Retail: Convenience That Costs Everything? | E-Commerce, Consumer Behaviour & the Future of Retail

Gareth King (00:32)

Joe, thank you so much for joining us and welcome to the show. You've seen just the seismic disruption that the internet's brought to the entire retail space. Did you ever think things would play out as transformative as they have?

Joe Zahaitis (00:47)

No. I remember, sadly, speaking my age, I remember when Amazon.com came out and everybody thought it was kind of a cute thing that sold books and that was it. There was nothing about it that was a force in the industry. And we've seen obviously the disrup-tion that it has had, and some of the things that it has in my mind caused as societally and otherwise.

Gareth King (01:09)

Yeah, that's a good case study. But one of the things that I guess a very obvious side effect of the rise of e-commerce, not just Amazon, but just as a massive industry has been the loss of malls, or we call them shopping centres here, as community spaces.

Now, before we get into Amazon and I guess the digital details and things like that, these malls and things have been one of the big side effects of the boom of internet driven re-tail and e-commerce of course. Beyond kind of losing places for, you know, people to hang out and just kind of socialize and do things like that, what do you think has been the actual community and societal effects of losing these spaces?

Joe Zahaitis (01:57)

It has caused in my mind, the nature of both the internet in general, we can speak Ama-zon specifically, but internet and e-commerce has caused in my mind an isolation of so-ciety.

You no longer, exactly to your point, the mall was a place to go not only socially, but also to buy things and then you would do socially things while you were out. Now with the ability and especially now with the ability of what I call instant gratification babies, where you can order something online and have it delivered by the afternoon, no one needs to leave their houses. And the sad part is, is that is led in my mind to a de-socialization of society. And that's not necessarily a good thing, I don't think.

Gareth King (02:33)

Yeah, look, I think even beyond this kind of same day delivery straight to your house, the de-socialization of society, it is one of those really obvious effects of the internet and technology. But you know, just continuing on one of the points that you mentioned there, as obviously e-commerce and larger outlets within that space have evolved, they do now offer that same day delivery.

Let's start off on that point, which is very beneficial in a certain sense, but also has a lot of negative effects when we look at the type of businesses that giants like Amazon can essentially steam roll over. These smaller ones, even medium sized ones, ones that just can't afford to, you know, those gigantic shipping contracts and rates. And of course, the underclass of lower paid potential gig workers to deliver that service. How do you think that's playing out in the sense of digital retail overall?

Joe Zahaitis (03:29)

From my perspective, again, you have to remember when I got both into the industry and just how old I am, which is not a bad thing, but it is. Sears, Sears and Roebuck Company was the giant back in the day. They had stores all over the United States.

That was a classic model of Sears. Craftsman Tools, which is a part of Sears, they basi-cally bought into the model, sold some of their product, and then shut it off. And then over a period of time, Craftsman almost went outta business. They bought them pen-nies on the dollars and made it a house brand.

I think we're seeing that same thing play, you can go even further back with Standard Oil. He would take his kerosene prices down to next to nothing until his competitors either went out of business or needed to sell. Then he would buy them pennies on the dollar, and he'd boost the prices back up again. But he would go into markets, and he is the reason that antitrust laws exist because of that in terms of monopolies.

You saw the same thing play out with Sears and I think we're seeing the same thing play out with Amazon. Amazon's got free delivery, instant delivery, instant access, this and that. Anybody can start up a web store, whether it's legit or not has yet to be seen.

I remember back in the day, one of the things I valued about Amazon was the products I was getting and the customer service that came behind it. I think Amazon has gotten too big for its own britches in that products I have researched online that I then went to Am-azon to get a price comparison and see if I would buy it from them, trusting them as I have, turned out to be frauds, fake products that were coming out of other countries. Won't mention them, but it doesn't matter.

Bottom line is it was not the legit product that I was looking for from that brand or that name. Who's watching the house? Are the foxes watching the chicken coop? It's destroy-ing, to your point, and I think it's a huge thing, local businesses, whether they be local online businesses or local retail businesses, because people don't have to go out any-more.

Gareth King (05:13)

Yeah. Look, that passage that you've just explained there, there's quite a few points in there that I'd love for us to kind of pull those apart individually and dig a little bit deeper on. We started off with this kind of super-fast shipping culture. Now, one of the things that that also incentivizes is it's super easy to try something that you are not a hundred percent confident is right, and then return it.

And of course, with so many places now offering free returns, I guess the amount of in-stant shipping and constant return loops as well is not only so much more traffic, logis-tics, pollution, all of these different side effects of digitized retail, kind of removing the consequences of our obsessive consumption.

One of the things that people talk about quite a lot is fast fashion and how bad that is for the world. And I guess that can connect with another point that you made there, which was the countries that will not be named making knockoffs and certain things like that. So, it's just so much junk flying around as a consequence of the e-commerce ecosys-tem. Is this something that these giants that can offer, this 24 hour to you and return loop feel they've got no responsibility to address?

Joe Zahaitis (06:37)

I think where you're going to see it addressed is not going to be at an Amazon level be-cause one of the things that even Amazon is wrestling with is the nature of what is classed as friendly fraud. And that's when someone orders eight items, maybe to try them on, maybe to just, you know, they're not sure which one they want, and they get eight of them and they return seven. Well, sometimes based on again, the Amazon poli-cies that are out there that might negatively impact the merchant that is represented on the Amazon website.

And most importantly, from my perspective, it leads to a greater propensity for friendly fraud. I will buy this item, product, clothes, shirt, whatever, wear it, and then return it. Why? Because I know my credit card company's got my back.

And I think that has a negative impact on society because there are no consequences. There are no consequences to my actions. If I buy this, I’ll just return it, and I'll get my full money back and the only person who's left hanging on that is the merchant. And in many regards, many instances, that's not Amazon.

Gareth King (07:39)

No, absolutely. And I think that that's kind of operating under the faceless internet. Like there's no people on the internet. It's just pixels and representations of people. But on that misrepresented products point, one thing we've seen over recent years is the ex-tremely rapid rise of drop shipping.

We know with these intermediaries, the odds of misrepresented products, as you men-tioned, increase even more fold, like beyond what Amazon is. So, two points from there. Do drop shippers do you think have any kind of safeguards even to a level that Amazon does? And as you mentioned a few minutes ago, where does customer service in this highly digitized world of retail come into all of this?

Joe Zahaitis (08:23)

From my perspective, I think it's gone as we're talking about the nature of internet, but it talks about society. It's a transactional based world now. If you look at the nature of and I'll use LinkedIn as a quick example, but the number of pitch on first contact that I get on LinkedIn is staggering. And it is what it is. It's the nature of the beast.

But the challenge with that is the individual that's on the other end and their bot and their whatever that's doing this has no interest in the relationship, and in establishing and knowing what is it that Joe really wants? What does he need to buy? What does he need to get? How can we help him? It's just like, have what you need and I'm going to hit 80 million people or as many as I can. And hopefully this falls and hits on one of them.

It's transactional. It is not relationship. It's not knowing your local store. The number of years I've been going to the same hardware store, it has now since closed, I feel bad, but it was a local hardware store. And that was part of the challenge is it was a local hard-ware store. It was not a major brand, but they had everything I wanted. And if there's any-thing I needed, I could go talk them about it.

Customer service in that same regard, you're talking to big box retailers, otherwise cus-tomer service doesn't exist. Try and call PayPal and get customer service on PayPal. Doesn't exist. If you can't self-service it, you're out of luck, which is unfortunate.

Gareth King (09:38)

Do you think that that lack of accountability in the digital space has led to this lack of ac-countability when it comes to customer service? Or are these companies simply going for the cheaper technology driven route, which is a chatbot or some incredibly frustrat-ing process that all somebody wants is to speak to an actual human?

And is that simply just a trade-off that we've all made for the convenience of shopping online, do you think?

Joe Zahaitis (10:08)

I think it goes beyond even shopping online, but it is the nature of the internet. One of the things I've always loved about American Express is you could call American Express with a challenge with a charge or something happening on your card. Lost it, issue, for-got to tip someone, got double charged for something. Any problem you have at Ameri-can Express. And what I've always loved about that card brand is on my phone call, on first contact with the individual I'm talking to on the line, nine and a half times out of 10, they can resolve that issue, hang up the phone and I'm done.

Getting that resolved right away without having to bump it to a manager, without having to call back, without having someone have to research it. American Express has even gone down this path. They're not as customer centric as they used to be. And it would be my belief, credit card industry I'm using now as a backdrop, I believe it applies to oth-ers is, it's all a numbers game.

Okay, we're going to have a few pissed off clients. Don't care. But there's going be a whole bunch. Don't care. Because if it's one, two, three, four percent, I have a four per-cent of a consumer base that hates me. So what? I got the other 94, 96 that don't and have never had to call in.

The challenge with that is that if all you're doing is running it as a numbers game, then you win on price, you lose on price. If there's no other value to what you bring to the ta-ble, why do I need you for? I'll go to the next guy. I'll go to the next guy. I'll go to the next guy. And that's, to me, that is not the nature of what we bring to each other. And I think a lot of that has been, if not caused by the nature of the internet itself, certainly exacerbat-ed by the nature of the internet.

Gareth King (11:38)

That's a really great point. We started off this conversation touching on the small busi-nesses that have been driven to extinction in a lot of cases. We’ll say negatively impact-ed. Yes. That's a nice way of putting it.

One of the side effects of that, you know, we mentioned the closure of shopping cen-tres, malls, whatever you like to call them. But the other side effect of it is where physical stores along high streets, they just sit empty for months or years. Often this can be down to landlords charging, you know, rents that are just too high for the small retailer envi-ronment.

But from your perspective, do you think that these community, local shopping strips, retailers, et cetera, will ever return in this digital age of gigantic e-commerce? Or do you think that they're gone for good thanks to, you know, the convenience of big tech?

Joe Zahaitis (12:41)

I have an awesome response for that because it is one I've thought actually deeply on oddly enough. I applaud and welcome the advent of the AI world. It has swung the pen-dulum so far to not trusting anything you see, read, experience, hear on the internet where I think the pendulum is going to, and has already begun to swing back the other way, where no one is going to want to do business with anyone unless we literally stand like you and I right now, face to face, belly to belly, to know it's a real person I'm buying from.

Not because I have to buy from a real person, but that's where the trust comes in is that if I'm not buying, especially in what I do for a living from a consulting perspective, it's a high-ticket item. You're not going to just go, hey, just go talk to my bot and he'll take care of it. It doesn't work that way. So, AI and the advent of AI, I think while it's a great thing as a time saver, we had fax machines, we had computers, we didn't have phones quite a years ago and we certainly not ones that sat in our pocket.

But with the advent of this AI thing, I think we are taking this so far out of the realm of what we trust as humans where it's going to bring it back the other way. And I certainly hope so.

Gareth King (13:51)

Yes, that's a great segue into discussing AI, but before there, you mentioned that trust around seeing someone face to face. I think what happens at the moment for these small businesses that are fortunate enough to have that physical space is this concept of showrooming. You know, they go in there and find something that they like and then go and find it cheaper online.

I guess this leads me to the point while we're talking around these smaller physical stores. Now I remember reading this, this recent article and story about this UK custom neon sign maker. And they were, I mean, look, that's a pretty niche business to begin with, but they were closing up their physical store, after a few years I think it might've been, because everyone was just going into their store and then going and getting one of these really cheap knockoff versions from one of these countries that we won't name again, simply because of the cheapness to produce it, the cheapness to ship it, that, you know, Western cities and countries just can't compete with on price.

Where do you think that, let's say, higher paying nations and societies go from here now that the, I guess, the technology allows people to do the same thing from anywhere in the world? Like how, how will we compete not only in a retail sense, but just in a, an ex-change sense do you think?

Joe Zahaitis (15:17)

I can address it kind of specifically because I do woodworking as a professional hobby. I've done it since I was 14 years old. And the nature of what you brought up, go into a store, someone is showrooming and using it as an opportunity to see, feel, and touch, and then go online and buy the product. I would venture to guess that what they bought online, they probably, unless the person in the store is selling a similar cheap product, they were disappointed with the quality they got.

The woodworking I do is solid wood only. I don't work in veneers. And when someone comes to me and says, Joe, I'd like you to build me this, Isaw it on Ikea. And that's what I'd like to have. My response is, I think you should go to Ikea and buy it because I will never be able to produce it the way I produce something, where you will be comfortable with it because that is what you're looking at. You're looking at the cost of what it's out there, not the actual item.

Gareth King (16:08)

You also mentioned earlier, you know, AI and how this can play into this space because we won't be able to trust.

Joe Zahaitis (16:16)

Already can't. You already can't.

Gareth King (16:19)

Let's say, okay, we can't, we already can't trust what they're telling us. Now, one of the things there's been out over recent months was different LLMs planning on putting ad-vertising into them and/or offering direct purchase from within those tools themselves.

If we see those turn into marketplaces as well, cutting out an additional step before you might hit Amazon or anything else, and just purchase directly from this faceless large language model, do you think that the LLMs will be able to serve up much more hyper-targeted or niche offerings from smaller makers? And will there be a return of visibility that way?

Or do you think like everything else, they'll just end up being dominated by the giants who can afford to pay for the most exposure?

Joe Zahaitis (17:08)

Not even pay for the most exposure. It's going to be those that have the greatest amount of volume because if you even think from an LLM perspective, and we'll just use that, and I don't know it detailed enough. I'm sure one of your listeners can go to at a granular lev-el. Okay, LLM, I want to sell, use the cutting board model. Okay, great. Joe's got cutting boards. Great. He doesn't have any in stock. Great. Move to next.

And now you do that often enough where the LLM has learned to not even bother to look at Joe's cutting boards because he's doing them custom, and they're a custom piece that is more of an artwork, I'm not even gonna serve him up anymore because these guys over here that have the really, really cheap product that's coming from off seas, they are constantly coming up, having it available, selling it, and people are engaging with the product.

We're giving over, I think, we're giving over control to your point of a nameless, faceless entity that is only driven by data. It's not driven by anything else. And okay, that's fine if that's what you wanna do, philosophically, but I don't know that it helps us from a hu-man perspective.

Others would argue with me on that and say, well, Joe, I just want to sell product. Sure. Good luck. Mean, again, win on price, lose on price. Someone's going to come around and sell it cheaper than you.

Gareth King (18:20)

It's a great point you raised there too around they only work off data. And I think that re-gardless of who or what we're buying online, one of the positives in my opinion, that has come out of so much of this online shopping and tracking good or bad, however you want to look at it, is what can be that extremely personalized product suggestion experi-ence.

You know what I mean? It's like if I'm seeing three products or items in a sidebar of a browser and they're all really relevant to me, that is beneficial in a way.

But obviously that's only possible thanks to these extreme levels of data tracking and collecting. What do you reckon? Do you think the time saving is worth it? Or do you think we're trading far too much of ourselves for a few minutes of convenience when we're shopping online?

Joe Zahaitis (19:12)

I'm going to come at it from a different angle. When I grew up, granted I'm an old guy, when I grew up, you watched a program and you would watch five, seven minutes worth of commercials during a half hour program. Those commercials were teed up. You would get up, go to the bathroom, get a drink, whatever, or watch the commercial if it was engaging. And that was the extent of the media and the propaganda that was being pushed into your face in terms of selling product.

The challenge I have with these highly, highly personalized, I, my daughter was working a million years ago, when she was in high school, she was working at a movie theatre. And we were looking for non-slip shoes because whenever, she was manager, but when she would walk behind the counter, there was grease on the floor and oil from the popcorn and everything else, and you don't want to slip.

So, I was out there just researching with her. I didn't buy any. I was researching this no-slip kind of restaurant shoes. For the next four weeks, six weeks, every time I turned on any browser, it was serving me up all of these different non-slip shoes that I didn't even want.

My challenge, and the reason I bring that up in the context of, when I was young, there was X amount of marketing that was driven at me on a daily basis. Now, the younger gen-eration is being marketed to 24-7. And I think that level of indoctrination, just driving it home, and personalization, you've got, let's not go conspiracy theory on products that, I call her the A woman, otherwise she's going to ask me what I want.

But when you look at that, whether it's listening or not, it still is targeted towards my browsing history. I'm online and obviously it knows what I look at on Amazon. So, it's go-ing to deliver it to my, it's going to say, hey, do you want this? It's personalizing it just based on what I look at. That level of constant selling to this younger, I don't know that they have the defences to be able to defend against it psychologically.

Gareth King (21:01)

No, that's, that's a great point too, but to counter that obviously they're so native to it. So, would they even consider the effect of it? Or it's just so normal to them?

Joe Zahaitis (21:09)

My daughters are older, they're adults, and we have this kind we've actually talked about this exact topic. And the nature of it is that they can somewhat perceive it, and they can acknowledge the fact that it is probably too much in terms of the constant marketing that is being done to them. But they also have, because they pretty much didn't grow up in a world before, at least computers, maybe not the internet, they have acknowledged and accepted the fact there's nothing they can do about it. So, it's a negative.

But I think the younger generation, when one jump younger than my children, they don't know it, they don't see it, and they're being controlled by someone who's outside of their realm. And they don't even know.

Is it good or bad? History's going to tell us that down the road. I don't know that it's nec-essarily good. think, and I try and do this now, unfortunately not today. I try and separate myself from this computer, from all of this technology, go walk outside and woodwork or do other things. Because I think you need to break away from this. It's too much. There's too much data flow coming into our brains on a moment over moment basis. There's no creativity anymore.

Gareth King (22:11)

Yeah. And I think that that point there, there's too much data flow. You know, the con-cept of retail therapy, right? Like someone might use to be, I've had a bad day or a bad week or whatever. I'm going shopping. You know, I'm going to find something and treat myself. The fun and the joy of the experience of getting out there and doing that was po-tentially part of the therapy aspect of it.

Like everything else when it comes to the internet, it's almost been over optimized. So like the concept of retail therapy is very emotionless. I don't need to go out and see any-one or experience anything. I can just click, click, click add to cart. It'll turn up here later today, or maybe tomorrow. And it's just faceless emotionless, et cetera. So, I think that's a real transformative of the psychology of shopping as well.

Joe Zahaitis (23:02)

I think you could even take it outside of payments and go to social media. The nature of social media, there's nothing social about it. Because to your point, you just said it in your last sentence, click, click, click, view, view, view. There's no human interaction that's taking place. Look at the dating app, swipe left, swipe right. Is there any real getting to know anyone? Not really.

All of those are, in my mind, noise. And the algorithm that's behind all of that noise, to your point, is so well refined to keep you on the platform. I even look at it. I'm an old guy. I look at it I'm like, okay, that was a cute one. That was a cute one. That was a cute one. That was a cute one. I mean, in terms of all the cat videos, because I send them to my girl-friend and it's like, whoa, I gotta get out of this. I mean, obviously it already knows that's what I want to see or it thinks that's what I want to see. And it starts driving it home. It's like enough, enough with the cat videos for God's sake.

Gareth King (23:52)

Look, I think that just goes back to the same thing that we're talking about a little while ago. It just knows everything about you. Now, if you see that as benefit, whether you're shopping, or you see it as intrusive because you might be talking about a cat collar, while we're on cats, and then you'll see start getting all the adverts for on your phone or your computer or whatever it is, that's a little bit creepy and people are obviously totally aware of that but just don't know what to do.

But I do have a couple of questions I'd specifically love to ask you around the payments aspect of digital retail and e-comm. So, there's two, two prongs on this. First is the na-ture of digital payments online. And I'd love to pick your brain a little bit about all the is-sues within that as a system or an ecosystem, I should say.

But then secondly, this rise that we've seen in recent years of even physical spaces, whether they're stores, restaurants, et cetera, anything that will only accept digital pay-ments. What kind of problems and considerations is the entire digital payments ecosys-tem presenting if you're not really organized and on top of everything?

Joe Zahaitis (25:05)

Again I've been in the payments for a long time, so for me to say this about my own indus-try is a little counter-cultural, but I'm going to say it anyhow. The nature of digital pay-ments in my mind is, it's a further loss of control. I think that people buy more, spend more, consume more because they're not watching dollar bills or Australian dollars, ei-ther way. They're not watching physical product cash leaving their wallet.

It's super easy whether it's online or in a physical store, to just swipe your card and go and not even pay attention to just how much you just paid for this, that's a negative. The other negative is, and some would argue me that the cost of cash handling, which there is a cost, but if I give you a hundred bucks for a product, you have a hundred bucks, you turn around and you use that and a whole bunch of other hundred bucks to pay your rent. Now that landlord has a hundred bucks, a thousand bucks, whatever, and they turn around, it is net net same same. At the end of seven or eight iterations, the nature of that cash at that value still exists.

I pay you for a product using my credit card, debit card, whatever you want. Now, the hundred bucks I gave you, you only get to keep about 95, 97 of it. Now, you turn around to pay your rent on a bunch of those products sold and you give your landlord 97 bucks, because I want to keep the maths easy, he now only gets to keep about 87 of it. So now the decrementing value that's available, because we're paying along the way for everyone to touch that. And that's my industry. And that doesn't make me happy, but this is what we've come to.

By the time you get to seven or eight hops out, you've got almost no value left. Now the hundred bucks we started with has got no value nine steps down the chain because everyone's taken, got their hand in your pocket for every single transaction. Sure, it's been super convenient. Where I have a challenge with this is I have seen, okay, I've seen operations that take credit card only because for security reasons.

You're paying on the island at a hot dog stand or something like that and they don't want staff outside carrying cash. I get that. Go inside if I want to pay cash. But then the stores that only take digital payments, really? What if I want to pay cash? What if I'm unbanked? What if I'm underbanked? And now I can't go into the store and buy product because they only take credit cards or digital-based payments.

Gareth King (27:30)

There's kind of two, two very obvious ways that you mentioned there. Like one is obvi-ously that we'll call it a convenience fee. Now, whether it's actually a convenience fee, this inescapable part of paying digitally. Now I know here there's, there's apparently some kind of law that you can't put those fees on the top if you don't offer paying with cash as well or something like that.

But I think so many places have gone digital payment only. Is it really a case of everyone just kind of taking their cut or is that an actual cost of like running the networks? Like how is this all lining up? And do think we're just so used to it now that…

Joe Zahaitis (28:05)

We could spend a whole show talking about the nature of the card brands, the net-works, and where that money goes to. Where we've seen this come into a problem is that, again, from a state's perspective and where I have a problem with merchants, we have had merchants that, typically restaurants, that will add a percentage at the tail end of your fee to pay for the credit card fee.

To which then I say to the proprietor of the restaurant, have you decreased all of the pric-es of all of your hamburgers and sausages and everything by 4 %? No. All you've done is done a 4 % swing. You used to have this 4 % built into your costing model. Now you're charging 4 % on the back end, you got an 8 % swing. You're making more money and I, as in the consumer, am paying for it.

I look at those types of, unless you're gonna lower the price, don't talk to me about put-ting 4 % on the tail end of the bill, especially without telling me.

Gareth King (28:54)

At a local level, it doesn't really make any sense other than we just don't want to handle cash, to why you're mandated your customers pay by card and someone eats these extra fees.

Joe Zahaitis (29:07)

It's a fundamentally, just to address that part real quick from merchant perspective, it's laziness. Lazy because I don't have any shrink from any of my clerks or anybody pocket-ing any of the cash walking out the door. So, I don't have to worry about managing the cash in or it's easy to do with credit card. You know, it's much easier and then it all nets out to the penny at the end. $125.16 equals $125.16 versus $102 and I had to give change and then you got that whole thing going on. So, the cash handling is a cost to do this, but is it worth it?

Gareth King (29:38)

In the nature of this global digital retail and e-commerce world, cash clearly and obvi-ously doesn't work in that regard. So those extra fees and things...

Joe Zahaitis (29:52)

But you also weren't buying a little tchotchke from across the ocean a long time ago. You would walk into a local store, and you would buy whatever they had. You wouldn't nec-essarily get that one. You also didn't know it existed because there was no internet.

But what you're saying is, I can't do this unless I have digital. You would have never done it prior to that. It's only because you have that physical capability. It's like, well, I want that one, and it just happens to be in Finland or something like that. Okay, well now you can do that if you want. It works.

Gareth King (30:24)

Yeah, totally. That's kind of what I was getting at. It's almost a byproduct of this global digital shopping network that we find ourselves in.

But the other angle around digital pricing that we're finding online is it's very, very easy to find price transparency. I always remember hearing that say a fashion retailer, like you're going to buy a pair of jeans or whatever it is. The markup or something in there was like 90, 95%.

But now if you were say to look at that same pair of jeans in one of those stores, let's say it's a hundred dollars or you can get it direct from the manufacturer for like $50. Do you think that this price transparency, it really just benefits the larger offerings that can sell closer to that lower price, and any smaller one that needs to make a profit to stay in business is quite disadvantaged by that transparency?

Joe Zahaitis (31:18)

You allude to two different things on both sides of the line with that statement in my mind. Okay, I can go to a retailer online and buy a pair of jeans for a hundred bucks. Or I can go to the manufacturer and buy the same pair of jeans online for 50 bucks. I think that's a great model because direct from the manufacturing company to me, not only do I know what I'm paying, but I get that they mark it up. Do they provide any value? They pro-vide instant access to it in the context of; I'm going to the local store to get it. That's great. All of that works.

But that direct from the merchant plays into your smaller model. I have a product I want to sell online, and it costs X. Someone can buy it or they cannot buy it. That works. I don't have to go, and the consumer shouldn't have to go to Amazon to get the product.

But now we flip it all the way back to the beginning, what you said in terms of cost, the nature of cost, where am going to buy it? Am I going to buy it at the cheapest? Okay. If it's the same exact product, then I don't disagree with you. Where the challenge in my mind runs in, is it in fact the manufacturer you're buying from? Are you sure? Because you go to the retailer, you're buying, use Levi's, you're buying Levi's.

You go to the manufacturer, you're getting Levi's. Unless you happen to be on the wrong website and it's something that looks just a lot like Levi's, but it's really not Levi's and it's a knockoff, you're still paying the same price you would pay the manufacturer, you're not even getting Levi's.

Gareth King (32:49)

I think that just comes back to that trust again, and everyone being quite vigilant with what they're buying in the online space. And I don't know the answer for that, I was just kind of thinking of, you know, the smaller business that might sell Levi's and 10 other jeans brands. They offer this physical store experience, but they might be 30 % more ex-pensive.

Joe Zahaitis (33:10)

If you look at that from a suit, I'm not going to use jeans, I'll use a suit. I personally don't mind paying a markup for that because I want to physically touch it. I want to experience the quality of what I'm getting in that context. Can I buy it online? Sure. Can I buy it from a retailer to get it online or directly from this manufacturer online? Sure, I could.

But I wanted and I'm willing to pay for the nature of that experience to get what I want in the context of what I want, and to make sure. That to me is that there's a value to know-ing what you're getting. And I think to your point about not trusting people, that's where we get to with even some of this stuff is that, do you know what you're getting?

Gareth King (33:49)

That's a great point there around knowing what you're getting. That kind of leads me into my next question for you. Where does the future of online retail go from here? Is it a re-turn of knowing what you're getting? Cause you know, great points that you raised there, that markup fee of being certain, the physical touch, no misrepresentation, like all of those great points.

You don't really hear people discuss those as that's what you're paying for with the markup. It's all these shops too expensive, I'm going to buy online. So, look, there's pos-sibly a return to emphasizing those benefits more openly than where we are.

What do you think would need to happen for the original exciting promise of online retail to come back? Like, how do we get back to this like quite positive vision of what online retail and e-commerce can be?

Joe Zahaitis (34:48)

The nature of the internet has helped with a lot of things. It's helped with the penetration and globalization and everything else, but also it helps with now take jeans, hyper styl-ized. You can even bring it into a retail environment. I walk into a retail store where they use a camera, you can now do it with your phone and determine exactly not only what your size is, but what your fit is. And then through custom building a week later, I can have genes that are not only built to fit me, they're built to fit exactly me.

Are these a little more expensive? Sure. Are they a lot more expensive? No, but they are custom designed and built to fit you. But at the end of the day, would someone pay for that to have something that fits a little better than what comes off the rack? Probably. Would they be willing to pay a premium? Not twice, but certainly a lift, I would think.

And if you then build that into a retail environment, I remember when Tesla came out, Tesla had no car dealerships. I remember the one that was in a local mall that we have here in the Chicago land area. It was literally a storefront. You walk in, there was one car and it was representative of kind of what Tesla was selling at the time. And you would go through it, and they had all the different colours on the wall, and you would order it like you would order online. You would order it from the Tesla, and they would build it effec-tively to your order and then it would get delivered.

And I'm like, okay, that to me, now that takes the internet and it flips it on its head and it makes it not from something that's mass appeal, but it hyper stylizes it back to an indi-vidual. That to me is a potential positive.

I got a lot of negatives with the internet, but in terms of the future of online, I think a lot of the communication and a lot of the dialogue and a lot of the exchange of value in life is going to come from real people talking to real people. I think that's the first piece. But then the second piece of it, let's take this behemoth and make it work for us.

Gareth King (36:36)

Yeah. One of, I guess, the positives that has been happening is a lot of brands are seeing their own stores as more than just racks or displays, you know, of products. Like they're actually building in experiences for customers that do add that value that can justify that higher price.

And I think there's some super incredible examples of that happening and really interest-ing stuff. So definitely interested to see where that might go over the next 10, 20 years or however long we've been dealing with this stuff so far.

Alright then Joe, thanks so much for your time today. That's fantastic. What have you got coming up and where can people follow what you're up to?

Joe Zahaitis (37:12)

The easiest way to get a hold of me is at my website. Oddly enough, there are not a lot of Zahaitises on the planet. So, I own the domain zahaitis.com. But that's the best way to get a hold of me. And in terms of what I've got coming up, I have my own podcast coming out here in the next few weeks. You'll be able to find that at zahaitis.com as well and link to it. And we're going to definitely have Gareth on for one of the episodes.

Gareth King (37:35)

Awesome, sounds like a plan. Joe, thanks so much.

Joe Zahaitis (37:38)

Appreciate it. Thank you for having me on the show.