Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Tim Stenovic on Bloomberg Radio. We're delighted to have a
Speaker 1: guest back with us in studio because what's interesting is
Speaker 1: we just talked about earnings, but don't forget we have
Speaker 1: a lot of economic news coming out this week, including
Speaker 1: we'll get a read on the consumer with retail news.
Speaker 1: Retail data should say that's eight thirty am Wall Street
Speaker 1: time tomorrow. This is so key, Tim in terms of
Speaker 1: what's going on in the retail sector broadly, but also
Speaker 1: then what it tells us about the U S. Consumer,
Speaker 1: so key to economic growth and so key to really
Speaker 1: kind of what happens in the financial markets. Yeah, I
Speaker 1: mean remember last week the University of Michigan Preliminary Sentiment
Speaker 1: Index show that consumers are not ready to tighten their
Speaker 1: belts just yet, despite warnings of a looming recession. With
Speaker 1: another view on retail, we welcome back Shaker not Eroson,
Speaker 1: executive vice president and chief supply chain Officer at American Eagle.
Speaker 1: He joins us right now in our Bloomberg eleven three
Speaker 1: oh studio. Good to have you with us, Shaker, How
Speaker 1: are you good? Good? Afternoon, Carol lintim new year, Happy
Speaker 1: new year? Will it be a happy new year? Well,
Speaker 1: that's what I wanted to start with, Shaker, is you
Speaker 1: know where you laugh? You did not answer, But go
Speaker 1: ahead and we'll talk about supply chain, you know, in
Speaker 1: detail over the next few minutes. But I want to
Speaker 1: know what you're planning for. Carol talked about this idea
Speaker 1: that the consumer, you know, we're getting these new we
Speaker 1: got retail sales later this week. Uh, and it's key
Speaker 1: for understanding how the consumers is feeling. But how do
Speaker 1: you think the consumers doing well? I think the consumers
Speaker 1: are definitely m beating all expectations. Like you know, I think,
Speaker 1: like we all talk about recession, um, but the spend
Speaker 1: has not like receded yet, like you know, like you know,
Speaker 1: there's every every retailer out there has experienced good sales
Speaker 1: during the peak season. UM. And at least that's what
Speaker 1: the master Card data says. And that's what basically the
Speaker 1: consumer sentiment is. UM. Like I'm not allowed to talk about.
Speaker 1: I was just you know, I knew that, but I
Speaker 1: was just trying to get you. I'm so sorry I
Speaker 1: disappointed you, UM. But that said, I think like, um,
Speaker 1: you know, last year was a year of just in
Speaker 1: case inventory in the system, primarily because the supply chains
Speaker 1: were all uh a month before your report you could
Speaker 1: share anyway, keep going, keep going. So um so we
Speaker 1: we we definitely um every every retailer had like just
Speaker 1: in case inventory. Like you know, the supply chaine was slow, unpredictable,
Speaker 1: so people actually ended up like carrying more inventory. Like,
Speaker 1: just to give you some context, eight hundred million square
Speaker 1: feet of warehouse space in two was used for storing inventory.
Speaker 1: That number means nothing to me. So it's a cent.
Speaker 1: It's a cent of space. It sounds like a big
Speaker 1: number to make it, but it's very free. It's it's allowed.
Speaker 1: What do they normally hold, Well, you don't have that,
Speaker 1: like you know, normally have any of that. Yeah. So
Speaker 1: so like we should see massive rationalization of inventory this year.
Speaker 1: People have begun to kind of like ration the inventory
Speaker 1: back in this because the supply chains are working. The
Speaker 1: supply chain is getting the product into the country is working.
Speaker 1: But basically like there's inflation still like looking us at
Speaker 1: us from when it gets into the country to the
Speaker 1: doorstep when you start looking at basically what FedEx and
Speaker 1: ups have announced they have announced like a six surcharge
Speaker 1: on every package, which means one pound package that you
Speaker 1: ship like less than two hundred miles for one pound
Speaker 1: is going to cost ten dollars. It costs eight cents
Speaker 1: to bring a unit from China to US. It costs
Speaker 1: ten dollars to ship a package for one pound because
Speaker 1: it's expensive in the US. Absolutely, it's the last mile,
Speaker 1: it's and that's what makes it expensive very much so.
Speaker 1: But like you know, we live in a very fragmented system, right,
Speaker 1: So we live in a very fragmented system because basically,
Speaker 1: like everyone is sitting in the center of the country
Speaker 1: and and from a warehousing perspective, distribution and trying to
Speaker 1: access the customer. But shake the problem is that unless
Speaker 1: you're Amazon and you have your own network of delivery drivers,
Speaker 1: which is by not any means how they all are shipping,
Speaker 1: how Amazon ships everything, you're all kind of dealing with
Speaker 1: the same cards. Yes, so, and that's where what we
Speaker 1: are trying to do with like American Eagle, with particularly
Speaker 1: quiet platforms is actually solving that very fundamental problem. So
Speaker 1: we are building a brand new category called collaborative commerce network.
Speaker 1: If you look at why the shipping networks work so efficiently.
Speaker 1: This collaboration, there's this consolidation at the at the port
Speaker 1: and you know, when it gets into it gets out
Speaker 1: of the factory, it's one giant shipping network which is
Speaker 1: bringing the product into the country and it is all interoperable.
Speaker 1: It's all trade moving on that ship. We don't have
Speaker 1: a system like that in US. Everyone is actually, can
Speaker 1: we have a system like that? And we've talked about
Speaker 1: this with you before. Yes, very much, so very much.
Speaker 1: And that's what we've been throughing so far. Like you know,
Speaker 1: when you when you hear Michael Rimpel talk, who's our
Speaker 1: chief operating officer. He was on the even on the
Speaker 1: second quarter called the third quarter call, and he mentioned,
Speaker 1: it's unprecedented that we spent less money in then we spent.
Speaker 1: We spent less money in then we spent in. Why
Speaker 1: Because collaboration works, and collaborations across retailers on supply chain
Speaker 1: is the way of the future. So tell us how
Speaker 1: much can you drill down because we're talking at this
Speaker 1: high level, which which is fine, but so say so
Speaker 1: you're collaborating with who or what in terms of moving
Speaker 1: stuff around. So we have we have fifty brand retailers
Speaker 1: on our platform, everyone from Sacks, Steve Madden's Fanatics, uh
Speaker 1: Sacks and so these are large customers who are actually
Speaker 1: doing business with us. And and primarily what we're doing
Speaker 1: is we are aggregating, just like Uber, We're aggregate aiding
Speaker 1: all of the packages in inventory which is headed in
Speaker 1: one direction, or fulfilling these packages closest to where people live.
Speaker 1: But but the thing that I don't get is it's
Speaker 1: not like I go back to Amazon, because I think
Speaker 1: it's what a lot of people are familiar with. If
Speaker 1: you make two separate orders on Amazon, sometimes they show
Speaker 1: up those two things show up in the same package.
Speaker 1: If I order something from American Eagle and something from
Speaker 1: Steve Madden, those are not going to show up in
Speaker 1: the same package, right, That's what we're attempting to solve.
Speaker 1: Are you attempting to attempting in the same package? We
Speaker 1: are attempting to solve. So we have we we've designed
Speaker 1: and this is something that we have basically conceptualized design.
Speaker 1: But you know, you have to get to a certain
Speaker 1: scale for distinct to work. But you need sort of
Speaker 1: like one identifying characteristic from the consumer in order to
Speaker 1: make sure that you know the tim stant of ex
Speaker 1: re orders. This is the same as you know my
Speaker 1: wife who has a different last name, who's ordering this.
Speaker 1: Yeah right, so so so we we are we are
Speaker 1: doing like this is fundamentally happened in other industries. We
Speaker 1: have a concept called merge in transit. So primarily what
Speaker 1: it means is none of these networks, they're all push networks.
Speaker 1: When you when you actually like you know, buy something,
Speaker 1: you're pushing a package to like Tim's doorstep. The Quiet Platforms,
Speaker 1: which is a facility close to where you lived him,
Speaker 1: is able to take packages which are all headed to
Speaker 1: your door and then give it to one carrier so
Speaker 1: that one carrier delivers to your door in one one box.
Speaker 1: And that's essentially what we're building out right now. If
Speaker 1: you if you listen to Carole Tomy talk, you know,
Speaker 1: she talked about it, like in a second quarter earnings
Speaker 1: earnings call. She said, the cost of last smile to
Speaker 1: your door, Tim is five dollars and fifty cents on
Speaker 1: cost spaces. The next package she delivers to your door
Speaker 1: is sixty cents more. Okay, So Carol, I'm gonna jump
Speaker 1: in here because I'm seeing this too with Uber for
Speaker 1: example and Uber eats. If you order something on Uber Eats,
Speaker 1: they say, okay, you have you know, X number of
Speaker 1: minutes to add something to your order from CVS for example,
Speaker 1: which is along the way. And I'm not using the
Speaker 1: names correctly, but it totally makes sense because that incremental
Speaker 1: cost to get that thing to your door is cheap.
Speaker 1: And imagine, right, you have in the last ten years
Speaker 1: if you if you revolve the time back and look
Speaker 1: at it, like what ten years was like you had
Speaker 1: probably one package from one carrier you know, developed to
Speaker 1: year door. Now you have ten packages coming from ten
Speaker 1: different people, but ten different carriers showing up at your door.
Speaker 1: We've only got about forty seconds left here, So what's
Speaker 1: key in making this work? Like, I get it? So
Speaker 1: what is it that you have? You have to have
Speaker 1: just a ton of people buy in and help support
Speaker 1: the infrastructure or what, Yes, it's it's it's this is
Speaker 1: like like I will put it in the words of
Speaker 1: what like you know and out of President told this
Speaker 1: is going to be game changing. What we're trying to
Speaker 1: do is going to be game changing because it brings
Speaker 1: sharing economy to a whole new level at the physical
Speaker 1: and the digital almost sounds like air the airline industry
Speaker 1: in the hubs of Like I order a bunch of things, okay,
Speaker 1: and it all goes to Atlanta and it's put into
Speaker 1: one little box and then it goes out to me.
Speaker 1: Box is just a manifestation of collaboration. But you know,
Speaker 1: even if you don't put it in one box. But
Speaker 1: if all the packages which are headed right tim goes
Speaker 1: to one carrier, you still get the efficiency God delivery
Speaker 1: provider supply chains. Yeah, and if we just put it
Speaker 1: all on metaverse and just buy metaverse things like I
Speaker 1: have my own theory about Metaverse for sure, like you,
Speaker 1: you still needed physical word to execute on it. Comeback
Speaker 1: rest soon, Shaker not a Rajan Executive EP Chief Supply
Speaker 1: chain Officer over to American Eagle. Thank you, Thank you,