[00:00:01] A Trillion-Dollars. That's where Whatnot's Tom Verrilli sees live shopping headed in the U.S. market, making up to 15 to 20% of all retail. Every year since this show started, we predicted live shopping would take off in North America and every year we were wrong. Until Whatnot. More than $8 billion in sales last year and they beat that in the first half of this one already.

[00:00:26] This episode of The Retail Razor Show recorded live from Retail Club AI Festival. Tom tells us why today is like 2005 for live shopping. You're listening to The Retail Razor Show, where your expert hosts and their guests cut through the cluster in retail and retail tech. Welcome back to Season 6 of The Retail Razor Show, the top-ranked indie business management and marketing podcast on GoodPods.

[00:00:55] And the original show in the number one indie podcast network for retail. I'm Ricardo Belmar. I'm Casey Golden. Welcome Retail Razor fans to Retail's favorite podcast, where we cut through the clutter to give you sharp insights on what's happening in retail today and tomorrow and get real about what's driving the future of commerce. This is Season 6, Episode 14, and it's coming to you recorded live and in person at the Retail Club AI Festival in Huntington Beach. And Casey, I have to say, I've been waiting a long time for this one.

[00:01:25] You know, we both have. If you have listened to this show for any length of time, you know we've been banging the live shopping drum since day one. Oh yeah, since the very first season. We watched live shopping explode in China, across Asia. We were so sure North America was next. So every year we called it and said this is the year live shopping takes off and every year it didn't. Our predictions scorecard has the scars to prove this.

[00:01:53] Oh yeah. Well, the wait is finally over thanks to Whatnot, the first company to make live shopping really take off here and in such a big way. Sellers on Whatnot did more than $8 billion in sales last year, and they've already beat that number in the first half of this year alone. So we sat down with Tom Bareilly, Whatnot's chief product officer, who came to Whatnot after leading product at Twitch.

[00:02:16] Tom tells us why he thinks today is 2005 for live shopping. That's the moment it became clear e-commerce worked and every retailer starting asking how big a piece of their channel mix should it be. And yes, he called traditional e-commerce legacy. I'm not there yet, but we need to know what it is.

[00:02:40] Well, then we get into what makes live commerce so different. Double the discovery signal of a traditional site, recommendations that have to run in real time because the inventory moves so fast, and personalization built on who you like to buy from as well as what you buy. So from live lobsters to Louboutins, Whatnot has 224 categories live right now. And fashion is obviously biggest by volume.

[00:03:07] Tom tells us how a Pokemon card buyer who runs a seafood shop got live lobsters onto the platform, and why he thinks live could reach 15 to 20% of all US retail. That's like, I don't know, trillion bucks? Yeah, exactly. I think we finally get to make a live shopping prediction that we might actually get right.

[00:03:32] But before we dive into that, let me tell you about the next big event that you'll find the Retail Razor at, and that's Retail Agent Con. On Tuesday, November 17th from 11am to 3pm Eastern, join me and more than 700 of your retail peers at Retail Agent Con, a live virtual event from our good friends at IHL Group with ClearSight AI. It's an honest look at what AI agents are really doing today across merchandising, order management, inventory and store operations. Which ones are real? And what has to change in your org chart to make them stick?

[00:04:02] You'll hear from retail leaders like Glenn Allison of Tractor Supply, Scott Sager of David's Bridal, Justin Emig of Artisan Lane Furniture, and Karen Beebe of Bells. Plus, Dr. Janet Sherlock on getting agents and people working together. And IHL's Greg Buzik, Jerry Sheldon, Lee Holman, and yours truly. Registration is free for retailers at RetailAgentCon.com. And technology providers, good news, sponsorships are still available. That's four hours of real-world insight you can use heading into NRF's Big Show in January.

[00:04:32] Register today. Thanks to Retail Agent Con for bringing you this episode of the Retail Razor Show. You just dropped a few names there, Ricardo. Yep. So exciting. So now let's welcome Tom Varelli, Chief Product Officer at Whatnot, to the Retail Razor Show Podcast. And welcome back to the Retail Razor Tent.

[00:05:01] We are honoring this time to have Tom Varelli with us from Whatnot. Thank you so much for having me. Yeah, absolutely. Appreciate you being here with us. So I have to honestly say I think we've been looking forward to this conversation because both Casey and I have spent, I don't know, probably since the beginning of our podcast talking about live streaming and how we felt like, why is this not working yet? And until you guys came along, I don't think it was. But you've proven that it does. It's very much working now. Exactly. Absolutely. Which I love. I love that it's working now.

[00:05:30] I appreciate you being early believers. Yes. Exactly. Exactly. We failed a lot of our predictions because of it. Make bold ones now and I think you'll be pretty good. Yeah, so we'll reset our predictions this time and just say it's going to continue to work well thanks to Whatnot. Deal. There we go. There we go. So since we're at Retail Club AI Festival and everybody's talking about AI, I think maybe the best way for us to kick this off is to kind of ask you, so given how Whatnot works

[00:05:56] today and how live streaming is playing out today, where do you see AI fitting in to this model? Is it going to aid in discovery? Is it something else? Is it all of the above? What are your thoughts there? Yeah, it's funny. I said to somebody recently when they asked me about our AI strategy, I was like, that's kind of like asking about our internet strategy. It feels like it will be pervasively through all the things. Right. Maybe to be slightly less pith and kind of like grounded in. I think there's a couple places. I think the first is that the vast majority of people underestimate how hard it is to be a retailer.

[00:06:24] Like there's just so much work involved in like inventory management, logistics, fulfillment, customer support. So if I put aside like internally, we use it to code and we use it for lots of things. I think the two places that you see it the most are like for sellers. Our goal is to take all of the kind of cruft and the grind out of selling in order to help them. And there's like both they want that generally. But also one of the things about live selling is it's incredibly revenue dense when you're

[00:06:50] live, but all the time you have to spend sourcing, you know, fulfilling, managing any customer support interactions. All of that takes away from the time that you can be live. And so we want to make sure that kind of sellers can do the thing that they do best, which is they're live talking to their customers, kind of moving product, and then take as much of the rest of that work out. And then maybe the second big layer of it is one of the advantages that live commerce has over kind of legacy e-commerce is we obviously have like double the discovery signal.

[00:07:18] So if you think about like you buy from a traditional retail site, you get the, you know, what did you purchase? And you can wait a minute. Are we calling e-commerce legacy now? I think we're calling, we're calling static pages with some static imagery where everybody is forced to use the exact same listing detail page legacy. Okay. Okay. I like that. No shade intended. Just more. How do you describe the kind of like iterations? Uh, the gray in my beard suggests that I'm, I'm used to kind of like, we'll call it a

[00:07:47] subtle hint towards where to go in the future. Exactly. But if you, if you think about a traditional, how about that? Yeah. E-commerce site. Okay. Uh, what you find is that you've got, you know, here's my purchase history. And that leads to those kind of like, you know, hilarious recommendations of you just buy a vacuum cleaner and now you're recommending another vacuum cleaner. And then if you think about something more social, you've got like watch time, following, chat history. The amazing thing about live commerce is we have both of those signals simultaneously. Okay.

[00:08:15] The challenge for live commerce is, uh, that the inventory moves so quickly that what you just sold is not necessarily predictive of what you will sell tomorrow. Oh, interesting. Yeah. Because your inventory moves so quickly. Your inventory is going to change. It moves so fast. Okay. It's not the same thing as loading up 10,000 SKUs and just like waiting for them to move. Yeah. And so we invested really heavily early in a very, like very quick recommendation system. Um, most, uh, you know, traditional e-commerce sites basically do offline recommendations

[00:08:41] where overnight they'll calculate what's the thing that you are most likely Ricardo to buy today. Yeah. And when you show up, they filter for that. Uh, for us, that doesn't work. So we've always had to be doing recommendations in real time. Uh, and that means you kind of sacrifice some of the depth of those recommendations, the quality. Right. I basically lets us do both simultaneously because we can extract from what's happening in real time transpose what's going on. So AI should help on what not sellers do more selling and less grinding, and it should help

[00:09:09] us better match sellers and buyers over time. Uh, and we've already seen that and that's why growth is as good as it is. Hmm. Interesting. It's still secret that, you know, AI is changing the discovery. Um, I mean, I don't know if you've Googled lately. I sure haven't. Google doesn't even work the way it worked six months ago and it's wretched. And they don't know how it will work six months from now. I know, right? Exactly. That's it. That's it. That's it. How do you see discovery changing? So I think you're going to see a really interesting bifurcation.

[00:09:38] To your point, I think the traditional search based intent funnel is eroding quite quickly. Uh, whether it's directly Google and SEO or whether or not it's even, do I go to a kind of marketplace and use the search bar? Because, you know, for decades, e-commerce was optimized for time on site as low as possible, purchases as high as possible. It all starts with search. Because most e-commerce sites are essentially, and I'm going to age myself now, a scaled up Sears catalog. Right? Like it's a long list of things.

[00:10:08] Spiegel catalog. Oh, okay. Oh, there we go. There we go. Uh, color coordinated. So, but like... That's the stylish version. The inventory list is so long, you have a search bar, but it really is like that high intent. Yeah. Yeah. Yeah. Yeah. Yeah. And tent shopping still exists. And so I think if you're looking for particular light bulbs, air filters like those, you know, I need a million snap block bags for my kids' school lunch. Right? I think, uh, all of the kind of like AI LLM top of funnel is going to completely change that because it's much better at predictive. Right? Yeah.

[00:10:37] Turns out I buy sandwich bags every month. Hey, it's time. Like they can start pre-filling your carts. But I think live commerce is pretty different to that because, um, you know, e-commerce has been around for, you know, 20... It's very emotional and very like, what's the word? Like in the moment, like... So yeah, I call it like... In the moment, yeah. I call it... What are those things? Like when you... Oh my goodness, I can't think of the name. Evocative? What are you looking for? Everything that's... Serendipitous? Right up front by the cash rack. Yeah, okay. I hear what you're going. Yeah.

[00:11:06] Um, I don't know the word either, but maybe I'll... We'll just invent one. Yeah. Here's the framing I tend to use. There's seven and a half trillion dollars of retail in the US last year. Uh huh. 80% of it's still in person. Right. Why? Because you're high intent to buy something, but you don't know exactly what you want. You go to the grocery store because you need food, but you don't know what's fresh. You don't know what's good. Right. You go to the mall because you've got a wedding coming up and you need an outfit, but you're not going to search wedding outfit.

[00:11:34] Like you don't know exactly what you want, so you want to go in and see it. Yeah. And like the reason that brick and mortar continues to do like do well is people value curation, knowledge, advice that a brick and mortar kind of like vendor can provide. Live basically brings that online, but gives you the scale of e-commerce. Like, because if you were running a high street shoe store and you had 30 people in your store, you would never close. That's like an unbelievable number of customers. Hmm.

[00:12:01] At a kind of global live stream scale, 30 viewers is nothing. Right. So it's really easy for retail. Right. Impulse. Impulse. That works. There you go. I actually think it is much more high intent browsing. Like people come to what not only to shop. That's their only thing. Okay. They're not doom scrolling in the middle of the night. They're kind of like, how can I do it now? But if I don't buy it now, I might not be able to buy it later. You might never see it again, right? So like this risk and reward and sense of urgency. And you're typically there with friends. Auctions are fun because you feel like you're winning.

[00:12:29] So like there's this really incredible combination of people come with the intention to buy, but I don't know exactly what. I can find really good bargains and then I'm with other people and it's fun. Right. Okay. So I want to come back to something you quickly mentioned before that I think is also another hot topic around personalization. Sure. Which I'm sure everybody around here is expecting A is going to fix this because for years now, most retailers think they're doing personalization, but most consumers would disagree. Right.

[00:12:57] And it's the very example before it's the vacuum cleaner example. We know it's just a prebuilt recipe. Yes. Yeah, exactly. Right. The dirty secret. The dirty secret. So how does personalization factor in your model? I think it comes in two ways for us. And it goes back to that like both kind of product and social element I talked about before. Yeah. So one of the reasons that, you know, sellers love selling and whatnot is they get really high rates of repeat purchasing. Oh, okay. So the majority of sellers who are kind of selling something today are selling to somebody who bought from them before.

[00:13:27] And so we can basically build a series of personalization based on not just what do you like to buy, but who do you like to buy from?

[00:14:01] Mm-hmm. So we have a lot of like what product and what are you buying historically, but also on the seller. And that tends to matter a lot. Exactly. Yeah. And we get that in a variety of different ways. Like what's the engagement rate? How do kind of people interact? And then we've got a variety of formats that basically go with that. Do you want really quick auctions and sudden death? Do you want kind of like what, you know, more like a party purchase, which is kind of like an evolution of group buying. Uh-huh. Do you want kind of like fixed price purchasing? Mm-hmm. And then you want to talk to your seller.

[00:14:26] So we can, well, the, basically AI lets you take a piece of data and extract an understanding from that very, very quickly. Yeah. Whereas what you're talking about is exactly right, Casey. It was like, it used to basically be a static list where we're like, cool, hard match, vacuum cleaner, vacuum cleaner, push it again. You touch something orange, you touch something orange, I touch something orange. We all go to something green. That's right. Like we are all going on the same journey based off of like an action.

[00:14:51] Not to get wildly nerdy with you, but the history of where those recommendations come from is something called collaborative filtering, which actually started with like book recommendations. You and I have read the same book. Oh, right. Ricardo and I have read the same book. Right. Therefore I recommend to you, to Ricardo, our book that you read. I am a common link. Exactly. And the problem is eventually that gets to be meaningless. Right. Because like everyone is connected. Exactly. And so it's been quite successful obviously for lots of people. Right. I do think there's a depth of specificity which matters. Yeah. Yeah. That's right. That's very interesting. What do you see for the future of shopping?

[00:15:21] First, like just with AI and second, with live streaming. It's been a tough, US has been a tough market for live streaming. It has. I think if I was to try and describe the last little while, it kind of, I go back to like when e-commerce started. When e-commerce initially emerges, everybody's answer is like, I don't think that's going to be a thing. No one's going to buy a car online. Right. I mean, I'm surprised you don't have a neck brace on from the amount of whiplash you've probably experienced over the last five years.

[00:15:49] Well, you then go from there into everyone was like, okay, by the mid nineties, it was, okay, it might be a thing, but it's for nerds. It's for like weird collectibles. It's not going to be mainstream. Oh yeah. By 2005, everyone's like, okay, so fundamentally every retailer will have some kind of e-commerce presence. The question is how much of their channel mix will that be? Right. I think basically today is 2005 for live. It's quite clear that it works in every category. We have 224 categories live on whatnot right now. You can buy live lobsters or Louboutins, right?

[00:16:17] You can buy, you know, Michael Jordan rookie cards or skateboards. Like you can get just about anything on whatnot. Very cool. Fashion is actually our largest category by volume. Okay. And so it's quite clear that it works. The question really is going to be how much of each retailer's channel mix will it be? Right. And is that going to be a mainstay? Is it going to be something that they use to kind of double down on their relationship with their customers? Yeah. Is it going to be something that they use for, you know, are we going to see the REI garage sale on whatnot? Because that's the kind of like community environment they want to build.

[00:16:47] I think every retailer is going to spend the next decade working out what part of my channel mix is that. Yeah. And at whatnot, the way I think about my job is just to make sure that for each of those, we've got the best offering for them. Okay. So the way we build is we'll just sit down with a seller who hasn't sold live before and say, what do you need? Okay. Like what are the pieces that are missing? Yeah. Yeah. You know, like our seafood category literally started because one of our buyers who traditionally buys Pokemon cards and whatnot emailed our CEO and said, hi, I run a seafood store. I love whatnot. I want to be able to ship like live lobsters on whatnot. Live lobsters on whatnot. Let's talk.

[00:17:16] And we sent some engineers to his place and we sat down with him and worked out what we needed to do and changed our offering. Oh, that's amazing. That's amazing. If you are familiar with whatnot, jump on his show. It's incredible. He's like just down the road from here in San Diego. So I love that. I think that's a great story. That's basically how it evolved. So, you know, what's interesting to me on that example, there was a period where, and we had someone on our show in the past talk about this, where the belief was that live stream was going to work if an individual retailer did it on their own. Yep. And that every individual retailer would start doing it on their own.

[00:17:45] And you would have to, as a consumer, right? Remember like, Oh, whose live stream am I watching today? Like it was going to be in my calendar. Versus having a common marketplace that holds everybody. And maybe that can happen. Maybe if you are big enough, maybe Home Depot has enough traffic on their website that Home Depot can maintain that kind of like local piece. Right. Right. But I think what we've learned from the internet thus far is that like, it turns out it's quite hard to build and maintain the right set of features. Right. And that you can get a scale by kind of aggregating all of that in one place. And that community. Exactly. And keep that community.

[00:18:16] What not buyers, you know, overwhelmingly buy cross category. Because it turns out, you know, everybody actually in fact wears clothes. In addition to whether it's Pokemon cards or Lego, everybody needs to eat, you know? Right. So, you know, there is a version of it which is kind of like your impulse buy at the supermarket checkout. And then there's the, no I'm coming today because it's the 30th anniversary of Pokemon. Yeah. And I know that I want to kind of experience those shows. So, I think, you know, I don't think it is beyond the realm at all to think about like

[00:18:43] live ending up in a 15 to 20% of all retail. Okay. Yeah. Which would make it a trillion dollar industry in the US. Yeah. We're obviously pretty excited. We shared earlier this year that like last year, retailers and whatnot made more than eight billion dollars in sales. And that they exceeded that in the first half of this year alone. So, they'll more than comfortably double that this year. Yeah. It's great growth. And I think it's pretty clear that like the future is coming. And if you want to get ahead of it, it's here now. Yeah. Amazing. Amazing. Amazing. Well, I think that's a great point to close on. Thank you for popping in.

[00:19:12] Thank you, Tom. Thanks for being with us. If you loved this episode, hit subscribe and drop us a five star rating and review on Apple Podcasts, Spotify or Good Pods. And if you're watching us on YouTube, like and subscribe. Pardon my coughing. And drop a comment before you go. I'm Casey Golden. Follow us on LinkedIn, Blue Sky, Threads and Instagram.

[00:19:42] And subscribe to our Substack newsletter for highlights and bonus content. For transcripts and guest info, visit RetailRazor.com. I'm Ricardo Belmar. Thanks for joining us on the Retail Razor Show, part of the Retail Razor Podcast Network. Until next time, stay sharp, stay human and stay ahead. This is the Retail Razor Show.