Rundown: TikTok's impending U.S. ban, Saks goes into retail media & Amazon's grocery ambitions

0:05Hey, everyone. Welcome back to the Modern Retail Rundown, where we recap the week's news. I'm senior reporter Gabby Barco, and I'm here with our editor-in-chief, Kale Guthrie-Weissman. Good morning, Kale. Good morning, Gabby. How are you? I'm good. We've had a very crazy week in the news, so we will get right into that. Yeah. For those who haven't checked out modernretail.co, which I highly recommend you do, There's been a lot of drama in the grocery space, which we won't talk about as much in the headlines that we go into. But it's worth noting that if you've ever heard of or been into a grocery store called Foxtrot, or it's more of a convenience store, not quite a grocery store.

0:51It was going to be the future of convenience stores, but they're now all closed. And it's been quite a saga. Gabby, you wrote a little bit about it, didn't you? Yeah, I wrote about this being one of the last hip retail concepts that has closed down. In the last few months, we had, you know, Showfields, Neighborhood Goods, these types of stores. And so it's just, yeah, this type of retailer is becoming more and more rare, which is not great for these small brands that rely on them. Yeah, I mean, it just kind of... I mean, Foxtrot had been growing for many years, announced many plans to open dozens of new stores, or maybe not dozens, but a lot of new stores.

1:37They kept telling us they were going to open in New York. They never opened in New York. But also, in order to be a successful store, you have to sell goods at a certain volume. And the impression I get is that maybe it just was never able to hit that volume, at least at not all of the stores. And when that happens, you hit a wall. So even if you're a pretty store that is curating brands and showcasing them in a fun way so that they're discovered, if you're not selling enough of them, you're probably going to shut down when push comes to shove. And I think that that's one of the take homes from this, though.

2:12It's always sad to see a new entrant come in and really try to shake things up and then suddenly go kaput. Like it was a pretty big whiplash this week, I'd say. Yeah. And, you know, just another example of a company that couldn't keep raising money to offset its losses seems to be a sort of a through line with these. Yeah, it absolutely does. And so, I mean, we can stop talking about this, but it's been something I've been thinking about all week. But you should, if you haven't yet, read the coverage. We have a few stories going into it, so I recommend it. Yeah. Okay. Well, this week we will be talking about TikTok ban.

2:57What else? Of course, it's the big headline in the news. And then we're going to talk about media networks. Saks is the latest retailer to launch one. And of course, we're going to talk about Amazon getting, you know, sort of just launching its latest grocery delivery program. Kind of a take on an old one, but we will get into that later. But let's start with TikTok. So President Biden signed a bill that forces the company ByteDance, that's TikTok's parent company, to sell the app to a U.S. owner or have it banned in the U.S. For those of you who weren't paying attention, about a month ago, this proposal came up where the House passed a bill that is a similar bill, really, that would ban TikTok.

3:52And then it felt kind of, you know, it just kind of came back around randomly this week. It felt like it happened a little bit in the background. It just went through the Senate really quickly. And then before we knew it, it was on the president's desk. And then from there, as expected, the outrage began. Yeah, it did. It happened really fast because when the House bill came last month, there was a lot of writing about it. there were a lot of takes about it. But the general consensus was that, yes, this is the first step, but the following few steps are going to take a while, and it'll be a few months at the very least.

4:35But it got fast-tracked for whatever reason, I think thrown in with another bill. And it just happened pretty much in the blink of an eye when no one was really noticing. And now we're seeing this backlash, a lot of takes. We're seeing a lot of people having a lot of opinions about it. And so it's interesting just the speed at which this happened, because it's rare that such an important and unprecedented type of legislation gets passed so quickly without people realizing it. Yeah. And of course, there's 170 million Americans that are on the app. This is a number that TikTok itself has cited pretty heavily.

5:18As we had reported, influencers and brands that have built their following and their business on TikTok are understandably pretty upset by the decision. I asked a TikTok shop agency a couple of weeks ago, what happens to the band? You've built your entire model on this platform. And they said, oh, no, it probably won't go through. So here we are. I mean, sorry to them, but that's kind of what everyone's been saying. And now we're like, and we will talk about how this is by no means is TikTok banned by tomorrow. But yeah, exactly. This is going to be a long rollout. There's going to be a lot of lawsuits about this.

6:02TikTok is fighting back. There are also probably certain maneuvers, if TikTok wanted to or ByteDance wanted to, it could take to try and lessen the blow. So, but it does seem that at least within the next year, there are some changes that are going to have to be made. And like it should be said, banning the app, what that essentially means, and you and I were talking about this, I think, the other day, but it means that they won't be available on the app store. So if you still have the app, you can still use it. That is, until there's a new update to it that you can't get, and then it'll become a brick app.

6:35But I don't know. So there's a lot of unknowns with this about, A, what ByteDance will do, whether or not it will hold up in the courts. I don't know. It's a pretty interesting situation, one that I honestly didn't think would happen so quickly. Yeah. So to break it down, you know, there's a couple of different challenges, including TikTok itself and the parent company pledging to challenge the law. And at the same time, there's, of course, tension now between American and Chinese tech industries, I guess you can say. Last week, I thought this was interesting. This kind of flew under the radar, too.

7:16But last week, Apple said it was asked to pull WhatsApp and threads from China's app store. The Chinese government saying that it's due to national security concerns. Interesting timing there. But yeah, with that, now that the president has signed the order, there's a few different things that may stall this from going through, like we said, lawsuits. China, the government itself is also pushing back because the regulators there can block exporting this algorithm, proprietary tech, and licensing it. So that's just another layer on top of it. And then at the same time, what they're really proposing is TikTok and ByteDance to be separated.

7:59But as we know, a lot of this tech is built on top of the same infrastructure and it's very heavily integrated. So that's a lot of data to be separating. And then not to mention, I mean, last but not least, there's not really a lot of buyers with tens of billions of dollars, you know, laying around that could buy this app. So I'm not really sure who they expect this to be bought by. Yeah, the big question is who would buy it. And there, you know, there were, I mean, there's also the whole thing that this was, this is not a new issue. This was brought up under the Trump administration. And then there was a potential buyer back then, but then that fell through.

8:44And so this has just gone through so many iterations, and it's been, I guess, refracted through so many different ideologies, because when Trump was trying to ban TikTok, it was a more conservative thing. And now it's a much more bipartisan and kind of Biden-leading thing. And so it's just kind of interesting how the conversation around this has distinctly changed, and people have completely flipped positions about it based on who is supporting it. But that big question of who is going to buy it, you know, there are very few companies that could afford a multi-billion dollar acquisition. There have been reports about just what would, like, it might not be a flat sale if it were to happen where ByteDance would just sell off all of TikTok.

9:30Maybe ByteDance would sell off a majority stake and keep some share of ownership of TikTok. There have been some reports that maybe ByteDance will keep the algorithm as part of that sale, but sell off the rest of it. And there was an article that came out this morning, this Friday morning, in Business Insider just wondering, one of the big reasons why TikTok has been viewed as so nefarious or of such interest to the US legislature is its algorithm. because supposedly it can aid in misinformation, it can create filter bubbles, things that people have said about meta for decades now. But anyway, the question that this article asked was, is the TikTok algorithm even, would it be okay if TikTok existed without its algorithm?

10:23And maybe it is. Maybe the algorithm is just smoke and mirrors and people just want the app itself. And so there are a lot of questions involved here, and it'll all rest on what ByteDance does, really, if it loses in the courts. Like, will it ultimately give up some of the reins? And I don't know what the answer to that is. yeah um they're saying they won't um also i just remembered uh yeah a certain twitter personality calling it digital fentanyl um that's always so funny you know um but yeah i mean you know the political side of things is is just it's changing by the day it feels like but yeah the other thing is that you know in theory you can't really they're not really supposed to allow a big the companies that can afford it like meta and google shouldn't be allowed to acquire due to antitrust.

11:12So we're sort of in a, you know, and then individual buyers, like I said, there's just really not that many that could take that on. And then, so yeah, the question is what happens now? And then of course, this is coming at such an interesting time for TikTok. We've been writing a lot about TikTok shop and it's, yeah, I don't know. It's just really interesting, this platform that really took off. I mean, obviously it was around a little bit, but as far as from a business perspective and from a digital advertising perspective, the last couple of years, a lot of brands have really invested heavily in it, like I was mentioning, and really wanted to build a following.

11:55I mean, I spoke to a few brands that have a dedicated TikTok manager. So this isn't something that was just going to go away. So So, yeah, it's probably going to be pretty messy. It could take months, if not years. And then one thing that, you know, this is I think you mentioned the 2020 proposal under Trump. But the one thing I think ByteDance is really going to be arguing is users' First Amendment rights and that if they do sell the algorithm, that could change under a different owner. I think that was a similar reasoning of the judge that struck it down back then. Who knows what could happen this time?

12:35But that seems like a pretty strong argument for them. Yeah. And just one last thing to wrap it up, but we're modern retail. And I do think that if there were to be a successful buyer, it would probably be not necessarily a tech company, but in the retail space. Wasn't it Walmart and Oracle that had entered into a proposed purchase of them back in 2020, 2021? I've heard people, and these are people who know nothing and just love to write on LinkedIn, so we should take it with a grain of salt, but people saying Amazon should buy TikTok. I don't know if that would happen, but it seems like the most likely acquirers would be the people who would be most interested in the commerce side of things and also having the social media aspect too.

13:22But I think that would be interesting. And if that did play out or it did get approved, that would be, it would just be interesting, I guess. Yeah, it's interesting. They think Amazon will be allowed to buy it. Yeah, I know. I do believe the FTC would not like that, but what do I know? Yeah, I don't know. I mean, they're blocking razor brands from buying each other, so I'm sorry. But yeah, I mean, oh, yeah, again, we'll see. This is obviously a developing story. But yeah, from that, speaking of advertising, let's move on to retail networks. Saks, the department store, is the latest retailer to launch a media ad network.

14:03This past week, they mentioned that they are launching one that pretty much caters to luxury brands and designers. That's really who they specialize in. And it has 435 million annual website visitors. So per the release, they said that brands have the opportunity to boost revenue on Saks.com. This is going to be through sponsored product ads and on-site display banners. That's pretty standard for ad networks. But then, yeah, do you want to go into this investment that they're really betting on? Yes, absolutely. So pretty much a few weeks before this retail media network was announced, Saks also said that it got$60 million in an investment from Pathlight Capital and Bank of America.

14:54And it was all for Saks.com, sort of the e-com part, which Saks has split off its Saks business and its Saks.com business, which is an interesting strategy that we could talk for hours about. But anyway, pretty much, Saks is really trying to bolster its e-commerce offerings. It received this pretty hefty hunk of cash to do that. It's been trying to boost all of its different e-commerce programs. And the first and biggest announcement from this that was announced this week is this retail media network, which is clearly just a play, A, to get more brands to think of Saks as not just a retailer but an advertiser.

15:37But also, we're seeing a lot of retailers build out their retail media networks because it has a much better margin structure than it does selling things. It's pretty much you have a website, you sell advertisements on it, brands want to get those advertisements placed. But, you know, it should also be said that nearly every retailer of a certain size is trying to do this. So standing out in the clutter is difficult. And, you know, it's unclear just how robust Saks' retail media network will be, what it can offer, and whether, you know, premium brands, luxury brands will think that's enough for them to put a real significant amount of investment into it.

16:13And that's the real question that I have. Yeah. And part of that is also media networks constantly popping up because, you know, indirectly due to the deprecation of the third party cookie. So, you know, more and more ad dollars are expected. I think in the next few years, it's expected something like a quarter of all ad dollars to be spent within these type of media networks. So there's a reason there's sort of this gold rush to them. But at the same time, I think with SAC specifically, this isn't Walmart or Target, right? Exactly. This is such a niche pool of advertisers who are talking about high-end designer brands, but they seem to think it's worth the investment.

17:00And then, you know, this week alone, we also heard Best Buy launched a retail media partnership with CNET, which is the consumer tech outlet. Best Buy already launched its network last year, so this is sort of an extension of it. But they're saying that, again, this is like a high intent shopper. Like whoever's going to CNET is expected to really be looking for a gadget. And so they're trying to better integrate the Best Buy checkout experience with that. But yeah, I mean, what are your thoughts on the segmentation of retail media already? Well, I think you really hit the nail on the head with the idea that Saks, and even Best Buy for that matter, is not a Walmart or a Target or an Amazon.

17:47And so yes, all of these retailers sit on a lot of first party data because of the purchases they have. But it's only as valuable, you know, it's valuable at scale and it's valuable when you have people who you have a lot of information about how they shop, how they interact at many different points. And Saks, I, you know, it serves a purpose where it's for, you know, it's a department store. It's more luxury brands. People buy higher end goods, apparel, handbags, etc. But I doubt it would be as valuable to an advertiser in terms of first-party data and understanding what their shopper does as, say, Amazon does.

18:31Amazon is really pushing with its retail media to not only have display ads on Amazon.com or even physical ads in Amazon stores like Whole Foods, but also to connect that data with Amazon's video properties. So if I'm watching Amazon Prime TV, I will get an ad that is targeted to me because Amazon knows who I am and what I've shopped for, and it will then come onto my TV screen. And Saks doesn't have the media properties to do that, but it also just doesn't have enough of the data of its customers to understand those nuances. And so, you know, it's not I don't think a company like Saks or even a company like Best Buy is necessarily trying to do something like that.

19:14But it just shows that, yes, every retailer is trying to get into retail media in some way, but it can only go so far. And I do fear that brands will only think these sort of secondary or second tier platforms are only so strong and worth their investment compared to these other ones, which seem a lot more powerful. That being said, the CNET partnership, I'm just super fascinated by because, I don't know, could you imagine if, for example, I'm trying to think of what another, like Staples, that's a bad example, but like Staples had a partnership with the Wirecutter. Like, that would be, I don't know, it like, what's the, as a journalist, like, it seems weird that you would partner with for an advertising partnership with someone who's supposed to do unbiased reviews, but also, it's neither here nor there.

20:00Right. This is like an extension of affiliate marketing, I feel like. You know, publishers have been doing that a lot. Yeah. And then just to kind of add one last note about the department store ad networks. In the last couple of years, we've seen also, I think the closest example was Lord & Taylor, I think in about 2021, launched theirs. But I was just reading around, you know, some of the analysts saying that it's not necessarily the slam dunk for these retailers that they expected it to be. It does generate some revenue. But again, it's yeah, it's not going to save their business by any means.

20:43And I also just will add to that. I think, you know, the initial services that Saks offers, I think it said it was search and display ads, if that's correct. and I think it will be what it can do beyond that that will be valuable to brands. And I, to be honest, don't know what that is, but maybe Saks has some interesting things with the first-party data it has that it will be able to sell and then help them target better. So that's going to be the real question is, what beyond the tried and true retail media offerings other than just like a banner of a nicer brand can you give? And so we'll keep an eye out.

21:18All right, well, next up, We have Amazon launching a new grocery subscription service. Earlier this week, Amazon rolled out a subscription grocery delivery service. It's both for Prime members as well as low-income households. So here's how it works. Essentially, it costs Prime members$9.99 a month and low-income families using EBT cards$4.99 a month. It also gives subscribers free grocery delivery for orders over$35. If this sounds familiar, it is sort of a reworking of what Prime was already offering not that long ago. But yeah, what are your thoughts on the retailers it's servicing? I mean, this is sort of the big thing is like Amazon has been trying to streamline its grocery, getting more people to use it for grocery right now.

22:14And it's always been, how can Amazon diversify away from Whole Foods? Because Whole Foods fits a certain niche, but it's not necessarily the grocer that every person in the United States turns to. But it will be said that with the service as it is right now, Whole Foods seems to be the primary thing that it offers. So it works with Whole Foods, Amazon Fresh. It also has some more specialty retailers that are also part of it. So the ones they named are Cardenas Markets, Save Mart, Bartell Drugs, Rite Aid, Pet Food Express, and Mission Wine and Spirits. This program has been beta tested for a few months in certain cities, but the big announcement this week is it's being rolled out to 3 ,500 cities and towns in the U.S.

22:55So it's, yeah, it's definitely interesting, and it's definitely a way for Amazon to retry the grocery delivery thing that you mentioned with Prime, but also bring in new members. I think the EBT low-income part is super interesting. Yeah. And, you know, in many ways, we could talk about how Walmart and Target, I think Walmart Plus is a great example of a program that really grew, especially during the pandemic, because it offers a lot of value for, you know, Walmart Plus members. And then Target, just a couple of weeks ago, we talked about the new Target Circle. Exactly. Sort of a Shipt-esque, you know, they already own Shipt, but it's a little similar to that.

23:38So it's almost like we're circling back on grocery delivery, no? Yeah, we're circling back on grocery delivery. I do think that Walmart's grocery delivery has been part of it for years. Walmart has not really changed much of it from what I can imagine. And so it's been Target and Amazon trying to figure out how they can get in on it and compete with Walmart, who I think has been winning in this area. And it should be noted that Walmart Plus costs$12.95 a month. It includes the multimedia things like Paramount Plus, and it includes free grocery delivery. Prime, you pay Prime, whatever it is,$10,$11 a month.

24:18But then this service is extra for you to get. Prime includes free delivery of Amazon things. But if you want the free grocery delivery as part of this, it will be an extra$10 a month. So it seems, you know, I don't know, it is clear that a lot of these players are trying to catch up with Walmart on this one specific thing. Yeah. Yeah. And as we mentioned before, Amazon seems to be segmenting all of these add-ons out of the Prime membership, like, you know, the$2.99 a month for watching Prime Video ad-free, for example. So these are all add-ons. But yeah, what about, you know, we mentioned it a little bit, but Amazon seems to be constantly working and reworking its grocery strategy.

25:10Of course, there's Whole Foods there, but I think we've seen a lot of reports about Whole Foods not necessarily being the big revenue generator that, you know, they thought maybe it would be when they acquired it. We're going on seven years now. So yeah, this seems like another play at that. It's really the grocery strategy has been rejiggered many times over the last few years. It was, you know, the focus was that it was going to open up more fresh stores and make that core. And then last year, I think it was, Amazon started closing up certain underperforming fresh stores and saying it was going to retool what its overall strategy was.

25:49Another plan was that Amazon was going to really focus on its retail tech services so that it can get into more retailers. So it was trying to sell grocers just walk out. It's cashierless tech where you just, you know, take an item and walk out. And then a couple of weeks ago, Amazon was like, never mind, we're not going to be selling just walk out to grocers. That's for something else. We're instead doing our Dash cart, which is the smart cart. And it's trying to get retailers to buy that. It's closed. It's Amazon Go stores. Pretty much it's been, you know, as with all things Amazon, it's test and learn, put a lot of money into a certain thing, see if it works and if it doesn't.

26:25take it away and try something new. And Amazon has been doing exactly this with grocery for seven years now, and it has not figured out the exact right strategy. And so this is another version of that where if I'm reading between the lines, what Amazon is saying is we have a lot of store fleets with Whole Foods. We have partnerships with certain specialty grocers. We have a few Amazon Fresh stores. With that, we can sort of grow our e-commerce grocery business and focus that as the consumer-facing front of it. Maybe test out some other types of locations. Maybe there'll be some more Amazon Fresh stores down the line.

27:03Who knows? But then also, the retail tech side will be focused on the smart carts, which is where other players like Instacart are also trying to gain footing in. And so it seems like it's a much less ambitious strategy than it was a couple years ago, especially when it comes to physical footprints. Amazon isn't opening up dozens of stores hoping to take over the grocery space. It's instead just trying to get more people to sign on to get free delivery for grocery for it and then go from there. Yeah. As always, it'll be interesting to see what the adoption looks like because this does seem like a pretty good deal.

27:41But again, we'll see if people want to tack on another$10 a month for another service. And that's another thing that I find really fascinating. And I talked with someone about this earlier this week, which is the inclusion of the low-income families is smart because every family needs to feed their households. I was looking at some data and actually a lot of households that make less than$35 ,000 do use grocery delivery, which I was kind of shocked at. This was data from Contar that they shared with me. But Whole Foods is not the target retailer if you are a low-income shopper. It's known as whole paycheck by many people.

28:24It doesn't hold Kellogg's or Oreos or things like that. And so it's interesting that Amazon is trying to get a certain type of shopper, one who is more budget conscious, but more likely than not having them buy from a more premium grocer. And so I do wonder if there will be a mismatch there, especially when you compare it to Walmart, which is a much more affordable and encompassing grocer that has everything, both nice products and more affordable value-focused products. And so I think that'll be the real question is, can Amazon build out its assortment so that it's able to match what lower-income families need?