Modern Retail Rundown: Amazon ignores Temu, Grubhub layoffs & Instant Pot goes bankrupt

0:05Hello, and welcome to the Modern Retail Rundown. I'm your host, senior reporter, Gabby Barco, and I'm here with editor-in-chief, Kale Guthrie-Weisman. Good morning, Kale. How are you doing, Gabby? I'm doing great, doing great. We have a lot to get through this week. We'll be discussing Amazon and Tmue's price wars, Grubhub layoffs, and lastly, Instant Pot's bankruptcy filing, which felt like it kind of came out of nowhere. So it'll be interesting to unpack that in a little bit. But first, let's start with Amazon excluding Tmue from competitive price checks, which I feel like at first read kind of makes sense, but there's a lot more to it as I was reading through the coverage.

0:54So essentially what it is is that sellers who sell on Amazon are required to not sell their products for lower prices elsewhere, of course. for competitive reasons. And Amazon does track that via algorithm. But the company says that it's not including Timu in those price searches. So yeah, why don't we get into what that little competition or sort of a little bit of a jab means here? Yeah, it's definitely a jab. And it's definitely interesting because Amazon, the one thing that it prides itself is that if there is a price on Amazon, it's going to be the lowest possible price. If you're a seller or brand, whatever, you're going to be constantly checked whether you know it or not to make sure that you are not selling your price lower on at any other retailer on any other platform.

1:49And so it's quite notable that Amazon has specifically said that it's not going to include Timu in its price algorithm check. And this also comes on the heels of other announcements that if you put all the pieces together, it's a fun little jigsaw. They all make sense to what they're saying. Amazon has been, quote unquote, cracking down on counterfeits. Counterfeits has been a huge problem on Amazon for years. And some of the most recent moves that Amazon has made have been teaming up with companies that have had counterfeits sold on the site and suing other brands that are selling what they claim to be counterfeits of their products.

2:33And the big issue with Timu, and this is the thing that we've talked about, we've written about, et cetera, is that Timu is a pretty, I don't know if unregulated is the right way to say it, but it's really, really cheap. And a lot of it is just knockoffs. And so Amazon is pretty much saying, you're such an unverified platform of cheap crap that we're not even going to consider you when we're holding you up against the other platforms that sellers are selling on. Right. And I think, you know, we don't want to go too deep down the counterfeit claims rabbit hole, but, you know, Amazon is a little bit of a black kettle situation because I know they're doing a lot about the canner pits, but if you browse really quickly, there are still thousands on there probably.

3:26So it's just a little bit of an interesting, almost like a hierarchy going on here. But it just seems like nothing's really stopping Timo at this point either. So do you think, will this hurt it at all? Or do these sellers have to be careful? I mean, what is this looking like for them? Because at the end of the day, the sellers are the ones who have to navigate this? I mean, I think that this probably won't really impact sellers. I'm sure sellers are kind of thrilled about this because, you know, Timu is a platform that most of the stuff that it's sold on, the vendors and the sellers are based out of China.

4:05For Amazon, you know, they focus specifically on the U.S. marketplace on having as many brands based in the U.S. so that they can fulfill it as quickly as possible. So I don't, I don't, I'm sure, I'm sure if I were an Amazon brand, I would be happy that Timu's not involved because if Amazon sees a product that looks like mine, but isn't mine, and it's$2 instead of$20, I won't be dinged for that. But it is interesting just about the changing dynamics. And the fact of the matter is that both of these companies are, have major problems with counterfeits. Amazon is now trying to say that it's cracking down on it.

4:45As you've said, you know, it can publish as many press releases as it wants. It's still a big problem. Timu, for its part, of course, says it doesn't allow counterfeits. There's an entire section on his website that says, we don't allow counterfeits and we will take them off. But also Timu speaks one side of the mouth and goes to the other and says, Timu is not actively involved in the listing and sale of sellers items. So pretty much it's saying it's on the sellers. It's not on ours. You know, we're just a platform. And so I think that it just shows that a I mean, it shows a lot of things, but Amazon is trying to not go down that rabbit hole because it's trying to portray itself as the place to buy more quality goods.

5:25Like as a side note, and this is something that I don't think we need to go down, but it's something I'm personally really fascinated with, is that the rise of dupes is pretty much not necessarily the rise of counterfeits, but the rise of knockoffs. And that is a huge TikTok and Amazon phenomenon. And so like I feel like all of these sort of cultural things are coming up to the surface right now. And Amazon is trying to figure out the best way to navigate it and hasn't quite figured out the path forward. Yeah, yeah. The counterfeit situation. I was talking to someone about this last night because it came up out of a New York Times story that just went live a few days ago saying that counterfeit designer bags, some of them are actually more sought after now than the real ones.

6:11And it's part of this very multi-layered cultural phenomenon right now. But yeah, maybe, I mean, I don't know, maybe companies like Amazon and Timu are like, hey, that could be a little bit of a benefit right now to attract Gen Z. Absolutely. But I think that there's another important thing that Amazon is not dealing with right now, but might have to deal with in the future, which is that Timu is growing. Timu is quite big and is getting bigger. And we should probably back up. Timu, for those who don't know, we've talked about a little bit. It's owned by PDD Holdings, which is the company behind Pinduoduo.

6:46Pinduoduo is, I think, the biggest, if not one of the biggest shopping apps in China. And PDD is trying to make Timu the Pinduoduo of the United States, essentially, using, from what I understand, many of the same vendors, many of the same price structures. It's a different app, but it's the same overall idea. Timu's general merchandise has increased from$141.5 million this past January to$634.8 million in May, according to Yippit Data. And that's a huge increase. A lot of that is paid. Timu has been doing a huge marketing push. They had a Super Bowl ad, for example. All these different things.

7:30But Timu is trying to become much more ubiquitous in the United States. And it is clearly working in some regards. But Amazon, with its latest move, is saying, we're going to ignore you for the time being. Yeah. And I feel like I'm not sure about, I mean, probably most consumers, but they're not necessarily direct competitors. I think most people probably liken Timu, as we've mentioned before, more so to like a Shein or a fast fashion. Although I know it's more than just fashion, but it feels like it has more of that model than what Amazon's been building over a few decades. Yeah, definitely. But I also think at the core of it, it's people mindlessly buying things, which Amazon would say, maybe it's not so mindless, but I bet you consumer, the way people buy things says otherwise.

8:23I would say that Amazon is trying to prove itself to be a much more considered a much more flagpole in the ground type of platform that every American uses. And Timu is trying to be sort of an online dollar store, it seems like, or like with she in an online fast fashion, something that you go to because you know, it's going to be really cheap and, you know, will be potentially questionable quality, but, you know, better than nothing. But that being said, Amazon has a lot of very cheap things there. Amazon prides itself on its price, as we're talking about with this price algorithm. And Amazon also prides itself on its efficiency.

9:01And I think Timu is doing the same. There was a there was a story that came out a few weeks ago. I think we mentioned this. I can't remember. But like, essentially, Timu is able to get people's things to their doors in the United States from China in an insanely quick time and is probably losing a whole lot of money because of it. But still, it's trying to be as efficient or as quick as Amazon in that sense. And so there are definitely parallels in what's going on, even if they have slightly different models. Yeah, it will be interesting to see how this shakes out, especially as you mentioned, Timo continues to grow.

9:39It feels like they've been around for a lifetime already. But they really only came on our radar this sort of past year and then with the Super Bowl ad. So it will be interesting to see whether it does become a real problem to somebody like Amazon. Yeah, and if it does, and this is something that I've written about a little bit in my Amazon coverage, but Amazon's price algorithm is one of the most annoying thing that sellers deal with because it is so automated and it is so opaque. And so I've talked with numerous sellers who have had, for example, the buy box, which is the box that says, you know, buy with Prime, buy this, removed because Amazon says it saw a cheaper price elsewhere, but they don't know where that price was from.

10:27And they go and look and maybe some account that they had a wholesale relationship with put it on sale without them knowing. Things like that. And so there's an entire issue right now with Amazon's price algorithm that constantly plagues sellers. I wrote a story a couple of months ago about how collectibles and out-of-print things, so there are people who buy from warehouses things that are no longer in print like toys or video games. And then Amazon goes by the MSRP, so what the original price was that it was sold at, for what the best price is, even though that's not what it's worth anymore because it's out of print.

11:05But that's just how the algorithm works is this automated thing. And so I imagine as Timu becomes more popular and maybe Amazon begins paying more attention to it, this could be another issue that sellers might have to contend with. But of course, that's not what's happening now. I'm just looking ahead in the future. moving on to the next topic unfortunately uh more layoffs coming uh this week or have come this week i should say uh with grubhub laying off 15 of its staff it's a pretty significant number uh it's the latest company to announce layoffs as we said and uh per the wall street journal that's that comes that to about 400 jobs or roles.

11:50So of course, the CEO says that the business is growing, especially compared to pre-pandemic levels, but operating costs are of course really high, have been for a lot of companies. But I think it probably also speaks to the fact that maybe food delivery and takeout are just naturally not doing as well as they were a couple of years ago. Yeah, I think that might be one of the big takeaways of this is that, you know, it was takeout was huge during the pandemic. Everyone was getting things delivered. That was that was the hot industry to be in. And now it seems like things are flattening, if not falling.

12:33I was looking at Just Eat Takeaway, which is the European owner of Grubhub. And this is for everyone. And they own other companies beyond Grubhub. But customer orders fell 14 % in the past quarter to$227.8 million in the past first quarter. So orders are falling, which is not good if you are a company like Grubhub that needs to grow and needs to have more people ordering on your platform. Yeah. At the same time, I know these companies are also trying to generate revenue in other ways. For example, everybody now has a monthly pass of some sort that gives you a slight discount and no fees. It does save people a little bit money, but you do really have to be using it enough to make it worthwhile.

13:20It's not like a Spotify or anything where you're just kind of like a utility. So with that said, the marketplace gross order value is also up, which I think speaks a lot to the way DoorDash has diversified, right, unlike Grubhub. So, yeah, let's talk a little bit about the fact that DoorDash and Uber Eats have slightly pivoted their model to go beyond just meal, like restaurant meal delivery. Yeah, what do you think? How do you think that's playing into this? Yeah, I think that's a big thing, which shows the companies that are growing are the ones that have been focusing on areas outside of just restaurants.

14:02And so, you know, DoorDash has been going after, or should I say, eating the lunch of companies like Instacart going after like convenience delivery and things like that. It's into partnerships. Correct me if I'm wrong. I think with Sephora. Is that correct? With DoorDash? Yeah, a lot of retailers are on there. Yeah, and a lot of other retailers. And I think that that is a very smart strategy to try and grow AOV and try to get more people onto the platform. And we also shouldn't forget that DoorDash is also growing its advertising platform, you know, with relative, relative degrees of success.

14:42But these are all ways the company is trying to make a concerted effort to say we're not just a restaurant delivery platform, because I think focusing solely on that and trying to be a public company is not going to be as successful. And Uber Eats is doing a similar thing where it has been trying to get more people to get other things beyond just meals delivered. And Grubhub seems to have been focusing mostly on just the food. And that seems to be potentially one of the reasons why it has not been doing as well as the competitors. Yeah, that's sort of what I was getting at, which is that not to say that this is a direct result of that.

15:20But Grubhub over the years has really prided itself on being like a restaurant partner versus trying to kind of beat everything to every type of retailer ever. And, you know, of course, that has its advantages as far as having exclusives or having a pretty strong base. But at the same time, unfortunately, when the market does dip like this and you can no longer play to the strengths that you had a couple of years ago, it can have major impact. Of course, I keep having to remind myself that these numbers are still a lot higher than they were pre-COVID. It's just that those benchmarks are not really good enough anymore, I guess.

16:05Well, and that's exactly it. That's what's so crazy is that these are better pre-pandemic numbers. If Grubhub were showing these numbers in 2018, they would be doing amazingly. But the problem is that, you know, the pandemic caused the benchmarks to change. But also the DoorDash's diversification also changed the goalposts a lot. And so I think when you're talking about a public company, investors are looking for how are you growing. And if you have your direct competitors growing in different ways that have your shoppers and users using it in a different way, that's going to create a lot of pressure.

16:41And I imagine that that's causing a lot of Grubhub executives to not sleep very well at night because they haven't been focusing on this diversification. Yeah, yeah. And as the space consolidates, I think it will just become harder and harder to just, you know, continuously raising that bar. So we'll see where that goes in the next couple of quarters. Who knows, maybe people will, you know, stop dining out with all these menu prices at all time rates. Yeah, and also we have all of these platforms have been increasing their fees, which they say hasn't had the biggest of impact. But I imagine it'll reach a point where these companies need to show some semblance of profitability.

17:30And if they're unable to do that, they'll keep raising their rates and then users won't be happy. And it'll be the forever hamster wheel. Yeah, some of those checkout cart delivery and service, and there's just like a million lines on there where I'm like, you know what, let me just go cook something at this point. Exactly. Yeah, that's Kale's just ultimate tagline, just cook. But yeah, speaking of cooking, let's talk about kind of a similar, very food-heavy podcast today. But let's talk about other, of course, byproduct of the STIP that we're seeing in these categories that we're doing really, really well during peak lockdowns and all that.

18:16Instant Pot has filed for bankruptcy, and it's part of a bunch of bankruptcy filings that we've been covering pretty heavily the last couple of months. So this week, Instant Pot's owner, Instant Brands, filed for Chapter 11 Protection. The company also owns, of course, the famous Pressure Cooker and also Pyrex. The filing comes after, like I said, a lot of problems for the company. whereas they were doing very, very well, as you can imagine, during 2020. So, Kale, you are probably our Instant Pot's expert on staff. What are your thoughts? Well, I don't own an Instant Pot. I need everyone to know I own a knockoff Instant Pot that I wanted to Yankee swap three years ago, and it's the best.

19:09But I mean, I think the Instant Pot thing is really interesting because it's a really good example of if you have a really good product, that doesn't necessarily mean you have an amazing, huge brand. And so Instant Pot did really well. People really liked it. It created demand for a product that never existed. And that's all great. And then it was bought by this bigger owner. And then they had all these big plans to go into new areas like air fryers and things like that. And none of that quite hit. They weren't able to hit the scale that the Instant Pot had. And that's one of the big reasons is that Instant Pot was such a good product that people probably bought one and haven't bought another one since then.

19:53And it was a sensation, but it's really hard to replicate that sensation. And so it was, in my opinion, whoever the founder of Instant Pot did, did exactly what they were supposed to do, which is they created something that was zeitgeisty. They sold a lot and then they sold the brand. But it's really hard to replicate that and make that into a viable business model. And this is a great example of that because, you know, these types of fads grow, they become huge, and then they dip. And like we have numbers here just about how the demand for multi-curs have gone down since 2020, which makes a lot of sense when you realize it.

20:29And if you don't have a really good strategy for how you're going to grow that or how you're going to become a multi-product brand, then you're just kind of screwed, you know? Yeah. And the company does cite a couple of what have now become, I feel like I had a dollar for every time I mentioned this, which is supply chain issues and inflation stricken shoppers, of course, where, you know, you probably don't need every single size of the cooker. But that, of course, has that trickle effect of declining sales. You know, we have some numbers here. I think these are per the actual bankruptcy filings.

21:09Kale, these are some pretty heavy dips here. Yeah. So we have electronic multi-cooker sales. They reached$758 million in 2020. And then they plunged by 50 % last year, 2022, to$344 million. So pretty much demand just completely tanked. For Instant Brands specifically, their net sales decreased 21.9 % in the first quarter of the fiscal year of 2023. They described it as a year-over-year sales contraction. And so it just shows that this was a company that had a really good product that people really liked that tapped into the cultural moment. And we talk about 2020 a lot, but Instant Pots were big before the pandemic.

21:58The New York Times was hot on Instant Pots, I want to say in 2019 and 2018. But also, it is just one product. And the company was unable to figure out a way to expand beyond that. And then once that product becomes less cool or enough people buy it and they don't need to have two Instant Pots, I don't have the counter space to have two Instant Pots, what do you do? And that leads inevitably to a sales construction. Just another number, Instant Brands had$500 million in assets and liabilities. So a lot of money that they owed. Yeah. And this is, of course, part of the bigger picture, like I mentioned previously, of these companies that really benefited from all of us being home and cooking or some of us learning to cook during lockdowns.

22:51Whereas now we're sort of seeing this pendulum swinging to the other direction, not saying that people aren't cooking anymore, but that number has shrunk pretty significantly as we got back out. But yeah, this is a little bit of a different example, but what Bed Bath & Beyond is going through right now had that lifeline during COVID because it's a homeware heavy company is also, I mean, Bed Bath is no longer, but it'll be interesting to see what instant brands will be doing with this. I mean, there's no plans that have been announced, but I feel like just because it is such a cult-followed brand, I mean, they have that really famous Facebook group where there's so many recipes being shared.

23:44You would think that is a way to monetize the brand. I mean, you would think, I mean, this is me. I don't think they can do this, but this is if I were the business behind it. There have been so many cookbooks written about Instant Pots. I feel like they should capitalize on that. I don't know. The content? I know that they're a hardware brand, but there were just like, there were so many things that rode on its coattails that I'm surprised they didn't try to get in on the IP of that as opposed to expanding into new products. But that's just one person. But I also, I want to add one thing because I learned this fact last night while on TikTok.

24:17Hit us. And it's about Pyrex. And I learned that, so Pyrex that this company owns, Instant Brands or whoever the real overlord is, that Pyrex is different from the Pyrex that is available in Europe. And so the way you can tell the difference is the United States Pyrex is all lowercase and the European Pyrex is all uppercase. And the United States one uses tempered glass, which is less good than the type of glass they use in Europe, which withstands heat better and doesn't break as much. And so a lot of people have been complaining about their Pyrex exploding or breaking and things like that. And that supposedly has to do with it being the American Pyrex and not the European Pyrex.

25:00So if you're looking for good Pyrex, look for all uppercase is what I've learned. Great. Yeah, just another category where people are going to be smuggling things back into the US. First, it was sunscreen. Our sunscreen is not as good. And now it's Pyrex. So yeah, start putting those orders in. But yeah, that is really interesting, especially because it's such a ubiquitous brand. You can find it literally at any retailer at this point. So something to think about. Yeah. That was exactly it where I was like, wow, have I been buying the wrong Pyrex all these years? Though my Pyrexes are fine and I will still use them.

25:37But it's just something to gnaw on. Yeah, I've never really had an issue, but something to think about. But yeah, I just kind of circle it back and tie it up to Instant Brands, which we should mention is owned by a private equity firm. I think you were alluding to the overlords there. Like you said, yeah, there was a very smart sale, I think, in 2019, where it was just in time where the company sold and obviously was doing really well. And so, yeah, we'll watch out for what their plans will be. Hopefully they'll still be around. That's our show for this week. Please rate and review us on Apple Podcasts, Spotify, or anywhere else you're listening.

26:25Also, don't forget to subscribe to the Modern Retail Podcast to hear interviews with industry leaders hosted by Kale every Thursday. Kale, do you have a preview for us for next week? Sure. Next week, I'm talking with Miguel Leal. He's the co-founder and CEO of Somos Foods, which is a Mexican CPG company that's trying to bring really good Mexican food into every major grocer in the United States. It was a fun conversation. Please listen. great looking forward to that and yeah of course come back on Saturdays for the Modern Retail Rundown and as always thank you for listening

27:25Thank you.