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The Commerce Collective Podcast
This Month Above the Fold - Joybuy launches in Europe, the changing upper funnel landscape, and where retail media spend will go in an AI search-driven future
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Foreign.
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Welcome back to Flywheel's Commerce Collective podcast. You're listening to this month above the Fold, a monthly series on the Commerce Collective feed where Danny Hoffman, senior director of Global Retail Strategy at Flywheel, and I cover each month's most important commerce topics. I'm Emma Irwin and today we are covering the launch of Joy Buy across Europe, the changing upper funnel landscape, and we're beginning an ongoing riff on the future of AI in commerce, focusing this month on on the impact to paid search. Let's get into it. Danny, how have you been? What's up?
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I'm great. I carry an American accent, but I live in London and we are about to head into the five month period where arguably London is the greatest city in the world. So I love that we haven't seen the sun for a long time, but it's coming and I'm so ready.
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Very good. I can feel you there with the weather up north in the US for, for fun and giggles, I'm doing a show and tell for you because last night I wrapped up picking up some ceramics that I've been working on. I've never done ceramics in my life, but here we have a horse that is Flywheel blue that I just wanted to show the world.
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So stunning. Thank you. Thank you for sharing. I appreciate that.
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Of course. All right, story number one. JD.com backed Joy Buy has launched its marketplace across Europe. We can tell that you live in London per picking a story centered on Europe, but that's probably a good thing. We don't cover it very often. But can you tell me a little bit about Joy Buy? Like what is it like, how does it work? I have not. I was not familiar with Joy Buy until you sent me this story.
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Yeah, the world of e commerce is bigger than just the United States. This is really interesting to me. So Joy Buy is backed by JD and so JD is the largest retailer by revenue in China. So it's a US and Hong Kong company. What's really interesting here. So JD has basically backed this, this new retailer, Joy Buy that's launched in uk, Germany, France, Netherlands, Belgium and Luxembourg. They are going to be doing next day delivery and the timing here is really fascinating. So in 2024, JD was in talks to buy Currys, which is a retailer in the uk, and then Argos last year which is another retailer in the uk and then they backed out of both of those retailer purchases and kind of created their own here. This is particularly interesting especially given the timing around fulfillment. So JD launching Joy Buy is a same day delivery fulfillment option. Amazon's also introducing one hour and three hour fulfillment. Alibaba Quick Commerce is also making headways and news too. So there's a lot of global fulfillment speed that's become a big story in
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terms of like product selection and pricing. Would you describe Joy Buy as more like an Amazon or more like a Temu or Shein kind of vibe?
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So this is why I think that the Currys and Argos news is interesting here. So the other part of this is that Joy buy struck a 2.2 billion euro deal with a German based electronics retail group called Seconomy and they also now have a physical retail footprint through mediamarket and Saturn. They're working with a UK supermarket called Morrisons and it seems like some of the Morrisons branded items are going to be on the site. So very different from Atemu where Temu was a little bit brandless and focused on cheap product, slow delivery, really going after kind of the lowest common denominator of shopper. Amazon's comparison to Attu is haul. Joy Buy is actually a true, it feels like Amazon comparison. So you've got private label coming from the supermarket Morrisons, you've got electronics coming from German specific retail groups. You also have physical footprint coming from partnerships with German retailers. This is a really fascinating play and I think one of the things in Europe is that Europe is a really fragmented marketplace. So every single market has different retailers. So if I look across each of the markets that they play, UK has a handful of retailers that are different mentioned a couple is already. Germany has a few that are different too. France has some that are specific to them and also some that are shared across some of the Southeast Europe marketplaces. So Carrefour is that one, Netherlands has Bowl. So each of these marketplaces has their own retailers. Amazon is one of the few that goes across marketplaces until this Joy Buy launch. And so that's the part that I find really interesting about this is that they are specifically competing with Amazon on kind of being the breadth retailer.
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And do you think that's a like a legitimate threat to Amazon in the near term or is it going to take a while? I don't know.
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I don't know either. So this is, I think this is really interesting. Some of the things that are on Joy Buy site that they are touting as differentiators. So they're talking about 24, 7 customer service, free return, same day and next day delivery, guaranteed quality. It feels like they're speaking the language that we usually associate with Amazon. When you look across Europe Also so one of the things that I've always thought that is a strength of Amazon in the US is just the size of marketplace. So the total population of Europe is somewhere in the 750 million range. So like 10th of the world's population, the US is about 350 million. And so when you think of each of these different marketplaces, Europe in total is only about 2x the size of the US which is why. And US GDP is massive and US consumer spending is massive. So a lot of these retailers end up usually pushing either US first or the usual rule of thumb is that anything that happens in Europe is roughly a tenth the size of the US in terms of market cap or size. So a lot of our businesses that we work with in Europe and in the US usually the European business is roughly a tenth of the size of their US one, give or take. This is fascinating because what it feels like to me is that Joy Buy is a path in for JD to expand into Europe in more traditional ways. So as opposed to like the Eastern TikTok shop social commerce ways. But I wonder if this is a, a test to then expand into the larger consumer economy that is the United States.
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Eventually that was going to be my follow up question. Like oh, do you see this coming across and maybe actually working advice to brands. Would you say like get on there now, get your products on, go experiment. Or is it more of a wait and see kind of thing?
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So I think what's hard for brands and the TEMU thing was especially hard because it was like there's no brands here. So if I'm the only brand, do I stand out? Does it make sense for me? Is this the right shell for me? Joy Buy is hard because for a lot of brands their strategies are incredibly fragmented. There's a lot of places to touch consumers and so if you choose this one, what are you not choosing? I think becomes the challenge. Right now there are no ads on the platform, at least from what I could see. I did a little bit of scrolling and I didn't see anything that was paid. But it also just launched. I would be shocked if it didn't have a retail media platform at some point in time. But what that means for brands is that the selection kind of takes care of itself. If you're already in some of these grocers or sell through some of these electronics or German manufacturers, it seems like that selection is going to carry through to here. But we'll see. I mean this is probably much more about test and learn for brands that are willing to expand. But I wouldn't be surprised if in three to five years this becomes one of the core retailers that matters. In the same way that TikTok shops shop has become a like it's not an option anymore for brands who are trying to test and expand.
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Interesting. We got a, we got a live prediction right there. That's pretty cool.
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Yeah, well come back to me in three to five years.
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Yeah, well hopefully we'll still be, we'll still be doing this. So I will be like 25 years into doing this podcast.
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If you have a little bit of extra and you're curious to see what happens here, it's worth kind of dipping a toe in. But as of right now, I don't know if there's necessarily a first mover advantage. These consumers are likely very similar to the ones you get on Amazon. They're just, it isn't additive, it's just sharing across. It seems like similar products and assortment too.
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I'm going to move us into story number two. So we're going to touch on some of the industry discourse that has brought to life some maybe pent up long standing differences of opinions on how ad inventory is bought and sold, sold, what it should cost, the power dynamics of the game, et cetera. So you and I are going to try and build an unbiased hypothetical scenario here. If advertiser spend moves away from the trade desk over time, where does it go instead and why?
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So this has been really fascinating to kind of follow this thing live for a moment. So there's been a lot of news specifically around transparency with trade desk at the center. And as a result of some of that news, trade desk is down 8%. What this ends up meaning is it's a lot less about trade specifically and a lot more about okay, so if I'm going to push away from this one, what am I pushing now toward and why? So trying to kind of read the tea leaves on this. One of the things that brands have cared about a lot has been the idea of transparency. But the other thing that brands care about a lot as it relates to DSP is also results. So they want to see the thing working more than anything else. And so there's a. This is relatively old at this point, but the association of National Advertisers in December of 2023 put together a report and this report made its rounds and has made its rounds over the last few years that essentially out of every $1 spent in DSP by brands, only 36 cents of that $1 actually reaches the end consumer. And that was really eye opening because what it meant was that what spend is actually effective and what spend is actually wasted. So historically I think that in the ANA piece 35% of spend was wasted on MFAs or made for ad sites. And this has become a large part now where SSPs have parameters in place to create credible inventory and minimize waste like this goes. It's pretty pervasive in most of the DSPs and SSPs that exist now. But one of the key pieces of that is also about reaching consumers. And historically we speak in terms of reach and frequency when we think about dsp, but the actuality is that when brands spend, the goal for brands is to be able to then get those consumers to take a certain action. The longer answer to a shorter question is where do, where do advertisers then go? Likely we'll end up seeing them go toward the retailers who are continuing to verticalize or toward the providers who are continuing to adapt and grow and shift. So Google announcement that they're folding Gemini into its DSP is obviously enticing. Amazon is continuing to connect with either their own agents or brands agents in a DSP ui, but they're also verticalizing. There's a lot of different touch points now that make for this to be a DSP is not just like another point in the consumer journey, but it is likely one of the places in which you can truly do some brand building as providers. Specifically the retailer providers go further up funnel on the basis of first party purchase audiences, which is what's unique to them.
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Okay, hear me out. As someone who has not bought or sold ads across dsp, the open Internet, if the spend does move away from the trade Desk and into DSPs like the ones you've mentioned, are advertisers then like missing out on a really valuable selection of open Internet inventory. I don't think this is answerable in numbers, but like what percentage of the open Internet does Amazon's DSP or Google's cover surely like retailers can't own all of it, right?
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So the, the inventory itself is actually really interesting because it's almost becoming aggregated by certain players. So the, the goal ends up being measurement more than anything else. And so that's actually the, that's the power. With Amazon including Netflix as viable, Disney as buyable, Live Sport as buyable, Prime Video is viable all within one entity, that's then measurable all the way to consumer is. I can prove that some of these things that I used to think of as different or Fragmented or siloed from my DSP buy now become connected directly with purchase. Same thing with Walmart and Vizio. Same thing with the continued expansion of carrot ads. I mean, even when you think about Trade Desk, they have connection through Snowflake. There's a lot of push here to make sure that I am connecting the actions that I'm taking in terms of brand building with purchase. It is more about the ease of that connectivity because for brands, the ability to measure did it actually drive a purchase is the most important part. So again, going back to that study, if I can minimize that wasted spend, but I can also maximize the number of my ads that reach consumers, those consumers are really critical because that's where DSP goes from having kind of a little bit of mental gymnastics in terms of return to being a lot more true in terms of what am I truly getting for the spend that I'm putting in this place.
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Petition for ANA to run that experiment or research again, I'd be curious to see. It's been three years. I wonder what the percentage would be three years later in terms of how much of every dollar is wasted.
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I think a lot of the DSPs and SSPs have actually really pushed hard here, whether it's a direct response to that or not. But that is something that has now become pretty core where you can get pretty granular in terms of what you are and are not targeting. It's interesting that debate here is over transparency, because the question then becomes transparency to see what exactly the I think a lot of this ends up actually going into the third part that the ANA flagged, which is fees in general. And so I think what brands want to know and what DSPs want to provide and what agencies want to know is where's all this been going? And most effectively, how do I prove that it is going toward the eventual conversion that is the thing that brands get compensated. On
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the conversation of where upper funnel spend goes, results being what matters in tying upper funnel to sales, we can get into our last story, which is going to be more of just an ongoing riff on the future of commerce. Specifically for now around AI search. You know, the ongoing storyline of will AI kill the search bar? We know that upper funnel spend and revenue are growing, but is that maybe out of an anticipation of like AI really impacting paid search? What about how AI has impacted discovery? You know, where. Where do brains put their dollars with so many things changing?
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What I really like about this actually is that you and I are riffing on this and I don't think either one of us both have the answer or should have the answer. This is truly just professional curiosity. And so this is where I would love to maybe spend a couple of minutes just kind of figuring this out with you and getting our collective thoughts. But this actually, this feels a little bit like homework. So we could probably disappear, come back in a month and be like, hey, this is what I went and researched and found. This is what you found, but maybe it's a push to all of your listeners too. I'm assuming everyone probably has an opinion on AI and the changing landscape of search. I would love to hear from everybody on this. This is genuine professional curiosity. What we're seeing a lot is this shift toward mass personalization. So this is kind of this quote unquote, fifth wave of the digital sphere, where we went from algorithmic driven commerce to now algorithms no longer are really the thing that drives as much as individual personal engagement, whether good or bad. So I've been playing this game with folks where if we're sitting in the same room, which you and I are not even sitting in the same continent, but if we're sitting in the same room, same IP address, we both search on the same retailer site, we search the exact same term. Do we get the same result? And arguably no. I don't know if you've done this before, Emma.
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I have done that before and it is generally different.
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Yeah. So that the PAVE results are different, the organic results are different. And I think this is both fascinating, not that surprising, and also challenging for brands who have spent the last several years trying to convince their organizations that the number one goal is gaining organic rank. And now organic rank becomes incredibly relative and personalized. And so when we say share of voice, it's share of voice compared to Emma, compared to me, compared to third other person even paid in organic share of voice. That experience is so personalized that last year, during Prime Day, actually last few prime days, what's been challenging is that most of the consumer experience ends up being something like I get on the homepage and it says products that you've viewed before, products that you've purchased before, and discoverability sort of goes out the window. So this is where this ended up, opening the question for, I think both of us, which is if search is incredibly personalized, almost so much so that it actually kind of mirrors the personalization of chatbots, and retailers are opening their own chats like Amazon, Rufus, Walmart, Sparky, et cetera, what does that experience do to both organic and paid search? And does it eventually Long term, does it actually kill paid search? So this was the connection that we were having in terms of okay, well DSP becomes more important. DSP continues to be closer and closer tied to conversion and consumer behavior. Do we actually just kind of truncate this funnel a little bit?
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I've spent a lot of time thinking about just in terms of discovery and I had a good conversation with another colleague who was saying like it's really currently actually like the death, death of upper funnel search because those like high consideration purchases you might have or not purchases high consideration like queries you might have done just in plain Google. You now maybe are doing it because it's more direct. You get a much more streamlined set of answers if you put in a broader. But like something you really need to think about. Like the. This is not a good example but it's the one that's coming to my mind of like you need to buy a new car. You're not going to buy your new car on Amazon. So that's a bad example. But something like that where you're really thinking or like maybe it's even a vacuum cleaner. And then the number of search results that you get back are so it's so much smaller. And then if you're playing paid search in there, once that develops, is that there's just one product that can win the auction. Like there's only one. What if they all become paid? How different is that from actual regular paid search in the grid then at that point and what does that mean? Do challenger brands die? Do the biggest brands get to survive? Because all of the LLMs say hey, we know those brands. We're just going to shoot off those names because everyone talks about them and just kind of that like death of discovery. That then is death of search. And maybe not death. We, we gotta stop being so morbid. But that, that's what I've been thinking about like of the. Oh like all these brands in the world. If the, it's, if it's just like so much more of a truncated, streamlined funnel. Do they all have space? Do they all have a place in the world if this really gets adopted?
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Yeah, I, I mean I think the. There's a couple of pieces that are really interesting to this that you're saying which is your discovery ends up being incredibly personalized. Which ends up meaning that if brands are saying well how are consumers searching? The problem is that they're all searching relatively uniquely. There's not that much that ends up being true overlap in terms of some of these Searches, there's recommended ones or you get some of the dropdown stuff. But brands reaching searchers in this way is very new. And I think you're exactly right that it goes from what used to be an endless aisle to now a very truncated aisle that then continues to be built based on further probing, further questions, and a couple of stats that I thought were really interesting. So Walmart had reported from a survey of their consumers that 81% of shoppers have used Sparky to look up product availability about a product before purchasing. So and on Amazon, rufus users are 60% more likely to purchase. So this actually gets you from discovery to purchase, refining the shelf and even pulling in retail signals much quicker. One of the ways in which I used Sparky recently, just to kind of test and play with it and it'll actually push you to create baskets. I think one of the prompts that it was giving me was, I want to make a movie night. Here's 10 products to go create a movie night. And it was offering me blankets and popcorn and the headset. And it was fascinating the basket that it tried to create to increase aova. And the stat is that consumers who go through this particular purchase journey, they will purchase a much higher either quantity or price point of product. They aren't comparing the price, they aren't comparing the shelf anymore. And so maybe you're right that it ends up truncating selection or pushing more towards true brands. But I also feel like genuine brand building and making connection with consumers who recognize your brand name. As the shelf shrinks, how do you keep standing out? It's probably based on that recognition for sure.
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And then that gets me thinking on, like, how do you, how do you measure that as a brand? Like, what signals will the retailers be giving in terms of like that query specifically? Maybe someone buys a brand of popcorn from that, but it's like, can they actually see that it was purchased via inspiration from Sparky and that's where that started. And like, then you don't know how did they ever have any kind of exposure to that brand out there in the world? Or it truly was that short of an experience.
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I mean, this is unfounded because this hasn't been launched and no one has said this to me ever. And so this is purely a guess, but I can't imagine a world where. So right now the personalization is being unpicked via clean room. So it's a personalization, but personalization at scale, that is then aggregate and anonymous. And so now I can start to determine what do My consumers do on average. And how do I then reach them and meet them? I can't imagine a world where the AI chatbots that are integrated within a retail environment aren't then included into that clean room in some way, shape or form at some point in time. Today, no, but eventually, probably. And so then you can get to okay, consumers either likely search this thing or it's just binary. Consumers engage with chat and then this is the thing that they do within a certain category. I don't know the answer to this, but I imagine that that path to purchase will probably end up including that format at some point in time, especially now that ads are starting to enter that space too. So if ads are there, the consumers are there more and more frequently. And that's where consumer behavior heads. There is a world where why would I go to the shelf and do all of the work myself to compare products when I could just cut through the noise and get down to 5 instead of 500.
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And if the retailers are providing that level of measurement, I could also see like that's a much more attractive place to put your spend versus a non retailer owned LLM. If not to. Not to get in the weeds there. But like yeah, if you just. It seems easier to get the measurement and signals when within that like closed loop loop ecosystem versus the others. And so like how does that pan out? But do more people use non retailer LLMs for the next few years than they do retailer one side? I don't know. I could probably actually do some math there maybe.
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I mean this is actually there was a. And maybe this is the research that we add to next month when we follow up on this. But one of the big things that Patrick said that was eye opening to me recently at one point on this podcast was about Google. And so the AI answers at the beginning of Google results, one of the things that I know that a take of his was is that going to end up potentially undercutting some of the relatively valueless links that live below in the serp or some of the ad units that undercut when it's all getting summarized up top anyway. Does that then truncate the search experience? And is Google unintentionally or intentionally undercutting their own paid search environment? And so that happens at the exact same time as YouTube is officially the largest media network. I don't think it's necessarily an accident that brands are starting to push further up, so to speak. And even there, where it's usually a first mover, it's really fascinating to kind of watch and see what's the eventual growth of that relative to Gemini and do we see brands and advertisers starting to put more advertising money just in different places? I feel like there's a the little bit of a leadership role that Google might be playing on that for sure.
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I mean, I can say I haven't scrolled down on Google past the AI summary in a long time. It has to really feel so bad, so bad of a summary to get me going farther down. And that rarely happens.
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The only closing note on this is that even if in a world paid search, traditionally, as we thought of it, goes away, the fundamentals still matter. And until we start 3D printing stuff at home, fulfillment availability, price selection, those fundamentals of retail are actually arguably more important than they ever were before. If the shelf gets truncated, boom.
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Closing thoughts done. All right, Denny, thank you for your time this month. Looking forward to the next one.
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It was lovely. Thank you for having me.
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And that's it for this month's Commerce News. We'll be back next month covering everything you need to stay on top of it in Commerce. I'm Emma Irwin and we will see you next time.