Rundown: Netflix's retail ambitions, Amazon's Prime Big Deals Day gains traction & food companies plan for weight loss drugs

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. Hello, Kale. Hey, Gabby. How are you doing? Yeah, I'm good. You know, it's been an eventful week, but as usual, retail goes on. And so we will get into it. This week, we are going to talk about Netflix getting into physical retail, a full circle moment there. Then we are going to be talking about some takeaways from the second Prime Day, which feels like it just, you know, comes quicker and quicker in succession with the first one. And then lastly, and this is, I think, a really interesting dilemma for food companies, which is what are their strategies to deal with loss of appetite due to weight loss drugs, which is expected to rise in the next decade.

1:07So it's not going away, I don't think. So with that said, let's get into Netflix. So this week, Bloomberg reported that Netflix is creating this, I guess, immersive, almost pop-up feel of a retail store. It's a little, I guess, like, do you want to give us a little bit of a breakdown of what it could mean? Because they're not technically stores, at least from what I can tell. They're like a quote-unquote experience. Yeah, it's not, you know, the joke is, and I will make this joke throughout the segment, is that, you know, Netflix is going blockbuster. But if you were to read the, you know, the quotes that Netflix gave to Bloomberg, it is clear that it is trying to make it very plain that it's not just selling DVDs or renting out DVDs.

1:57It's doing something different. It's, you know, an experiential activation, etc., etc. The quote that Bloomberg says is that it's a place where fans can immerse themselves in the worlds of their favorite TV shows, shop for clothes, eat themed food, and maybe even try a Squid Game obstacle course. Which, for any of you who have been following Netflix for the last few years, this isn't surprising. Netflix has done these types of things on a one-off basis, on a pop-up basis. But now it seems it's going a little bit more permanent with this latest Netflix house concept. Yeah. And, you know, this isn't usually our wheelhouse, but a lot of it has to do with, you know, the streamers kind of being in trouble as of right now, because, you know, there's a reason they all introduced ad support.

2:52it's a really expensive business to be in. And so it's, I guess I think it's ironic that we're after years of being told everything is going to be streamable. Now we're kind of, you know, having to go back into the real world to experience some of these. So yeah, if with that said, it's interesting because this is only a couple of months after they stopped their mail and DVD program that was really popular. Yeah. I mean, clearly Netflix is revamping a lot of their things. In some ways you could look at this, although I'm sure Netflix wants me to say this and I don't think I'm using this as a comparison and not as an explanation of like scale or gravitas.

3:35But like this is an attempt to do what Disney and Universal have done with Disney World and Universal in the sense of being able to sell things so that people can have fun. But these sound much smaller and these sound, I don't know, are you going to be able to get a family to spend$5 ,000 over three days at a Netflix store? Probably not. But the ironies that you're saying are really funny just because one of the things that the Bloomberg story brought up is that there will be food and drink there that will be from fast casual to more high end. And it's like, what's another really bad margin business?

4:11Restaurants. And so Netflix is just getting from one difficult business into another. But, you know, I think your point about it, A, getting away from the DVDs and B, trying to grow its revenue in new ways with its like ad supported tier. This is all just an example of that, of ways that Netflix is trying to prove that it can make money beyond just being a hub of subscribers. Right. And I guess my question is, is the IP there to support that? Because when you're talking Disney, in this case, are people going to want to get on the Crown rides? I don't know. That's always been a question for the whole Netflix original content, but we'll see.

4:57Yeah, I mean, clearly something must have worked because they've done these tests. So you mentioned Bridgerton. They had their Bridgerton experience, which was, I think, like shows or something like that in select cities. They've done a lot of pop-ups with Stranger Things, which I think, you know, it doesn't have the IP of like a, I don't know, X-Men or something like that. But it does, clearly people like it. But I think that your point is very salient, where Netflix has been trying to make something that is an IP giant that you could franchise, that you could really, really make a lot of money on.

5:35And it's had hits, but it's never had something that people are dying to be a part of in the way that what Disney has done for centuries, in the way that Disney does that. So I think that that's a really good point. And it just is a question of the content. And Netflix hasn't had that one thing that everybody needs to be a part of just yet. It's also coming at an interesting time, which is that Best Buy announced it is going to cease selling DVDs and Blu-rays, which I found surprising. But it just seems interesting that, you know, there's kind of like a switching of the guards here. Yeah, no, there's a lot of interesting dynamics at play.

6:20You know, you mentioned Netflix is no longer doing its mail out DVD. Best Buy is getting rid of its DVD selling thing. I just looked at the numbers quickly a few minutes ago and like, you know, DVD and Blu-ray sales are on the decline, but they're still pretty huge. According to a Forbes article, I found 2022 DVD and Blu-ray sales were 1.58 billion, which, you know, is less than the 1.97 billion of 2021, but nothing to sneeze at. But, you know, the joke of is Netflix trying to become blockbuster? Well, if, for example, Best Buy is getting rid of its DVD and Blu-ray business, maybe with these new stores, it would be smart for Netflix to try and sell some DVDs since clearly there is some demand there and they might be able to make some money.

7:09But that being said, Netflix has made no mention of it. Everything has been around merch and around experiences and around food and dining. But I do think there are some interesting dynamics at play with the age-old business of buying or renting a DVD that people usually scoff at. But it's over a billion dollars. That's a lot of money. Yeah. And it'll be interesting to see also what the partnerships will look like because Netflix has done a lot of them in the past at least year or two. And it kind of seemed like they were like a preview for what's coming. But I think in this case, this isn't something that's living on their site.

7:49It's out in the real world. So it'll be interesting to see whether, you know, okay. Netflix is known for, you know, putting out their own numbers, right? And so that's been one way that they can kind of bypass a lot of their success metrics that other companies have to report. So I guess I'm just picturing a world of like, is there going to be millions of people outside these stores the way they claim, you know, when one of their movies drops? Exactly. And like, I think your point about metrics is really interesting where we have, whenever we ask about a specific partnership with a brand, they'll give us very interesting stats that don't tell us anything about sales.

8:31So, you know, social mentions were this or I feel like it's one of those things where it's all about building buzz and you can get really fudgy with those numbers. But when you have when you are when you have the physical story yourself and you need to prove that it is financially viable, then things get a little bit more serious. So it'll be interesting just to see how these these spaces manifest, what will be considered success and also what will actually be in them and that will drive people to go to them. Yeah. And I will be looking out for an Ozark menu. I want to see what those cocktails look like.

9:09Moving on to our next topic, Amazon Prime Day 2.0 or second one. What's the official title for it? Oh, my God. I didn't actually write it. It's something like deals. I should look this up. Actually, one second, I'm going to look up Prime Day October. What do they call it? Amazon's Big Deals Day. Big Deals Day. Okay. Big Deals Day, which I do think it lived up to the name, at least from a marketing perspective, because I did see a lot of big red letters saying big deal all over the site while browsing. So it seems like they, and we'll get into this in a little bit, but the, I guess, presentation and the marketing of this Prime Day feels to me pretty different than the typical July one.

9:58Yeah. And I think that there's a lot of room for experimentation with this one because this is only the second time they've done that. So for background, Prime Day as a concept has been around since 2015. It's the way that Amazon tries to gin up sales during a traditionally slow time, i.e. the summer. So in July, Amazon has Prime Day, people buy millions of dollars worth of things. And then during Amazon's earnings report, Amazon says, we sold a lot of things. We're doing great. And then last year, Amazon introduced a second Prime Day in October that, you know, the aim was it's big deals and it's going to be the beginning of your holiday shopping.

10:38There was a big question about whether this will be a permanent fixture, just something for last year. Now it seems that it's permanent. And to add to that permanence, we're seeing other retailers like Target and Walmart launch similar deals days on that same time span. So it seems that Amazon is still trying to figure out exactly how it wants to market this. The big focus is things are cheaper, buy them, but it's also a quasi-holiday sale. And so it clearly was a success. We'll go into some of the numbers in a few minutes, but I think that we'll probably be seeing evolutions of how this is explained to its shoppers over the years.

11:22Right. Yeah. And again, the comps were only really looking at last year, but this year was Prime members ordered more than 150 million items from third-party sellers. Last year, it was 100 million. So it's growing pretty consistently. the average spend per order was 53.47. I feel like that sounds about right, but I think it's slightly less than the typical summer prime day spend. And this one I found pretty interesting. It's more than 60 % of the products that were sold were less than$20. 4 % were more than$100. So So I don't know if this is reflective of just the overall spending sentiment and people looking for just ways to do their Christmas shopping or holiday shopping cheaply or as cheaply as they could.

12:17But it's an interesting step. Yeah. Yeah. And that was one of the big while we were doing research about this this week and trying to look at what, you know, what brands were saying, what researchers were saying. That was a big theme that we kept seeing was this specifically this October Prime Day. People were were spending, but we're spending it on lower dollar amounts. And there, you know, that's indicative of the overall economic environment we're in where people are looking for value. They're trying to spend less. But there's something and this hasn't I don't really have. There's no research that I found to back this up, but it makes me wonder how many of the things people were buying at this event were actually, quote unquote, for the holidays or were just people stocking up on cheap things that they saw were cheaper because I don't know.

13:07usually I spend, maybe I'm a little bit generous, but like I spend more than$20 on holiday gifts, but maybe I see something that, you know, a product of mine that is 30 % off and a little bit cheap and I'll see that on Amazon. I'll be like, I'll buy that now. So I do wonder how much of this actually was a ramp up to holiday buying and how much of it was just people waiting for a big sale so that they could stock up on some things. Yeah. You know, obviously we don't have empirical data, like you said, but anecdotally speaking, which journalists love to do. I did hear, yeah, like toilet paper and cotton and Q-tips.

13:43And ironically, I actually, I think I spent around 50 something dollars during the day. So I'm hitting the average, but yeah, none of it was for holidays. I will be honest, this was the first Prime Day I've ever bought something, but it was over$50, I will say I bought a hot plate, but it was because I was waiting for a time when it would be discounted. And it was. So I bought it. Okay. This is classic kale. Just buy kitchen gadgets. Yeah, of course. A sale. It's very on brand. Yeah. So I think the question is, and this is, you know, this preceded last year's launch of this October Prime Day. Is that our big deals day?

14:27I guess is the official start of the holiday shopping season October, like officially, because that seems to be pretty much the sentiment among a lot of brands. Even though some are resistant, they're like, you know, people still wait for Black Friday and not everybody's going to change overnight. So I don't know. It's interesting to think. Amazon has been pushing it back a lot, you know, probably trying to drive more sales earlier. where all it wants is people to buy a lot of things at all times of the year. And so if it's able to make a shopping moment earlier than it was before, that's a win for a big platform like Amazon.

15:06But I think that your question is right. When does it start? There's another question that I have that I still don't really – that probably will never have the answer. But it's what are we comparing this event to? So, you know, in some ways, it's called a prime day. So are we comparing it to the July one? Up until now, this October one has sold less goods than the July one. Does Amazon want it to exceed it? Does Amazon want to be the same? Does Amazon want to instead compare this, say, to Black Friday? Like what is the comparison point here that Amazon wants? Or is it just going to be its own thing where people buy more things?

15:43But, you know, as people looking into this as journalists, we love to sort of have a comparison point of like, you know, was this better than this? We can compare it to one time last year. We're right now comparing it to the July one. And right now it didn't do as good, but it's also the second time it did it. But that's sort of my question is like with Amazon launching a new thing, what does it want it to be compared to? And I don't really have a perfect answer. People do think of it as another Prime Day, but yeah. Yeah. I kind of feel like maybe we're still in the experimentation phase, which is maybe why Amazon hasn't said, like, we want this to be as big as the official Prime Day.

16:21Because we've talked about this before, right? They're kind of known for testing, throwing things, seeing what works. And so, you know, obviously this is on a big scale, but I wouldn't be surprised. You know, it could go either way. Absolutely. Absolutely. And then one last thing we can add to this is it seems like at least from the sellers we spoke to, they do like participating, at least maybe some brands in certain categories, and they're having pretty decent returns from them. So I think as long as the sellers are on board, it seems like they'll probably keep going and growing. Yeah. I mean, I think if Amazon told sellers were having a deal day, discount your prices, sellers would be like, okay, fine.

17:10But the sellers that we did speak with all said they saw more sales. At least we spoke to them after Tuesday, asking to compare this year's day one prime day to last year's day one prime day. And for the most part, they all were like, yeah, sales are good. They're exceeding what it was last year. And so, you know, the initial response is that it did have the intended effect where it got people to buy their products at a discounted price. So, yeah. Yeah. Yeah. One founder I spoke to just, you know, anecdotally again, or in passing said that they picked the SKUs that they had the most excess inventory of, which, you know, killing two birds with one stone, that's a big theme right now.

17:55So it's, you know, probably not a bad idea. Yeah. If you're trying to offload products right now. Absolutely. Next up, we are going to be talking about what companies do when diet fads come and go. This has become like one of my favorite topics because it falls under like, well, I don't know. It's weird. Maybe it's the antithesis of better for you. But the big, you know, like your PepsiCo's, Cokes, all of that, they are trying to grapple with how to, I guess, cater to people as, you know, people try to cut back on sugar or eat less processed food and all of that. But in this case, I should have mentioned earlier, the weight loss, you know, GLP-1s drugs that are taking off and have really, yeah, done so in the last year and will continue to do so, according to pretty much all the industry experts, that could really have an impact on what people eat and drink.

19:02And even some of the restaurants mentioned, like maybe people will not order as much. And it's an interesting problem to think about already. and I don't know how you make people hungry if they don't have an appetite. I just, yeah, it's interesting. Yeah, no, it's a fascinating issue. And I guess like the way that the industry has handled weight loss before was with more products for consumption. So, you know, Diet Pepsi, Pepsi Zero, things like that. But the fact that there are now products that are aimed at having people just eat less is clearly scaring a lot of big CEOs. So like we saw PepsiCo's CEO pretty much said, right now there's been a negligible, a quote, negligible impact on its business because of weight loss drugs like Ozempic.

19:59But the quote that he said that has been covered a lot is, we're observing the growth of these new drugs and its potential impact, which is the fact that he's even mentioning it, I think, is noteworthy because it means that they are worried that this will hurt their volume down the line as more people begin taking these types of prescriptions. So, yeah, something very interesting. Yeah. And, of course, you know, we don't know the long-term effects. Things could change. Yeah. Consumption of these or, yeah, just prescriptions even can change. But for now, I'm interested in the ones that just came right out of the gate.

20:35Like ConAgra's CEO said, we have to adapt or die, really. So, I mean, that's not exactly what he said. I should read the quote. But that's what I read between the lines. He said, if we end up seeing changes in consumer eating patterns, let's say they go smaller portions, then we design smaller portions. If they switch different types of nutrients, we evolve innovation. We switch to different types of nutrients. is the kind of stuff that will happen over 5, 10, 15 years, not six months, which is true. But, you know, R &D takes a long time. So that's probably why they're like already thinking about it.

21:11Yeah. And I also, I mean, the cynical part of me wonders, like, you know, there is a distinct possibility that these could become really popular and have an impact statistically on overall food sales. But also, if there's something we know about our retail CEOs is that they like to cry about things that they know will get a lot of coverage. Or I don't know if that's the right way to say it. But we're hearing a lot from companies like Target, or we've heard a lot of cries from companies like Target over the years, talking about shrink and theft as reasons to close their stores. and it's a lot, you know, there has been, you know, this is not to say that there hasn't been retail theft over the last year, but there are a lot of other dynamics at play that have not been mentioned, namely that Target is like, you know, had some difficulties with its larger format stores, is opening smaller ones, has a lot of 10-year leases that it wants to get out of.

22:11And so I think there are parallels with that type of thing where you hear a CEO on an earnings call go on the record about something that it says is out of its hands for a reason why its sales are going down. when, you know, maybe your products just aren't as good as they used to be. I don't know. Like, I'm not saying that. But do you know what I mean? Like, I feel like they love to find extraneous topics that are hot button to blame for why their businesses are not doing as well as they once were. I think I call it like the finger pointing because that's what's going to grab headlines. I mean, we're reporters.

22:46We know that. Sometimes fall for it. But there's finger pointing that happens where sometimes, especially the last couple of years with inflation, everything and supply chain, it's so hard to tell because we don't we don't see, you know, the operations on the other side. But it kind of, yeah, it does seem like they blame. Sometimes they blame everything, but just your sales are declining. That's that's maybe that's as simple as that. People just aren't buying as much as they did in 2021. I don't know. Yeah. Yeah, and especially with a company like ConAgra or a company like Pepsi, now people are going more towards private labels.

23:20We could talk about that. But my entire point is that there is always something that is completely outside of these executives' control that they see as the big warning that will hurt sales. Maybe there are a lot of things that are within their control that they just don't want to deal with. I don't know. Yeah. And then I wanted to mention this, which is early surveys of customers because I was thinking, how do you even know somebody went into Walmart and didn't buy Doritos because they're on? But it turns out they did this survey by JP Morgan of 300 people. So I don't know. I'm a little side-eye.

24:00I don't think 300 people is enough of a pool, but we'll see. Yeah, it'll be interesting to watch. I think we're still in the fad phase or a very honeymoon phase of the coverage of these types of prescriptions. And so will they actually become bigger and more widely used? We'll see. It's very, very early days. And so we, you know, until we have data on that, we can't really talk about the impact it's going to have on food sales. You know, I think we're maybe we're putting the cart before the horse, but I might be wrong. Okay, well, that's our show for this week. Please write and review us on Apple Podcasts, Spotify, or wherever else you're listening.

24:43Also, don't forget to subscribe to the Modern Retail Podcast to hear interviews with industry leaders on Thursdays. And of course, come back Saturdays for the Modern Retail Rundown. Thank you for listening. Thank you.