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Marcus Johnson (00:00):

In the rapidly evolving world of retail media, few platforms are as uniquely positioned as DG Media Network. With over 20,000 stores, Dollar General serves as a lifeline for over 90 million shoppers across the US. At a time when shoppers are looking to save money, DG Media Network, media built better. Hey, gang, it's Monday, November 21st. Rachel and listeners, welcome to Behind the Numbers, an EMARKETER video podcast made possible by DG Media Network. I'm Marcus. And joining me for today's conversation, we have our retail briefings analyst living in New York is Rachel Wolff.

Rachel Wolff (00:42):

Hey there. Thanks for having me.

Marcus Johnson (00:44):

Absolutely. Thank you for being here. Today's fact. Where did the term stealing someone's thunder come from? So as the BBC notes, in 1709, a man named John Dennis invented a machine that made a noise just like a thunder clap. It worked really well. But Mr. Dennis play wasn't that great. And soon after its opening night at the Theatre Royal in Drury Lane, which is the oldest theater in London's West End, his play was replaced by a production of Macbeth. When John Dennis went back to the theater to see this new production, he was outraged to discover that this thunder machine was being used in Macbeth and no one had asked his permission. The story goes that he stood up and shouted, "They will not let my play run, but they will steal my thunder."

Rachel Wolff (01:41):

That is very interesting. I always thought it was like Greek mythology or something, or there's some story of somebody stealing Zeus' thunderbolt or something. But this is much more interesting than that.

Marcus Johnson (01:52):

Nothing to do with the sky. Yeah, apparently. I don't know why he was building a thunder clap machine. That's a lot of effort. I mean, no wonder his play failed. He spent all the time on the machine, not enough time writing.

Rachel Wolff (02:05):

And he probably used it once.

Marcus Johnson (02:07):

Exactly. Oh, Mr. Dennis. Anyway, today's real topic, the three biggest questions surrounding Amazon at the moment. Okay. So every quarter, we will be looking at how the big tech players are getting on and asking what are the three biggest questions surrounding said company, in this case, Amazon, right now. We're going to discuss my ranked list, and then Rachel will tell us what she would change or ad. Maybe we've missed something. By we, I mean me. Okay.

(02:41):

So I think Rachel, the number one story at the moment for Amazon is their corporate layoffs, which made a lot of headlines as Alina Selyukh of NPR was explaining, Amazon is laying off 14,000 corporate workers as it spends big on AI. They did give some reasons, well, a few different reasons as to why, but I'll start with this question. Why does Amazon need to cut workers when they're doing so well, do you think?

Rachel Wolff (03:17):

I mean, that's sort of the crux of it, right? And 14,000 is just the total number of reductions that they're going to have in their workforce. I think some reports have the total number of layoffs at 30,000, but Amazon has said they're going to hire more in certain places. So the company, as you said, they say it's not financially driven, it's not AI driven. But they have talked a lot in the past about how AI is going to make the company more efficient and reduce the need for all of these management layers and just enable faster innovation. So I think part of it is like a bureaucracy thing. Amazon has talked a lot about how they just have too much bureaucracy, too many people getting in the way of doing stuff. And I think that's certainly one reason for the layoffs. But I do think the AI piece is definitely an interesting one.

Marcus Johnson (04:07):

Yeah. They said the reasons for doing this was part of it's right sizing. Amazon ballooned its workforce during the pandemic, as a lot of companies did. And then the other part is investors aren't happy enough with the growth of their cloud business. AWS is growing very, very fast, but not fast enough compared to Microsoft and others.

(04:30):

But the AI piece and losing jobs whilst you're doing so well, I think is very interesting because, and I think Amazon might be a bit of a microcosm for the jobs market. One reason might be because they're the second largest private sector employer in the world, and so they're somewhat of a bellwether. The job market goes as Amazon goes, so to speak. But at first it does look like they are spending a lot on AI, and then cutting jobs over here to save money.

(05:04):

But when I looked into it a bit further, it seems like the headlines have maybe spooked folks, but the AI related job losses haven't actually hit yet. Ernie Tedeschi, former chief economist for the White House Council of Economic Advisors, says, "I'm very skeptical of extracting signal from headline layoff notices." And as we were mentioning, Amazon CEO Andy Jassy saying that the layoffs weren't financially driven or about AI.

(05:34):

However, back in the summer, he did write to employees saying essentially we will cut some jobs to add others in the next few years. We expect this will reduce our total corporate workforce as we gain efficiencies from using AI. And Amazon has been cutting jobs back to 2022, laid off 10,000 people that year. So they've been doing it for a while. But it does feel more like the headlines are scaring into thinking this is happening right now, when actually companies are maybe planning that this will change things in the future.

Rachel Wolff (06:03):

Yeah, I think that's definitely true that AI is not the job stealer that people think it is at the present moment. But I do also think that in some ways Amazon's claims that AI had nothing to do with it kind of disingenuous because they did say in the letter talking about why they needed to make these changes, that AI is changing the way the organization operates. And I think the way that a lot of retailers are approaching this is maybe instead of talking about, okay, AI is going to replace people, then they're framing it as AI will enable the current employee workforce to do more. So essentially keeping the workforce stable, not hiring more people, but also not firing them.

Marcus Johnson (06:46):

Yeah. Yes, especially because people leave on their own accord. It's not the only way that people stop working at jobs. They leave, and sometimes when they leave, companies are asking, can we do parts of their job with AI? And it is hard to really understand what's going... Because to your point in terms of how much is AI really affecting jobs at the moment, there is a new study from economists at Yale University Budget Lab and the Brookings Institute saying that the doomsayers are wrong and that there is as yet very little evidence that AI is putting people out of work.

(07:25):

The other part of the problem here is that, as Emily Peck of Axios notes, that the government shut down. And so the Bureau of Labor Statistics isn't putting out job reports, and it's kind of difficult to see the full picture of what's happening. It's possible AI is driving layoffs in the past month or two. But there's a list from Challenger, Gray, and Christmas, and they look at the top three leading causes for layoffs this year. They don't put AI in their top three. Federal government job cuts. DOGE cited in nearly 300,000 layoffs through September. Number two was employers waiting out uncertainty over tariffs and inflation, cited in 200,000 cuts. And then store and plant closures from typical business churn was in third place. So it's easy to point the finger at AI, but there's a lot going on.

Rachel Wolff (08:14):

And I think the other piece that you have to talk about when you talk about Amazon is their automation push in their fulfillment centers. So there was a report in the New York Times that said they plan to replace 500,000 jobs with robots at some point in the future. I mean, I think it's probably in the next few years, it's not immediate, but that would also be a significant reduction, obviously, of Amazon's workforce that is also AI related. Maybe it's not gen AI related, but that is also something to think about when looking at Amazon and their plans for the future.

Marcus Johnson (08:53):

Yeah. You do kind of have to pass out what is being done right now with AI and how it's changing jobs and what that could do, AI could do to jobs down the road. There's this survey from retail executives by Amperity suggesting just one in five employers expect to reduce head count due to AI in the next 12 months. The share who actually planned to add employees due to AI was actually slightly higher. And then this chart here as well that folks can see on the screen if you're watching, data from the World Economic Forum shows that more companies are upskilling or hiring because of AI versus downsizing.

(09:32):

It does feel like it's easy to make the correlation between, okay, this company is taking money away from here, these people, to spend on AI, but just when you look at a lot of the research and a lot of the data, it doesn't necessarily suggest that, even just the overall unemployment number was a little bit below 4% a few years ago. Now it's a little bit above 4%. So that hasn't moved too much. But it does, I mean, there's a lot of cognitive dissonance, I think for folks, Rachel. When you look at the company that just made $180 billion in Q3, up 13%, its fastest growth in seven quarters, and it made $21 billion in net profit in Q3, up nearly 40%, as it's cutting 14,000 jobs, 4% of its workforce, it's hard for folks to wrap their head around why.

Rachel Wolff (10:21):

Yeah, absolutely.

Marcus Johnson (10:22):

And if Amazon's not doing well, what does that say for the rest of us? So that's what I think is the number one story here. Because it also kind of plays into the broader jobs market picture, and I think that matters for a lot of folks all the time.

(10:35):

So the second thing I think should be on the three biggest questions for Amazon list is their new help me decide feature. So our senior analyst, senior retail analyst, Zak Stambor, writing that Amazon is rolling out a new AI powered button called help me decide, that appears at the top of a product detail page when a shopper has been browsing comparable products without making a purchase. The tool analyzes browsing activity, searches, purchase history, and preferences to recommend the right product, presenting shoppers with recs that include an explanation of why it's a great fit, insights from customer reviews, and how it aligns with past purchases and preferences.

(11:15):

The question here, I think, Rachel is is Amazon's new help me decide feature a significant stepping stone towards agentic AI? I don't want you AI to decide on your own yet at least, but get me as close to the decision as you can.

Rachel Wolff (11:30):

Yeah, I think Amazon is experimenting with all of these little AI enhancements to the customer experience they have. I think Rufus right now is really the main one that people interact with where it gives you product information, it will summarize reviews, and you can ask it questions. And something like 250 million people have used Rufus this year. And that's, yeah, it's a huge 140% increase in monthly active users, 210% increase in interactions.

(12:04):

And I think the most crucial part for Amazon is that, and this is all internal data, but customers who use Rufus are 60% more likely to complete a purchase. And so you tack on products or features like help me decide. And one can only imagine that these tools are just going to be even more effective at nudging customers to check out whatever they put in their carts. So I think it is very much, I don't know that it's necessarily a push toward agentic commerce necessarily, but certainly one to improve the experience of customers shopping on Amazon and to keep them shopping on Amazon.

Marcus Johnson (12:44):

Yeah. I had two take aways from this. One is, it's a new kind of comparison offering. Kelly Tyko of Axios was pointing out that once you press the help me decide button, the AI services, one main recommendation, along with an upgrade recommendation or a budget recommendation, these two upgrade and budget alternatives. And it reminded me of likening it to airlines. When you're booking a ticket, you have a certain ticket type, but they also show you how much it would be to buy a slightly more expensive ticket, economy to business to first class. And retailers, that's not always the case. A lot of the time they're comparing side-by-side items. So I thought it was interesting how this could move shoppers up and down in terms of their price range or in terms of what they're going to buy versus left to right.

Rachel Wolff (13:39):

Yeah, I think that's a really interesting feature, especially now when people are very conscious of how they're spending money. And maybe some people are willing to splurge and some people want the budget option. So I think certainly giving customers more options is always going to be better than just directing them to one.

Marcus Johnson (13:54):

Yeah. The second takeaway was from Ms. Tyko as well, from her piece, basically questioning how are these recommendations decided. She was warning that the feature could raise questions about how Amazon's AI decides which products can get spotlighted, and whether paid placements, brand partnerships, or its own retail lines could ultimately influence those AI generated best picks.

Rachel Wolff (14:18):

Right. And there's also the question of what does this mean for Amazon's ad business when most of the money that it makes comes from search placements through a traditional search on its website? And I think that's a question that they have to answer sometime soon.

Marcus Johnson (14:34):

Absolutely. So that's my second pick. Amazon's new help me decide feature. Number three. I went with Amazon's AI smart glasses for workers. So Amazon's unveiled prototype AI smart glasses for its delivery drivers, writes BBC's Lily Jamali. She explains that Amelia, the Amelia glasses, as they're called, include a camera and built-in display, and pairs with a button in a waistcoat. The glasses help drivers find the right packages in their trucks, give them turn-by-turn directions to the right address, and take photos of successful deliveries instead of needing to use a phone. So my question here, Rachel, was is this the Trojan horse for smart glasses? Is this the way we get used to people wearing them out in the wild?

Rachel Wolff (15:29):

Maybe. I mean, I would say that I think for the majority of the consumers, the Amazon smart glasses, they don't necessarily have the features that they're looking for at this moment in time. I would say. I think it's an interesting piece of kit. I think the way that look at them as more through the lens, no pun intended, of what Amazon is doing overall with fulfillment. I mean with these smart glasses, the aim is very much to make it easier for these drivers, speed them up, get them to the door faster, help them find the package faster. And I mean, throughout this year, they've been rolling out all of these innovations in their fulfillment centers with these last mile delivery capabilities to just get stuff faster. So I think it's very much in that vein. I mean, going back to the automation push and fulfillment centers, I think it all fits in very nicely with that.

Marcus Johnson (16:30):

Yeah. What are the efficiency gains here? Amazon's VP of Transport, Beryl Tomei, I think that's how you pronounce it, estimates the glasses could create up to 30 minutes, half an hour in efficiencies per eight to 10 hour shift by minimizing repetitive tasks. So quite significant. Also, it helps people find the packages in the trucks, gets them to the places, but also if they drop it at the wrong place, with precision location targeting, it can basically warn them, hey, you've put this at the wrong house, which could be very beneficial as well.

(17:08):

It seemed, Rachel, that another one of my takeaways here was safety first, privacy second. So safety first. I say that because Amazon said the smart glasses can detect when they're in a moving vehicle and it shuts them off automatically, which I thought was pretty cool. And it also supports prescription lenses, which is going to be an important part of this. And then privacy second. Sean Hollister of the Verge noting that Amazon's blog post doesn't discuss any possible ethical concerns that workers or customers might have as these glasses monitor the last mile of the delivery process. How big of a concern is that?

Rachel Wolff (17:45):

I think it's a valid concern. I mean, one thing that I was thinking of was that you do a tremendous amount of data from these drivers going from door to door essentially. And that can all be used obviously to help Amazon build out their geospatial strategy for fulfillment and all those things. But it is a lot of data that people may not be comfortable giving up. And I do question how much of this mapping, again, not to bring it too much back to automation, but again, the more that you regiment these things, the more that you hand it over to AI to make those decisions, I feel like the easier it is to eventually hand it over to say a robot delivery thing. I don't want to say person. Machine, to handle those tasks.

Marcus Johnson (18:33):

Cyborg. Yeah. They are helping people find the packages, helping people get to the locations, helping people drop it off. It does seem like at some point it'll be very easy to pluck the human element out of this and replace it with whatever a cyborg, robot, drone replacement looks like.

(18:51):

But something you said earlier, it's kind of an interesting piece of kit. I do think it is a bit of a stepping stone into getting people comfortable using these. Because I think people wearing these out in the world, it kind of freaks people out a little bit. Is the camera always on? Who are they recording? Whereas for a worker, it's kind of hidden behind a brand, so to speak, or a company. And it's a tool. It's something that people are using to help do their jobs faster.

(19:22):

So I think if maybe if the Postal Service, whoever, started using these, people would have less of a problem with it. And then maybe people do get more comfortable with it. Because it's almost the reverse of a Ring doorbell. There's this camera that is staring out into the world at all times without your permission. And the glasses that are going to be the thing, the reverse angle of that experience on the last mile delivery portion. And I think it is a baby step towards broader adoption potentially.

Rachel Wolff (19:51):

Yeah, that's an interesting point. And I think how many Amazon workers are going to be using these, presumably a pretty sizable amount. And they might see the benefits in other areas of their lives as well.

Marcus Johnson (19:59):

Exactly. Yeah.

Rachel Wolff (20:00):

And boost adoption that way. So I think that's definitely an interesting piece. I would also just wonder how many people would know that these drivers are wearing smart glasses.

Marcus Johnson (20:09):

Great point. Yeah. Because they don't look that different really. They look like similar-ish to, what do you call it, racquetball. I think we call it squash glasses. They're a little bit different, but not where you would notice it. And yeah, I think maybe people used to know their mailman 30, 40 years ago, but I don't think many people are staring at their Amazon driver that much. So yeah, it's a good point.

(20:40):

All right, that's my top three. So to recap, I've got a question about Amazon's corporate layoffs. The second one is about Amazon's new help me decide feature. And finally, Amazon's AI smart glasses for workers. Are there any bigger questions, or should these be ranked differently in terms of significance?

Rachel Wolff (20:57):

So I would maybe reframe question two a little bit, still thinking about AI. But I think one of the most interesting stories about Amazon over the past few months has been how it is approaching agentic commerce. I would say more specifically with regard to third parties. So they just sued Perplexity for allowing its agent to make purchases on Amazon's website after Amazon changed its terms of service to explicitly prohibit that type of behavior. It shut off Google and OpenAI from doing the same. And I think there is a big contrast to be made with how Amazon is approaching agentic shopping versus how say Walmart is. I mean, Walmart has a partnership with ChatGPT literally to make agentic commerce possible, to allow people to purchase from its site.

Marcus Johnson (21:50):

Their instant check-out.

Rachel Wolff (21:51):

Yes. So I think it's almost an existential... I don't, no, I'm not going to go that far. It's not an existential crisis for Amazon, but it is a serious problem for them. Because going back to the question of ad revenues. As I said, most of Amazon's ad revenues come from search. And if more people are using a ChatGPT or Perplexity to do the product research on their behalves, then that sort of takes Amazon out of the equation a little bit more and they lose ad revenue, they lose customer data. So I think it really is a big question for the company, how they're going to respond to this threat.

Marcus Johnson (22:28):

Yeah. I think that's fair. I think a reframing absolutely works.

Rachel Wolff (22:34):

Do we want to talk about grocery?

Marcus Johnson (22:37):

Always. Grocery, so the reason I'm not including it in this list, and there's a ton of stories about what they're doing, what they're doing with Whole Foods, the future of Amazon Fresh, what they're going to do with grocery on the whole is because I thought there's so much here actually we could move it into the retail show. So Suzy, host of the retail show, you'll be covering that in a future episode. I haven't told you yet, but you're finding out through the public airwaves. But yes, I think there's definitely a conversation to be had there. What jumped out to you about that?

Rachel Wolff (23:07):

I mean, it's pretty much the same as previous quarters, but Amazon Fresh I think is kind of on the decline. I would say it's on its way out.

Marcus Johnson (23:16):

It sounds like it. Yeah. Especially the UK, I believe they're packing up shop in the UK. Yeah.

Rachel Wolff (23:20):

No more Amazon Fresh for you UK listeners. But I think in general, what Amazon is trying to do with grocery is interesting. It's trying to get people to order more groceries online, which is not necessarily a bad strategy if you look at how Instacart and DoorDash and Uber Eats and all these companies are growing pretty quickly, but it's still a challenge. And because they don't have the physical footprint that Walmart has, I think it's a logistical challenge that they haven't yet figured out how to solve.

Marcus Johnson (23:50):

Yeah. Yeah. I think that's a good one. Their grocery business. Yeah. Physical store sale is still small. It's making about $6 billion a quarter, but it's only about 3% of their business. So it's not nothing, but they still haven't figured out the right direction to take, and then double down on the investment there.

(24:10):

The other two stories quickly that I was thinking about including in the list, one, was Amazon stretching Black Friday and Cyber Monday into a 12 days of deals starting November 20th running through December 1st. I thought that was interesting because we've always talked about the stretching out, the elongating of shopping holidays, and how long would it just be the Cyber Five, and when would it become more than that? So I thought that was interesting.

(24:36):

And then also second story, Amazon paying $2.5 billion to settle an FTC lawsuit after the agency accused the retail giant of knowingly duping users into its $15 a month Prime program, and making cancellation unreasonably difficult. But not big enough for the top three, I think. Anyway, that's my list. And Rachel pretty much agrees. So happy to have you back-

Rachel Wolff (24:58):

Which is rare.

Marcus Johnson (25:00):

... because... That is true. She's normally very combative. Rachel, thank you so much for being on today's show.

Rachel Wolff (25:06):

Thanks for having me. This was a lot of fun.

Marcus Johnson (25:08):

Thank you to the whole production crew and to everyone from listening to Behind the Numbers, an EMARKETER video podcast made possible by DG Media Network. Subscribe, follow, as always, rating and review if you can, and we will see you on Monday. We do have a special edition episode coming out tomorrow, so check that one out on Saturday, a Saturday special. Otherwise, we'll see you on Monday. Happiest of weekends.