Episode 115

How Retail is Shifting Amid COVID-19

Eamon Kelly - Edgewater Research
April 15, 2020
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Supply chain, lock down, store closures, falling ad costs, rising costs of sanitation…just a few of the areas impacting retail and e-commerce right now.  In my interview with Eamon Kelly of Edgewater Research we talk about the following hot topics to recent data points.

  • How ad costs are impacted on Amazon, Facebook and Google during the crisis
  • What categories are seeing spikes vs. dips in sales…there are a few surprising areas here plus some opportunities for companies to pivot.
  • What major retailers like Dick’s sporting goods are seeing
  • How retailers like Chewys are experience both growth and interesting shifts in costs and increased margin pressure
  • How to think about inventory levels with more shopping shifting online

Connect with Guest:

Eamon Kelly - Senior Research Analyst and Partner at Edgewater Research

Via LinkedIn

Edgewater Research

Via LinkedIn

Via YouTube

Mentioned in this episode:

Jason & Scot Show Podcast

Episode Transcript

Brett:

Well,hello, and welcome to another edition of the E-Commerce Evolutionpodcast. I'm your host, Brett Curry, CEO of OMG Commerce. Today,we're giving you an update on E-commerce, supply chain, Amazon, someother big retailers. And we've got a very interesting guest on, andhis company does a lot of research. They've got their finger on thepulse of what a lot of major retailers are doing and what they'reexperiencing right now. And so this is going to be kind of theCOVID-19 update. Things you need to know as it pertains to retail andE-commerce.

Brett:

Hey,Brett Curry here. Before we dive into today's topic, I want to talkquickly about YouTube ads. People ask me all the time, "Whatmakes for a great YouTube ad?" And it's true, the ad is thehardest part for getting YouTube to work. Now, I love the campaignstructure. I love audience targeting, and I love tinkering with bidsand using the smart big algorithm. And I even like budget management.I like all that behind the scenes stuff.

Brett:

ButI've seen it time and time again, where the exact same campaignstructure just limps along with a mediocre video. But you get theright video with the right message that resonates with people, andthat same campaigns structure just takes off. It scales.

Brett:

So,over the last couple years, my team and I, we've been collecting goodYouTube ads. We've been watching. We've been paying attention,looking at our own clients, looking at the numbers. Finding what areads that resonate and work on YouTube. We started building thislittle guide. This little guide that we use internally, and westarted categorizing ads and giving them fun names like theManifesto, and the UGC Mashup, and the Have It All.

Brett:

Westarted kind of breaking down what elements in these videos make themwork. So, I was speaking at a recent event, and I just happened tomention that this resource existed. People started to clamber for it.Everyone was like, "Hey, I want to see the guide. I want to seethat resource. I want to see all these successful ads."

Brett:

Andso, that's what we've done. We put together this resource, kind offirst time ever. Going to share it with a broader audience. It'sfree. Check it out, and get our list of winning YouTube ad formulas,with lots of examples. Let this be your inspiration for your nextkiller YouTube ad.

Brett:

Sothis is a free resource. We'll link to it in the show notes to thisshow, but you can also go to OMG Commerce dot com. Click onresources, and then guides. And it's the YouTube Ad Template andGuide. Check it out, and I hope it inspires your next killer YouTubead campaign.

Brett:

Now,back to the show.

Brett:

Letme tell you a little bit about my guest before I welcome him on theshow. Eamon Kelly is a partner at Edgewater Research, and EdgewaterResearch is a fascinating company. They really serve the investmentcommunity. They analyze different retail companies to providedetailed analysis for the investment community. They are networkingand speaking with hundreds of different manufacturers. They'redigging into things like supply chain and inventory and sales andprofits. Really just a wealth of information.

Brett:

So,we've got some great data we're going to look at for Amazon and forsome other major retailers. I think this is all information that canhelp us and inform us, as we try to make our own decisions of howwe're going to navigate the waters of retail in a COVID-19 world.

Brett:

Sowith that, Eamon, thanks for taking the time, man. Really appreciateyou coming on the show.

Eamon:

Yeah,no, thanks for having me. Looking forward to it. You know, as youmentioned, it's certainly an interesting time with COVID and theimpacts. From our perspective, the daily and weekly changes thatwe're seeing across the landscape, an interesting perspective offollowing some of these retailers that have closed shops. Whetherit's somebody like a Dick's Sporting Goods or Bed, Bath, and Beyond,or ULTA Beauty.

Eamon:

Thensome of these other ones that have benefited in closed shops, like aBest Buy, and seeing the perspective of retailers that have bothbenefited and been negatively impacted. It's just been a fascinatinglast couple weeks.

Brett:

Itreally has. Some things, I mean, some things are kind of obvious. Youknow, hey, orders are up on Amazon. Well, that's no surprise. Peopleare at home, and they still want to shop, and they still have thingsthey have to buy. But some of the other things, like some of thebenefits of which categories are up, or the areas where there's toomuch of a good thing. Now, Amazon's shifting gears.

Brett:

So,we'll talk through some of those details. But definitely aninteresting time. It is changing on the daily. I think it's one ofthose things where we're trying to do at OMG Commerce as a digitalagency is, we're still trying to have a long term mindset andapproach, and just knowing, hey, the industry, the E-commerceindustry is going to come out ahead. You know, I think stronger thanmost other industries.

Brett:

Butwho knows what that looks like, or when, exactly? But still then,focusing a lot on the short term, because man, things can change acrazy amount from day to day. Let's dive in a little bit. Let's talk,I want to talk a little bit about a subject that is very near anddear to our heart at OMG Commerce. It's what we deal with, and that'sdigital ad costs.

Brett:

So,this is fascinating. You know, digital ad costs have been on the risefor years. You know, we're on a, we're proud of this. We're on a 10year run of economic growth, and the emergence of direct to consumerbrands, and you know, increased competition on Google and Facebookand other digital ad platforms. So the cost of digital ads has beenon the rise, year in, year out, for quite some time.

Brett:

Whathave you guys been seeing in your research? And then we'll talk aboutanecdotally what we're seeing with our clients. You know, we serveabout 84, 85 E-commerce brands. But what are you guys seeing as faras digital ad costs right now?

Eamon:

Yeah,sure. I think, and you know, we have an interesting perspective withwhat me and my team do on Amazon and some of the other retailers,along with, you know, our digital team that focuses on a lot of thosedigital ad platforms.

Eamon:

It'sbeen pretty interesting. It's consistent across both of ourverticals, where for the most part, over the last several weeks we'reseeing CGC declines in the 20, 25% range. Certainly there's some thatare higher, and some that are lower. I think on Amazon, the, youknow, one of the big drivers is a lot of the third parties havepulled back. You know, they've had their FBA buy box restricted.

Eamon:

Amazon'sreally focused on the essentials, and as a result to that, you have alot of third parties that are pulling back on advertising. You know,you also have a lot of these big essential categories that, theydon't have product to sell. Without product to sell, you're not goingto advertise. So it's just been really interesting across thesevarious categories, seeing the ebbs and flows of these dollars movingin and out.

Eamon:

ThenI look at some of the digital channels, and the benefit for somebodylike Amazon is, they're not in the travel business.

Brett:

Right.

Eamon:

..lots of these other categories, they're not in the hospitality sidethat are really seeing big falloffs. You know, they don't have a tonaround, you know, the Olympics. And March Madness, and MLB. You know,you look at a lot of sports, and there's just tons of dollars outthere that traditionally go to those guys. Amazon doesn't play inthat realm yet. They're seeing similar type declines to what we'reseeing at the Facebooks, the Twitters, the Snapchats of the world.

Brett:

Yeah,super interesting. So I'll chime in on kind of both of those areas.Let's talk Amazon first. So we have a large Amazon ad division at OMGCommerce, and we serve sellers and vendors on the platform, managingpaid search and video ads and display ads. And it is interesting, youknow. We'll talk about this in a minute. But there are somecategories on Amazon that have just gone through the roof. So,essentials, certain supplements. We have a client that sells arts andcrafts, and then things like that for kids. Just exploding. A lot ofthose categories are up two to five X, you know, right now because ofthe environment that we're in.

Brett:

So,then you run into some issues where Amazon's not taking new inventoryinto their fulfillment centers for some of these categories, so theycan focus on essentials. And they're delaying ship times, and so, orwe have clients just burning through inventory. So all of that canlead to a slowdown in ad spend. You know, we've had some clients thathave successfully pivoted to now FBM, you know, fulfill by merchant,instead of just FBA. So, that's helped.

Brett:

Butoverall, yeah, it's, you're either down in sales, and so that'scausing a little bit of a decline in ad spend. Or you may be sellingalmost too much, and so that can result in a decrease in ad spend. Westill have a few clients who are spending more, just because there'sopportunities and you know, just room to push and things like that.

Brett:

Butit does make sense globally, ad spend on Amazon has probably taken ahit. So, that's been interesting.

Brett:

We'lllook at some of the other platforms. So, Facebook, you know, Twitter,Snapchat, YouTube, Google. We focus more on the Google and theYouTube side of the equation, not as much on Facebook. We're hearingthings, though, from people that advertise on Facebook, some of thesportings good. One friend of mine who's in the sporting goodbusiness E-commerce, he's seeing his CPMs on Facebook down 43% rightnow. So that's a lot, obviously.

Brett:

We'reseeing with YouTube, you know, from reports that we hear from otherlarge advertisers to, you know, our several dozen clients on YouTube,falling in line with what you're talking about. You know, that 20 25%drop, up to 30% drop. It does depend, right? Because now we're usingGoogle and Facebook smart bid algorithm to try to optimize forconversions.

Brett:

So,there's still going to be these little pockets where there's going tobe advertise that are competitively going after the same audience,and so costs aren't dropping as much. But safe to say, costs aredown. If it makes sense for your business right now to advertise andgo after new customers, ad costs are down, so big opportunitiesthere.

Eamon:

Itwas actually interesting, you know, Chewy was kind of the firstretailer that we had that reported earnings. You know, they made acomment last night that, you know, they're certainly seeing declinesfrom an advertising side. When asked, "What are you going to dowith the savings you've seen from a marketing side?" Theircomment was, "Well, we don't know how these cohorts are."

Eamon:

Arewe going to have to spend more to keep these customers over time? Itwas something that we just hadn't, you know, we hadn't really thoughtabout a ton. It was a perfectly fair point. You're having thesecustomers shift to E-commerce, and you know, why we, while we thinkthere is going to be a big shift, their point is like, we don't knowhow sticky this customer is going to be. How much are we going tohave to spend to keep them?

Eamon:

Arewe paying to acquire this customer that's really just a one-time useon this platform, or what's the lifetime value going to be? For them,you know, they said they look at it, they won't really know forprobably six months to see what that is.

Brett:

tosee those specifics, yeah.

Eamon:

Yeah,that's the challenge, I think, that a lot of these, you know, whetherit's retailers or brands, or you know, anybody spending is, you know,just looking at these dynamics that people just have not been throughin the past.

Brett:

Right.Yeah, and what's interesting. So, I get to hear an interview with aguy from Deloitte on one of my favorite podcasts, so shout out to theJason and Scott Show. I highly recommend that podcast. But he wastalking about, you know, as we look at, as they look at recessionsover history and looking at the retail sector, consumer buying andthings like that, is that consumers will adopt new behavior during arecession that they will keep even when the economy turns.

Brett:

Soas an example, you know, after the great recession you had peoplereally go, or during the great recession, you had people shopping atdiscount retail stores. So your TJ Maxx's, your Marshall's, thingslike that.

Eamon:

Yeah.

Brett:

Lotof people stuck with that, even as the economy changed a little bit.Those retailers continue to grow. I think we're going to find, and toChewy's point, we won't really know for six months or so. But I thinka lot of the people now that are shifting their behavior right now,when they're in, you know, at the time of this recording, still inquarantine, lockdown type mode, that, some of those behaviors aregoing to stick.

Eamon:

Right.

Brett:

NowI've got my Chewy's account set up. I've got some things that I canjust automatically reorder, easily reorder. Some of those behaviorsare going to stick. I think it's smart, and of course this, you know,makes sense. I'm a digital ad guy, so I'm going to be, I'm going tothink this way. But I think you look at companies in history thathave pressed on the gas in a strategic way during a downturn, duringa recession and gained a lot of market share. And so I think thosethat are in the position to do that can really come out ahead.

Eamon:

Yeah,I think, you know, we've obviously seen no surprise to anybody, a bigshift in E-commerce the last couple years. I think as you look at theway we think about it is, yeah, it's just, it's an acceleration thatis going to accelerate even faster coming out of this. You're goingto have people that, you know, whether it's you've shopped Amazon butnot other places, you'll just get comfortable shopping. The olderdemographic probably is going to get more comfortable shopping, andgoing to try out more avenues that you hadn't before.

Eamon:

Thestruggle, I think, for a lot of the brick and mortar retailers is,you're going to see a shift from brick and mortar to E-tail, and evenif they keep those customers, it's coming at a lower margin. So, youknow, it-

Brett:

That'sinteresting.

Eamon:

Iwas going to say, as they're keeping their stores open, it's not likethey're closing stores and able to offset, you know, the lowermargin. They all have these overheads that they have to run from abrick and mortar standpoint. And coming at a significantly lowermargin, you know, is going to create challenges. That's why you'vehad somebody like Walmart, who's been a lot more focused on OGP,outlying grocery pickup, and less focused on the dot com side,because they see the margin pressure that occurs on the ... deliveryside.

Brett:

Itreally makes sense. I mean, they're, you know, you could get intotopic on grocery wars, which would be interesting. I know Amazon iswith the acquisition of Whole Foods, and some of the Amazon Go storesand things like that, they're all trying to establish a foothold inthat space.

Brett:

Ido think Walmart's going to really emerge as the winner from thissituation. I just know from our own behavior and from others, I mean,the Walmart delivery, Walmart pickup, I mean, that's just super,super convenient. Almost a necessity right now for a lot of people. Ithink that's going to shift a lot of behavior to that, which isinteresting.

Eamon:

Yeah,and I think, I was going to say, with that I think you're going toalso have, you know, let's not underestimate the number ofbankruptcies that we're going to see. You know, from the retailcommunity that occurs, and the longer this goes on, the higherlikelihood that we have, you know, a lot of those pop up.

Brett:

Yep,yep. And so, to a couple of your earlier points that I want tohighlight, it's been interesting. You know, Amazon has certainlygotten a lot of volume, and they're going to emerge a winner fromthis as well, of course. But they've almost, you know, like we talkedabout, they've gotten so much focus on essentials and things liketoilet paper and all this stuff that people can't find in retailstores, that they've had to delay incoming shipments and shipments tocustomers for other products. We've seen this ...

Brett:

I'lljust give you a quick example. One of our clients that's a supplementcompany, done very well on Amazon, primarily in Amazon Business, butthey have their own store off Amazon. We can very clearly see thenumbers, so we manage their Google ads and their Amazon ads. Butthere was a week when there was real inventory issues on Amazon, andtheir sales spiked. I mean, exploded on their own dot com.

Brett:

Ithink what you're seeing there is, while yes, there are more shopperson Amazon, as Amazon has issues with these ship times or delayed,people are also saying, "Well, I'm going to search for thoseproducts on Google now." So maybe a product search that I wasgoing to, would have began on Amazon, I'm going to start on Googlenow. And I'm going to find a retailer that will ship it to me direct.

Eamon:

Yeah,I think you're absolutely right. I just had a conversation earlierthis afternoon with somebody who made exactly that point. Amazon'sput their stuff on, you know, over a month delivery times. Let's behonest, at this time right now, nobody's searching for something thatthey want to wait for a month. There's a reason buying somethingright now. So, you know, yeah. You started on Amazon, and you wentoff. That example, you know, seeing huge, huge, huge increases at notonly Walmart but all of the other, you know, all of the otherretailers that they deal with that have, you know, that are stillopen or that have even just dot com sides of the business there.

Brett:

Yup.And I think this has been one of those things where we'rerecommending to people, hey, maximize your search efforts, whetherthat's with search ads and Google shopping ads, or SCO for organicsearch. But there will be people that ... I have a client in theexercise, the home workout space. They've been doing well. As you canimagine, nobody's going to the gym, everybody's got to work out athome. They were selling a lot on Amazon, but again, now Amazon'sdelaying shipments four to six weeks. Well, I want to work out now.

Brett:

So,fortunately, they've been doing FBM and some other things. They wereable to kind of pivot. But yeah, I think there's going to be peoplethat are forced to buy online, and Amazon isn't going to be the onlyone that's going to go, you're going to go to some individualretailers as well, which is exciting.

Eamon:

Sure.

Brett:

Now,one thing I want to talk about is, you know, what are you guys seeingin terms of what categories on Amazon are we seeing the biggest liftsin? And some of these are going to be not surprising at all. Let'slook at that, and then I want to circle back to something, the coststructure. Kind of the unforeseen costs that are popping into this.We'll get into that in a minute.

Brett:

Whatcategories are you guys seeing exploding on Amazon right now?

Eamon:

Yeah,I think you said it. I mean, it's the obvious , right? I think as welook through this, there's been an evolution of, you know, the firstones of the masks and the sanitizers are kind of the no-brainers.Quickly evolved to the, to anything in the cleaning side.

Eamon:

Ithink you mentioned earlier, supplements. Perfect example. So, as welook, it's certainly a lot of the ... consumables and anythingfood-related. Seeing huge spikes in that. Prime Now is past a week, aweek out, in many cases two weeks. You can't even set anything up.

Eamon:

So,they're seeing huge increases there.

Brett:

We'vegot some friends in the prepackaged snack space, and it's like,that's a great time to be in the prepackaged snacks space. Even ifyour snack's not popular, people are probably going to buy it.

Eamon:

Yeah.

Brett:

Youknow, protein bars, whatever they can get their hands on. People arebuying.

Eamon:

Right.Yup. Then I think the other one is, you've seen a big one here in thelast two, three weeks, as businesses have been forced to have peoplework from home. It's all of the traditional work from homecategories, whether it's, you know, we're seeing it in officefurniture, laptops, PCs, and all the PC related accessories. Thoseare seeing big spikes.

Eamon:

Thehealth and beauty side, to the point before, supplements, cough,cold, things like that. Also seeing in storage containers, as peoplepantry load. Adding it there, you know. The one that I was surprisedat first, but when I started to see improvements in appliances, thatsomebody like, somewhere like a Best Buy, I kind of question myself.Like, what do you mean, why are people buying appliances? You know,as I went in to a local store, I kind of got a quick reason whyeverybody was buying spare refrigerators to put in their garage, orbuying deep freezers.

Eamon:

Youknow, I think what you're seeing now over the last, call it twoweeks, you're starting to see some of the more Midwest, northeastregions getting a little bit warmer, you're seeing tools, lawn andgarden, and some of the outdoor categories.

Eamon:

Ithink arts and crafts and toys, and those sort of categories areseeing some nice improvement, as people look to keep their kids busyand give them something to do. So, those are some of the examples ofones where we've seen some nice acceleration.

Eamon:

Ithink that the flip side of that has been, you know, what is reallystruggling. There's probably a couple where we've seen the biggestdeclines. I would say soft lines are probably by far the biggeststruggle. You know, whether you're talking apparel-

Brett:

Clothingand accessories and things like that.

Eamon:

Yeah,apparel and footwear. You know, from a business perspective, nobody'shaving meetings anymore.

Brett:

goto meetings in my slippers. Or barefoot.

Eamon:

Exactly.So, you know, it's that. Then, the other part is sporting goods. Abig piece of sporting goods, and what Dick's Sporting Goods does, forinstance, is team sports. Without team sports, I can go out and throwthe ball around with my kids, but you know, there's no team sportsgoing on. Those are some of the examples of ones where we've seenfalloffs.

Eamon:

We'vealso seen a big falloff in the automotive aftermarket category. So,we follow Advance Auto and Auto Zone and O'Reilly, and the lastcouple weeks there we're seeing probably 40 to 50% type declines,because it's no shocker. Nobody's on the road. You're not driving, soyou're not having breakage to your car.

Eamon:

So,those are some of the categories where we're seeing kind of thewinners and losers, if you will.

Brett:

Really,really interesting. I think what's fascinating about this is asE-commerce business owners, we need to think about, how could myproduct potentially be consumed more in this work from home, stay athome economy for however much longer this will last? At the time ofour recording, at least 30 days, maybe 60 days or more for parts ofthe country.

Brett:

So,how can my product be used in those areas? I'll touch on, I want totouch on both sporting goods and auto, for a second. Because this isinteresting. On the sporting goods side of things, totally makessense. Anybody that relies on team sports, hurting right now. Becauseteam sports are doing nothing, right? I coach my son's basketballteam. This was my last year to coach, and then the season endedabruptly. Now all spring and summer sports are either on hold orpostponed, or canceled.

Brett:

Butwe have a few clients that are in the training space, and so one's inthe baseball space. At-home training equipment. They're actuallydoing good, because now it's like, hey, Junior still wants to develophis swing, or Suzie wants to develop her fast pitch softball pitchingstyle, and stuff like that.

Brett:

So,some of those at-home things are working. We had an at-homebasketball training company. They're doing really well. But yeah,your traditional retailers that rely on team sports, definitelyhurting.

Brett:

Theautomotive side, it is interesting. I think there are certain pocketswhere, let's take a more affluent customer. We have a client in theauto space that sells a non-essential for auto, but they kind ofcater to a slightly more affluent. Like, you wouldn't buy thisproduct unless you had a classic car, sports car, a nice car typething.

Brett:

They'redoing really well right now. I think what's driving this is, peopleare at home, thinking about their nice car. Right? They're maybe notout driving, but they're tinkering with it or whatever. But I think,yeah, you look at brake pads, oil change stuff. Your standardO'Reilly, Auto Zone type of thing. We happened to get out last night,just to drive around with the kids and go to a drive-thru because wehadn't been out of the house in so long. Seven pm, it was like it wasmidnight. Just weren't many people out, so it was really weird. Itwas really weird.

Brett:

So,makes sense that auto would be down.

Brett:

Let'stalk about somebody, I think this was a fascinating thing you broughtup earlier. So, you know, E-commerce is seeing an influx of orders.But then there's also some of these, I don't know if unforeseen isthe right word, but these costs that aren't necessarily normallyassociated with E-commerce. Or costs that are normally associatedwith E-commerce, but they're just exaggerated right now.

Brett:

Whatare some of the cost pressures that people are dealing with now, thatthey weren't dealing with before?

Eamon:

Yeah,I think there's a couple things. I think the first one would be theobvious one that I touched on a little bit for the brick and mortars.It's just the shift from brick and mortars to dot com, and there'sobviously an added shipping cost. That's the obvious one.

Eamon:

Buttake somebody like Amazon, and you have the amount of and cleaningthat's needed to be done in these warehouses and facilities, to keeppeople safe. That's certainly a higher cost that they never had inthe past.

Eamon:

You'rehaving to see more hiring of workers. Both Amazon and Chewy both haveadded, or are adding lots of employees to help on the fulfillmentside. So, added costs from that perspective. I think with a lot ofthis, a lot of the fulfillment centers are full. Shipping, you'rehaving some higher shipping costs from trying to expedite and getthings to customers, to hit your promised deadlines.

Eamon:

Ithink that's the biggest thing I see for a lot of these retailers. Idon't care if something shows up in five days. Amazon kind of did itto themselves, right? They've strained people to focus on two dayshipping, to one day.

Brett:

Right,right.

Eamon:

Now,yeah, I go and there's a lot of stuff, like, I don't care if it comesin five days. I think what consumers want is transparency of, tell mewhen it's going to come.

Brett:

Right.

Eamon:

Atleast get that date, you know. If it's seven days, I'm at leastcomfortable. But I'm going to buy that product, knowing it's going toshow up in seven days. But it better show up there in seven days.Don't come in 10. 10, just quote me 10 days, and I'll be happy.

Brett:

Yup.Yeah, exactly. Yes, really, really interesting times now for sure.Other things you're seeing from large retailers right now, andanything interesting in your research that could be helpful for theE-commerce community to be aware of?

Eamon:

Yeah,I just think it's, I think the biggest challenge and the biggestquestion that I've had from manufacturers is, how do I go aboutfiguring out when my products going to slow? When ... are theretailers going to open? When are all of a sudden people going tostop buying certain products?

Eamon:

Youknow, you look, and pantry load is slowing. Some of that is hard togauge. Is it slowing because there's no toilet paper listed on Amazonanymore? But trying to figure out when that change is going to occuris going to be a very challenging one. I had a conversation lastnight with somebody looking in the consumer electronics space, andsaid, "Hey, I have all these people calling me, looking for thisproduct or that product. How do I figure out how much to pull in, andI don't want to be the last person shipping stuff, because I might beselling ... My normal run rate might be a hundred widgets a day. Now,I'm doing 500 widgets a day. Well, if I bring in a couple weeks ofinventory, that's a couple months of inventory in a normalizedenvironment."

Brett:

Right,right.

Eamon:

makesure and take advantage of the situation and these opportunities, yetreduce my risk on the back end? So, I think that's the biggeststruggle. I don't know that I have an answer of trying to predictwhen these certain categories are.

Eamon:

ButI think it's, the majority of people are taking a somewhat cautiousapproach of making sure that they're not pulling in too much. I thinkthe other challenge is, you know, an interesting conversation I hadwith somebody today said, "I'm seeing orders, because one of mybigger competitors is in a state where they're not allowed toproduce."

Brett:

Wow.

Eamon:

Asthat competitor, or as those competitors get back on board at somepoint in time, I know that my business is going to see a significantstep down. predict that? Very challenging.

Brett:

Yup.Yup. Yeah, it's super interesting. I mean, you know, when you, it'sboth a blessing and a curse, right, when more orders come online. Andnow you're selling at a much higher run rate. It's exciting, makespredicting inventory levels super challenging.

Brett:

You'vegot, we'll just take toilet paper as an example because it's kind ofan interesting and a fun one. You know, that's going to slow down,right? There's only so much toilet paper you can stockpile. It's notlike our consumption is actually going up. We're not using moretoilet ... Maybe we're using more toilet paper at home than we do atthe office or whatever.

Brett:

Butglobally, the use of toilet ... We're not eating it. same, so that'sgoing to slow down. Eventually there's going to be a real slow down.It's just kind of a shifting in demand of toilet paper. There areother things that are increasing. So now maybe we are buying morepackaged foods and snacks, and we're sitting around eating oursupplies or whatever.

Brett:

Butpredicting that is super tricky. I think, but I think a couple thingsthat do work in the favor of retail, and you mentioned this. I thinkfor the most part, people are going to be a little bit moreunderstanding about slightly longer ship times. You know, what choicedo we have? We're all kind of being understanding. We're all kind ofin this together type of thing.

Brett:

So,I think maybe being slightly more conservative with inventory levelsis pretty smart. I think, but the other thing you've got to keep inmind is, being opportunistic, right? We've got some really strongbrands that we work with, that are going to run out of inventory in afew areas. There may be a few weeks' gap where they're out ofinventory. I'm not going to mention who they are, because I don'twant the competitors to swoop in. But you got to be watching yourcompetitor levels, seeing when your competitor may run out ofinventory of something. You'd be able to pounce on that and take thatopportunity.

Brett:

So,with that, you got to have inventory to be able to do that. Right?So, it's a tricky game right now. I think the best we can do is lookat managed costs as wisely as we can. But don't slow down, becausethere is a shift in buyers to E-commerce. Try to capture as much ofthat as you can, reasonably. Have those long term goals, but thenalso be willing to pivot, because you're going to have to pivot a lotand pretty quickly.

Eamon:

Yeah,I think the other thing, too, as you think about it, is coming out ofthis, there's, one may think, "Well, as soon as my localrestaurant opens up, I want to get out of my house."

Brett:

Absolutely.

Eamon:

Thechallenge is, you think about is, if this lasts for three months, alot of restaurants aren't going to have any usable food. The supply,you think about all the issues that we've seen at the retail level,right? People went to Costco and grocers, and all the shelves wereempty. Well, the same thing's going to happen for the restaurantcommunity and food service when that gets back online. There's goingto be a massive flow of orders that are wanting to go that way, andis there going to be the availability? We're probably going to have asimilar to what we're seeing at the consumer side, right? We'reprobably going to have a couple month window where it takes time fora lot of that stuff to get back in stock from a restaurantperspective.

Brett:

Yeah,supply chains are kind of wonky everywhere, right? So it's going tocause some disruptions. Maybe you're going to be at your favoriterestaurant, one of these days, right? If, hard to even imagine thatright now.

Eamon:

Yeah.

Brett:

Butwe're going to be there one day, and yeah, maybe they won't havecertain dishes because they're having supply chain issues as well.So, super interesting.

Brett:

Well,Eamon, this has been really interesting, very fascinating. I'mthankful for companies like you that have your finger on the pulse ofwhat's going on and can provide this meaningful data that can atleast get us thinking and processing and looking for opportunities,and looking for ways we can improve our business.

Brett:

Ifsomeone wants to plug in more and maybe kind of dig into someEdgewater Research, how can they get in touch? How can they learnmore about you guys?

Eamon:

Sure.Our website is Edgewater Research dot com. If anybody wants to emailme, it's Eamon at Edgewater RC dot com. E-A-M-O-N at Edgewater RC dotcom. Happy to have a conversation with anybody, and plug in withanybody looking for some support and help on, whether it's Amazon orjust kind of retail in general.

Brett:

Awesome.Really appreciate it. I will link to your site and share your email,if you're cool with it, on the show notes. So, we'll allow people toconnect with you as they'd like to. But been super interesting,Eamon. Thanks for the time. Thanks for coming on. Really enjoyed it.

Eamon:

Thanksa lot, Brett.

Brett:

Yup,absolutely. And as always, we would love to hear from you, ourlisteners. We would love that review on iTunes. That helps out theshow. It helps other people discover the show. So, if you feel soinclined, leave that five star review. Leave some feedback. We'd loveto hear from you.

Brett:

Withthat, until next time, thank you for listening.

Brett:

Allright, man, that's a wrap. That was perfect.



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