Ep 54: Review reliance up but trust is down; Amazon kills bookstores for Grocery Business, Nextdoor's #s

Part 1 Video start 0:13 - Consumer reliance on reviews is up but their trust in reviews is falling

Part 2 Video start 11:07 - Despite surprise, Amazon’s closure of non-grocery businesses indicates they are getting serious

Part 3 Video start 17:55 - Nextdoor has never developed into the alternative local social network & their numbers show it

Reference Articles:

1. Reviews Paradox: Consumer Reliance Up, Trust Down
2. Amazon’s sprawling grocery business has become an ‘expensive hobby’ with a cloudy future
3. Here Comes the Full Amazonification of Whole Foods
4. Amazon is shutting 68 retail stores, ending Amazon Books, 4-star and Pop Up shops
5. Amazon Kills Bookstores for Grocery Biz (Greg’s take)
6. Nextdoor: First earning report since going public

Transcript Ep 54:

Greg: Hello, again, welcome to Episode number 54 of Near Memo with David, Mike and me, Greg Sterling, to talk about the developments of the week in search, social and commerce and with the local hint of local or whatever. Yeah. With the local accent is better. Um, w we're we're not going to talk about Ukraine today, although that's very much on most people's minds and it's.

But we're going to take a break from that this week, even though we're thinking about it. And for my item this week, I'm going to lead off with the bright local study that was released at the end of January. Uh, their annual consumer reviews study survey which asks a lot of questions about. How do you, how often do you read reviews and how many stars do you need before you'll consider a business and what motivates you to write reviews and the balance between positive and negative reviews and what creates credibility and where do you read reviews?

But so it's interesting. I linked to it into the in Friday's newsletter. Um, but the thing that caught my eye was a kind of a paradox between increased reliance on reviews. What they found was that. Um, I'll have to look at the particular number. Uh, they found, you know, something like 77% of consumers now always or regularly read local reviews, which is up from 60% in 2020.

So it's a meaningful increase. And the number of people who never read reviews was down to 2% from 13% in 20. So people, you know, more and more people are reading reviews. But the other thing that was striking in the opposite direction is that you know, 62% of consumers said they had encountered a fake review at some point in the past year.

Um, but more significantly. Uh, the survey found that 67% of respondents that having seen a fake review, it made them more distrustful of online reviews in general. So we've got a situation where people are more reliant on reviews, using reviews, engaged with reviews more often, but also seemingly more distrustful of reviews.

And just one more before you guys jump in one more comment. Um, the survey asked them where were the fake reviews distributed according to their patients? And people in sort of the rank order Amazon, Google, and Facebook, and then Yelp, TripAdvisor, apple maps. So the top three, Amazon, Google and Facebook were where most people thought they'd seen think reviews which is not necessarily in accord with what's actually going on.

Although there's a lot of fake reviews on it. Um, but the other thing that was interesting was that people, they, they th the question sought to get more insight into how suspicious people were. So even though Facebook was number three, in terms of the places where people would seem fake reviews, 70%, it was number one in terms of people being suspicious about the reviews on Facebook.

So in other words, most people were more suspicious of reviews on Facebook than they were. Amazon or Google, if that makes sense. Even though they had seen fake reviews less often, according to the survey, they were more suspicious. And I think this reflects just the bad reputation that Facebook has now.

People, you know, Facebook does a bunch of shady stuff. They've had a bunch of scandals and so people are inclined to believe that there's going to be more. Bad behavior there. And so they're translating that into sort of a perception of reviews, which I think is where a lot of the data in the survey come from is perception.

Not based on actual experience in the Uber, all transparency company survey, Google was the place where there were the most fake reviews. Then Yelp then trust TripAdvisor, and Facebook was the lowest of the four that were measured. We didn't look at Amazon for different. So I just find all of that kind of interesting and reflective of a larger trend, where people are compelled for whatever reason to use online tools and services, but they trust them less and less.

So any thoughts or comments on that?

Mike: My first thought is just a couple of weeks ago, Google published an article about what a great job they're doing with moderation. So either they're delusional or they believe their own PR. Or it is what it is, and they're not going to do anything about it. I mean, in the end they have a very large responsibility in this whole thing.

And they have, from my point of view, never done much to sustain the integrity of reviews. And I think that if that continues, it will lead to ultimately perhaps five years out a reduction in client in the value of, and usefulness of reviews. That being said, I think users are also getting smarter and how they use reviews.

Like I was, again, looking at an exercise bicycle. I looked at several that were recommended in consumer reports, Peloton, which I counted out because of the price. Although now I'm counting up because of quality control issues, but then there was two others, there was a Schwinn and a soul and the Schwinn became obvious just looking at the negative reviews.

That there was physical problems that they didn't fix quickly. And again, so I didn't look at it. Didn't really care about the overall thing other than what consumer said report said, but I did care about the fact that there were specific. Issues that the company didn't deal with correctly and those persistent, it wasn't like two years ago.

And they went away. Whereas with the Sole that didn't happen. The complaints that they had were where the quality of the customer service and not with anything about the product. So I think that to some extent in place like Amazon, it doesn't matter if you're looking mostly at negative reviews for specific details, whether the positive reviews are fake or.

And I don't know on Google, whether that's the case.

David: Greg's dog is clearly very animated by the topic.

Greg: She was recently in the, in the, in the market for an exercise bike herself and was frustrated by the lack of consensus around recommendations online. Yes,

David: Mike, I thought, I think you brought up a pretty interesting point that Greg has made in the past. Um, you sort of made it obliquely. You said, oh, you started with, you know, consumer reports and then.

Went down your consumer journey for there and from there. And Greg has mentioned sites like the Wirecutter previously seen that doing reviews of electronics as it has been around for a long time, that sort of thing. And the what, it's what it seems to me, Greg, I, I sort of, I sort of buy into your sort of devolution of the overall impact of

Greg: reviews as they become.

David: More spam filled that I think consumers will start to move towards these more long form, independent published reviews from reputable sources as they're potentially everyday from starting point to end point in their journey. And so I still think they're going to be discussing. Via Google. I think, I don't think that the Google's place in the consumer journey is necessarily at risk, but as the reviews in the local pack become less and less and less trustworthy, you might see some of these longer form sites, not Yelp.

Um, but I mean, people who review things professionally gaining a little bit more traction. Um, and I think I looking at my own behavior, I've sort of, I can sort of sense a similar thing that I'm not really. I sort of expect every restaurant to have at least four stars. Just probably what the bright local survey.

Yeah.

Greg: That that's the, that's the threshold. That's the threshold to, yeah. So I expect, I

David: expect a certain level of quality products in, in local reviews, but then I'm much more likely to dive into, okay, what is the Willamette week say? Or maybe there's a, you know, an article that got published on eater about it, you know, top 38 restaurants or the new restaurants.

And that's just, that's just in restaurants. It's also true in so many other areas that, that I find myself searching it, travel personally home birth, you know, home furnishings, that sort of thing. I think I've sort of seen myself using blogs and other other review sources that have independent credibility much more in the last, I would say two to three.

So I think that that may be the logical outcome of this is that yeah, those, those gold stars are sort of necessary table-stakes to gain consideration potentially, but that you're, you're sort of using that as a checkpoint, not as a, okay. This is going to determine the decision of where

Greg: I make my first.

Yeah, I think that's absolutely true. Um, another thing that consumers do that we discovered from surveys at Uber, all when I was there is that people increasingly look to multiple sites for consensus. I mean, I've done that in travel. It's like you look at one site, then you go to other sites to see if the, the statements and ratings are consistent.

Um, even though fake reviews can be duplicated across sites or people that are faking reviews on one site may fake them on another. But I think, I think that the whole process of looking for using reviews has become much more complicated and burdensome for people. And I do think the expert reviews will play a much larger role in certain categories.

Um it

Mike: also depends on the technique you use depends on how serious the question is. I mean, if you're buying a specific.

Greg: Yes. You know, consideration is a big,

Mike: you're going to just take whatever cooks you're going to probably take whatever Cook's illustrated said and just buy that one. Right? If you're buying like an exercise bike, it might require more research, but then there may be things that you want to become an expert in yourself and those in which you make different decisions.

So it depends a lot on the, a doctor might be an altogether different thing. Although around here, it's not. Pick Dr. C

Greg: again. Yeah. I mean, I, I, I sense that there's some sort of opportunity for somebody in all of this, but I don't know exactly what that would look like from a consumer standpoint, because I think it's just, you know, very difficult to launch a new consumer site that has any kind of review or review aggregation.

But I feel like there is some successor to the current review paradigm that we need. I don't know exactly what that looks like, but we should probably move on. David is short on time today. Um, so Mike, we're going to talk about a big decision that Amazon made this week to shutter all of its bookstores and most of its other brick and mortar stores, except for grocery and presumably Amazon style, their new showcase store

Mike: in LA.

Okay. So there's been three articles over the last or three news stories or last four weeks about Amazon in stores. The first one was in CNBC about the sort of. Cavalier way that they were treating their various stores. Although if you've dug it deeply into the article, you realize that with fresh, where they are building almost they're taking over existing closed grocery stores, building them out specifically so that they can deliver from that store efficiently.

And then also having some retail presence you realize. That there are things that they are focusing on. I think this cleaning out of stores that the most recent article really reflects a sort of recognition that they don't have much to add in selling books at retail. They don't have much to add in selling four star rated products at retail.

When I read about those stores, they said where they were the most uncurated messes that people had ever seen. Whereas in

Greg: growth, you're talking about Amazon, Amazon four-star in particular for certain particular,

Mike: right?

Greg: Yeah. Those are, those are, those are totally weird stores. I've been, I've been in, in them in they're very strange.

And so

Mike: not only are they strange, but they don't add any real value to the, to the project. And so I think. They look at groceries is one, a huge market to one where they can add unique value on two fronts. One is checkout and the other's delivery. And I think that you will see there was a recent article in New York times about their.

Uh, they're taking a whole food and finally putting in the, just walk out technology into this totally redone whole foods. And I think what you'll see is that bifurcated strategy where whole foods with just walk out technology versus fresh with a really strong delivery component, as well as just walk out technology and also the seven 11 type store.

Those are the three areas that I think they're going to play in. They can play there because it speaks to their technology strength.

Greg: It also

David: strikes me on the grocery front that there, those grocery stores are sort of uniquely uniquely interesting to Amazon from a logistics perspective, because there's a lot of specialized equipment in grocery stores around food storage and that sort of thing.

Whereas books, you can store in any warehouse anywhere. And the delivery component is not as essential to. Getting them there, but getting them to a person's house before something expires. So you don't need as, as distributed a network of book warehouses as you do with, with food and beverage. So I agree, Mike, I think that there they're going to be a long-term player in grocery even separate and apart from the whole foods brand.

And I think that that makes a lot of sense for them as, as a brand position.

Greg: I think that the, the, you know, I sort of see them in a certain way, analogous to Tesla, maybe that's too grandiose in comparison with the just walk-out technology. There are a bunch of companies that are working on it. This Amazon is sort of often thought of as the only one that has this, but there are other companies that have this.

And so I think Amazon is going to establish a kind of perceived demand for this, or, or set a competitive bar that others will quickly have to follow. And I think eventually. We'll see all of the major grocery chains with at least some version of this in some of their stores I have yet to be in an Amazon fresh store.

So I haven't experienced it directly. I wonder about, you know, this is a very trivial point, but I think about bagging groceries, you know, I'm, if I go into the store and I've got a ton of groceries that I'm buying, I appreciate somebody being there to help bag or to bag them on my behalf. As opposed to some self-checkouts the dog degrees.

She doesn't like begging, she doesn't like bagging groceries either. But I, I mean, I think it's this, you know, I mean, I think it's cool to be able to just leave the store without standing in line, but what's that going to be like from a, you know, from that, that aspect of, so the first time I

David: frequently bring my own bags from home and I hate having to unload the bag on the, on the cares or whatever it's called carousel thing that runs through the checkout and then put everything back in the bag.

It would definitely be easier just to put stuff in my bags, in my cart and walk them up.

Greg: Yeah. So I

David: maybe see it as a positive for reusable bags and reducing the amount of plastic and even recycled paper we're using. So,

Greg: and I also

Mike: at BJ's, they don't back for you right now, which is a Costco competitor that we have locally.

And it ends up when you in New York state where you're required to have your own bags, where you have to pay an extra, it ends up not being a huge impediment to. To convenience, although I could see where it might be

Greg: sort of one, one final point before we we go to the, to the final item today you know, stores are very important for Amazon regardless of what they are in order to I mean, they have Amazon lockers in some of the whole foods, but really just as a return, you know, they, they, they've established a number of partners like ups store where you can return products.

Rather than having to, well, I mean, going to the ups store is kind of like having to ship it back. But at, at, at whole foods in particular, you just take the thing in, it doesn't have to be packaged up and you drop it off and it's the most convenient thing ever. And so they need to maintain some physical, some real world, world presence for that level of convenience.

And they could certainly do it in the grocery stores. So that's, that's fine. But I think that that's been a kind of key development for them. That's helped with. Uh, and also prime membership helps you in the grocery store. So there's another angle there for them is that it reinforces prime, the benefits of prime as well.

But what price is another factor here? I don't know if this is a, is a, is a mass market phenomenon. It may be, but it's, it may be for people who are very tech savvy, or tech technologically inclined, or for people who have more disposable money to spend on groceries. Um, because most people are going to go to where they can get the cheapest groceries.

And I don't know how that's going to factor into all of this. We'll see. Obviously. Yeah. So the final item today is we're circling back to next door, which released its earnings. Was it this week? It feels like, I think it was this week. Yeah. I was going to say it was last week, but it's just a lot, so much is going on.

So nextdoor released its first formal earnings after their spec IPO. Um, and uh, there were a number of interesting findings in there, David that,

David: yeah, just the first was, well, first of all, there, they reported the quarterly revenue was up 48% year over year. Um, which is impressive. Uh, I guess from, from any measure the flip side of that is the revenue was only 59 million and.

Just in terms of the the level of interest that next door seems to have in the local SAS community. I expected to be on the front of this for whatever reason. Um, and so I went and did a little bit of quick math. It's essentially one 1300 of Alphabet's quarterly revenue and one 600 of Meadows, quarterly revenue and something like one, 200th of Twitter's quarterly revenue.

Um, And I think that that's, it just shows the next door has a very, very, very long way to go from a revenue standpoint. I know that they just started on, you know, monetizing, not, not that long ago, but then the other side of that is that their, their weekly active user count was only 36 million, which struck me as a very low number and not something that is all that.

Uh, monetizeable just generally. Um, and so I, I think that next door. Still has a unique place in the market. Uh, I think they could be executing much better from a product standpoint as a consumer and certainly from a product standpoint as a, an advertising platform or as a, as a acquisition customer acquisition tool for businesses.

Um, but I don't know that they're going to be this, this sort of local replacement for Facebook that a lot of people have had predicted, and I may even have predicted it historically. I was pretty, I was pretty, yeah. Excited for next door and sort of the mid teens. And increasingly the longer I stayed on the platform as a user, it just evolved into a bunch of conversations from really annoying people.

And in many cases, these annoying people were, there were next door, sort of self anointed next door, elite. Um, they are self appointed next door leak that they had chosen us like community managers. So I think it's a really. I'm still rooting for anybody to come along and, and provide an alternative to Facebook and Google at the, at the local level.

But I'm increasingly pessimistic that it's going to be next door. Um, I think they run into the same content moderation problems that all of these major players do. And they have nowhere close to the scale to either deal with the moderation issues or the or to leverage their, their base of users for advertising our customer acquisition for.

It was an interesting report there clearly, you know, they're growing at a, as still a pretty reasonable rate, but they have a long way to go and I'm just not sure that they're ever gonna

Greg: get there. So. Well, the, the the user, the active is its monthly active users, weekly active. Okay. So weekly active, right?

So that's important. Uh, obviously the more, the more weekly sort of splits the baby between daily and monthly, which is what Facebook uses. But considering that they've been around since 2010, that's, that's a low number. I mean, we're, we're 12 years in and that's a low number for that. And I think as you point out, some of the issues are cultural issues, meaning, you know, the culture that is exists on next door.

They're trying to transition from a kind of neighborhood watch culture to one where people trade word of mouth recommendations and otherwise engage with one another. And they've had a lot of difficulty doing that. Um, another point I would make is. They are going to rely on self service advertising by small businesses to generate a lot of revenue growth, which I think is a dicey proposition for anybody that wants to do that.

Um, they will have to make it incredibly simple, which they're trying to do, but I think that that's going to be really challenging.

David: Yeah. And from a business standpoint, in particular, I, as a user, I don't know what the business side, it looks like it a user it's incredibly difficult to. See what conversations are happening anywhere outside of your zip code?

Right? So even

Greg: though that I'm

David: adjacent to three or four different neighborhoods and where I live in Portland, though, where I want to know what was going on, because it's a mile bike ride or whatever, it's very, very hard to sort of get involved in those conversations. And certainly for businesses, their customer radius is a lot wider than the default radius that next door sets as a, as a user.

I, it could be just a problem with the way the product is constructed, sort of architecturally.

Greg: I think they're trying to address that they have the chief product officers from LinkedIn, and I think there's a number of strategies that they're going to implement that will, will broaden out the networks.

They're trying to expand people's communities. Did you want to say anything about next door, next door, a

Mike: million actually recently I've gotten several invitations to join. I am of the sort of Groucho Marx belief that I'm not sure I want to be a member of any club that would have me as a member. So I resisted.

It's like one more thing one has to do. So I have not. And I live way out in the country, so I don't have to interact with my neighbors. And I then avoid these kinds of disappointments. So it's not for me.

Greg: Well, w one, one quick point that goes back to the reviews discussion at the beginning, you know, you can get local business recommendations on next door that are, it's an it's an alternative source and they are often pretty good.

Um, you know, it is a place that I go to look for people. And in one case there was a carpenter that I found a guy to build fences and other stuff out of wood. And he said that somebody had recommended him on next door and he was overwhelmed. By like 90 inbound leads, you know, kind of organic leads. Um, so they are able to deliver some real value for small businesses.

But I agree with you, it's, it's challenging right now to sort of get at that information. Um, but, but, but that's an opportunity for them that hasn't been fully exploited. So I think, I think with that, where we're all out of time this week, and fortunately we have more, we could go into, but Uh, as always, thank you very much for listening and we'll see you next week.