Rundown: A Prime Day postmortem, the impact of a UPS strike & increased scrutiny of energy drinks

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-Weissman. Good morning, Kale. Hey, how you doing, Gabby? We're doing great. We're doing great. Just, you know, enjoying the Midsommar that we're having. Is that what it is? When does Midsommar happen, actually? I have no idea what Midsommar is, but fun fact, I got into a debate last night about whether we are in the dog days of summer. and we are. We are officially in the dog days of summer because this person I was talking to said it was later and it's not.

0:39It's right now. So just so you all know. Okay. Well, I always thought it was August. No, it's mid-July, man. We're in it. Okay. Okay. Good. We are learning a lot of new things on the podcast, so that's good. Yeah, but we have a lot to cover this week. We will be starting out by recapping all the highlights from Prime Day, Prime Days, we should say. And then we will check in on the latest updates from the UPS strike that may or may not be happening. It's pretty eminent right now. And then finally, we will look at the emerging backlash against all of these new energy drinks that have been popping up and the controversy around them, including caffeine levels.

1:24It's giving us flashbacks to the early odds, right, Kale? It sure is. My college days, my Halkian days. Yeah, I don't even want to get into what I did on For Loco. But anyway, let's get into Prime Day. Yeah, so this year, unsurprisingly, Prime Day set new records for itself. It seems to be beating its own numbers every year. This year, it sold 375 million items. Last year, it was 300 million. So it's a pretty big jump. And then it was$13 billion in GMV and$7.7 billion in revenue over the two-day period. So yeah, a lot of people shopped on Prime Day. So it seems even though, of course, it has more competition than ever from other retailers, other e-commerce sites.

2:15But I think the big takeaway for me was that it just seems like nothing is really ever going to stop Prime Day. What do you think, Hale? Yeah, that's true. And I think that this was pretty, you know, I feel like I'm trying to remember and I didn't bring up the numbers, but like last year's Prime Day was a little, it did not have as big of a splash as it had in years past, I want to say, in terms of like the records it was breaking. And so this was I think a lot of people were watching to make sure like Amazon could keep with the growth that it needed to in order in order to show that Prime Day is the big summer sales spectacular.

2:51It says it is. And these numbers, I mean, we're still still early on. We'll probably get a press release and more details over the coming weeks and months. But it's clear that it did resonate at this time and people did shop and more people did go to to make purchases on Amazon. as well as other retailers. We'll talk about that soon over this week. And so I think it was the narrative that is being provided is that this was a very successful Prime Day. Yeah. And last year, I think that was in line with overall Amazon sales slowing after really, really quick growth during the pandemic. So it makes a lot of sense.

3:32But regardless of what's happening on Amazon itself, there is evidence that other retailers are taking away that market share. So there's almost like a halo effect happening where customers are seeing or online shoppers are seeing sales pretty much on any website they go to, which can be overwhelming. So yeah, so we are kind of seeing that spending spread across, especially to someone like Walmart, I would say. Yeah, Walmart and Target. And those companies, those retailers have been doing this for a few years now, pretty much trying to catch as many sales as they can. And I think it's now beginning to really cement into shoppers' brains that it's not just on Amazon where you're getting deals, it's on these other ones.

4:19Just donning my hat as thinking about all things marketing, I think one really big thing that Amazon does every year with Prime Day is the announcement of the numbers after. You know, it's a very big deal for everybody to wait with bated breath as to how big of, you know, a sales jump did they have? What were the records broken? What was this? What was that? And I think that's an opportunity that I don't know if we'll see it this year, but soon we'll be seeing those from Walmart and Target in terms of, you know, they can make this a moment about them in terms of the sales that they saw as well, because they clearly have been able to probably take some market share, or if not take some market share, expand the pie of people who are buying on that day to see record numbers themselves.

5:04And that's something that I'm going to be interested to see is just how do these other retailers, all of whom participated in some semblance on Prime Day in this past week, how are they going to announce the booty that they won. Yeah. And I think it helps that they have a way more prolonged period. I mean, like prime week, I'm doing air quotes. I know this is an audio medium, but they are still happening all week. So they have actually more of an opportunity. Whereas prime day really does end at 3 a.m. Eastern. I know because some of the stuff in my cart went up to its normal price when I didn't check out.

5:40Oh, no. It's okay. It was literally nothing I needed. I was using that, like, keep it in your car for 24 hours thing. And it worked. I didn't really need them. So back to, I mean, that is the psychology of Prime Day, right? That's what NNL has said, which is that when I spoke to people this week, they were like, I think the sense of urgency and the countdown clock is really what gets people, speaking of marketing. Yeah. And we'll get into this later. I think that we have, you'll probably bring this up, but I think that they really got into that type of psychological marketing. And I think video this year played a really big deal with Amazon specifically with their whole, is it Inspire, their TikTok thing, which I had never even looked at it before.

6:23It is Inspire. And let me tell you, when I was doing the Amazon coverage this week, I think I spent, it is very mesmerizing. It's probably the reason I'm not, I don't check TikTok too much because you're scrolling and you're seeing the deals underneath the actual creator and all the creators say, you know, they are earning commissions from these products. So I should explain this is Inspire is this new feature. Basically, it looks like a TikTok clone that Amazon rolled out last December, but it really only officially launched pretty recently. So this is the first time it's really being tested.

7:01And what they did, it looks like they pushed a lot of influencers and creators that typically do have a lot of Amazon recommendations and content to use it. And so you're just scrolling and scrolling and you just keep seeing more and more deals. And you could literally click on the product right as they're talking about it and go to the page and see. It has a little red, you know, Prime Day mark on it. And it's, yeah, it is very tempting, I will say. So I saw it firsthand, but I do wonder, we haven't seen exact numbers yet, But there was a lot of speculation that that feature specifically is going to play a big part in conversion.

7:38Yeah. And I think that it's I really want to see the numbers about that because Amazon was really pushing it. And it honestly, you know, I went on the app. I didn't buy anything during Prime Day, but it was just to see what was going on. And that was one of the more engaging parts was seeing these videos that looked exactly like a TikTok of someone in their bathroom or their living room showing off whatever it was that they were showing off. Like it's it's smart. It's very similar. I don't know. I think all of all of the platforms are slowly coalescing on on this new type of quick fix thing. It's very similar to Timu, which doesn't necessarily have video just yet.

8:16But it's it's all you know, you have a 90 percent off deal at this moment. Keep scrolling. There'll be endless products. Buy them now. And I think that that is what a lot of these apps are moving towards is a quasi-entertainment commerce thing, which is interesting, you know. Yeah. And especially with this one, it makes sense that – and for those of you who didn't see, if you opened the app, I think it's probably still there. There's a little light bulb, and that's the Inspire, which maybe if you didn't know, like it looks like it's just a random tab on your app. But I thought it was interesting that most of the recommendations usually in the last couple of years have come from, yeah, TikTok and Instagram where people see, you know, a product like Sheets or, I don't know, Airfryer or whatever on TikTok.

9:04And then a lot of that traffic gets directed to Amazon. And right now what's happening is that Amazon's like, wait, we can just do that in-house. Why would we wait on the TikTok traffic? So to me, that's what it looks like. It's like they're just trying to bring all of that ecosystem on their own platform. Absolutely. It makes sense. And I think that a lot of the TikTok influencers who do, you know, what's the hashtag sought on Amazon? Hashtag TikTok made me buy it. TikTok made me buy it. They would love to have an in-platform option on Amazon where they can more easily transact as long as they're getting the same commission.

9:42So it makes a lot of sense. I'm really hoping Amazon gives us some numbers about how Inspire performed, but I'm not going to hold my breath. It'll probably be something totally meaningless. Yeah. It's like when Netflix tells us their viewer number. They're just going to say like 52 billion people used it. So we'll see. And then, yeah, I want to talk a little bit about just some of the differentiators because like we said, a lot of other companies are doing kind of lookalikes, you know, kind of cloning. I mean, some of them even have Prime in the name of their sales. But they, I think Amazon probably is feeling more pressure than ever to create more perks and differentiators.

10:24And some of them, like, for example, this year, for the first time ever, they are doing deals on like travel bookings. So they have a, they had a Priceline partnership where people got, I think, 20 % off for, on their travel for, you know, shopping during Prime Day. So travel bookings. So there's things like that. And then personalization. I think everybody's feed is more personalized to them now than ever during those two days. So there's a lot that they're doing to keep people on the app. Yeah, it makes sense. The travel thing is interesting because there's been a lot of talk about, given the economy, given inflation, given all this, people are buying less discretionary goods.

11:11But things that are still doing well are travel and experiences, those types of things. So that Amazon is trying to have at least some offering that is in that arena makes sense. But that being said, the overall performance that we're seeing with Prime Day in general and the areas that we saw doing well, what did your story say? I feel like it was apparel. There were a bunch of areas that are more or less discretionary goods that saw huge sales boosts over Prime Day. It means that people probably didn't want to buy full price, but the moment they get permission to spend less because of a deal, they're going to do it.

11:46But I think it's smart that Amazon is looking at these other areas that it has not traditionally been in, like Priceline with traveling, to try and get people to think outside the box in terms of how they can spend on Amazon. Yeah. And so, you know, like we said, I think just bringing in creators more than ever and all of these sort of unique sales and deals seems to be a big takeaway, at least for us. I don't know if we missed anything else that you want to add, Cale, as far as Prime Day goes. No, I think we did a good summation. Go us. Yeah, it is actually kind of hard to sum up because there's so many different routes you can take with Amazon.

12:30There's just a lot of different angles. So that's, you know, we try to keep it streamlined. And we can now move on to our next story, which is this, you know, it's a big strike week, as I'm sure a lot of people know. And so UPS workers are now maybe may or may not be striking 340 ,000 UPS workers. A lot of people may go on strike as their negotiations stalled over the last week. This would be the first UPS strike since 1997. So, you know, a few decades there. But it is a big deal because obviously a lot of e-commerce relies on UPS specifically. It makes up about 37 % of the parcel delivery market by revenue in the U.S.

13:18That is the biggest chunk out of all the carriers. So, yeah, what are, I think, Kayla, you looked into it. What are companies or retailers thinking about right now if this is going to be happening? And we don't know how long it will last. Yeah, I mean, it's a big if if this will happen. But right now, it sounds like the talks between the union and UPS are stalled. And, you know, it would have it would have a huge impact. There have been a bunch of stories that have talked with brands, I've talked with retailers about what they would do. And they all pretty much said, like, they would do their best, but it would probably make things more expensive.

13:58because for one thing, there's no way that one other carrier can instantly just take up the capacity that UPS had because it had such a big chunk of the capacity. I mean, that being said, FedEx, I think, is already reaching out to clients, trying to woo people. Pretty much what brands have been saying is that if they already have deals and have negotiated rates with UPS and if they, in a moment's notice, have to move over to FedEx or have to move over to USPS, the fees are going to go up. I think some said they might go up as much as like$5 to$10 per product, which is a huge amount when you're selling thousands, if not hundreds of thousands of products every day.

14:44And so they don't have the ability to try and negotiate rates with these carriers because they have to just move them over. And so it would have a big impact. But there's also another really important thing here, which I think is important to highlight, which is that this isn't, while the strike is a new issue, the overall uncertainty with fulfillment and last mile delivery is not a new issue. In the last few years, the pandemic really screwed everything up for every brand that was around. There was a bottleneck with all delivery networks. Things took, you know, many more days, if not weeks to get delivered.

15:20And it meant that a lot of brands had to really, really drill down into what their supply chains looked like and who they were using as carriers, etc. And so for a lot of brands, my understanding is that this is kind of a flashback to that, but it's also something they know how to do. When the USPS all but shut down in 2020, or not all but shut down, but had a bunch of issues that - Yeah, it made them reach out to other carriers and think outside of the box. And so I think what's happening is, you know, I'm sure brands and retailers aren't thrilled that they're collateral damage about this dispute happening, but they also are more prepared than they were, say, three years ago for how to make a quick change such that they're able to deliver their goods to their customers.

16:10Yeah, yeah. It seems like there's sort of like these emergency plans that are in place now after those years. I remember, you know, a lot of people had, yeah, those, especially during the holidays. That's when really a lot of that comes into play. But I was actually wondering when you, when they do talk about the increased rate, is that also because they, when you come in as a new customer, you're not locked into your original rate that you had? Or is it because it's the new rate for 2023 is what they're getting? I don't know for certain, but when you are a brand or a retailer that does things at volumes, you negotiate your rates with your carrier well beforehand.

16:53And so if your major carrier suddenly is like, we're on strike, it means you have to go somewhere else and then you don't have the upper hand. And so they can give you a much higher rate. And that being said, so like pretty much it makes it more difficult to have real negotiations or be able to have some type of bargaining chip on the table. But we also have to take into account that these other carriers are about to have their volume go up by, you know, whatever fold. They're really going to have a lot of new packages that they're going to have to deal with. And so it would make sense that they would increase their rates as a result because they're going to be stretched much thinner.

17:31Again, this is a big if the strike does happen, but it's already, it makes sense that everybody is trying to sort of scramble to figure out what happens next because UPS is such an important player. Yeah, and those rights, like you said, I think when it's like a small item or an inexpensive order, that's a really big price to pay just to ship. But there's another thing that I think is really interesting that I want to do a little bit more research on. But like, there's, I imagine right now, those in the sort of digital e commerce fulfillment space are, are seeing a boost of interest, or at least a boost of customer service inquiries, like 3PLs.

18:11And that, you know, these are these are the fulfillment partners that warehouse and ship things for for brands of all sizes. and they are the ones who have the negotiations with these carrier services. And so like the New York Times ran an article a couple of days ago that pretty much talked with a 3PL who said, you know, what we're telling our customers is that, you know, you don't have to worry about this. We have to worry about this. So that it could mean it'll be more difficult for these 3PLs, but it's also a great marketing thing to have where you can say, you know, don't worry about this issue that's going on.

18:45This is our job. And so I imagine we're going to be, you know, a lot of 3PLs are going to be seeing, if not increased business, but at least have a new line to say to show that how valuable they are. Right. Yeah. So we'll keep monitoring the situation, as they say. And yeah, look out for any other updates on the negotiations that are happening. next we are going to be talking about energy drinks and the latest i mean this is a topic that i personally have been kind of obsessed with i think energy drinks are having a pretty big moment right now not that they ever went away but you know they're very much in the spotlight there's more brands than ever um but this uh week logan paul's energy drink prime which yes it's a big Big week for Prime is facing a backlash.

19:38Senator Chuck Schumer, who is the majority leader in Congress, called on the FDA to investigate Prime. So this is because I think it's basically a packaging issue. So a lot of the Prime, for those not familiar, bottles look almost the same. It's just that they all have different colors. They have hydration. They have energy. And so Schumer's worried that parents are buying the very, very, very high caffeine bottles as opposed to the hydration for their kids. And so it's kind of like a marketing issue, it seems like. But one, I think what's the stat is that One Prime has the equivalent of about six 12-ounce cans of Coke.

20:26So that is a lot. And so that brings us to our next issue, which is that what is happening? Is there a call for regulation on how much caffeine can be in these drinks? And again, like we said at the top of the show, it kind of does bring us back to the early aughts when I remember my school was like, you are not allowed to have Red Bull or all these drinks, especially before sports practice. I feel like that was a big one because people were passing out and, you know, it's a lot of health risks to teenagers drinking these. Yeah, I mean, it's interesting. Like Logan Paul is sort of the new Red Bull car.

21:08Remember the Red Bull Mini Cooper or whatever that would drive to your high school? And so it's interesting that this is happening again. And it would be very interesting if this did lead to more regulation about how much with overall energy drinks. But there is a lot more activity going on in the energy drink space. So it makes sense that lawmakers are keeping an eye on it, especially if, as it seems to be happening, they are specifically marketing to younger demographics. But it seems like right now they're focused specifically on this one drink. I will be keeping an eye to see if they try to expand it elsewhere.

21:49But a lot of the other energy drinks that are on the market right now seem more clearly to be targeting like, you know, 20 to 30 year olds and have a different type of spin. Like you wrote a story a few weeks ago that was about the rise of better for you energy drinks, that there are a lot of them that are trying to be both, you know, health, quote unquote, healthy, but also give you caffeine, which I think is an interesting trend that shows that like there's definitely demand for these types of, you know, revved up drinks, but they need to be cloaked in something else that makes them seem like they're good to drink.

22:21Yeah, it's sort of like the, I don't know, like how matcha has that sort of glow of like, oh, this is not going to make you crash in the afternoon. So these are positioning themselves as that sort of afternoon, replacing a second or third coffee type of, and they have like probiotics and they're functional and all of that. And so, whereas I think Prime is interesting because it is very loud and forward about being an energy drink. It's not trying to say that it's healthy or, yeah, better for you or organic or all of that. So with that said, you know, these types of brands are not really slowing down.

23:01I think, you know, we see, like you said, Rockstar, Red Bull are still pretty big. I think Red Bull is still number one in the category. So, yeah, it's just a matter of are they targeting, you know, too much too young of an audience? And that's why they're getting criticized. Yeah, it's true. But also, and I think a lot of the major brands like Rockstar has been trying to undergo a big brand transformation because its branding has been kind of stagnant over the last few years. And so it shows that there's kind of an energy renaissance. And so I imagine if you're a startup or even if you are PepsiCo or whoever, seeing lawmakers go after one of the competitors might make you scared a little bit just about what that – could they have a more scrutinized eye towards the other players.

23:46And so, you know, we'll see. But I imagine, you know, things don't seem to be completely like there's not a huge shakeup right now, but it does lead down the road that there could be or maybe the executives should be scared that there might be. Yeah. And I should mention, Prime is actually one of the fastest growing startups in the space. I believe they're like constantly sold out at a lot of retailers. They're doing very well and now are expanding into Europe. So this would be obviously a big deal if it were to impact their business. Yeah. And this has very big echoes of the Four Loko panic, which is something I think about fondly.

24:28So I don't think we're there yet, but who knows? Yeah. That is our show for this week. Please rate and review us on Apple Podcasts, Spotify, or anywhere else you're listening to us. Also, don't forget to subscribe to the Modern Retail Podcast to hear interviews with industry leaders every Thursday. Kale, who do you have on next week? I am talking with John Maris, who is the CEO of Solo Brands, which among other things, has the stock symbol DTC. Isn't that fun? That is fun. That's a good one to get. Yeah. And of course, come back on Saturdays for the Modern Retail Rundown. And as always, thank you for listening.

25:19Thank you.