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Speaker 2: On this Friday after Thanksgiving, Jeff Chang joins us. He's
Speaker 2: a president of vest Financial. You know, it's great, Jeff
Speaker 2: to have you here. I'm looking at the S and
Speaker 2: P five hundred year to date up fifteen percent. I've
Speaker 2: got the NASHTAC up twenty percent. Boy, that is solid performance.
Speaker 2: I don't care where you are, who you are, What
Speaker 2: do you do for twenty twenty six?
Speaker 3: Do you think?
Speaker 4: Yeah, great to be here.
Speaker 5: You know, I still think the biggest driver of growth
Speaker 5: is going to be AI. It's also what's interesting now,
Speaker 5: it's also going to be the greatest source of volatility.
Speaker 5: I mean, you can even see today with the CMB
Speaker 5: and data centers like this is really going to be
Speaker 5: what's going to be driving the market overall into the
Speaker 5: next year. I think also, you know, on a larger basis,
Speaker 5: you're kind of weighing between kind of the macro factors, cooling,
Speaker 5: inflation AI, but also you know, earnings catching up to
Speaker 5: valuations what we've seen today, you know, with multiples being
Speaker 5: on the higher end of the spectrum.
Speaker 6: Yeah, so this AI trade, I mean it's definitely changing.
Speaker 7: There's rotation involved, right, I mean, do you still stick
Speaker 7: with the nvideos or do you start looking at some
Speaker 7: of the other companies like the alphabets now that are
Speaker 7: very involved with our TPUs.
Speaker 5: Yeah. I think there's definitely growing competition, but I think
Speaker 5: when you look at Nvidia, it's still the bell weather
Speaker 5: for AI hardware. You know, from there because when you
Speaker 5: look at AI and the foundational parts of it, you're
Speaker 5: looking at you know, compute, data centers, networking and cloud
Speaker 5: and cooling. Isn't that as well? But I think when
Speaker 5: you look at Nvidia, it's sits very kind of right
Speaker 5: in the center as far as foundational parts of a
Speaker 5: given that you know, one thing is that they've also
Speaker 5: if you look at the numbers and four guidance has
Speaker 5: been pretty strong. I do think where you start to
Speaker 5: see a little bit of volatility is the idea that
Speaker 5: competition is coming in. And so if you start to
Speaker 5: look at you know, the likes of Microsoft really planting
Speaker 5: the flag and cloud, and then like you said, Google
Speaker 5: and Alphabet coming in into the AI chip space as well,
Speaker 5: So we can't see some volatility there, but mostly the
Speaker 5: dominance of Nvidia we'll see is going to be pretty
Speaker 5: strong into twenty twenty six.
Speaker 2: Fanny, I think I'm oh for a lifetime trying to
Speaker 2: call the top of a bubble.
Speaker 3: You know, I just never.
Speaker 6: Possibly won't even try doing that both.
Speaker 2: I was selling stock Boy cranking at IPO's March of
Speaker 2: two thousand with a vengeance and no idea. Yeah, like
Speaker 2: five minutes later it was over. So how do you
Speaker 2: and how do investors in general? Jeff do you think?
Speaker 2: How do you think about a bubble? And are we
Speaker 2: in a bubble? Are we at the top of the bubble?
Speaker 2: How do you think about that?
Speaker 5: I don't think as far as like you've probably seen
Speaker 5: recently in the news of soft Bank and the like
Speaker 5: Superior Teal selling their positions in Nvidia, I actually don't
Speaker 5: think that's an indication of people getting out due to
Speaker 5: a bubble. I think, sure, are the are the AI
Speaker 5: stocks in hyper skillers expensive? Yeah? I could you can
Speaker 5: make an argument for that, But when you're thinking about
Speaker 5: AI and the idea that it might be a bubble.
Speaker 5: This is very different than something like you know, if
Speaker 5: you were to look at crypto, I would say that
Speaker 5: this is a structural shift. Now, selectivity matters where you're
Speaker 5: actually going to be in AI. But I think what
Speaker 5: we're seeing is a generational shift as far as you know,
Speaker 5: because AI is going to diffuse into mainstream as far
Speaker 5: as anywhere from logistics to enterprise software, you know, healthcare,
Speaker 5: defense is.
Speaker 4: Going to go everywhere there.
Speaker 5: I think where you're seeing a lot of people misunderstanding
Speaker 5: is and when we've seen this story play out before,
Speaker 5: is the idea that, okay, we've seen a huge amount
Speaker 5: of investment into AI, uh you know, and you know,
Speaker 5: hundreds of bill dollars, where as in the actual earnings
Speaker 5: you're talking to twenty you know, twenty five thirty billion
Speaker 5: in actual earnings. But this is where you start to
Speaker 5: if you pull back the curtain a little bit. Keep
Speaker 5: in mind your earnings is based off of accounting depreciation,
Speaker 5: which tends to front load your expenses, and it doesn't
Speaker 5: account for the earnings potential over the long term at
Speaker 5: least seen this play out before. If you look at
Speaker 5: going back, like fiber optics, there are billions of dollars
Speaker 5: on front end investment, but we hadn't seen the trillions
Speaker 5: of dollars of earnings potential that came out in many
Speaker 5: years afterwards. So you know, like they always say, you know,
Speaker 5: history doesn't repeat itself, but it does rhyme. I think
Speaker 5: what you're seeing here is kind of the fiber optic
Speaker 5: Internet type situation. We're really fundamentally changing, you know, how
Speaker 5: we do business going forward.
Speaker 7: So you say, the foundation of long term AI is sound,
Speaker 7: but where do the revenues come from? And what are
Speaker 7: you projecting out in terms of revenue for these companies
Speaker 7: that are spending a fortune on AI.
Speaker 5: Yeah, So it like they said, like selectivity matters. So
Speaker 5: if you're talking about you know, the Microsoft metals, Metas,
Speaker 5: the Googles, and the videos of the world, those they
Speaker 5: are going to touch every part of AI, whether or not,
Speaker 5: whether or not the earnings are going to be generated
Speaker 5: from industrials, whether you know, industrial animation, whether it's going
Speaker 5: to be generated from healthcare, they're going to be at
Speaker 5: the center. Given that the core foundation being cloud, compute, data.
Speaker 4: Centers, and networking.
Speaker 5: So that's really where if you're looking as a long
Speaker 5: term investor, who are where the earnings are more sustainably
Speaker 5: and more higher probability of actually realization is.
Speaker 4: Being at kind of that center.
Speaker 5: I think where you start to get a little bit dicey,
Speaker 5: is you know, trading on the hype, going for these
Speaker 5: types of moonshot type trades where you're looking at small
Speaker 5: cap stocks and maybe in small robotics or so on
Speaker 5: and so forth. That's where you start to get a
Speaker 5: little bit of dicey as far as will we see
Speaker 5: that earnings realization to justify the valuations.
Speaker 2: You know, Vonnie, I remember the beginning of this whole
Speaker 2: AI discussion maybe three years ago. Gene Monster from deep
Speaker 2: Water Asset Management, to me is one of the best
Speaker 2: technology analysts on Wall Street. He said, Hey, think about
Speaker 2: a continuum of what's important. Let's put electricity like from
Speaker 2: zero to one hundred. Electricity he puts it ninety five.
Speaker 2: The Internet he puts at seventy AI he put it
Speaker 2: like ninety right there. I mean that, So every time
Speaker 2: I think about, jeez, maybe we're kind of in a ball.
Speaker 3: I know. He was so right. So, Jeff, where do
Speaker 3: we go from here? What's the next way to play it.
Speaker 2: If I've played out my Nvidia trade, maybe I've played
Speaker 2: out my Microsoft Microsoft trade on AI. What's the next
Speaker 2: leg do you think for this whole investment thesis.
Speaker 5: Yeah, so this is very similar to let's say, in
Speaker 5: nineteen ninety nine and two thousand in the tech boom,
Speaker 5: that a lot of these pumply traded companies people were
Speaker 5: taking kind of bets here and there. I actually believe
Speaker 5: if you then really kind of fast forward the tape,
Speaker 5: you'll notice that the real winners, the companies that really
Speaker 5: want to kind of the Internet boom. The facebooks of
Speaker 5: the world, the Netflixes of the world, the Airbnb's of
Speaker 5: the world, they weren't around. They were in startup mode.
Speaker 5: So I think a lot of folks that are trying
Speaker 5: to play the AI trade, a lot of the facebooks
Speaker 5: in AI of tomorrow are going to be in venture
Speaker 5: They're going to be in early stage or middle stage
Speaker 5: startups that are really being able to innovate, move fast,
Speaker 5: kind of break things kind of mentality. I think, like
Speaker 5: I said, the next wave, it's not publicly traded, especially
Speaker 5: in the AI space. I think, like I said, the
Speaker 5: foundational parts, like you know, the hyperscalers and the videos
Speaker 5: of the world are publicly traded, but I think a
Speaker 5: lot of the next wave of software and usage cases
Speaker 5: across all industries are actually in private markets right now.
Speaker 7: All right, well, Jeff, we have to leave it there,
Speaker 7: but thank you so much for joining us today. And
Speaker 7: I know you're in Las Vegas, so if you're putting
Speaker 7: anything putting on black today that is best Financial President
Speaker 7: and co founder.
Speaker 3: Jeff, stay with us. We're from Bloomberg Intelligence coming.
Speaker 8: Up there for this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 7: So let's bring in our next guest to talk a
Speaker 7: little shopping. We have Julie Bornstein. She is the CEO
Speaker 7: of Daydream, which is an AI agent for fashion retail
Speaker 7: in particular.
Speaker 6: Julie, thank you so much for joining.
Speaker 7: First, just explain a little bit what a fashion agent
Speaker 7: for retail can do.
Speaker 6: For me when I go online.
Speaker 9: Yes, well, ultimately the goal is to be a personal
Speaker 9: stylist in your pocket.
Speaker 10: Today. What we do is we allow you to let.
Speaker 9: Us know what you're looking for using whatever you want to. Say,
Speaker 9: you have a Christmas party with your office in a
Speaker 9: bar in New York City, and we can help you
Speaker 9: find what you're looking for. We make it easier to shop,
Speaker 9: and we also allow you to post a picture and
Speaker 9: then we can help you find something that looks like that.
Speaker 3: So I don't know where to go here, Julie.
Speaker 2: But of shoppers say they're using AI tools for holiday shopping.
Speaker 2: That's according to a horse pull for MasterCard.
Speaker 3: Are retailers are they ready for that? They are they
Speaker 3: trying to take advantage of that? How are they performing here?
Speaker 9: It's early days for the retailers, but they are starting
Speaker 9: to learn how to both appear through some of these
Speaker 9: different chat surfaces and they are also trying to figure
Speaker 9: out how to use AI to make the customer experience
Speaker 9: better on their sites. Some of them are doing interesting
Speaker 9: things get up, H and M. They're also participating with
Speaker 9: us Daydreams. So because we're sort of the first AI
Speaker 9: shopping platform, they can partner with us and their show
Speaker 9: up as customers are explaining what it is that they're
Speaker 9: looking for in a whole new way. Julie.
Speaker 7: We always hear when it comes to AI that is
Speaker 7: all about the prompt, right, So what are customers doing
Speaker 7: and how should we prompt better?
Speaker 10: It's a great question.
Speaker 9: I mean we see prompts that are everything from I'm
Speaker 9: going to a wedding and I want to wear a
Speaker 9: pink dress, but all look like a cupcake too. I'm
Speaker 9: going to a wedding and I want to wear a
Speaker 9: revenge dress in the selt burn. So we have lots
Speaker 9: of different kinds.
Speaker 6: I want to see what the hallucinations are for those
Speaker 6: of users.
Speaker 10: Yeah, exactly what the cupcake dress looks like.
Speaker 9: People are very creative and the truth is that every
Speaker 9: consumers are just learning how to prompt, and so part
Speaker 9: of what we do is also give them ideas so
Speaker 9: that if they're starting to look, and then once they
Speaker 9: get used to it, people will write very long things
Speaker 9: with very descriptive details of what they're looking for.
Speaker 2: I've seen some technology use some apps on the iPhone,
Speaker 2: take a screenshot of something and then it brings you
Speaker 2: right into a shopping environment.
Speaker 3: Talk to us about where that is right now, where
Speaker 3: that's going.
Speaker 10: Yeah, that's going to just get better and better.
Speaker 9: I think the idea of being able to screenshot something
Speaker 9: on the new iOS allows you to instantly you don't
Speaker 9: even have to open an app bring up results from
Speaker 9: any of the apps that you have already downloaded. So
Speaker 9: if you have Daydream downloaded on your phone and you
Speaker 9: screenshot anything from Instagram or as you're walking around and
Speaker 9: you see someone wearing something you like, you have the
Speaker 9: ability instantly to pull up the results that are closest
Speaker 9: to that product, and if that product still exists, you
Speaker 9: can get that exact product.
Speaker 10: So it's pretty cool and it's a pretty quick way.
Speaker 9: And what we're seeing is younger generation gen Z is
Speaker 9: very higher use case for that. They're just used to
Speaker 9: being able to snap anything and then be able to
Speaker 9: find what they're looking for.
Speaker 7: So if I screenshot something, it sends a whole load
Speaker 7: of information into the background of my phone.
Speaker 6: Is that right?
Speaker 7: That sounds a little dangerous to me. It means I
Speaker 7: should probably stop screenshotting things.
Speaker 9: No, it's really if you choose to then use the
Speaker 9: search mechanism for it. So in general, screenshots are not
Speaker 9: you know, nothing's happening with them until you decide to
Speaker 9: do something with that screenshot. So you know, if you're
Speaker 9: looking for a product, it's pretty safe.
Speaker 2: So all right, how about this warm but not bulky
Speaker 2: coat under three hundred dollars. Where is the AI thingamajig
Speaker 2: going to take me?
Speaker 9: Well, on daydream, it's going to take you to a
Speaker 9: set of results that match that kind of query, and
Speaker 9: then we'll see lots of results from around the web
Speaker 9: and we will once you find what you're looking for,
Speaker 9: you link out to the brand or the retailer that
Speaker 9: sells that product. So similar to the way Google works,
Speaker 9: we're basically sort of a search and discovery platform that
Speaker 9: then helps you find the retailer to buy from.
Speaker 2: All right, well, in the world of search, it's search
Speaker 2: optimization type thing. Is that is there a similar type
Speaker 2: thing here in the world of AI.
Speaker 9: So it can depend on what the business model is.
Speaker 9: In our case, we are totally focused on finding you
Speaker 9: the best product for you that matches both the query
Speaker 9: and your personal preferences as we learn about you, and
Speaker 9: so it's not an issue of whatever you know, whoever
Speaker 9: pays the most gets the way to show you what
Speaker 9: their product is. But in some cases, you know, there's
Speaker 9: an ad base model.
Speaker 10: Ours is not.
Speaker 7: Julie Open ai on Amazon both made headlines this week
Speaker 7: with shopping launches. How are their products different to yours?
Speaker 7: Are they compatible to use together or how are you
Speaker 7: dealing with that competition.
Speaker 10: We're really excited about it.
Speaker 9: I think in general shopping, you know, this is the
Speaker 9: first season where AI is really going to improve the
Speaker 9: shopping experience, and it's only going to get better. I
Speaker 9: think the fact that they're both doing this is very
Speaker 9: validating to us. They're separate, but ours is totally focused
Speaker 9: on fashion, and so if you go to either of
Speaker 9: those platforms, you'll find that you were kind of generally
Speaker 9: across all categories, but a little bit less focused on
Speaker 9: a single category. And so shopping and fashion is so
Speaker 9: nuanced that, you know, daydream is better for that.
Speaker 2: So, Julie, what are your clients telling you here about
Speaker 2: this holiday shopping season. What's the level of optimism because
Speaker 2: there are a lot of economic cross currents out there.
Speaker 9: Yeah, that really are I think that this year is
Speaker 9: going to be bigger than last year, but probably not
Speaker 9: by a huge amount. What we're seeing is that there's
Speaker 9: a lot of excitement for all of the sales that
Speaker 9: are going on this week for Cyber Week, and so
Speaker 9: what we have is a daydream broadcast on It's a
Speaker 9: broadcast channel on Instagram where you can actually see all
Speaker 9: the brands and all of the offers that they're giving you.
Speaker 9: What we know is that a lot of people are
Speaker 9: saving the things that they want to buy and coming
Speaker 9: back today to go see if they're on sale.
Speaker 7: You have a lot of experience raising money and bringing
Speaker 7: companies to market and so on. You sold your previous
Speaker 7: company to Pinterest actually, and you've been on the boards
Speaker 7: of you know, Sweet Green, Redfin Weight Watchers, so much experience.
Speaker 7: What is the environment like now for consumer companies and
Speaker 7: raising money.
Speaker 10: It's interesting.
Speaker 9: It's a very strange environment because the role of AI
Speaker 9: has kind of thrown everything off, and so I think
Speaker 9: every everybody who has an interesting angle with AI is
Speaker 9: definitely able to get conversations going. I think that if
Speaker 9: you're not doing something with AI right now, it needs
Speaker 9: to be a very unique proposition. It is a very
Speaker 9: AI focused fundraising environment. Doesn't mean that there aren't other
Speaker 9: ideas that are great and out there, but certainly the
Speaker 9: fact is that AI can help pretty much every aspect
Speaker 9: of building a business right now, and so you want
Speaker 9: to be able to show how you have an advantage
Speaker 9: leveraging AI that other people don't have, so you have
Speaker 9: to figure out what your moat is.
Speaker 7: Julie is partially the reason it's such an AI type
Speaker 7: of fundraising environment because all these dollar donors are invested
Speaker 7: in AI themselves.
Speaker 9: No, I think it's more because everyone believes it's going
Speaker 9: to shape the future, and it's still early, so it's
Speaker 9: hard to know exactly how. But if you're not actually
Speaker 9: taking advantage of it, it seems like a really missed
Speaker 9: opportunity because it will change to the way everyone does work,
Speaker 9: from the way employees work, to the way products are made,
Speaker 9: to the way supply chains run, to the way consumers
Speaker 9: experience a HI.
Speaker 2: So what's the next step here for AI? Do you think, Julie,
Speaker 2: is there another natural progression?
Speaker 9: I think that there will be a lot of evolutions
Speaker 9: in the models. I also think we'll start to see
Speaker 9: over the next year or two a lot more consumer
Speaker 9: experience is changing. So we haven't seen a lot of
Speaker 9: that yet other than going directly to some of these
Speaker 9: new chatbots.
Speaker 10: But if you think about.
Speaker 9: All the things you do in your day to day life,
Speaker 9: things will get a little bit smoother and smarter. As
Speaker 9: a result of AI, and there will be new businesses
Speaker 9: that come along, like Daydream that just make shopping, for example, easier, smoother,
Speaker 9: and more personal.
Speaker 2: All right, great stuff, Thank you so much. We really
Speaker 2: appreciate Julie Bornstein. She's the founder and CEO at Daydream.
Speaker 3: And stay with us. More from Bloomberg Intelligence coming up
Speaker 3: after this.
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Speaker 2: For more on the state of the consumer on this
Speaker 2: Black Friday, is Andrea Barnardo, a seasoned business leader and
Speaker 2: board director in consumer brands and retail Andrew, thanks so
Speaker 2: much for joining us here. What's the mood of retailers
Speaker 2: here going into this holiday shopping season? There certainly are
Speaker 2: a lot of economic crosswinds out there.
Speaker 11: The retailer is actually quite optimistic, especially compared to where
Speaker 11: they were last year. At the beginning of this year,
Speaker 11: we thought tariffs and tax cuts would drive consumer behavior,
Speaker 11: and while tariffs still remain a big concern, consumers are
Speaker 11: also absorbing something much more subtle. The ripple effects of
Speaker 11: a shutdown, fewer government services, a cold housing market, and
Speaker 11: large company layoffs. So frankly, the eccount of feels contradictory.
Speaker 11: But spending is holding, as we've just seen in Q
Speaker 11: the Q three earnings reports, they are holding. Households are
Speaker 11: more cautious, but customers are still spending in a really
Speaker 11: selective way.
Speaker 6: What are they buying.
Speaker 7: Andrea Deloyde is seeing a lower average spend for the
Speaker 7: Black Friday Cyber Monday. But you know, these statistics sometimes
Speaker 7: can be misleading in the sense that people will continue
Speaker 7: to spend or they've already started spending.
Speaker 11: That's such a great question because when we talk about
Speaker 11: the contradiction of seeing spending the customers being more selective,
Speaker 11: I like to define it as the customer isn't stepping back,
Speaker 11: they're really reprioritizing and they're doing a purposeful reallocation. So
Speaker 11: when you think about what they're spending on, they're kind
Speaker 11: of three big shifts that are happening. One, customers are
Speaker 11: moving towards intelligent value. They're looking for things that have function,
Speaker 11: meaning utility, longevity, so they can feel like they're really
Speaker 11: getting a return on their investment.
Speaker 4: Two their consolidating purchases.
Speaker 11: And so one of the interesting things we've seen is
Speaker 11: in some of these QB earnings reports.
Speaker 4: Is where some of the values are going down.
Speaker 11: We are seeing higher ticket prices and higher order values
Speaker 11: on top of lower order numbers. And so this means
Speaker 11: customers are consolidating purchases, they're sticking with fewer retailers, They're
Speaker 11: leaning heavily into loyalty programs and also convenience. And then finally,
Speaker 11: customers are shopping to reduce stress.
Speaker 4: They're choosing products.
Speaker 11: And services that save time, that simplify life and add comfort.
Speaker 3: How about availability inventory?
Speaker 2: If I'm going to go out and get my kid
Speaker 2: the Gi Joe with the Kung Fu grip, is it
Speaker 2: going to be in the stores?
Speaker 4: It will be.
Speaker 11: That's one of the really interesting things that happened this
Speaker 11: year with tariffs, a lot of companies pulled.
Speaker 4: Their inventory forward.
Speaker 11: So whether you were planning on a shorter cycle as usual,
Speaker 11: they actually said, let's pull inventory for the next year
Speaker 11: so we can get goods into stores and online. So yes,
Speaker 11: hopefully your kid's toy will be their in store, and
Speaker 11: if not, I can tell you. With the improvement in
Speaker 11: AI and technology, they are surely going to offer you
Speaker 11: something that they think is just as compatible.
Speaker 7: I was speaking to the CEO of a toy company
Speaker 7: just on Wednesday, I guess, and he was saying that
Speaker 7: a toy that was maybe twenty dollars before the pandemic
Speaker 7: is now forty dollars for various reasons. So there was
Speaker 7: a pandemic right the supply chain snawfoods, and then inflation
Speaker 7: thanks to that, and then inflation from you know, fiscal
Speaker 7: spending and so on, and now we're right up to
Speaker 7: almost double what it was before.
Speaker 6: Are we seeing that? Are we seeing that kind of
Speaker 6: inflation across the board?
Speaker 11: Yes, we are, and it's happening in more categories than other.
Speaker 11: So you're mentioning toys, disposables, groceries. We are seeing that
Speaker 11: inflation across the board. And to your point, it has
Speaker 11: to do with the general inflation. It has to do
Speaker 11: with terraiffs because while companies have absorbed some of the
Speaker 11: tariff costs, many of them have actually passed.
Speaker 4: It right on to consumers.
Speaker 11: And so this is why consumers are being much more
Speaker 11: selective about where they purchase, and related to that, to
Speaker 11: trade down or explore alternative options. If it's a commodity item,
Speaker 11: they might actually say, let me go explore this other
Speaker 11: brand that might be a little bit cheaper, or buy
Speaker 11: the generic version of that to help capture some of
Speaker 11: that value back.
Speaker 2: What's promotional environment out there these days? Andrea, Am I
Speaker 2: going to get deals when I go to the store,
Speaker 2: assuming I actually do go shopping.
Speaker 11: You won't get deals. They will be very selective deals.
Speaker 11: So as retailers and businesses are looking at their inventory,
Speaker 11: they want to be much more precise about what they're promoting.
Speaker 11: So they're going to be focused on where do they
Speaker 11: have a lot of inventory, what can they replace fast,
Speaker 11: what's going discontinued, where.
Speaker 4: Are you going to get that value?
Speaker 11: And even in some areas, they are going to price
Speaker 11: promote on items where they know you will add on.
Speaker 11: So you won't find full deals across the board. You
Speaker 11: won't see fifty percent off side wide as much as
Speaker 11: you used to, But what you will see is on
Speaker 11: specific categories they're certainly discounting, but at the same time
Speaker 11: they will bemting those discounts because they know this is
Speaker 11: the holiday season, they know customers are focused on value,
Speaker 11: so they're still going to put those select deals right
Speaker 11: in front of you, So it feels like the same
Speaker 11: velocity as it did in previous years.
Speaker 7: What's popular when it comes to fashion and retail and
Speaker 7: department store retail in that sense. Coles for example, reporting
Speaker 7: the other day and their strategy under the previous CEO
Speaker 7: who was ousted was to focus on fragrances and petits,
Speaker 7: and that strategy seems to be working even for the
Speaker 7: incoming CEO who's now been made permanent. But it struck
Speaker 7: me as odd that suddenly fragrances are very popular.
Speaker 11: They are, and fragrances have to do with that longevity
Speaker 11: and value. Customers want something that they know they can
Speaker 11: use over time, and so what you'll see is right now,
Speaker 11: you'll see purchases in what I call functional tech. So
Speaker 11: if you need a new laptop, if you need a TV,
Speaker 11: things that you need that will have a long term
Speaker 11: value to you, also fragrances and well, and it's something
Speaker 11: where you feel like you'll get your return, it will
Speaker 11: last over a period of time as well as you
Speaker 11: will feel good about yourself. And then finally, there are
Speaker 11: other areas in beauty and in luxury, and many of
Speaker 11: these retailers, especially those that have multi brand portfolios. We
Speaker 11: have seen their luxury brands, whether it's home furnishings or apparel,
Speaker 11: actually outperform. And that still goes to the value, which
Speaker 11: you don't often see value in luxury. But what happens
Speaker 11: is customers think, Okay, at least if nothing else, I
Speaker 11: have longevity and I have resale value.
Speaker 2: Hey, Andrew, you say that share of wallet is the
Speaker 2: real battle this season, not just traffic.
Speaker 11: What do you mean by that, Well, what we're seeing
Speaker 11: is that with these average order values going up, what
Speaker 11: customers want is they want to go to a one
Speaker 11: stop shop. And so where retailers are competing is they're
Speaker 11: adding services, they're adding shipping, they're making sure they're inventory
Speaker 11: and logistics are there.
Speaker 4: So that you can add more to your purchase in
Speaker 4: one stop.
Speaker 11: One of the big opportunities that I'm seeing is bundling.
Speaker 11: We've often heard about bundling when it comes to travel
Speaker 11: and dieting, but when it comes to bundling, if you
Speaker 11: were able to to talk about a gift set, or
Speaker 11: add the pants with the shirt, or combine a whole
Speaker 11: set of items, customers always see that as an opportunity.
Speaker 11: And so you see that retailers are using that to
Speaker 11: increase their ticket values right now.
Speaker 7: Yeah, I love all the words associated with a bundling
Speaker 7: and a whole, yeah and unlox my whole today. I
Speaker 7: love getting holes, but I never I never seem to
Speaker 7: feel to afford them. Andrea, thank you so much for
Speaker 7: joining us today. A fun conversation there, and a serious
Speaker 7: conversation too with Andrea Vornado, much appreciated consumer brands and
Speaker 7: retail experts.
Speaker 3: Stay with us or from Bloomberg Intelligence coming.
Speaker 1: Up there for this, you're listening to the Bloomberg Intelligence podcast.
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Speaker 7: Let's talk something that maybe isn't going to be so
Speaker 7: calm though in the coming weeks, tariffs taking their toll
Speaker 7: on consumers and companies alike. Our next guest says tariffs
Speaker 7: are now one of the biggest variables in retail margins.
Speaker 7: Joining us to discuss as Ryan Peterson, founder and CEO
Speaker 7: of flex Sport, a leader in global supply chain technology. Ryan,
Speaker 7: thank you so much for joining I would have thought
Speaker 7: that things would have calmed down a little bit. We
Speaker 7: have at least some kind of certainty, albeit we're waiting
Speaker 7: for a Scolds decision, but we have some kind of
Speaker 7: certainty over tariffs at the moment.
Speaker 6: What are supply chains like? Is there's still chaos out
Speaker 6: there or are we.
Speaker 7: Getting to some kind of ability to see the future.
Speaker 8: Somewhere in between.
Speaker 12: I think people are getting more used to the fact
Speaker 12: that you have to operate and a lot of uncertainty,
Speaker 12: and brands are figuring out how to be agile about
Speaker 12: it and a lot of different strategies where.
Speaker 8: They can do that.
Speaker 12: But there's still a lot of you mentioned scotis that
Speaker 12: that big core case is coming. People are hoping and
Speaker 12: praying for a refund and it's actually you know, there's
Speaker 12: a lot of variables here. You have to figure out
Speaker 12: how much of the duties, how much of the tariffs
Speaker 12: do you want to pass through to your customer. Goldman
Speaker 12: Sachs reporting about thirty seven percent of the duties are
Speaker 12: getting passed through, with nine percent getting forced on the supplier,
Speaker 12: and the balance is just hitting earnings for these companies.
Speaker 12: So there's that and then even just calculating the duties
Speaker 12: is harder than ever before the nature of the stacking tariffs,
Speaker 12: where there's all these different tariffs, they just.
Speaker 8: Keep getting layered on each other.
Speaker 12: We've seen more traffic to our tariff simulator on our
Speaker 12: website than to the overall website.
Speaker 2: So it's interesting, Ryan, do we think that companies are
Speaker 2: going to try to push more of those costs through
Speaker 2: going forward as opposed to absorbing them into their P
Speaker 2: and L statement.
Speaker 12: You only have two choices kind of. I mean, I
Speaker 12: get you can renegotiate things with your factory. That's not
Speaker 12: a choice, that's something you're going to always try to do.
Speaker 12: And then you have two choices. It's do you pass
Speaker 12: it through and or do you eat the costs?
Speaker 8: And the good businesses will pass it through.
Speaker 12: I think that's you know, one of the hallmarks of
Speaker 12: a good business is your ability to pass through price increases,
Speaker 12: but a lot of companies can't. So may not even
Speaker 12: be a choice as much as you'd like to. The
Speaker 12: moment you raise your prices, you start to lose demand.
Speaker 12: So yeah, then longer term you have some more options
Speaker 12: around moving supply chains, but it's become so difficult because
Speaker 12: you know it's not just hey, exit China, move your
Speaker 12: factory somewhere else. Tariffs on India are just about the
Speaker 12: same as China, and they might pop up anywhere in
Speaker 12: the world that with the way things have been.
Speaker 7: Going, ryan, are we done with all the avoiding certain
Speaker 7: areas because you know, there's a drought in one canal,
Speaker 7: and there's war and potentially in another canal, and there's
Speaker 7: you know, terrorism in another part of the globe, or you.
Speaker 6: Know, are we back to everyone can ship everywhere?
Speaker 12: I know we're definitely not back to normalcy there. And
Speaker 12: the container volumes going through the Suez Canal are still
Speaker 12: down about seventy five percent since the HOUTI started to
Speaker 12: cut that channel off at the end of a couple
Speaker 12: of years ago, and actually just last week created a
Speaker 12: poly market on this. Now you can bet on anything
Speaker 12: out bet on whether when traffic will return to normal
Speaker 12: through the Suez Canal. It's not very it's pretty thinly
Speaker 12: traded right now. We'll see if we get some more
Speaker 12: signal out of that. But there are some rumors that
Speaker 12: will start to come back to life next year and
Speaker 12: ships will return, but for now they're going all the
Speaker 12: way around Africa and polymarket has me at thirty seven
Speaker 12: percent to return in Key one. I think that's free
Speaker 12: money I'm taking. That won't happen side of that shore.
Speaker 6: Hey, we're ignoring that part of the conversation. What about
Speaker 6: the Panama Canal, Well, Panama's been.
Speaker 8: There ongoing thing ever since they re engineered it.
Speaker 12: So they widened the canal in back in twenty fifteen.
Speaker 12: And you know, the Panama Canal runs on fresh water,
Speaker 12: so if you widen the canal, more fresh water flows
Speaker 12: out of the canal into the ocean than when it
Speaker 12: was narrower. And so ever since they've done that with
Speaker 12: the same amount of rain, you've now had these periodic
Speaker 12: moments where there's just not enough water to operate the canal.
Speaker 12: We're currently in a normal period, but a couple of
Speaker 12: two years ago it was really bad. They could only
Speaker 12: operate about two thirds capacity on that. That's going to
Speaker 12: keep coming back unless they spend tens of billions of
Speaker 12: dollars re engineering the water flows in the canal, which
Speaker 12: I don't I don't think they're gonna be able to do.
Speaker 3: That's on my bucket list to go through the Panama Canal,
Speaker 3: it really is.
Speaker 7: I think you're containership wisely then, Paul, because you're not
Speaker 7: getting on all of them.
Speaker 2: I know exactly, but I'm ready to do that. Talk
Speaker 2: to us about inventory levels, Ryan, I mean, are retailers
Speaker 2: are they stocking their usual amount of retail inventory or
Speaker 2: are they going a little bit light or what are
Speaker 2: they doing?
Speaker 8: No, you could argue they're going the opposite.
Speaker 12: They're going heavy on us here because because not so
Speaker 12: much because of the uncertainty of demand, although that always exists,
Speaker 12: but because of the tariffs.
Speaker 8: So everybody front loaded.
Speaker 12: You know, these reciprocal tariffs on restive world ended August
Speaker 12: twenty ninth, and you had a while, a couple of
Speaker 12: months to know that that was coming, and so everybody
Speaker 12: brought all their inventory in early. And what it's going
Speaker 12: to look like is you can never really predict what's
Speaker 12: going to be a hit product and what's not. And
Speaker 12: so you're gonna have You're gonna have stock outs on
Speaker 12: certain hit products where because it's not much hard to replenish,
Speaker 12: you're paying higher duties, and so you're gonna have stockouts
Speaker 12: on some of the hit products. And then I suspect
Speaker 12: you're going to have quite a bit of overhead of
Speaker 12: products that didn't move, and you'll probably see some good
Speaker 12: deals coming.
Speaker 8: In the beginning of next year.
Speaker 12: I mean, we may see some right now with Black Friday,
Speaker 12: but usually these things play out into the Q one
Speaker 12: period once the holidays.
Speaker 8: Are over all.
Speaker 2: Right, Fannie, here's the book recommendation of the day for
Speaker 2: you about the Panama Canal, The Path between the Seas
Speaker 2: David McCullough.
Speaker 3: Phenomenal book about the history of the.
Speaker 6: Panama and a great writer. I will definitely read that.
Speaker 7: I'm on my twenty second book of the year, which
Speaker 7: I guess is good, but.
Speaker 6: So Ryan.
Speaker 7: You know, in terms of shipping companies and em and A,
Speaker 7: there was plenty of speculation that ZIM, for example, was
Speaker 7: going to.
Speaker 6: Get bought out or whatever.
Speaker 7: That happened a couple of times this year, and some
Speaker 7: of these shipping companies have been really having a hard
Speaker 7: time of it trying to deal with all of this uncertainty.
Speaker 7: Do you have any forecast for us and what we
Speaker 7: might see maybe next year in terms of m and
Speaker 7: A and consolidation.
Speaker 8: No, I don't really know. We'll see it.
Speaker 12: You know, we see a few of the big companies
Speaker 12: executing that strategy. DSV is the biggest right forwarder in
Speaker 12: the world. They've been the most inquisitive. But they just
Speaker 12: bought dB Schenker and that deals closed, and.
Speaker 8: That is a lot to digest.
Speaker 12: They're going to be you know, it basically doubles their
Speaker 12: number of offices around the world, almost doubles their volumes.
Speaker 12: So the main acquire is probably off the table for
Speaker 12: the next couple of years as they two on that one,
Speaker 12: and we'll see. There's you know, there's been a lot
Speaker 12: of consolidation. When I started Flexport, there were twenty three
Speaker 12: ocean carriers, major ones were down to eleven, and I
Speaker 12: don't know there's there may be some mergers, but they've
Speaker 12: all in the past that was done out of financial
Speaker 12: weakness where they were all kind of struggling.
Speaker 8: Well, they've all put a lot of money on their
Speaker 8: balance sheet.
Speaker 12: Over the last few years when the rates were going crazy,
Speaker 12: So there's not going to be a lot of the
Speaker 12: forced m and a that we saw that drove that consolidation.
Speaker 12: We'll see though, maybe there's some interesting strategic opportunities.
Speaker 2: Well, we do have little kasa or pending consolidation in
Speaker 2: the railroad industry. Norfolk Southern and Union Pacific do you
Speaker 2: think shippers want a transcontinental railroad, Ryan, probably.
Speaker 12: But I don't think they just want one. You get
Speaker 12: monopoly powers. They'd like to see more than one. And
Speaker 12: that's the challenge. We've only got four railroads in the US,
Speaker 12: and if you merged the two and you got two
Speaker 12: on the west and two on the east, so you
Speaker 12: could end up in a position where you've got two
Speaker 12: end to end railroads crossing the country.
Speaker 8: I mean, it makes a lot of sense.
Speaker 12: It's sort of silly to transfer to a different railroad
Speaker 12: just because you're crossing the country. But you will see
Speaker 12: probably who knows how we'll play out, if the efficiencies
Speaker 12: are passed through to the brands, to the people that
Speaker 12: are shipping cargo or not, or does it get absorbed
Speaker 12: in sort of oligopoly pricing.
Speaker 7: Ryan, When it comes to the different modes of transportation,
Speaker 7: so poor its trains, you know, rail shipping, and even
Speaker 7: at one point people were flying their cargoes right for
Speaker 7: a huge premia. Who are facing the highest premia or
Speaker 7: is it the same for everybody across the board?
Speaker 3: Not sure?
Speaker 8: Answer the question in terms of what.
Speaker 7: If you're booking travel for your inventory, does it matter
Speaker 7: if you're a toy retailer, or if you're you know,
Speaker 7: a clothing retailer, or if you ship furniture, is it
Speaker 7: the same price or does it depend on ways?
Speaker 6: And how does that all work? Do you bid on it?
Speaker 7: Is it an auction?
Speaker 12: Your pricing will be about the same no matter what
Speaker 12: you're shipping these days, that's the beauty of the container.
Speaker 12: Nobody cares what's inside of it as long as it
Speaker 12: doesn't you know, catch on fire or anything. But but
Speaker 12: the tariffs will be quite different based on the different
Speaker 12: uh based on the value of the goods and what's
Speaker 12: being shipped. And so there you see big category shifts
Speaker 12: where certain products are just really hard.
Speaker 8: Hitting others are totally xempted.
Speaker 12: And the other factor here is if shipping prices go
Speaker 12: way up, like a container of furniture only holds about
Speaker 12: eight couches something, so a high shipping price there, all right,
Speaker 12: hits the pretty hard.
Speaker 2: Rough Leave it there, Ryan, thanks so much for joining
Speaker 2: us at Ryan Peterson Founder and see you a flexport.
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