Ep 644: 77% of AI Shoppers Want a Recommendation: Phillip Jackson on the New Bottom of the Funnel

0:00Phillip Jackson:In the Western world, the way we experience culture is through what we buy. The brands who create commerce create culture. We're developing like a sixth sense now. In this shift to AI, we're starting to develop a sixth sense as to something that was handwritten copy versus AI copy. There's something really devoid of life that's coming out of AI-generated copy. This is the year of autonomy and sovereignty. As businesses become more automated and we're doing more with less and we're trying to do exponentially more, we expect that we have this more personalized relationship with the consumer. And therefore, as we have better personalization, we'll have a better, deeper relationship with the consumer.

0:37Phillip Jackson:I think that might be fundamentally at odds with the sovereign individual.

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2:01Phillip Jackson:Phil, welcome to the D2C podcast. You are the co-founder and CEO of Future Commerce, and I think you're one of the sharpest cultural observers of retail and D2C out there. You came up as an engineer, and now you turn what you see across retail into big picture theses about where brands and buying are going. Welcome to the D2C podcast. Oh, thank you so much. Oh, you do me too much honor. It's a pleasure to be here. And I've been, obviously, I've been subscribed to the show for years and years and years. So it's long overdue. It's been, yeah, I ran into you at Shop Talk this year. And we sat for half an hour and had a really epic chat about some of our philosophical underpinnings of media theory, which I thought was pretty real nerd slinging fest.

2:45Phillip Jackson:It was great. Yeah. Unfortunately, we subject a lot of our audience to that. It doesn't get the highest engagement. But the people that appreciate it definitely appreciate that. So your whole thesis or one of your main theses is that commerce is culture. Can you describe for the DTC audience what you mean by that? Well, let me, it comes from actually 20 to 23 years of actual practical experience in the e-commerce ecosystem. Some of that was spent in the early aughts from about 1999, 2007 or 8, building software and architecture and teams that built software and architecture in the e-commerce ecosystem.

3:26Phillip Jackson:Now, we wouldn't have called it D2C back then. It was effectively what it was, but they were like digitally native vertical brands. We did everything in-house, you know, media buying, supply chain fulfillment, what have you. And then it became very much an Amazon era and then cloud platform era. The job started to change, but that was my early experience. A lot of those conversations in those days were getting online, but that's because a lot of it was sort of like arbitrage opportunity, but a lot of the internal conversations were like we needed to capture the online culture. The people who are online were going to be transacting.

4:00Phillip Jackson:And then when the world sort of started to change with social media, we were chasing trends, right? And so it was how do we either create virality or how do we chase virality? And then I left the e-commerce, like the brand side world, and I moved to the agency world because I was tired of hiring agencies that didn't know what they were doing. And then I had to pay them to teach them how to do their jobs. And I did an agency stint for about 10 years with a company called Something Digital who were Magento and then Adobe Partners and the first Shopify Plus Partners in the world. And I observed when I took on a strategy role that pretty much every conversation that I had, whether it was in C-suite or the boardroom, was some facet of shaping or creating culture or understanding and synthesizing culture.

4:49Phillip Jackson:And so when it came to creating media about the work that we were doing, I sort of distilled all of my experience down to pretty much every conversation I have ever had, whether it was internal to the business, whether it was a QA person that I was talking to or a developer I was talking to or a developer ecosystem that I was creating content for or someone in the boardroom. It really just came down to a function of understanding culture better. And we sometimes did that through trying to apply technology, but most of the time we live and die and succeed by how well we understand culture and whether we can get out in front of it.

5:25Phillip Jackson:So yeah, and in the Western world, the way we experience culture is through what we buy. Whether that's a good thing or bad thing, I think is not a value judgment, it just is true. And so the brands who create commerce create culture. And that's what we examine at Future Commerce through our media. I had a teacher in grade 11 tell me, he's like, now more than ever, you are what you eat. And I thought, I think he meant that on a number of levels. He was a very deep philosophical guy, but I think it definitely is true. Well, you are what you buy or what you buy is what you become. What you consume, right?

5:58Phillip Jackson:For sure. I did a podcast recently and the guest talked about this idea of co-opting, co-opting culture versus cooperating culture. And so when you talk about trying to leverage culture or have that be part of how you think about commerce, do you find that there's a fine line between sort of like co-opting it? Because I feel like customers are savvier than ever when it comes to like authenticity and your ability to actually feel like you're actually adding or collaborating with the culture versus co-opting it. Yeah, I do feel like when we're co-opting, it's often used in a derogatory sense, like print derogatory.

6:36Phillip Jackson:And it comes off as like, you know, Steve Buscemi, how do you do fellow kids? Like what we're trying to do is we're trying to tag on to something that is not native to our brand or not native to who we are or our expression of our brand within our brand's target audience's expression of culture. And so what we're doing is we're just in the same way that we saw a deluge most recently. This will fix us in time, this conversation, but the deluge of the Empire State Building climbers and everybody who tagged on to creating their version of AI on the flag that they unfurled. right? People just want to be part of something that's happening in the media because we have no more monocultural moments left, right?

7:26Phillip Jackson:To me, that is co-opting, but also it shows that you have very little in the way of creativity and it shows that you have very little in the way of your own perspective on what is defining and what is unique about your message in the world. you have to wait for the world to define a message for you to jump onto it. And so that's, I think the word co-opt is probably apt, but I don't think that every brand can be uniquely carving out a space in culture. We actually need a lot of brands that just ride along with the cultural current. So I think it behooves us to understand who you are and what place you play in the society of brand.

8:10And it would be a mistake for a brand to think that like Like your customers need you to chime in on every cultural moment that's happening, right? You really have to pick your spots, I think.

8:20Phillip Jackson:I'll take it a step further. We have forgotten. If it's true that we should be in it for the long haul and, you know, there's a world where your brand could last for 30, 50, 100 years, which, you know, according to Jeff Bezos, that's really only reserved for, you know, liquor. And it's a very small category of companies that can last for that long. If your brand is meant to last for that long, then there are periods of gestation and periods of hibernation that you'll go through and times where you'll be fat and times where you'll be lean. And I kind of think of it, we were talking about media theory.

8:58Phillip Jackson:I kind of think about it as sort of like the Japanese filmmaker concept of ma. We need respite. Brands will never do this by default, by the way. Customers impose this upon them. Culture imposes this upon them. It's happening to Nike, by the way. Nike was on fire in the culture. It was everywhere. Jordan ones were on everybody. I'm wearing threes right now. And then the culture decided that we're over it, right? And they moved on to Sambas. Before that, Nike didn't have as much cultural heat, right? We go through moments where you can chalk it up and say that they did everything right for a spell.

9:34Phillip Jackson:And you can say that they overplayed their hand and that's what caused us to get over it. But I do think that there is this concept of ma where you'll see it in a kung fu cinema, where just before the big battle, they'll show like rain falling, right? You'll see this in Hayao Miyazaki films, right? And anime, Spirited Away, or you can't just bang on and keep moving to more and higher and higher and higher and higher emotional heights. You need ma, you need a respite, you need a break, because otherwise you can't experience emotional elation. You can't experience the height and the high without having the exact emotional opposite.

10:13Phillip Jackson:We need the break before you have the emotional climax. And we experience the same relationship with brand. We have the same relationship. We need a break sometimes. So for us to believe that people want to hear from their brands all the time, I think is a dramatic mistake. And in that way, we shouldn't be participating in every single social movement, every single cultural moment. We should be waiting We should be in hibernation waiting to come out when it's, oh, no, this is my moment. This is when I should be weighing in. And it should come with extreme conviction. And I think that before the age of the dashboard, before we could measure everything, we had better intuition about it.

10:49I like that you bring up Nike, actually. We just reported in the newsletter the other day about their sort of double-digit quarterly decline in sales that they're experiencing. This coincided with me. I actually bought two pairs of Nikes this year, some nice P6000s. But then I also bought swooshless Nikes. I bought for the first time, I bought swooshless Jordans. And I thought that was a really cool like metaphor maybe for the challenges they're experiencing, where it's like the swoosh is their icon in so many ways. And if I'm buying, what am I buying swooshless Nikes for, you know?

11:18Phillip Jackson:What is even in the point? Exactly. They're just, well, they're Jordans. I've never had Jordans before. I didn't want a big gaudy thing. I just want a nice, simple, like, I guess I could have just bought like Allbirds or something, right? I don't know. What do you make of the decline of Nike overall? I guess there's a number of reasons for it. It's their overcommit, I hate to say it, but it's their overcommitment to DTC and their move away from some of their retail partners, I think is one of the reasons I read for it. What are some other, because it's like the other shoe, like New Balance has seen big growth.

11:46Adidas has seen big growth, I guess, with the Samba. What do you chalk up Nike's sort of consistent decline to these days?

11:53Phillip Jackson:So full transparency, you know, we're partners and media partners with Nike. and I have a little bit of insight into some of the turnaround efforts. And I do think that their current perspective now is to double down on the culture of sport. And I do think that you have clued into something that I think that maybe Nike got away from for a long, long time as that it tried to pivot into things like streetwear and style, right? And as it moved into more owned channels for DTC, they forgot who their original audience was, which was people that are passionate about sport, right? Nike's running and commitment to running is what made them iconic to a whole generation of runners, right?

12:40Phillip Jackson:It is the foundational story of Nike. I don't know if you read Shoe Dog. To move away from that and its commitment to running as a sport and basically abdicate it and allow players like On to come into retail and allow Hoka to grab such a foothold in retail because they wanted to have owned channels is probably one of the bigger strategic mistakes. And a lot of ink has been spilled on things like that. But I do think that it has allowed an entire ecosystem of runners to have what they probably wanted for a long time anyway, which is a world of choice. And there's more people that are running and there's more people that are doing running like running adjacent activities these days.

13:26Phillip Jackson:You know, run clubs are extremely popular. and there's probably a lot more dollars available from a lot more upstarts in all of those categories because of the plurality of competition now. I think competition actually breeds innovation, right? And so we need more of that. We need more folks to come in and get the incumbents off their duffs. So I think it's actually better for the consumer overall. We probably shouldn't feel too badly for global incumbent brands who are very recognizable, right? Like, they're going to be just fine, probably. But again, it's like everything kind of has to come in waves.

14:03Phillip Jackson:And so seeing them invest in football, for instance, seeing them in soccer, and their commitment to the World Cup and their technology and their innovation and technology and how much they're really working on, say, like retail and retail partners for that really shows that they are understanding that, like, I think sport is really where it is. and sport is having a moment in the culture and they really need to understand that a little deeper. Is it going to get right back to where it was overnight? Yeah, probably not. I think back to like the whole streetwear push too, with, with brands like Adidas and New Balance, I think they did such a good job of like bringing in other like art directors, like Virgil Abloh or, you know, other people like that where, so by giving control of the brand a little bit to these really authentic players in that streetwear space, I feel like these other challenger brands were able to gain a bit of a foothold well let's think about too where the long tail of um of value has accrued in the in that ecosystem is like collectors and collector marketplaces are areas where there's a tremendous amount of like secondary market value that you could probably blame the original manufacturers on having helped to create Think about the negative press that was generated around the control of the supply that helps to create the frenzy in the demand that helps to support the secondary value in the marketplace.

15:26Phillip Jackson:The drop model itself is something we've written a lot about. We actually have a piece over on Future Commerce where a contributor of ours, Angelica Frey, who has a way with words. She had a piece. I'll actually drop the name of it here. It's called Commerce Has a Humiliation Fetish. basically the idea is uh things like the drop model line culture like standing in line for all kinds of you name inane things like i don't know pizza cookies yeah cookies bagels right like uh looking at how people like are humiliating themselves getting into fistfights over plastic watches at swatch swatch watches yeah right we're we're in a very strange time in the culture where the there's a performative nature to our it's not having the object it's being seen having the object and that is worth more than the object and its secondary market value by far and so we have we get a lot of social we perceive that we receive a lot of social value especially in a content economy that there's something to be gained out of that and you could probably say that a lot of this stems back to like pre-2020 streetwear culture, like Supreme, and then how Nike kind of partners with the streetwear vendors.

16:43Phillip Jackson:All of that's kind of gone now though. And I think that the participation of like footwear brands and trying to get a foothold, pardon the pun, but trying to grab some part of that value in that exchange in the marketplace. And then And let's talk about NFTs. Like the fact that they all invested in NFT projects probably didn't bode well for the consumer either. So, I mean, we could go back in retro and try to like rewrite history or like try to figure out like what exactly happened in history. I do think that we just get tired. We get bored with things, right? It doesn't mean that we don't want some token, like what I would call a reliquary.

17:21Phillip Jackson:Like we do want the object of desire. We want to say that we had collected the object that is the, it holds the sacred value. It's just, it's a different object now. It used to be the sneaker, right? But now it's, it's Nicolas Maduro's tracksuit, right? And so it's like the object has changed. What a moment. And they're more around media moments now than they used to be. One of your observations I thought was really relevant to me. I was actually, I was online yesterday and I was looking, I saw just, I just saw in a video of someone wearing an Apex twin shirt and I love Apex twin. Four years I've loved it and I've loved him and I'm just like, okay, I want an Apex twin shirt because I want to signify to the world that I'm a quirky music lover who likes odd beats.

18:09And I was looking at these brand new knockoffs on Teespring or whatever, just like with the Apex twin logo. But I'm like, I want it to look worked in. I want it to look like, but then I looked and you could buy a shirt that was 20 years old, but it was$500. That's 500 bucks. Versus the$300 shirt. And it lined up with your observation recently about broken in docks, which I thought was interesting. And talk to me a little bit about your observation going to the Doc Martin store. First of all, I've had a pair of docks and they kill, they hurt so bad to wear them for the first several months, depending on how long you're with them.

18:44So the idea of buying or paying more for broken in docks makes a lot of sense. But talk to me about your observation about being in the Doc Martin flagship store there.

18:53Phillip Jackson:Yeah, actually, I'm gonna tie this back to like a big philosophical point and now I'll give credit where credit's due. Victoria Buchanan, who, by the way, used to be strategist at Nike, she had this amazing sub stack write-up on why we prize the patina. Like, why do we like things that have real or faux age on them? And like a hidden commentary within that piece was why Golden Goose? I don't know. That's like something to be wondered about. But there's something, you know, there's tote bag culture. Like we flex with tote bags and especially older ones. To your point, like a lived in old concert t-shirt, especially one that signals that if you know, you know, it's your in crowd dynamics.

19:41Phillip Jackson:I wrote many, I guess it was whenever the Pope changeover last year happened, we wrote about how the economics of Pope merch spikes whenever there's a new Pope and how Pope John Paul II's US tour merch went from$12 t-shirts to$1 ,200 t-shirts overnight. If only you could have predicted such a thing. You could have made a killing. That's worth more than an NFT probably. but you've got this this like proof of work is something that i feel like is the abstract that covers everything that we've talked about so far because it requires work in the modern day and you can observe this whether you're walking down like carnaby street in london and there's a pop-up for this like box pop-up store called future stores which we've written about that has really actually struggled to find tenants until BTS comes into town.

20:36Phillip Jackson:And then BTS comes into town, they've got a line down three blocks, right? And why? Because people want, it's not just the line, it's like, it's the proof of work that it took to stand in line to get the t-shirt. And we can talk about all the dynamics that it requires to get there. To me, a pair of worn and Doc Martens is proof of work, right? And the patina is the proof of the work. And I do think that if you walk into their new brewer street store in soho it says something about us culturally as a people like not us americans but this one happens to be in london but it says something about us as a people culturally that they are selling secondhand shoes that are already broken in at the brewer street store and not just that they have a repair shop i think like levi's has repair like there's you can get selvaged denim jeans that are already broken in that's a thing that's been around for a little while footwear is on a different level to me uh that seems a little bit you know there's all kinds of like hygiene things maybe you could probably talk through or get maybe you don't imagine with it right yeah um but i do think docs just look better when they're older right and they look feel better they definitely feel better but you didn't put in the work and i think that there's probably some criticism to be leveled about the instant gratification, not just societally that we have, but the fact that there is a whole world of like Etsy and, you know, and Depop out there that brands are losing to, that we now need, we have to, it's not just incrementality.

22:11Phillip Jackson:Like it is incumbent on us to participate in the same shop has a cafe in it, right? The experiential nature of, of the retail store also is incumbent on us to create a cafe where there's a vinyl listening experience happening at the same time. Like what even is retail anymore. So the whole of society and the whole of the, not just retail experience, but everything about us is sort of coming down to like, how much work have you put into something in a world of AI where everything's instantaneous, right? And that to me is captured and really summed up in Doc Martens and how worn are your docs? And did you buy them or did you break them in yourself?

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23:25Don't wait, the clock's ticking. Enter at universalads.com forward slash q4 dash contest. No purchase necessary. See official rules for details. It is a real like a collision of moments right now for brands where it's never been easier to produce sort of like really shiny polished assets at the click of a button and a ramble into a microphone, essentially. But at the same time, I feel like we're in this crisis of authenticity where consumers can really sniff it out and can really tell. How do you, in what you've covered so far, how do you talk about this collision of AI and authenticity?

24:07Phillip Jackson:Oh, man. Should they resist the temptation to use it in their creative and their text? No, that genie's out of the bottle. Genie's out of the bottle. I, I'm going to answer that with a little bit of a different bent. We're developing like a sixth sense. Now we had like all of our normal, like faculties, like all of our normal everyday, uh, senses about us to, uh, spot something that was like handmade versus something that was like automated or like mass produced. Right. And that's, that's something that is, you don't really need to cultivate too much to just get a sense of. And then I think we've kind of, in the shift to AI, we're starting to develop a sixth sense as to something that was like handwritten copy versus AI copy.

24:52Phillip Jackson:And there's something like, I don't want to over-spiritualize it, but there's something really devoid of life that's coming out of the just like AI generated copy. People say fables better. I read the 200 page fable, white paper said that you didn't have to. There's some like shocking poetry in there. I don't know about you. It doesn't, I can't generate that poetry of the fable. Um, so I, while it might be possible to generate really great creative with AI, I don't either the dead internet theory is real and there's people doing it and we just don't know it, but I don't know the people that are generating it.

25:26Phillip Jackson:I haven't been able to see it and I can spot the bad stuff a mile away. And I think the bad stuff turns people off more than mediocre human output work ever did. And that is, I think, going to be a little bit of a social divide for a long time. I don't know how long, maybe that could be a couple of years, but there's a growing issue within people that have just decided they don't want to engage with brands that feel like they don't, like they're not living up to those social values where use of AI is becoming a social value. And I'm not sure what you've covered here on the show, if you've covered that, like AI is a moral choice, but like you can't not use AI as this brand operator now.

26:06Phillip Jackson:So it's just, I guess, how loud you are about it with your consumers, right? Yeah. It makes me think of the work of art in the age of mechanical reproduction. Yes. By Walter Benjamin, where you drain, endless copies will drain the aura out of something in a way. And that's mechanical. We need to update that for a work of art in the age of like - Intelligent reproduction. Intelligent reproduction. And so what is a brand to do? I think you're absolutely right that Genie's out of the bottle. I think everyone's using it. And that everyone has multiple filters on how they get it to not sound like AI.