Rundown: Shopify marketing shifts, Walmart Health losses & Poppi faces lawsuit

0:04Hey, everyone. Welcome back to the Modern Retail Rundown, where we recap all the major headlines from the week. I am senior reporter Gabby Barco, and I'm here with editor-in-chief Kale Guthrie-Weissman. Hello, Kale. How are you today? I'm doing good. How are you? Good, good. Yeah, it's been quite a week. We've had so many headlines this week, so. News never stops. Yeah, we're not going to get to all of them. I should say a fraction of the headlines. Yeah, just a few, the ones we thought were most fun or most interesting. Yeah, there's some pretty important ones. So first up is Shopify updates.

0:45There's a couple of different updates that the company has made to mostly really its branding for strategy purposes. After that, we are going to be talking about Walmart Health closing just about five years after it was launched. It feels like yesterday. I feel like I remember that announcement. And finally, we are going to be talking about the Papi lawsuit out of California over gut health claims. So, yeah, first up, let's talk about Shopify. I know, Kayla, you've been following a few different announcements or reports that the company's had. So over the last week, there's been a few different changes.

1:33a foot of Shopify, the major theme is that it is doubling down on its branding. Like I said, I think the shop app, which we both find very fascinating, is a big focus of that. But yeah, first there's a leaked memo that was seen by Business Insider that says, Shopify is planning on sunsetting Shopify Plus. The branding, this is pretty interesting because I feel like Plus has felt like such a big push for them over the last few years and such a differentiator as an offering for merchants. So yeah, what are your thoughts on that? Yeah, so we have like two different headlines that might not fit perfectly together, but I think they're both interesting and go towards, if you read between the lines, some strategic shifts that are afoot.

2:20But the Shopify Plus thing I thought was super interesting And it was pretty much Business Insider got its hands on a post written by some Shopify execs saying, and this isn't a changing of its products or services, but simply that Shopify is like to like its external marketing, etc. is not going to differentiate between Shopify and Shopify Plus. Plus, for those that don't know, though I bet a lot of our listeners do, like Shopify Plus has been around for a long time. And it was a really big push. I want to say it launched in 2014. And it's Shopify's enterprise tools suite. So pretty much Shopify first launched as an e-commerce platform, predominantly focused on small to medium sized businesses.

3:07Like if you wanted to have a really easy e-commerce experience, you could use one of its templates and have a Shopify website and it would be low or no code, like et cetera, et cetera. Shopify Plus was pretty much a play to compete with, you know, Salesforce, you know, all of the big enterprise players so that a bigger brand could have a Shopify storefront, but it would be much more beefed out. And this is, you know, Shopify has built a huge agency ecosystem for Plus over the years. There are a number of Shopify Plus specific agencies that work with major brands so that they can build out their storefronts.

3:45But also over the last year or so, Shopify has been building out very specific tools specifically for larger brands. Like Commerce Components is a really big one, which were a slew of different tools meant to give brands a variety of different ways that they can use Shopify. And it doesn't necessarily mean that they have to have a Shopify storefront. They can just be using one of these tools and maybe they'll like it and maybe then they'll start getting, you know, adding more e-commerce layers that are powered by Shopify into it. And so, you know, none of this is really changing. The big shift is just that Shopify is saying, we're not going to call our enterprise service Shopify Plus.

4:27It is Shopify. It's all Shopify. And I think that's really interesting because this has been a big push over the last few years for Shopify to be considered a major e-commerce player for the big guys, not just the small guys. And so now we're seeing that become part of the overall branding, I guess you could say. So it's not like there are two different arms of the company, one for enterprise players, one for SMBs. It's all the same. And it also kind of hints at the fact that Shopify's major focus right now is just working with big brands, big influencers, those types of accounts. And, you know, if you're a smaller guy, you can probably sign up to use Shopify.

5:05But that's not, you know, Shopify is now for big companies. And so I think that that's what I found so interesting about this update is pretty much it's no longer two different entities. It's one. And Shopify is letting its employees know that that is what it's going to be going forward. Yeah. And then just to zoom out a little bit, Shopify's enterprise strategy has evolved over the last year. So the major focus has been to launch a variety of tools for these larger players, you know, to be able to support their volume, whether or not their e-commerce sites are built on top of Shopify. I think that was a pretty big deal.

5:44And then ShopPay was another good example of this. That's, you know, their sort of payment checkout system. So, yeah, I guess like, you know, how do you think like this fits in under this umbrella or this branding that they're trying to expand out beyond just relegating these bigger quote unquote players to two plus? Yeah, I think it makes a lot of sense. And I think, honestly, the real, probably one of the real wins that Shopify has had has been with ShopPay, which, you know, is its easy way to pay. You know, I think it's, you know, checkout free. I forget exactly how they describe it. But one of those things where you click a button, it texts you and then you've suddenly paid, which I've used and it's pretty easy to use.

6:33And I think that has, I believe President Harley Finkelstein told us not that long ago, pretty much, that that's one of its most popular component tools. And that's really what brands are glomming onto. And I think this strategy of using these specific tools to entice brands to use Shopify and then go from there seems to be a pretty smart strategy and then bring them onto other parts of the ecosystem. And the idea that now it's not like you're going to use ShopPay and now you need to use Shopify Plus. It's just you're using a Shopify tool and ideally soon, potentially, you will have your entire e-commerce platform built atop Shopify.

7:16And so I think, you know, a lot of this is focused on building out these bespoke tools or different offerings that will then sort of, you know, in a breadcrummy sort of way entice people into the ecosystem and then they can go from there. So, yeah, I think that that's exactly right. Yeah. And then speaking of the checkout experience, another portion that we're going to be covering is the shop app, the consumer facing app. So this is a headline that came out of Marketplace Pulse, where they caught an interesting tidbit from the recent earnings that said the company in Q4, that in Q4, the shop app had nearly reached$100 million in GMV in a single month, which seems like a lot.

8:08But then I guess when you expand it out to the bigger picture, like that is kind of a drop in the bucket for Shopify. But the fact that I think this is what I said yesterday talking about it. The fact that people are shopping directly from the shop app and checking out in itself is really interesting. I'm sure a lot of it is retargeting from past shops that they've or past brands that they've shopped from. And so, yeah, that's interesting because it's such a passive program for them. Right. Like, I mean, I know they've tried to build it over the last few years, but they're not really like it's not like a big focus.

8:42Yeah, it seemed like it's been very interesting because there are a lot of functionalities in the shop app that I've personally never used, though I guess people do use. Like, you know, there's you can search for brands and you can use it as a marketplace and you can buy products in there. And so it seems like Shopify has sort of built this app that first it was trying to get people to come to it because at least this is from my perception. Yeah, like, yeah, tracking. So I've opened the app maybe a little over a dozen times if I've ordered something and I want to know where my package is. But it hasn't, as far as I can see, done a major marketing push to convince people that it is a marketplace app.

9:24But the ShopPay thing is what I think is really helping grow it, because if people use ShopPay, then they get rewards that they can redeem in the Shop app. And essentially, with this maybe a throwaway line, maybe Shopify was hoping someone like Joe from Marketplace Pulse would catch it, but was pretty much saying, oh, people are using this and they're buying through the app. And yes, it's$100 million, which is nothing like I think Shopify's GMV as a whole is$250 billion. So like, you know, half of a percent or something like that. But people are using it and people are clearly thinking about it and making purchases in the app.

10:04And it hints at, you know, A, that people are using ShopPay and probably having that be part of, you know, their checkout program and then opening up the Shop app to do that. But B, that there is some possibility that there might be some further updates or some further marketing place so that consumers think of Shopify as a marketplace app, at least with this with where it is right now. So I thought that was super interesting. The fact that, yeah, people are buying, you know,$100 million is nothing to sneeze at. But also Shopify is pointing to that, like, yep, this is a marketplace app, even though we haven't really been focused on it for the last few years.

10:42Yeah, and I think the thought is, I'm sure if there's more effort and investment made into it to make it look more like a marketplace, that'll probably attract even more customers. Because it really is every brand you've ever shopped is on your homepage, basically. Yeah. Which is pretty, I mean, yeah, just anything really that you've tracked, that you've ordered before. And it kind of, you're right, like it all goes back to pay, which I have used many times. It kind of sneaks up on you. The second you get to the checkout page, you just like, you're subtly checking out and it's all done. So, yeah, I think that's what they've done a good job at.

11:19And I'm sure a lot of customers are coming back for that reason. Yeah. And I do wonder if we're going to be hearing more updates or more, you know, more of a marketing push to get more people to think of the shop app as something more than just, you know, tracking your shipping. but all of this points to Shopify really trying to be laser focused on bringing in more larger brands into the fold and think of it as a major e-commerce player that can work with companies of all sizes especially like you know I think we wrote a couple years ago about how Shopify was courting influencers and trying to do like creator-led commerce that is still a part of it but it's pretty much just Shopify saying we can answer any of your e-commerce problems especially if you're a bigger guy.

12:08And now it's not just Shopify Plus, it's Shopify as a whole. And you can use things like our payment services. People are using our marketplace to buy things. We're a real competitor in this. Yeah. I mean, to recap, it really does feel like it comes down to consolidating more uniform branding, both on the B2B, the merchant side and the consumer side. So, yeah, it'll be interesting to see. I guess now we can track the shop app, GMV, to see how it grows. Yep, exactly. I'll be looking out for that in the following earnings. All right. Well, from Shopify on to Walmart. So Walmart is officially throwing in the towel on primary health.

12:55It's primary health centers that launched a few years ago. So this is what happened. This is a pretty big, ambitious plan that the company had. So Walmart Health is the name of this arm of Walmart's, you know, healthcare offerings. So, yeah, this was announced, like I said, 2019. And after years of trying to build out this essentially primary care network that's really focused on rural areas across America, Walmart is now kind of just sunsetting all of this and closing down all of the clinics that they did open. So these clinics offer, you know, checkups, lab tests, dental exams, and they had struck up a partnership with UnitedHealthcare.

13:43So it was on its way, but it turned out that it was, you know, healthcare is very expensive and time consuming. You know, who would have thought? And so this was really what they cited as the reason to give up on it. So, yeah, like we saw, I think we're going to be talking a little bit later about it, but I think retailers doing healthcare always seems like such a good idea and like a great added revenue source on paper. But then, you know, we don't need to get into the healthcare system of America and how complicated it is. And that's probably a big part of it. Yeah. And I mean, so Walmart, I think it was a couple of months ago in April, said it was closing it down.

14:27And it was both a shock, but also pretty much an admission that healthcare is really expensive. And we've seen a bunch of players try to get into healthcare, like CVS merged with Aetna, Walgreens has its own things, and a lot of them are sort of walking back a few things. But this week, what was super interesting is we got an actual number for how expensive Walmart's health care program was. According to Endpoints News, the Walmart health resulted in$230 million of losses last year. And so that's like, you know, you can be the biggest retailer in America, but$230 million in losses is a lot of money.

15:07And that really gives, shines a light on why after that many years of trying to be a healthcare leader or go into this very, very difficult and bureaucratic space, Walmart was like, nope, we're not going to do it anymore. And I thought that was super interesting and gives a sense of if Walmart is, you know, has that many losses with its program when we see other retailers try to launch health care services, it just shows how difficult it is and why it's probably going to lead to losses, at least in the short term. Yeah, and you can see it for context. So they only had 51 clinics that were operating at the time of the announcement.

15:48Originally, there should have been about 1 ,000 that were due to open by this year. And then right before, I think they were supposed to hit 70 by the end of 2024. So they were nowhere near where the target goals were. So it just kind of shows how hard it is to scale, you know, you're talking about. a lot of providers, a lot of doctors, nurses. So it, yeah, that could not have been easy, especially, you know, a big chunk of it happened to be during a pandemic. Yeah, no, exactly. And I think that this, it was a really big headline a few years ago that, you know, the next big frontier for retail players was getting into healthcare.

16:31And if you have the deep pockets, you can do it. Like, you know, Amazon bought One Medical for, I think it was, I'm bringing up the number right,$3.9 billion. And, you know, what Amazon and One Medical have going for it is that One Medical was already a system that was working, had its partnerships with insurance companies, had its locations open. But I'm sure it's still, you know, when you have a program like Walmart where it's building it essentially from the ground up and then also So getting into new business models that it wasn't traditionally in, that's going to eat away at any sort of money you were making.

17:10And so just the real lesson here is that despite the best intentions of these retail players, actually getting into healthcare and having it last for the long term and making it a sustainable business is very, very difficult. sold. And so, you know, Walmart learned this when it lost$230 million last year. Yeah. And I will say, I think just because we just talked about it as part of the prime benefits, but One Medical, I mean, I think that acquisition only went through about a year ago. So it will be interesting to see, you know, how integrated it will get over the years. And so, yeah, I think, like we said, so this is a statement, I just want to kind of read it to give a sense of the language that they've used, which is through our experience managing Walmart Health centers and Walmart Health virtual care, we determined there's not a sustainable business model for us to continue, which is kind of what we've been saying.

18:11And like you said, it's not the only retailer. In May, Walgreens also said it's closing 140 of its Village MD clinics, and there are 20 more that are planning to close. That is a lot, especially for Walgreens, which, you know, this is kind of their thing, you know, is healthcare. Yeah. Yeah, no, I mean, it just, you know, Walgreens, yeah, it just goes to show that this was, this was going to be, I don't want to say a panacea, but, you know, a couple of years ago, this was the big push for a lot of these companies that this was, they're going to, they're going to be able to get into healthcare, they're going to offer these services.

18:48And from there, they'll be able to profit. But I bet you some of it has to do with the insane healthcare system that's in the United States, but also it's just a completely different business. And it's very expensive as it is, you know, not taking into account all of the, you know, the bureaucracy that's involved with insurance, et cetera. And so I imagine, you know, maybe there were good presentations a couple of years ago about why this is great and they'll get so many more customers and it'll lead to this and lead to that. But then when you have to open up these stores, you have to hire these medical professionals.

19:23You have to figure out how you are processing all of these, you know, insurance claims, etc. That's that's going to bite you. And I think that's what we're seeing right now. Yeah. And so, you know, they still have the pharmacies and the vision centers. Those will not be touched. So I'm sure those will continue to grow. But otherwise, yeah, it cannot be said enough, I guess, is that health clinics are very expensive and very competitive. Right. I mean, you know, even though they I think the majority of them were actually like in Florida and Georgia is what I read. So they hadn't really expanded too widely.

20:00They were kind of trying to target these rural areas that were, you know, that didn't have access or supposedly didn't have access to health care. And so, yeah, just too slow to scale. Speaking of health, let's talk about health, healthy. You don't need insurance. You just need to drink soda. That's what this next one's about. Gut health, yes. Yeah, we love talking about gut health here at Modern Retail. It's one of my favorite buzzwords currently. So Poppy is facing a class action lawsuit over its prebiotic benefits claim. They are still on the cans. I believe there's a little tag that says good for guts or whatnot, something along those lines.

20:46But yeah, why is Poppy getting sued? So for those who don't know, who were not watching the Super Bowl, the Better For You soda brand had a suit filed against it in a California district court where the plaintiffs are claiming that, you know, the prebiotics benefits claim is just not realistic given the serving size of it and how much you'd have to drink in order to get the benefits. This was coming at an interesting time because I just wrote a story about how a lot of these food and beverage brands are going back to basics. And actually, speaking of the Super Bowl commercial, we did see this subtle, maybe to some people, but to us is a pretty big shift in Poppy's language being more focused on just selling soda, period.

21:39You know, like anybody who likes soda will like it versus drinking as some kind of wellness product. And so, yeah, this is interesting, though, because obviously these customers feel like they've spent a premium on these products and not actually getting the gut health benefits they thought they were. Yeah, I mean, I think that what we are seeing is the evolution of this branding for this very niche part of the beverage ecosystem where we saw a bunch of companies that launched and were a little bit more expensive. We're premium players, and so they needed to have a real value proposition. And so we're healthy.

22:21We're healthier than the competition, which probably is true. But that leads you into some uncomfortable territory if you are at least alluding to health claims. That being said, I don't know if I've ever drank a poppy and was like, I'm now I'm doing something that's good for my body. I guess the way that I thought about it is I'm doing something that's probably better for my body than if I drank a Coke. But like at the same time, I do think, you know, this will probably be a cautionary tale for a lot of the other startups out there that are part of this better for you craze where, you know, it's the idea that like it's sort of like the low calorie redux from the mid 90s where we're seeing all of these companies out there saying, you know, this is actually good for you and it's going to have all these insane benefits.

23:10But then, you know, you get into uncomfortable territory, as we're seeing now with this, if you're not able to back that up or if it's not, you know, exactly what you're saying it is. And just to be clear, it's not that there can't be prebiotic benefits in a poppy. It's just that what the plaintiffs are claiming is that you would need to there's two grams of prebiotic fiber in a can. And so you would probably need to drink about four in order to actually notice any sort of gut health benefits. So that's really where it comes in. It's a little bit in the weeds, but obviously they feel strongly enough that they could, you know, I guess, you know, get some sort of settlement from Poppy, I'm sure is the goal.

23:55But yeah, I mean, this is coming at an interesting time for the company. Like I mentioned, they're coming off a pretty big year scale-wise. I feel like more than ever, it feels like Poppy is now like a pretty mainstream brand. You can kind of find it anywhere. It's the top selling soft drink on Amazon. I know that was an area that the founder, Allison, have told us they really wanted to own. And they topped$100 million in sales. And there were talks of Coke wanting to buy them. So a lot over the last few months have happened. And so this is kind of an interesting time to be sued. Probably not a coincidence.

24:35Probably not a coincidence. But I also think that there is an interesting sort of branding issue that's going on here. And this is something that we're going to have a guest on the Modern Retail Podcast in a couple of weeks where I talk about this, but I won't say who. But pretty much as, you know, if you are a beverage that is in the quote unquote better for you space, and especially one that was big in a certain community that were looking for that. You know, like if you were in health clubs or if you were in health food stores or you were at GNC, you have a little bit more space and more of an ability, especially if you've been online, to do that kind of storytelling where you can say, you know, these are the prebiotic benefits.

25:15Here's what it is. This is why we're different from the rest. But as you become a scaled, massive brand, you have much less time and you have much less real estate to actually be able to explain what you are and why you're different. And so like for Poppy and any other company that's trying to do, you know, massive distribution throughout the country, you pretty much only have your can and you have to say what you are and provide a real differentiating factor really, really quickly. And that's potentially where you can run into some issues. You know what I mean? And like, you also have to maybe think about not rebranding yourself, but rethinking what it is, the story it is that you're telling to your consumers.

25:55Like, maybe it's not that, you know, we're, it's not all about prebiotic. It's just that we're a little bit healthier. And this is why, you know what I mean? I just think that a lot of this is about when you are expanding at such a rapid clip and you are now having your cans next to Cokes and Pepsi's and Dr. Peppers, etc. That means you're going to have to think about streamlining your branding and storytelling in a new way. And it also could lead to people misunderstanding exactly what it is that you're saying. Or maybe they're intentionally misunderstanding it so that they can get a big settlement.

26:31Who knows? But still, pretty much my point is that these companies, especially the ones that are growing, are really having to think more critically about what it is that they are selling to their shoppers more than ever before when they were a smaller brand and had a more captive audience of people looking for, you know, something new, something interesting where they could read the fine print. And then for its part, we should say that Poppy said that it stands behind its products and believes that the lawsuit is baseless and they will be vigorously defending against these allegations. But I do think there's an interesting history of lawsuits against food companies, specifically with the health claims.

27:13I don't know if you remember, but in 2012, Ferreira had to pay out about$3 million to plaintiffs who felt decepted over Nutella's health claims. The reality is that you're basically eating what amounts to a chocolate bar, but, you know, the whole, their ads tend, you know, they claim that the ads basically were obfuscating that and showed, you know, it's hazelnut. it's healthier for your child. And so there is precedent to this, but I'm sure this will be played out in the court for the next few months. Yeah, it'll be interesting to watch, you know, whether it will be vigorously defended or whether there will be a quiet settlement.

27:57And also we should be keeping an eye on packaging changes. So go to your bodega, see if there, you know, if there are any big changes that come up so that Poppy doesn't run into this again. That's what I'll be keeping an eye out for. Yeah. So that is a wrap for For our show this week, you can rate and give us a review wherever you get your podcasts. And please follow us on social at Modern Retail for all our latest coverage. We mentioned a few different stories. Please go read them. And on Thursdays, Kale also hinted at some guests, some exciting upcoming guests. But who do you have on next week, Kale, maybe that you can mention?