at it, like what ten years was like you had

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<v Speaker 1>probably one package from one carrier you know, developed to

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<v Speaker 1>year door. Now you have ten packages coming from ten

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<v Speaker 1>different people, but ten different carriers showing up at your door.

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<v Speaker 1>We've only got about forty seconds left here, So what's

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<v Speaker 1>key in making this work? Like, I get it? So

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<v Speaker 1>what is it that you have? You have to have

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<v Speaker 1>just a ton of people buy in and help support

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<v Speaker 1>the infrastructure or what, Yes, it's it's it's this is

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<v Speaker 1>like like I will put it in the words of

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<v Speaker 1>what like you know and out of President told this

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<v Speaker 1>is going to be game changing. What we're trying to

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<v Speaker 1>do is going to be game changing because it brings

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<v Speaker 1>sharing economy to a whole new level at the physical

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<v Speaker 1>and the digital almost sounds like air the airline industry

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<v Speaker 1>in the hubs of Like I order a bunch of things, okay,

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<v Speaker 1>and it all goes to Atlanta and it's put into

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<v Speaker 1>one little box and then it goes out to me.

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<v Speaker 1>Box is just a manifestation of collaboration. But you know,

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<v Speaker 1>even if you don't put it in one box. But

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<v Speaker 1>if all the packages which are headed right tim goes

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<v Speaker 1>to one carrier, you still get the efficiency God delivery

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<v Speaker 1>provider supply chains. Yeah, and if we just put it

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<v Speaker 1>all on metaverse and just buy metaverse things like I

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<v Speaker 1>have my own theory about Metaverse for sure, like you,

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<v Speaker 1>you still needed physical word to execute on it. Comeback

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<v Speaker 1>rest soon, Shaker not a Rajan Executive EP Chief Supply

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<v Speaker 1>chain Officer over to American Eagle. Thank you, Thank you,