Wendy 00:09

Hello, everyone. I'm Wendy Liebmann, CEO and Chief Shopper for WSL Strategic Retail. I'm already laughing, because this is Future Shop, and I am here with my I was going to say constant, almost constant, partner in crime of all things, Cloud Chat. Justin Honaman from Amazon Web Services. Good morning, dear, Justin.

Justin H.

Great to see you.

Wendy

Before Justin and I get started on our wild and wooly conversation, as we always do, just want to remind you, please don't forget to subscribe to the podcast. I'll just click subscribe, and then we'll know that you're behind the scenes there. Thanks for that. Now, under my conversation with Justin. Anyway, how are you doing?

Justin H. 01:30

Great. It's been a fast start to the year. I'll just say that

Wendy 00:56

Has it not? Has it not? I feel like

Justin H. 00:58

It's already May, crazy,

Wendy 00:59

and what struck me over the last couple of months, how could it not is this wave of discussion around the economic issues in the country, tariff issues in the country, the big T word. And as I thought about that, I thought, how in this time, is it different than maybe previous times, when now we have AI and technology to help us think about things like supply chain and pricing and Innovation at a time when everything is kind of everywhere. So knowing your world, which is quite broad in the CPG space, and your expertise, I thought, well, is there something now that's different in terms of how people cope with forget, whether it's tariffs or not, but economic turmoil.

Justin H. 01:49

So thanks again for the invite. For those that maybe haven't listened to our previous episodes, you should go back and check those out. They're really good. I work with retail consumer goods, and we brought in restaurants, also into our industry area that me and our team cover. But um, yeah, you're right. So like, in January, NRF, like, I don't know if you remember, after that, we were almost geared up to talk about generative AI. And then you get there and the word agentic comes up, and people like, Wait, that's now the thing. And then the last certainly, couple of weeks and months, there's been a lot of discussion around, like, of course, tariffs and supply chain and a bit of like, the economic uncertainty. I'll say we've certainly been tracking that, not only with consumers and shoppers, but also with what you know, how are retailer and consumer goods execs responding? And it's really interesting, I'd say, doubling down on technology investments, especially in the supply chain space. Of course, you know, when you think about things like simple things like forecasting, that are not so simple for most of the companies we work with, things like inventory, visibility and planning. It's definitely shined a light on that space dramatically the last couple of weeks, and even in like, sourcing and procurement. If you remember, you know, during COVID, someone the other day said, during the COVID times, I don't like calling it that, but you know, during that time, you know, people are like, Oh my God, we have, where is our sourcing person, or who is our procurement person, and so a bit of that has come back up in terms of just the where are we bringing in product, what's our costs? Or how do we manage that? Or do we need to shift our thinking. And on the AI front, certainly acceleration in technology investments, because you've got to have access to data to leverage, you know, things like generative AI.

Wendy 03:53

yeah, that's the thing that struck me.

I was thinking about how when now I'm trying, if I'm a manufacturer, I'm trying to source and fill in the gaps and figure out where both my forecasters are and where my forecasts are, the ability to have the technology and the data to help me do that in more efficient ways, and then figure out the pricing implications of all that, it feels like it creates a greater urgency for people to invest in that technology, both for now and obviously, for the future. So are you seeing that that ramp up, that urgency?

Justin H. 04:29

Oh, there's no question. In fact, that was the last couple of weeks. We already are in our planning process for next year. And as part of that, we actually write. We use a lot of PowerPoint with customers, but we actually use Word documents, as you know, at Amazon for, like, our strategy documents and whatnot. And a big part of that is like, you know, what are we seeing from customers, their customer, the industry? And in the question that came up again, of course, you know, is, like, you know, what's the impact of tariffs? Or is this something here for. Now and a couple months, and we'll be talking about something else and what we've seen from our customers is really note like, again, I'd say acceleration and interest in tools that help to manage these highs and lows, because there's going to be something else. So, yeah, but the flexibility, well, you know this word resilience. How do you build that in? And it's not easy for a big legacy consumer goods brand or a big retailer that's grown through acquisition, you know, they've got a lot of legacy technical we call it debt. And so I think I said a real acceleration, trying to get out of that and get to something more flexible.

Wendy 05:35

You reminded me of two things when you were saying that we've got a new piece of work. It'll come out in the in the middle of the summer next month is that summer, whenever it is early summer, that we're calling How America Shops® in Chaos and we did work in two, yeah, he laughs. We did work in 2008 called How America Shops® in Crisis, because it was when the global economic crisis and everything collapsed, and we woke up in the morning and we were like, Oh, my God, it feels like that. The speed of these things, whether it is COVID or whether it's now tariffs for the moment, or whatever is just makes, creates that need for, you know, facility, flexibility, responsiveness, and we've gone back to that original work to say, what is 2008 look like? What is 2020? Look like? What's the inflationary period from 2020 2025 look like? And saying, you know, how are shoppers is dealing with this? But also, what's the same and what's different, in terms of, you know, the technology we have, how people use their, you know, phones, their now, AI, of whatever form, as shoppers to be smarter. So we're looking at that history, and it's very interesting as we go into the field, , to see what's different and what's the same, and then how are they responding? So to your point, there the speed of that change, there's always something and how do the tools we have really accommodate or help us react and respond to those things?

Justin H. 07:11

I think you're right. I mean, so it's like, how do you are you preparing yourself for the future in a way that allows for flexibility, agility, moving, shifting, and if you can get some early signals, that's great. A lot of that then ties back to data and analytics. And because this is just the next, you know, the next blimp, the next thing, there's going to be plenty more. We've had plenty in the last couple of years. I was doing some research, a lot of the a lot of the like, when I'm working with customers, I'll share first what we've seen from the consumer shopper industry. You know, things like inflation, things like trends in different markets. And if you look at the level of volatility over the last, especially, I'm looking at the chart here, and I can't share it here, but like, over the last, like 10 to 15 years, you it only has increased. Increase, right? And so for our customers, like, if that's not going away, then how do you prepare yourself for that future? And that's easier for some than others. And I'll give you a quick example. I was with a retailer two weeks ago. They have a couple of hundred stores. They're doing price adjustments out of a spreadsheet. Like they look at a spreadsheet. Every day they decide that they should take price increase, price due to sale. I mean, like, I was like, what? Wait, what? Oh, yeah, we have this, you know, massive spreadsheet. And, you know, the idea of even moving to AI for them is so early days that they're, you know, still running things on a spreadsheet. And many consumer goods brands are still trading millions of dollars in trade funds on spreadsheets.

Wendy 08:43

Yeah. Well, I also think to your point about big legacy companies, particularly, you know, all these companies that have gotten bigger through acquisition. We had on the podcast couple of weeks ago, Anna Harmon, who founded a retail company called Studs, that happened right in the beginning of a pandemic. And they started with, it's all about ear piercing. And they started with a view to creating physical spaces. The pandemic hit, they had to go to E commerce immediately. They were a small company. They were basically doing things with drops, as opposed to a steady flow. So they created this whole drop approach. And they were literally, you know, warehousing, and they are not quite under their bed, but just about, and they were able to respond very quickly. And then when things opened up, they began to build stores. So they'll have about 40 before the end of the year. And so to your point about big legacy company, how do I make sense of all this, whether I'm integrating a new business that I've just bought, or I just have this portfolio of different companies at different stages, so that urgency for information, good information, smart information, seems to be even greater. So, yeah, do you see when you think about the variety? Any of your clients. I mean, you've added, you know, food service, food ,beverage, CPG, broadly, retailers. Are there industries or categories that are ahead of the game, and if so, for what reason, or is it individual companies that get it and move fast?

Justin H. 10:20

You have to, really, you know, you have to separate out the industries, I think, first, to do a little bit of segmentation, and we can talk through that. So, for example, in the consumer goods space, the vast majority of major brands are, are definitely, you know, accelerating their tech agenda. They have teams, if not already, like a COE, or structure set up around things like AI or they, you know, they they've got people that know the data just not easy to get to it for many of them, but they're leaning in, right? And most of those CEOs are supportive of tech in a way that they haven't been before. What's interesting in the consumer goods space, and I'll tell you, I think it's a lot of fun to watch. Or the new startups, and especially food and beverage, they're all digital native. I think we've talked about this before, but like, you know, they're able to flex and move and be dynamic and innovate in a way that's unique, and I think that that's exciting. On the retail side, there's a calm there's like some that are doing well. There are some that have many stores that are struggling, that you don't know are struggling, and then there's others that are digital native e commerce players, like a Mercado Libre, for example, that you know, they're, they're the Amazon of Latin America. Really think of it that way. So, and you know, we've seen, all seen the news the last couple of weeks of some retailers that are no longer, right. And so, you know, you wonder, did they? Did they lose their relevance? Was a product mix, it's not right. Did they, you know what? What was the disconnect? And I think a lot of retailers that are doing well or doing their homework on what didn't work, yeah, for some of the others, and are making sure that they stick to their vision, stick to a plan that's centered on the customer,

Wendy 12:11

I was having a conversation about concepts that are no longer relevant, that we get buried in An idea that the, you know, drugstore on the corner is also, is always about the convenience of the drugstore on the corner right, and that you can get your healthcare needs satisfied by this place on the corner. Well, on the corner changes right. What does on the corner actually mean? When I can click on, it's Amazon pharmacy, or I'm already in my grocery store. We had Kevin Host from Walmart on the other day, and he was talking about the fast delivery of pharmacy. You know, prescriptions with your grocery order, and you say to yourself, well, you know, when we think about accessibility or convenience, that whole word has just changed, right? It means so many different things. And to your point about, how do I learn from others, or how do I keep my mind open so that I'm not just looking at my model? You alluded to Agentic AI before, I was on Bloomberg the other day, mentioning, mentioning, and the fellow who was on before me came from PwC, and he was talking about investment in, you know, in technology. And he said, you know, Agentic, so I figured I had you on so you will explain to us what's the difference between, you know, Generative and Agentic and all of those things, as you educate us to be smarter about technology and AI and the CPG space.

Justin H. 13:40

So artificial intelligence has been around since the 50s. When you heard artificial intelligence and machine learning, you might have thought it's the same thing, and you probably thought it ITs job, right? And for the most part, kind of set in IT But you know, traditional AI use cases or machine learning, that's part of AI. If I had my slide up here. I'd show you how kind of it's all AI, but um, are things like recommendation engines, personalization, if you shop on Amazon, when it shows you, other people bought this product, or you might like this product, or things like that. Our contact center solution for what's called Amazon Connect, powered by IT the Alexa device in your home, yep, powered by AI, hey, Alexa,

Wendy 14:28

she'll start talking to me. Stop it. Stop it. Hey.

Justin H. 14:33

In our fulfillment centers, we hosted, like we always those customers our fulfillment centers, like the robots, powered by AI, okay, so then we had the last couple of years, this whole idea of generative AI, right? We've talked about this for a couple of years, and many of your friends and colleagues have spent time with on this, and that's really the concept of using large language models, and that technology, I feel like it is just. Just now being adopted in many new and different ways, whether it be text or images, which are powerful. This year, many companies are rolling out short form video, I mean, like, no photo shoot necessary, no. I mean, like, the video quality is incredible, okay? And then there's this whole idea of agentic, right? So that really was the buzzword of NRF and it has been, actually, the last couple of weeks, except for when all the tariff talk came in. I thought it's kind of funny, the tariff discussion immediately went to the top of the list, But agentic we're really talking about here is where the AI can act autonomously. So I don't want to get too into the technical, but it can make decisions. It can take actions with some human intervention, but minimal human intervention. And there's it uses this whole idea of agents, AI, agents interact with different tools and whatnot. Now I'll just stop there, because I don't want to get too technical on everybody. The vast majority of companies are not doing agentic. Ai, okay, they're also not doing generative. Ai, like they're still getting there. Many of them also, like I mentioned that small retailer, the couple 100 store retailer, it's not that small, like they're doing score carding and dashboarding and trying to get good data so, so a lot of excitement and energy on the agentic topic, right? Um, I'd say the if you said, Great, let's show 10 or 15 use cases real quick, and pop those up across your friends and colleagues. They wouldn't have them. Yeah. So, yeah, but, but listen, the bottom line is, the technology is moving faster than people can keep up with and certainly faster certainly faster than companies can keep up with. So and that's only going to continue, you know, generative AI was the buzz for a buzz word for two years. Agentic is here the next, you know, we'll be talking about some other technology maybe the next couple of weeks. It's just moving that quickly, yeah,

Wendy 16:59

yeah, well, and I do think under the broader cloud that we talk about, that you live and breathe in, is that notion of, how do we understand in a world of potentially so much data, how do we take that and use it To inform better, faster, more innovative solutions. And that's the thing I keep thinking about. Especially I look around in the CPG space, and I see all these changes, you know, companies reorganizing, letting go, people in our space, which is all around, you know, shopper insight and reach out, strategy and retail innovation. It's just chaotic. And so I think about, How did those two things come together to inform not only good use of data, but a time for really good insight, you know, to sit back and say, here's what the data says, Here's what the compilation is, but what does it mean? And what's the next question to ask, which feels to me like it's the prompt, right?

Justin H. 18:00

You're seeing this show up now. Or where you'll see it show up is in like, not just on Amazon, like companies their search capabilities in how they personalize the experience on their e commerce platform. You're seeing this now play out and how some companies do allocation and planning in the retail world, there are really good use cases around kind of base artificial intelligence, with demand forecasting, and on the marketing side, for those of you that are marketers, I mean, like I said, you're missing out if you're not already using these models for images. Like, they are really good. And, like I said, video coming. So like, but most of these are efficiency use cases, where, if you're a consumer or shopper marketing analyst, like these models can help you sift through data more quickly your massive spreadsheets that you're all using, you could apply a model of those, and it could come back with some things to think about, some questions to ask that you might have taken a long time to look at. So there are a lot of really good efficiency plays here on the supply chain side. You brought that up a couple of times that the challenge is where, you know, I was at Georgia, Pacific, before I came over to Amazon, we had like, 14 ERPs, okay, and only one of them was SAP. One was in four, two, and then you got homegrown. So, like, the idea of doing any sort of like AI, where you have data all integrated into accessible is not easy, right? So, so those are some of the things just to think about.

Wendy 19:37

Yeah, we're in the middle of that ourselves. So we feel the excitement and the pain. I mean, we've got 30 years of data now, 30 years of data relevant, no, although you never know, but certainly 10,15, to your point, you know. And looking at, what we're beginning to look at is, you know, sentiment, the implications of events. You know, the implications around category, and particularly, I think this last 25 years, you know, from September 11, so 2000 and think of then building generational differences, right? So anybody who was bought born right after, you know, the attacks of September 11, and then as we move through to the, you know, the.com crash, the core Gen Z and young millennials, you know, that whole period of time, so looking at those external macro moments, and then thinking about, what do we see in the everyday you know, the frequency of shopping, the categories, the switch between now, I must still buy my phone service, but I'm willing to give up split my pills in half. You know, those sort of things. So, but to your point, it's hugely exciting to see what we know and then what it can tell us about. You know, what does that might tell us about the future, when up goes up, what does down? You know, that sort of thing. So we're in that process at the moment, and it's, as I say, hugely exciting, but real quick

Justin H. 21:05

quick On the data front, I was it made me think of another really interesting use case. We're getting a lot of asks around loyalty right now, and so, and it's not, hey, I want a new loyalty program, points program, but like, how to better use the customer data, or how to better go through and then find the insights and like the preferences, or where, where our shoppers or consumers are going. Like, for these retailers that we work with, and it's just interesting, and I bring it up with every retailer that I'm meeting with, just to test it. And more than ever, like, the last of the last one here five years, like, we're getting a lot of asks on that, but I think it's because of the interest in that data.

Wendy 21:47

Yeah, I think you know, you're so right. I mean, we hear it without, I mean, obviously, how can our packaged goods clients, who are working with the retailers, who are being asked those questions, as well as the retailers, and we're actually working with one of our retail clients at the moment, around their loyalty program and enhancing but looking, as we often do, at the competitive, not the directly competitive landscape, but what else is going on in this I call it relationship, not loyalty, in this relationship data, and what does that you know, what's going because there's some really exciting things going on, but it's not necessarily in, you know, where you'd expect it to be, whether it's more transactional points, discounts, those sort of things. So you're right. I think that's really fascinating. And then how do you build it into the other words of the moment, retail media, and where does that knowledge come together? Right?

Justin H. 22:40

You know, we actually launched what's called retail ad service at NRF in January, and it takes the best of Amazon advertising, as I'll call it, and the engine behind that, and then allows retailers to use that on their own site, which is pretty cool, because you know, the retailers driving incremental revenue from the advertisers that could then advertise on their site. And then, of course, like, the engine is driving sales on their website, not to Amazon.com so it's, it's driving to their own e commerce. And so, like, it was interesting to see the feedback when we when we started sharing it with retailers in January, and now we're seeing that only increase as companies are prepared for retail media, prepared to start finding those new revenue streams, or prepared to change the experience on their own e commerce, or they're modernizing their e commerce. So you're right, it's that's an area we've talked about for a couple years, and everyone shows the hockey stick up for retail media network revenue and spend, yeah, but I feel like it's only now becoming a reality with many of our customers. Yeah,

Wendy 23:48

Yeah, yeah. That's very interesting and the last thing I wish I haven't had a chance to share with you, but, but we, we did some work more recently that we call Decoding the Digital Titans, where we looked at, where we looked at, the shoppers of Amazon, Amazon Prime, walmart.com Walmart-plus target.com just to kind of understand better the nuances, because we learned very clearly that, you know, all e commerce shoppers are not the same, and they use different things for Different reasons and all of that. And once they pay for that elevated membership, they are then quite different and it's really, it's just, it's just amazing, amazing. And you probably know a lot of it, it's really interesting, the more we dig into that, and those retailers who are not fully engaged at every touch point with their shoppers. Really, really are losing out on all of this, as you well know. So that's so what are you coming over the next couple of weeks? Where are you? What's when you're going to be doing? What's on your mind?

Justin H. 24:53

Your question earlier about the companies that are I'd say, what? Leaning in or leading, or that are demonstrating growth or finding good results from technology and I the common thread is the CEO is engaged. It's not an IT. The CEO has decided that digital is important. The leadership team is bought into finding ways to use technology, data and analytics in ways that are different and unique. And it's not just, you know, an IT thing or offshore partner thing. Those that are doing that, whether Regardless of industry, are the ones I'd say that are, are really ahead of course, supply chain is top of mind right now, even our partners that we work with in that space, it's been top of mind. We've, you know, we're kind of at the middle of the year here, so, you know, there's questions on holiday from our retail customers in terms of their planning for product and inventory. You probably have more good insight on that. And then I'd say that, I mean, from a, from a growth perspective, you know, I think we won't even have to have dedicated webinars to talk about things like the, like the AI topic. Let's go focus on a better customer experience. Let's work backwards from that.

Wendy 32:18

I would love to have that as our next topic.

Yeah, what do we need to do? I love that, and that's a great way to end. I would love to have that as our next topic, yeah?

Justin H. 26:24

And I'll tee this up. It's like, who is the customer? So, you know, if you're, for example, a PepsiCo, your primary customer is the retail, yeah, right? Or the distributor, right? Maybe the bottler, right? And then your consumer is the person like, buying it, yeah. But whereas, if you're Carter's, for example, your customer someone with young kids and whatnot, so yeah, we'll just leave it at that. But you think about it from that lens, like, and then have to work backwards from that experience. And is it e commerce? Is it in store? Yeah, so that's cool. That would be good tee up for next time.

Wendy 26:58

Yeah, I love that. That's perfect. So, stay tuned, everybody that's going to be right in Justin and my sweet space, because we love to talk about the person, whoever they are, opening their wallet and digital or physical and paying for this stuff that we all do. So anyway, well, as always, Justin, thank you. Lots of things for us to think about next time. You always ground us in where we are in the state of the world. Thanks. Justin. Cheers. So, here's the thing. I mean, Justin always gives us this broad swath of where we are in the state of technology. And the conversation around Artificial intelligence has always been really helpful as we've tracked the evolution we're just beginning. As he said, more importantly, next time he and I talk, we are going to talk about customer experience, and not just the bright, shiny tool that is artificial intelligence, but actually what the implications are and how we need to be thinking about our customers, whoever they are, and how we improve that level of customer experience, because guess what? We know it, right, everything, everywhere, all at once, and when people can just click to buy, the differentiator is how we treat them and how we engage them and how we serve them, whoever that customer might be. So that's what we're going to talk about next time. So, stay tuned and see in the future. Cheers for now. You