Gucci Gucci, Louis Louis, Fendi Fendi, Prada
This week, this man is my obsession.
Last week, I listened to a Kara Swisher interview of Scott Galloway, clinical professor of marketing at NYU Stern School of Business and founder of digital intelligence firm L2. Along with predicting Amazon’s purchase of Wholefoods and the firing of Uber’s CEO, the interview is overflowing with hilarious gems like this:
“I think Google is God. I think it’s replaced God for us. That is, as societies become more wealthy, more educated, God tends to play, or religious institutions tend to play, a smaller role in our lives. Yet our modern-day anxieties and questions grow, so there’s this enormous spiritual void for a divine intervention, and when you typically pray “Will my kid be all right?” you’re sending information into the atmosphere hoping there’s divine intervention, and it comes back with a better answer. Now it’s symptoms and treatment of croup.”
The biggest insight is focused on the future of retail:
Why brands are dying
“Ninety of the 100 biggest CBG brands last year lost share, and two thirds lost revenue.”
“Brand has effectively served as shorthand for getting you from the unknown to the known faster than you could on your own, because you couldn’t do the diligence. I’m going to London on Wednesday. If I was going on an expense account I’d stay at the Four Season or the Mandarin Oriental because on a scale of one to 10 they always do an eight. Then I’m on Instagram, I see a tribute to David Bowie. I see him at a hotel that looks cool. I go on TripAdvisor, I go on my social graph and within two minutes I have the diligence and the confidence to book …”
“Brands are still going to be important, but this notion that you can create a Don Draper-like genius campaign and wrap associations around a crappy product and get 60 points a margin, which describes probably two thirds of CPG right now. Do you really need to pay four bucks for that detergent when it’s probably 1.89? Basically Amazon is conspiring — with the help of 600 million consumers — to say, you know what? That 60 points a gross margin? We think we can starch it out for you.”
Amazon is using Alexa to sell you their own brand
“There’s what I call joy and there’s the mundane. Joy is buying a Porsche, a pair of Manolo Blahniks, or you have a pair of what look like Ray-Ban aviators; that stuff’s kind of fun. There’s some joy in shopping. I would bet 90 to 98 percent, depending on who you are, of retail is not joyous, it’s tedious. I think Amazon’s going to take that off the table.”
“What’s interesting though about voice and Amazon, let’s go one step. Online is typically a place that brands harvest as opposed to build their brands because they lose a lot of the magic and the mystery of fun brand, and packaging feel, etc. When you go to voice you lose almost everything. You lose packaging, you lose sometimes even the brand name. The number of queries on Google and the number of commands on Alexa that have a prefix of a brand is declining every day.”
“They’ve made a conscious decision to take infinitely cheap capital and encourage people to start buying via Alexa. When you start buying via Alexa you’re effectively obviating or rending almost useless the billions of dollars and decades brands have spent on things like eye-level packaging. They can’t even control pricing. A lot of people don’t even hear the pricing or know the pricing when they order on Alexa, and Alexa’s trying to build this confidence that if you buy it here it’s even cheaper than on Amazon. If you ask Alexa for batteries it recommends Amazon Basic batteries. Then you say no and it recommends another package of Amazon Basic batteries, and then it says, “That’s all I have.” If you go on Amazon, that’s not all they have.”
How Apple has avoided the destruction of the brand
“Apple’s blown the notion of core competence out of the water because they do so many things well, but they do it not only through great advertising. I think the biggest innovation, the one business decision that created more shareholder value than any other business decision in the last 10 years, most people would say Apple and the iPhone. I think they’ve got the brand right but the decision incorrect. I think the biggest, the most value-creating decision in business in the last two decades, was Apple’s crazy decision, irrational decision to forward integrate into something they knew nothing about, and that was retail. To build 500 temples to the brand because the pre-purchase branding, the sort of broadcast, is getting duller and duller. That Valyrian steel is getting duller.”
“No one’s safe, right? I would argue Apple has a 10-year lead on Samsung. What you want to do, I think, in the digital world to maintain value is you want to get fast and get valuable using a kind of digital technology. Cloud, network effect, etc. Then you immediately, once you have access to cheap capital, want to build analog moats that take years to overcome.”
What brands must do to survive Amazon’s onslaught
“I think the way to make money in retail, and the retailers that are doing well, is what I would call zigging while Amazon’s zagging. Everyone’s trying to figure out a way to invest in technology to take people out. I think the best ROI for retailers right now is an investment in organic intelligence. What do I mean by that? Best Buy and their blue shirts program, Home Depot and their Gold Aprons; I think the people in Apple are fantastic, Sephora and their cast. These are people who are passionate about beauty. People are no longer going to stores for product, they’re going for people. If they’re going to go in a store they want amazing service, amazing expertise, insight, navigation to the right product right away.”
If someone forwarded you this message, you can SIGN UP HERE to get future emails like this.
Dig Deeper! Watch This!
Like what you’ve seen so far? Watch Scott Galloway’s full presentation on the Winners and Losers in the Age of Amazon [1:04:16]. You won’t regret it, it is absolutely amazing.
Other related things I find interesting.
Scott Galloway: Why you should care about Luxury [4:16]
This one hits close to home because I’ve seen this firsthand through my girlfriend. She spent six years at VanCleef & Arpel’s (Richemont) Asia Pacific headquarters in Hong Kong. After running their retail performance department — analyzing sales data in every boutique across Asia to create individualized retail strategies — she was asked to open and run a boutique in a new market — Australia. Since moving to Sydney in January, the sales numbers of the boutique has exceeded company projections in multiples, thanks to high networth Chinese moving to Australia. The stories you hear are absolutely mindblowing.
Amazon’s goal is to take a cut of all economic activity. Just as a huge percentage of the internet currently sits on top of Amazon servers through AWS, Amazon hopes that acquiring Wholefoods is the first step in building an AWS-like service for logistics. That all economic activity that requires logistics will sit on top of their Prime logistics infrastructure.
Lyft is starting a self-driving car program and committing 10% of their engineers to it. Unlike Uber, they are playing nice by building partnerships with manufacturers like GM and Jaguar, as well as autonomous driving companies, Waymo and Nutonomy. They also plan to develop an “open self-driving system,” which will allow their partners to operate cars on their network.
