Darin Newbold  0:06  
Good day and welcome to Commerce Today. We're excited to have you here. My name is Darren and as always, Josh here to share with you what's happening in the world of commerce. So I know we were talking here ahead of time, Josh, and the economy is always big, and it's on your mind. So I guess what's on your mind about the economy, Josh?

Joshua Warren  0:26  
Yeah. So I've been thinking and had an interesting conversation this morning about how really how we feel about the economy drives our behavior. So if customers feel like the economy is getting worse, they spend less, if businesses feel like the economy is getting worse, they invest less. And it even got me to thinking about how, really the results of the economy, consumer spending are driven by people's feelings about what the actual economy might be right now. Which is a little scary. If you think about that loop.

Darin Newbold  1:00  
They're starting to be like a chicken and an egg. Yeah.

Joshua Warren  1:04  
And all this really tends to be based on predictions. And I started thinking about all the predictions about how we were like, This time last year, we were hearing about the huge recession that was going to happen in 2023. And there's there hasn't been one kind of missed on that. And so all of that kind of collided in my brain with a quote from Warren Buffett that we've mentioned before that to be successful. He was referring to investing. I think this goes for business budgets and investments as well, should be fearful when others are greedy and greedy when others are fearful.

Darin Newbold  1:34  
All right, well, besides the chicken and egg situation, we kind of pass that on. Behaviors obviously drive the economy. But what's that mean for the merchants for our Commerce Today, crowd

Joshua Warren  1:46  
budgets, I saw a lot of budgets and conversations around the priority and timing of E commerce investments this year, that were greatly influenced by people's feelings about the economy. And that just got me to thinking actually about a conversation years ago that I had with David DUBNER. He is the owner of an E commerce marketing agency called Cyberware. But he is a very, like everything they do is based on economics, math, science. So there were some economic truths that he shared with me years ago that I'm starting to see played out,

Darin Newbold  2:18  
basically, all right, share the share who wisdom here for all of us, we're

Joshua Warren  2:23  
okay. Yeah, I want a whiteboard for this, like this is this is fun, for me at least. So during times of low interest rates, and high economic growth, so think of you know, a few years back, especially when the government was just printing money during COVID, ecommerce brands will invest a lot more, they'll spend a lot more money, but then many businesses will spend too much, and they'll take on a lot of debt. And debt tends to be very cheap. During times of high economic growth. I know there's a lot of people talking about how interest rates were at or near zero in a lot of cases. Not too long ago, well, what goes up must come down, the inevitably, the economic growth slows down, interest rates go up, those businesses either have a hard time paying their debt as the interest rates go up, or they've gotten so used to just always been able to get more cheap debt, that when they go and try to get more debt, they find themselves in trouble, because they can't, because they can't qualify. So that's always an interesting cycle to watch. But then the other piece within this that David, really illuminated for me all those years ago, is that the businesses that stand out that don't just have like that slow and steady growth rate, but they you see, like a big jump in profitability and revenue. They're the ones that are aware of this cycle, and they act differently than those businesses.

Darin Newbold  3:41  
What do they do? That goes against the grain, if you will.

Joshua Warren  3:45  
So it's all about it's all about dollars, it's all about cash. So they build their cash on hand, when the economy is doing really well. And there's a lot of high economic growth. There's a lot of brands that will thing and a lot of CFOs that might say, hey, the debts cheap, let's go take the debt, let's not worry about having a lot of cash on hand. However, the kind of the more seasoned CFOs, I feel like will say let's build up a little war chest and set aside some money for a rainy day. And they build out that strong amount of cash on hand. Well, then, and when the economy slows, and we hit that lower level of economic growth, they start seeing that, you know, no one else can make strategic investments because they don't have money, and they can't access the debt that they've been accessing these brands that set aside that cash. Well, they can and lots of times, not only can they get a better deal, because they're one of the only people making these investments, but they're really smart about it, they can spend the right money on the right technologies to jump ahead of their competitors. And as the economy rebounds, they ended up way out ahead. So I think in a year or two as the economy continues to turn around, we're going to start noticing some brands and people are gonna say where did they come from? They came out of nowhere and all of a sudden this brain would never heard of this, you know, top 100 ecommerce brand in the United States? And I think it's going to be because they timed these investments. Right.

Darin Newbold  5:08  
All right. That's awesome. And that's, obviously that's a great plan that that actually is a good plan, even for an individual and not just a business. But how do you how do you take the next step? Don't there's some things we need to know, to really be able to take those next steps? Right? Right, right,

Joshua Warren  5:26  
you really need to know where we are in the economic cycle. And I'm not an economist, I'm not a financial adviser.

Darin Newbold  5:32  
But he does have a crystal ball behind him. They're just

Joshua Warren  5:36  
exactly. Also not a CFO. Sometimes I play one on TV, but that's all. So I'll take all of this with a grain of salt, do your own research, we're going to put links in the show notes to all of the sources for the data here. But basically, so far this year, there's been a lot of uncertainty, a lot of talk, that economy's bad, economy's bad, it's only going to get worse. But when you actually start to peel back the data behind it, and you even start looking at some of the reports released in just the last week or two, it seems like we've already past that inflection point where things are starting to turn around. And it might be getting close to that time to make those investments. And when I say the data shows that so more of my phone reading at night. So the Congressional Budget Office releases some interesting very long PDFs, Moody's, Swiss Re and a lot of others. I looked at all the data that they've released in the last few weeks, inflation has really eased up all these different sources, they they don't quite agree where it's gonna land. They think the next year inflation is going to be down somewhere between two and 4%.

Darin Newbold  6:40  
So hang on a second, what is this Swiss Re I mean, is that we're not making Swiss Miss.

Joshua Warren  6:46  
This is our our overlords in Zurich. So Swiss Re is the largest reinsurance company in the world. So they sell insurance to your insurance company, for when your insurance company sells you insurance. So they have their hands and businesses and risk profiles and everything all over the world. So they pay close attention to economic factors.

Darin Newbold  7:12  
All right. So interest is going to inflation is going to settle around two to four. What else are they telling us about about this and helping us kind of make the decisions, and maybe being able to we could ultimately maybe even provide, at least from their perspective, this is not us. And again, we're not CFOs or economists or anything, we're just reading the information and making some educated thoughts around it. So kind of where does this all lead us?

Joshua Warren  7:43  
While and I got to preface this by saying I've had one class in college and accounting. And I literally mean one class, I went one day, and then I dropped it. So. But I think the biggest thing and our longterm longtime podcast listeners will realize that I tend to be a little more optimistic than a lot of media voices out there. This time last year, when everyone was saying the economy is going to collapse, I was saying maybe it won't be quite that bad. Well, it's funny. Now all these sources are saying, oh, there's not going to be a recession, the most pessimistic source I can find set the chance of a recession in the next year at 33%. And then the economy is also expected to grow probably 2%, this year, 1% next year, and then back to like 3%, or better in 2025. So things are starting to turn for sure. And what caught my attention the most is Swiss Re says that they think the Fed is done raising interest rates. And that's been a big part of what's driven where we are in the cycle. They think the Fed is going to start lowering interest rates next year. And we're right at 5.5% for kind of the central fed borrowing rate, they think that'll be closer to 4.4% by the end of next year. So looking at all that and answering your question, if you have the cash on hand to do so, I would say sometime between now and the first half of 2024 is your opportunity to leapfrog your competition to make those strategic investments. However, if you don't have the cash on hand, you might be hearing this and thinking oh, I want to get out ahead of everybody. Interest rates are probably at their peak right now. That means this is the worst time to go borrow money to try to leapfrog your competition, because a year ago, they would have been cheaper a year from now, it'll probably be cheaper. So your options there. If you don't have the cash to make these investments, you can obviously reallocate budget. So if there's other areas you can cut in temporarily to make these strategic investments do that. Otherwise, I mean, sadly, you just have to admit that hey, the competition's gonna get ahead of you. And I will say if that happens, you're going to have some ketchup to play as the economy turns around, but I suspect you will never make this mistake again. Because if you miss one of these opportunities wants to Once you've kind of learned to see these patterns, you'll never want to miss it again.

Darin Newbold  10:03  
All right? Well, that's good. And maybe, who knows? Because I am also optimistic. Maybe there's an episode in our future that we might talk to people about things they could do, should they be not being a place to take advantage of this. And I do think we even had some episodes, that maybe we already talked a little bit about some ideas. But that aside, so you've talked about, hey, it's great to have this cash on hand and to be able to do stuff, which is where when you say do stuff on meaning investments and those kinds of things, what does that look like? What would you say, you know, a merchant would want to consider as far as making that investment with cash on him.

Joshua Warren  10:40  
So the first thing is, make sure you've covered the basics, like and everybody likes to talk about the cool new technologies, and we'll talk about this. But start with the basics. And when I say the basics, like people really overcomplicate this, but no matter what kind of E commerce you're in, there's really three steps there is getting people to your site. So getting some visitors getting some traffic, spending some money on marketing, there's having a great on site experience to convert that traffic into first time customers. And then there's having a great fulfillment and customer service process to make those first time customers in a lifetime customers. And so make sure everything's solid there. And you would think by now Ecommerce has been around a while. I think most brands would have that nailed down. But I have found that there's a lot that, especially with some of the things I had to focus on during the pandemic, there may be gaps and some of those basics. So look there first and make sure you've covered that.

Darin Newbold  11:36  
All right. That's that's the basics. For me kind of the boring stuff. Let's talk about fun, cool stuff,

Joshua Warren  11:42  
you just want to get to the Apple hardware. I know,

Darin Newbold  11:45  
I just saw that. So So yes, I want to get to the bundle.

Joshua Warren  11:52  
So look at and again, thinking specifically about using this as a time to leapfrog the competition, not just an incremental update, you're really trying to look for some type of unexpected technical disruption, something new, something different, something that, you know, most of your competitors haven't embraced yet. And it's interesting, this is an area where while a year ago, I feel like I was right about the economy, I may have been a little off on some of the things like AR or AI. I would say that Apple's vision Pro, I think a lot of people have kind of forgotten because they made the announcement so far in advance of the release that they have said that that's coming out early 2024. That means there will be consumers using Apple's AR hardware sometime between January and April of 2024. And so definitely, there's opportunities there for AR and 3d experiences with E commerce and kind of being one of the first brands to do something with that. So I think that can be a big way to get out ahead and give Darren something to do with his new Apple vision Pro that I know he's dying to get. The other thing is generative AI really making some smart investments in generative AI. We've talked before we have an episode about laying chain, and it is amazing how far link chain has come in the past few months. I've seen so many businesses deploy that into their systems and processes. There are people that are doing the basics like customer service chats, and things like that all the way up to really building it into inventory processes into loss prevention processes, like it has been deployed throughout ecommerce and commerce in general. And so I think finding something you can do in your business unique with generative AI could be another good use and an opportunity to leapfrog the competition.

Darin Newbold  13:46  
Yeah, AI is in everything. It's I mean, even things that the basics Google's embraced it and now it's all in the doc sheets. I mean, find it everywhere zoom as if it's a little crazy. But But yeah, I do believe some of the things that we've seen at conferences and that what what can happen when, when AI can predictively help based on the customer and creating a very, a much more intimate customer experience online is pretty amazing.

Joshua Warren  14:21  
Yeah, yeah, the way it can really make a you can personalize down to a one on one level where they feel like they're getting a personal bespoke shopping experience. And normally, you wouldn't be able to do that at scale. But with AI you can. And again, it's one of those things where you know, I don't like to talk about the buzzwords and the things that are cool but can't actually be applied to Commerce Today. And I will say that generative AI this summer, I saw a presentation from a very high end luxury brand in the UK, where general AI is already being used to enrich all of their product descriptions and they are presenting this that this summer about work they did last spring. So I can guarantee you by the first half of next year, they are going to be so far into advanced uses of generative AI that it's really going to set them ahead of all their competition.

Darin Newbold  15:13  
Awesome. Well, hopefully with that little kind of tease, and all of that, what we really are trying to do is emphasize the importance of while it can be boring, and it may not be your thing, the economy, it's important. And it's good to know and understand, understand that, how we as consumers, how the information is taken in all throughout the world, and recognize that just because someone is outside yelling that, you know, the sky is falling, does not necessarily mean the sky is falling. And we as merchants, and as those listening, it's important to understand those cycles, there's kind of natural cycles that occur when the economy is going well. And when it's not, it's kind of breathing, if you will, but knowing that, hey, panicking and trying to borrow a ton of money at the highest interest rates is not at all the best plan. And building up a war chest of available cash makes makes everything go much better. And it puts you in a place to be able to invest in the right things, even if that's just blocking and tackling your basics. And making sure those are really solid all the way to the really cool groovy stuff. And whatever that is, for the timeframe that we're in or that you're in, that you're looking at, I mean, Apple VisionPRO and AI, maybe it may be way beyond what what your commerce, e commerce right now needs. But whatever it does need, you've got to have the cash to be able to invest. Last Last, any last thoughts before we we put the bow on this one?

Joshua Warren  16:54  
I would just say that the media and I mean all media, they love fear, fear will get you reading feeling will get you clicking, when you read really negative, really pessimistic, really fear inspiring articles, look for the data, go out there, find some independent data and try to either verify or disprove what you're reading. And I think that applies to everything. But especially with the economy if you want to have a better sense of where it's actually going what's actually happening. You can't read the headlines you have to dig into this data.

Darin Newbold  17:28  
Yes, amen. Amen. Amen. That is, that is great. Great advice. All right. Well, as always, we very much appreciate you checking us out. Definitely send us a note thoughts. Hit the like button as always. And with that, you guys have a great, great day. Thanks.