[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


                    REVIEW OF EMERGING TECH'S IMPACT ON 
                      RETAIL OPERATIONS AND LOGISTICS

=======================================================================

                                 HEARING

                               BEFORE THE

        SUBCOMMITTEE ON DIGITAL COMMERCE AND CONSUMER PROTECTION

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 7, 2018

                               __________

                           Serial No. 115-105
                           
                           
  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                         



      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov

                               __________
                                      

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                    COMMITTEE ON ENERGY AND COMMERCE

                          GREG WALDEN, Oregon
                                 Chairman

JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Vice Chairman                        Ranking Member
FRED UPTON, Michigan                 BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
MICHAEL C. BURGESS, Texas            ELIOT L. ENGEL, New York
MARSHA BLACKBURN, Tennessee          GENE GREEN, Texas
STEVE SCALISE, Louisiana             DIANA DeGETTE, Colorado
ROBERT E. LATTA, Ohio                MICHAEL F. DOYLE, Pennsylvania
CATHY McMORRIS RODGERS, Washington   JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi            G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
ADAM KINZINGER, Illinois             PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida            PAUL TONKO, New York
BILL JOHNSON, Ohio                   YVETTE D. CLARKE, New York
BILLY LONG, Missouri                 DAVID LOEBSACK, Iowa
LARRY BUCSHON, Indiana               KURT SCHRADER, Oregon
BILL FLORES, Texas                   JOSEPH P. KENNEDY, III, 
SUSAN W. BROOKS, Indiana             Massachusetts
MARKWAYNE MULLIN, Oklahoma           TONY CARDENAS, California
RICHARD HUDSON, North Carolina       RAUL RUIZ, California
CHRIS COLLINS, New York              SCOTT H. PETERS, California
KEVIN CRAMER, North Dakota           DEBBIE DINGELL, Michigan
TIM WALBERG, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia
JEFF DUNCAN, South Carolina

                                 7_____

        Subcommittee on Digital Commerce and Consumer Protection

                         ROBERT E. LATTA, Ohio
                                 Chairman
ADAM KINZINGER, Illinois             JANICE D. SCHAKOWSKY, Illinois
  Vice Chairman                        Ranking Member
FRED UPTON, Michigan                 BEN RAY LUJAN, New Mexico
MICHAEL C. BURGESS, Texas            YVETTE D. CLARKE, New York
LEONARD LANCE, New Jersey            TONY CARDENAS, California
BRETT GUTHRIE, Kentucky              DEBBIE DINGELL, Michigan
DAVID B. McKINLEY, West Virgina      DORIS O. MATSUI, California
ADAM KINZINGER, Illinois             PETER WELCH, Vermont
GUS M. BILIRAKIS, Florida            JOSEPH P. KENNEDY, III, 
LARRY BUCSHON, Indiana                   Massachusetts
MARKWAYNE MULLIN, Oklahoma           GENE GREEN, Texas
MIMI WALTERS, California             FRANK PALLONE, Jr., New Jersey (ex 
RYAN A. COSTELLO, Pennsylvania           officio)
JEFF DUNCAN, South Carolina
GREG WALDEN, Oregon (ex officio)

                                  (ii)
                             
                             
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Robert E. Latta, a Representative in Congress from the State 
  of Ohio, opening statement.....................................     1
    Prepared statement...........................................     3
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     4
    Prepared statement...........................................     5
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     6
    Prepared statement...........................................     7
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................     8
    Prepared statement...........................................     9

                               Witnesses

Rob Taylor, Chief Executive Officer, Convey, Inc.................    11
    Prepared statement...........................................    13
Dan Sanker, Founder, President, and Chief Executive Officer, 
  CaseStack, Inc.................................................    21
    Prepared statement...........................................    23
David Borris, Member, Main Street Alliance Executive Committee, 
  and Owner, Hel's Kitchen.......................................    34
    Prepared statement...........................................    36
Jonathan E. Johnson III, Member, Board of Directors, 
  Overstock.com, and President, Medici Ventures..................    39
    Prepared statement...........................................    41

                           Submitted Material

Letter of March 7, 2018, from Tim Day, Senior Vice President, 
  C_TEC U.S. Chamber of Commerce, to Mr. Latta and Ms. 
  Schakowsky, submitted by Mr. Latta.............................    62
Letter of March 7, 2018, from Nicholas R. Ahrens, Vice President, 
  Privacy & Cybersecurity, Retail Industry Leaders Association, 
  to Mr. Latta and Ms. Schakowsky, submitted by Mr. Latta........    64

 
  REVIEW OF EMERGING TECH'S IMPACT ON RETAIL OPERATIONS AND LOGISTICS

                              ----------                              


                        WEDNESDAY, MARCH 7, 2018

                  House of Representatives,
     Subcommittee on Digital Commerce and Consumer 
                                        Protection,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:03 a.m., in 
room 2123, Rayburn House Office Building, Hon. Robert E. Latta 
(chairman of the subcommittee) presiding.
    Members present: Representatives Latta, Kinzinger, Lance, 
Guthrie, McKinley, Bilirakis, Bucshon, Mullin, Walters, 
Costello, Duncan, Walden (ex officio), Schakowsky, Welch, 
Kennedy, and Pallone (ex officio).
    Staff present: Mike Bloomquist, Staff Director; Melissa 
Froelich, Chief Counsel, Digital Commerce and Consumer 
Protection; Adam Fromm, Director of Outreach and Coalitions; 
Ali Fulling, Legislative Clerk, Oversight and Investigations, 
Digital Commerce and Consumer Protection; Elena Hernandez, 
Press Secretary; Paul Jackson, Professional Staff Member, 
Digital Commerce and Consumer Protection; Bijan Koohmaraie, 
Counsel, Digital Commerce and Consumer Protection; Ryan Long, 
Deputy Staff Director; Annelise Rickert, Counsel, Energy; 
Austin Stonebraker, Press Assistant; Madeline Vey, Policy 
Coordinator, Digital Commerce and Consumer Protection; Hamlin 
Wade, Special Advisor for External Affairs; Greg Zerzan, 
Counsel, Digital Commerce and Consumer Protection; Michelle 
Ash, Minority Chief Counsel, Digital Commerce and Consumer 
Protection; Jeff Carroll, Minority Staff Director; Caroline 
Paris-Behr, Minority Policy Analyst; Michelle Rusk, Minority 
FTC Detailee; and C.J. Young, Minority Press Secretary.
    Mr. Latta. Well, good morning. I would like to call the 
Subcommittee on Digital Commerce and Consumer Protection to 
order. And I will now recognize myself for 5 minutes for an 
opening statement.

OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Good morning. I would like to welcome our witnesses this 
morning for today's hearing on Emerging Tech's Impact on Retail 
Operations and Logistics.
    Thank you for being here to help us examine how e-commerce 
has changed the face of retail, and how both e-commerce and 
retail operations are responding in a world where technology, 
innovation, and consumer expectations are constantly evolving.
    Today, U.S. consumers demand the speed and convenience of 
getting what they want, when and where they want it, including:
     Ordering from their phones and picking up in-
store;
     Varied payment options; and
     Different delivery choices, including free 
shipping.
    This was evident during the 2017 holiday season, as 51 
percent of last-minute shoppers said they had planned to 
purchase their gifts online.
    E-commerce and catalog sales increased 12.3 percent during 
the holiday, accounting for 16 percent of all goods sold.
    In 2017, 80 percent of shoppers made more than four to 
seven online purchases in the typical three-month timeframe.
    As online shopping continues to gain in popularity and 
acceptance as in-store shopping, we want to understand how a 
consumer's decisions impact not only the e-commerce and retail 
companies, but also supply chain and delivery channels, 
particularly residential last-mile.
    This past holiday season, it struck me how massive the 
challenge of getting millions of packages processed and shipped 
to shoppers once they clicked ``buy now.''
    How are purchases able to be delivered to my home in Ohio, 
or to family members or friends across the country in two days' 
time or less, often without adding additional changes? If I was 
in a hurry, I might be able to take advantage of same-day 
delivery with the help of the new last-mile and independent 
contractor options, like Instacart or Cargomatic.
    When parcel deliveries encounter bad weather and delays, or 
are misrouted or misplaced, how does that impact--what impact 
does that have on e-commerce shippers and ordinary shoppers 
like me? Have the current tracking tools helped give consumers 
more information about their orders?
    Then there is the whole question of returns. What happens 
to a purchased item when it is returned? When it enters the 
reverse supply chain for restocking, is it sold on a secondary 
market, donated to charity, or discarded? I am sure this varies 
among companies, but I am interested in hearing from our 
witnesses about their return processes.
    This hearing is part of this subcommittee's ongoing effort 
to explore how the internet and advanced technology impacts our 
lives, jobs, and economy. Ohio is already home to some of the 
most highly regarded e-commerce fulfillment and shipping 
facilities in the country. Many retailers and e-commerce 
companies have made the investment in fulfillment and shipping 
operations in my home State because of our outstanding 
workforce, Ohio's transportation network, and the proximity to 
major population centers.
    For instance, where I live, just about 12 miles north of me 
where I-75 and the Ohio Turnpike come together, it is within 
one day's drive of 60 percent of the United States population.
    Emerging innovations, such as premium delivery, parcel 
locker boxes, and drones, will surely challenge the future of 
the supply chain to provide higher performance to satisfy 
customers.
    The internet and data have had a transformative effect on 
every industry in this committee's jurisdiction for the better, 
and also in presenting new challenges. One of those challenges 
is consumer data security in the e-commerce landscape. As this 
subcommittee has learned through numerous hearings on the 
subject, in exchange for efficiency and convenience, consumers 
provide companies with personal details, like their addresses, 
payment card information to complete that order.
    The reality is, that process is not going to change. I 
still need to tell the retailer where to deliver my new book 
after I pay for it. But continuing to improve security at all 
points of the supply chain is a critical goal that companies 
large and small need to be focused on.
    There are many interesting elements to this conversation 
about how new technology is changing how consumers shop and the 
package delivery system. I look forward to hearing from our 
witnesses today about their experience with this 
transformation.
    [The prepared statement of Mr. Latta follows:]

               Prepared statement of Hon. Robert E. Latta

    Good morning. I would like to welcome to our witnesses for 
today's hearing on ``Emerging Tech's Impact on Retail 
Operations and Logistics.''
    Thank you for being here to help us examine how e-commerce 
has changed the face of retail, and how both e-commerce and 
retail operations are responding in a world where technology, 
innovation and consumer expectations are constantly evolving.
    Today, U.S. consumers demand the speed and convenience of 
getting what they want, when and where they want it, including:
     Ordering from their phones and picking up in-
store;
     Varied payment options; and
     Different delivery choices, including free 
shipping.
    This was evident during the 2017 holiday season, as 51 
percent of last-minute shoppers said they'd planned to purchase 
their gifts online.
    E-commerce and catalog sales increased 12.3 percent during 
the holiday, accounting for 16 percent of all goods sold.
    In 2017, eighty percent of shoppers made more than four to 
seven online purchases in the typical three-month timeframe.
    As online shopping continues to gain in popularity and 
acceptance as in-store shopping, we want to understand how a 
consumer's decisions impact not only the e-commerce and retail 
companies, but also supply chain and delivery channels, 
particularly residential last-mile.
    This past holiday season, it struck me how massive the 
challenge of getting millions of packages processed and shipped 
to shoppers once they clicked ``BUY NOW.''
    How are purchases able to be delivered to my home in Ohio, 
or to family members or friends across the country in two days' 
time or less, often without additional shipping charges?
    If I was in a hurry, I might be able to take advantage of 
same-day delivery with the help of new last-mile and 
independent contractor options, like Instacart or Cargomatic.
    When parcel deliveries encounter bad weather and delays, or 
are misrouted or misplaced, what impact does that have on e-
commerce shippers and ordinary shoppers like me? Have the 
current tracking tools helped give consumers more information 
about their orders?
    Then there is the whole question of returns. What happens 
to a purchased item that is returned? When it enters the 
reverse supply chain for restocking, is it sold on the 
secondary market, donated to charity, or discarded? I'm sure 
this varies among companies, but I'm interested from hearing 
from our witnesses about their return processes.
    This hearing is part of this subcommittee's ongoing effort 
to explore how the internet and advanced technology impacts our 
lives, jobs, and economy. Ohio is already home to some of the 
most highly regarded e-commerce fulfillment and shipping 
facilities in the country. Many retailers and e-commerce 
companies have made the investment in fulfillment and shipping 
operations in my home State because of our outstanding 
workforce, Ohio's transportation network, and the proximity to 
major population centers. Emerging innovations, such as premium 
delivery, parcel locker boxes and drones, will surely challenge 
the future of the supply chain to provide higher performance to 
satisfy consumers.
    The internet and data have had a transformative effect on 
every industry in this committee's jurisdiction, for the better 
and also in presenting new challenges.
    One of those challenges is consumer data security in the e-
commerce landscape. As this subcommittee has learned through 
numerous hearings on the subject--in exchange for efficiency 
and convenience, consumers provide companies with personal 
details, like their address and payment card information, to 
complete an order.
    The reality is, that process is not going to change--I 
still need to tell the retailer where to deliver my new book 
after I pay for it. But continuing to improve security at all 
points of the supply chain is a critical goal that companies 
large and small need to be focused on.
    There are many interesting elements to this conversation 
about how new technology is changing how consumers shop and the 
package delivery system. I look forward to hearing from our 
witnesses about their experience with this transformation.

    Mr. Latta. And with that, I will yield back the balance of 
my time. And at this time, we will formally pass on the ranking 
member of the subcommittee and go to the ranking member of the 
full committee, the gentleman from New Jersey, for 5 minutes.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman. There's no question 
that the internet has changed the way we live nearly every 
aspect of our lives. It certainly has changed the way we shop. 
At any hour of the day, by phone, tablet, or a smart speaker on 
our kitchen counter, we have access to a dizzying array of 
products that appear almost magically at our doorstep 
overnight.
    The evolution of e-commerce presents exciting opportunities 
for business. And I look forward to learning more about the new 
technologies that are making it possible.
    The consumer benefits of e-commerce are obvious: ease of 
shopping, unlimited selection, and the convenience of fast home 
delivery or easy in-store pickup. Consumers of every 
demographic appreciate the advances of online shopping. Yet, as 
in all online activities, the constant amassing of personal 
information that makes benefits of online shopping possible 
presents privacy and data security concerns.
    We also know that the sophisticated algorithms analyzing 
all that data can have structural flaws that create racial and 
other biases and in how products are marketed, priced, and 
delivered. Additionally, the growth of e-commerce has increased 
freight traffic in our residential neighborhoods, and led to 
more packaging waste than necessary.
    Now, I am particularly concerned that the trend toward e-
commerce is increasingly resulting in consumers purchasing 
counterfeit goods. Just last month, the Government 
Accountability Office released a report finding that of 47 
products it purchased from third-party sellers hosted by major 
e-commerce website, 20 of those 47 were counterfeit. While we 
all want more choice, consumers do not want fake products, 
especially counterfeits that are dangerous, such as cosmetics 
laced with lead or mercury.
    And today I wrote to five e-commerce websites GAO 
investigated asking them to explain how they are addressing the 
problem of sales of counterfeit products through their 
platforms. And I hope our discussions at this hearing will 
include a review of the consumer protection challenges that I 
have mentioned.
    The commerce landscape is changing for sellers, as well. 
Online sellers are reaching a larger, more diverse customer 
base around the world. Low start-up costs allow even more 
people to benefit from online selling. Moreover, sellers are 
able to reach customers at all hours and employ workers who 
need a flexible work arrangement.
    At the same time, I am troubled by two big hurdles small 
businesses face in the growing world of e-commerce. The first 
is an outdated and decaying infrastructure. Our energy grid is 
precarious and inefficient, something as basic as clean water 
supply is not a given, and many areas of our country still lack 
reliable broadband access.
    And the second is the FCC's dismantling of free and fair 
access to the internet, or net neutrality. And this action by 
the Trump FCC will significantly handicap any business without 
major economic clout.
    Committee Democrats in May took on the infrastructure 
crisis by proposing $40 billion for secure and resilient 
broadband. This is part of our LIFT America Act. And we must 
stay focused on making reliable broadband access a reality 
everywhere. It's essential to small retailers in both rural and 
urban communities. And, of course, net neutrality is essential 
for small retailers. Without free and open access to the 
internet, the entrepreneurs that drive our economy will 
struggle to survive, let alone thrive.
    And last year I toured four businesses in Asbury Park, 
which is a city in my congressional district, and I witnessed 
firsthand just how integral the internet is to engaging new 
customers and generating sales.
    So, we should also be mindful of how the decline of 
physical stores, the rise of large fulfillment warehouses, and 
the incorporation of robotics and automation into the supply 
chain will affect the job market. And I am not suggesting we 
resist innovation, but that we continue to assess how to ensure 
our workforce is able to adjust to the shifting marketplace.
    Again, I thank all of you. It is going to be interesting to 
see what you have to say. And I yield back.
    [The prepared statement of Mr. Pallone follows:]

             Prepared statement of Hon. Frank Pallone, Jr.

    There is no question that the internet has changed the way 
we live nearly every aspect of our lives. It certainly has 
changed the way we shop. At any hour of the day, by phone, 
tablet, or a smart speaker on our kitchen counter, we have 
access to a dizzying array of products that appear almost 
magically at our doorstep overnight. The evolution of e-
commerce presents exciting opportunities for business, and I 
look forward to learning more about the new technologies that 
are making them possible.
    The consumer benefits of e-commerce are obvious-ease of 
shopping, unlimited selection, and the convenience of fast home 
delivery or easy in-store pickup. Consumers of every 
demographic appreciate the advantages of online shopping.
    Yet, as with all online activities, the constant amassing 
of personal information that makes benefits of online shopping 
possible, presents privacy and data security concerns. We also 
know that the sophisticated algorithms analyzing all that data 
can have structural flaws that create racial and other biases 
in how products are marketed, priced, and delivered. 
Additionally, the growth of e-commerce has increased freight 
traffic in our residential neighborhoods and led to more 
packaging waste than necessary.
    I am particularly concerned that the trend toward e-
commerce is increasingly resulting in consumers purchasing 
counterfeit goods. Just last month, the Government 
Accountability Office released a report finding that of 47 
products it purchased from third-party sellers hosted by major 
e-commerce websites, 20 of those products were counterfeits. 
While we all want more choice, consumers do not want fake 
products-especially counterfeits that are dangerous such as 
cosmetics laced with lead and mercury. Today, I wrote to the 
five e-commerce websites GAO investigated asking them to 
explain how they are addressing the problem of sales of 
counterfeit products through their platforms. I hope our 
discussions at this hearing will include a review of the 
consumer protection challenges I have mentioned.
    The commerce landscape is changing for sellers as well. 
Online sellers are reaching a larger and more diverse customer 
base across the world. Low start-up costs allow even more 
people to benefit from online selling. Moreover, sellers are 
able to reach customers at all hours and employ workers who 
need a flexible work arrangement.
    At the same time, I am troubled by two big hurdles small 
businesses face in the growing world of e-commerce. The first 
is an outdated and decaying infrastructure. Our energy grid is 
precarious and inefficient, something as basic as a clean water 
supply is not a given, and many areas of our country still lack 
reliable broadband access. The second is the FCC's dismantling 
of free and fair access to the internet-this action by the 
Trump FCC will significantly handicap any business without 
major economic clout.
    Committee Democrats, in May, took on the infrastructure 
crisis by proposing $40 billion for secure and resilient 
broadband. We must stay focused on making reliable broadband 
access a reality everywhere. It is essential to small 
retailers, in both rural and urban communities.
    Net neutrality is also essential for small retailers. 
Without free and open access to the internet, the entrepreneurs 
that drive our economy will struggle to survive, let alone 
thrive. Last year, I toured four businesses in Asbury Park and 
witnessed firsthand just how integral the internet is to 
engaging new customers and generating sales.
    We should also be mindful of how the decline of physical 
stores, the rise of large fulfillment warehouses, and the 
incorporation of robotics and automation into the supply chain 
will affect the job market. I am not suggesting we resist 
innovation, but that we continue to assess how to ensure our 
workforce is able to adjust to this shifting marketplace.
    Thank you, I yield back.

    Mr. Latta. Thank you very much. The gentleman yields back. 
And the Chair now recognizes the gentleman from Oregon, the 
chairman of the full committee, for 5 minutes.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Well, thank you, Mr. Chairman. Thanks for doing 
this very important hearing on the future, again, of emerging 
tech impact on retail operations and logistics.
    My district is home to a number of data centers: Google, 
Facebook, Apple, Amazon. Pretty impressive, the build-out that 
is going on there, the jobs that come with it, and how our 
economy is changing dramatically and rapidly. So this is really 
another part of our hearing sequence of looking at the future 
in innovation and legacy rules and regulations that actually 
can constrain and hold back innovation.
    The internet's incredible ability to transform old ways of 
doing business is by now widely known. And in the retail space, 
e-commerce has closed this gap between buyer and seller to the 
point where, you know, I can use this phone sitting right here 
and order whatever I need, and have it delivered by tomorrow, 
or perhaps sooner than that, I don't know. Well, I guess Uber 
Eats or something I can get--hey, what am I getting for lunch? 
I should figure this out.
    The long and the short of it is, the customer is in charge. 
And that's the way markets really work. And, you know, we want 
to make sure this marketplace continues to grow and that we 
don't stand in the way with Federal policy in things that 
inhibit.
    I would just say on the issue of net neutrality, it was 
really hard for these little start-up companies to ever get off 
the ground prior to Tom Wheeler's decision on net neutrality. 
That's why these little start-ups we know today like Amazon, 
Google, Facebook, et cetera, et cetera, by the way all 
blossomed prior to these rules. And I think you are seeing a 
complete overplay on the opposition to net neutrality. I don't 
think it is well understood.
    But anyway, going forward we see this enormous change going 
on in shipping. We see the change in the workforce needs. And 
we want to make sure that the market works, that there is space 
for innovation and competition. And we are more than happy to 
legislate in this space to prevent bad behavior on the 
internet, such as throttling and blocking and some of those 
things that I think we can find common ground on, we can 
enshrine in statute, and give certainty to the market as 
opposed to ping-ponging back and forth between courts and FCCs. 
And we would welcome a bipartisan effort to do that.
    At the same time, the shoppers are benefitting from lower 
costs and greater choices. This revolution in logistics allow 
Americans to find a product online, purchase it, have it 
delivered to their homes in a few days or hours. Companies are 
experimenting with drones. I was down at Google X with Sergey 
Brin as he was running one of their drones on the rooftop, 
showing how he could do package delivery and the speed with 
which they can bring you whatever you need. And so we need to 
look at what Federal issues are in the way of allowing that to 
move forward.
    And then you have changes in manufacturing, with the 3D 
printing holding potential to allow on-demand creation of 
products from ``local'' manufacturers. And so the internet 
revolution, continues. And public policy has to evolve with it. 
And our goal here is to put the customer first.
    And so, Mr. Chairman, thanks for your good work and 
bipartisan way as we move forward in this endeavor. And with 
that, I yield back the balance of my time.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    Good morning. Today we are examining the impact of 
technology on the retail industry and the delivery of goods and 
services to consumers. This hearing is part of this 
subcommittee's ongoing effort to explore the ways in which the 
digital revolution has impacted our economy and our country.
    The internet's incredible ability to transform old ways of 
doing business is by now widely known. In the retail space, e-
commerce has closed the gap between buyer and seller to the 
point where I can order anything, from anywhere, right on my 
phone. Customer demand has always driven changes in the retail 
industry. As we all know, ``the customer is king (or queen).''
    From the days of the earliest marketplaces, people would 
gather in person to barter or exchange money for goods. This 
model continued for thousands of years; in the U.S. ``main 
street'' became a metaphoric and literal place for shopkeepers 
to advertise and sell their wares.
    This persisted until another innovation seriously pressured 
the old way of doing business-in 1956 the world's first 
completely indoor Mall opened in Minnesota, a concept that soon 
spread through the U.S. and eventually across the globe.
    Starting in the 1990s the internet sparked yet another 
revolution in shopping, the impacts of which continue to 
unfold. The ability of the internet to remove barriers is as 
easy to understand as it is to pull out your phone and order 
pretty much anything you want-a sandwich for lunch, a pair of 
jeans, or a mattress. And you'll probably be able to find free 
2-day shipping.
    The internet allows buyers and sellers to communicate 
directly, compare products and prices, without ever leaving 
home.
    The changes this has wrought continue to be felt across 
industries. Many of America's twelve hundred malls1 are now 
feeling the same pressures that the Main Street general stores 
felt in the latter part of the 20th century.
    At the same time, shoppers benefit from lower costs and 
greater choices. Revolutions in logistics allow Americans to 
find a product online, purchase it, and have it delivered to 
their homes in a few days, or even hours. Companies are 
experimenting with drones and other delivery options to narrow 
that timeframe still further. Meanwhile, changes in 
manufacturing such as 3D printing hold the potential to allow 
on-demand creation of products from local ``manufactories'' 
that could revolutionize supply chains still further.
    The internet revolution also creates new challenges. The 
Energy and Commerce committee has been looking at ways to 
ensure Americans' privacy, and protect consumers' personal 
information from hackers and those that would seek to do harm. 
We have also been examining how algorithms can be used to try 
to persuade or even manipulate people.
    At today's hearing I hope our witnesses can help further 
our understanding of this revolution: how are your companies 
responding to it, what challenges and opportunities it 
presents, and most of all, how it can help consumers. I hope 
you will share with us any ways in which policymakers can 
remove barriers or promote policies that will further 
competition and protect consumers.
    The internet revolution is radically changing our world. As 
we continue to examine these issues we will seek to ensure that 
Americans continue to benefit from the blessings of technology, 
while keeping a watchful eye out on how we might protect them 
from harm.
    Thank you to all the witnesses for appearing before us 
today.
    Mr. Chairman, I yield back the balance of my time.

    Mr. Latta. Thank you very much. The gentleman yields back. 
And the Chair now recognizes the gentlelady of Illinois, the 
ranking member of the subcommittee, for 5 minutes.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Thank you very much, Mr. Chairman. And 
thank you to all our witnesses today.
    The internet has literally revolutionized how Americans 
shop. Consumers and businesses are less bound by geography. E-
commerce opens up the door to new opportunities and greater 
competition. E-commerce doubled from 2011 to 2016. In fact, 
it's growing 5 times faster than traditional retail. These 
numbers come as no surprise, given the number of delivery 
trucks we see on our streets and the packages piled up on the 
doorsteps and mailrooms across the country.
    As with other technological changes this subcommittee 
examines, e-commerce comes with other new challenges. 
Businesses must attract consumers to their websites, provide a 
convenient and secure shopping experience, and then literally 
deliver the goods. The U.S. Postal Service and private delivery 
service must transport a growing number of packages. Our 
infrastructure, physical and digital, must handle orders as 
they come in and ship out. States and cities must deal with 
changes to their revenue, not to mention collection of trash 
and recycling. And workers must adapt as jobs move from retail 
stores to customer service, tech support, and supply chain.
    The shift of consumers to the internet is especially 
difficult for small businesses. They have fewer resources to 
build a strong online presence. While a big player like Amazon 
can offer free shipping and get consumers to sign up for annual 
memberships, small businesses generally don't move enough 
product for that kind of business model.
    Unique challenges of building a successful business online 
only add to longstanding struggles such as access to capital 
and attracting quality workers. As we improve the resources 
that the Federal Government makes available to small business 
owners, we must factor in the growth of online retail.
    We also need to consider e-commerce as we advance 
infrastructure legislation. The internet can connect a business 
in rural Vermont, for instance, to a consumer in suburban 
Chicago, and both need access to reliable broadband. If we 
invest in broadband, we can expand business opportunities in 
both our large cities and smallest rural communities. But if 
broadband only reaches the area where it is most profitable, 
millions of entrepreneurs, workers, and consumers will be left 
behind.
    In addition, expanding opportunity through e-commerce 
requires a fair playing field. Net neutrality is fundamental to 
the innovation we have seen on the internet. The FCC's vote in 
December to undo net neutrality protection puts that innovation 
at risk. Without net neutrality, a broadband provider can 
charge a business extra to make its website load faster. The 
big names in e-commerce can afford to pay off broadband 
providers, but for a small business trying to sell nationwide, 
paying new fees to every broadband provider to load its website 
as fast as big corporate competitors may be prohibitively 
expensive.
    Consumers deserve better. That is why I have co-sponsored 
Congressman Mike Doyle's legislation to restore net neutrality 
and protect fair online marketplace.
    Before I finish, I would like to take a moment to introduce 
David Borris. Mr. Borris founded Hel's Kitchen in Northbrook, 
Illinois. In addition to running a successful business, Mr. 
Borris serves on the executive committee of Main Street 
Alliance, a national network of small businesses committed to 
being inclusive, sustainable, and trusted members of our 
community.
    I look forward to hearing from Mr. Borris and the rest of 
our witnesses as we explore the challenges and opportunities 
presented by e-commerce.
    And I thank you, Mr. Chairman. I yield back.
    [The prepared statement of Ms. Schakowsky follows:]

            Prepared statement of Hon. Janice D. Schakowsky

    The internet has revolutionized how Americans shop. 
Consumers and businesses are less bounded by geography. E-
commerce opens up the door to new opportunities and greater 
competition.
    E-commerce doubled from 2011 to 2016. In fact, it's growing 
five times faster than traditional retail. These numbers come 
as no surprise given the number of delivery trucks we see on 
our streets and the packages piled up on doorsteps and in 
mailrooms across the country.
    As with other technological changes this subcommittee 
examines, e-commerce comes with new challenges. Businesses must 
attract consumers to their websites, provide a convenient and 
secure shopping experience, and then literally deliver the 
goods. The U.S. Postal Service and private delivery services 
must transport a growing number of packages. Our 
infrastructure--physical and digital--must handle orders as 
they come in and ship out. States and cities must deal with 
changes to their revenue--not to mention collection of trash 
and recycling. And workers must adapt as jobs move from retail 
stores to customer service, tech support, and supply chain.
    The shift of consumers to the internet is especially 
difficult for small businesses. They have fewer resources to 
build a strong online presence. While a big player like Amazon 
can offer free shipping and get consumers to sign up for annual 
memberships, small businesses generally don't move enough 
product for that kind of business model.
    The unique challenges of building a successful business 
online only add to longstanding struggles such as access to 
capital and attracting quality workers. As we improve the 
resources that the Federal Government makes available to small 
business owners, we must factor in the growth of online retail.
    We also need to consider e-commerce as we advance 
infrastructure legislation. The internet can connect a business 
in rural Vermont, for instance, to a consumer in suburban 
Chicago--but both need access to reliable broadband. If we 
invest in broadband, we can expand business opportunities in 
both our largest cities and smallest rural communities. But if 
broadband only reaches the areas where it is most profitable, 
millions of entrepreneurs, workers, and consumers will be left 
behind.
    In addition, expanding opportunity through e-commerce 
requires a fair playing field. Net neutrality is fundamental to 
the innovation we have seen on the internet.
    The FCC's vote in December to undo net neutrality 
protections puts that innovation at risk. Without net 
neutrality, a broadband provider can charge a business extra to 
make its website load faster. The big names in e-commerce can 
afford to pay off broadband providers. But for a small business 
trying to sell nationwide, paying new fees to every broadband 
provider to load its website as fast as a big corporate 
competitor's may be prohibitively expensive.
    Consumers deserve better. That's why I have cosponsored 
Congressman Mike Doyle's legislation to restore net neutrality 
and protect a fair online marketplace.
    Before I finish, I'd like to take a moment to introduce 
David Borris. Mr. Borris founded Hel's Kitchen, in Northbrook, 
Illinois. In addition to running a successful business, Mr. 
Borris serves on the executive committee of the Main Street 
Alliance--a national network of small businesses committed to 
being inclusive, sustainable, and trusted members of their 
communities.
    I look forward to hearing from Mr. Borris and the rest of 
our witnesses as we explore the challenges and opportunities 
presented by e-commerce. Thank you, Mr. Chairman. I yield back.

    Mr. Latta. Thank you very much. The gentlelady yields back. 
This now concludes the Member opening statements.
    The Chair reminds Members that, pursuant to the committee 
rules, all Members' opening statements will be made part of the 
record.
    Again, we want to thank our witnesses for being with us 
today and offering testimony before the subcommittee. Today's 
witnesses will have the opportunity to give 5-minute opening 
statements, followed by a round of questions from our Members.
    Our witness panel for today's hearing include Mr. Rob 
Taylor, CEO of Convey; Mr. Dan Sanker, founder, president, and 
CEO of CaseStack, Inc.; Mr. David Borris, founder of Hel's 
Kitchen and Executive Committee member of Main Street Alliance; 
and Mr. Jonathan Johnson, member of the board of directors at 
Overstock.com, and president of Medici Ventures.
    And, again, we want to thank you all for being with us 
today. And we will start with Mr. Taylor. You are recognized 
for 5 minutes for your statement. Thank you very much.

  STATEMENTS OF ROB TAYLOR, CHIEF EXECUTIVE OFFICER, CONVEY, 
   INC.; DAN SANKER, FOUNDER, PRESIDENT, AND CHIEF EXECUTIVE 
  OFFICER, CASESTACK, INC.; DAVID BORRIS, MEMBER, MAIN STREET 
  ALLIANCE EXECUTIVE COMMITTEE AND OWNER, HEL'S KITCHEN; AND 
     JONATHAN E. JOHNSON III, MEMBER, BOARD OF DIRECTORS, 
         OVERSTOCK.COM, AND PRESIDENT, MEDICI VENTURES

                    STATEMENT OF ROB TAYLOR

    Mr. Taylor. Chairman Latta, Ranking Member Schakowsky, and 
members of the subcommittee, it is a privilege and honor to 
provide testimony on this important subject. My name is Rob 
Taylor, and I am co-founder and CEO of Convey, a software 
company headquartered in Austin, Texas.
    We partner with many of the Nation's largest retailers to 
help them gain supply chain visibility for customer deliveries, 
prevent those deliveries from failing, and ultimately provide 
improved customer experiences. We sit squarely at the 
intersection of technology, retail last-mile supply chain, and 
consumer experience.
    Over the past 20 years, I have helped build several 
successful companies focused on providing enhanced, transparent 
retail consumer experiences. At Convey, we are helping our 
retail customers differentiate on the emerging competitive 
frontier--providing predictive, proactive e-commerce delivery 
experiences to consumers.
    A confluence of factors is creating opportunities for 
innovation and differentiation in the last-mile retail supply 
chain.
    E-commerce growth continues to explode, projected to 
represent 1 in every 8 retail dollars spent in 2020.
    The Amazon effect continues to raise the bar in all aspects 
of consumer experience, including redefining consumer 
expectations for fast, free delivery.
    The online sales growth of big and bulky items, such as 
furniture and appliances, require more complex last-mile 
carrier networks, and expansion into other delivery modes such 
as residential freight, where capacity and connectivity is 
limited, appointments must be set, and drivers need to enter 
consumers' homes.
    Collectively, these trends create not only transport 
challenges, but also significant data and visibility challenges 
for retailers to effectively serve their customers.
    Carrier networks for retailers are expanding. Several of 
our customers work with 100 or more carriers just for last-mile 
deliveries. Each of these carriers produce unique tracking data 
that requires integration with disparate retailer systems. 
There is no industry standard for the production and use of 
this information.
    So why does enhanced visibility matter? We know 4 to 10 
percent of all last-mile shipments are at risk of leading to a 
negative consumer experience. Yet, 70 percent of these 
exception cases have the potential to get back on track through 
proactive carrier collaboration or customer communication.
    Delivery failures inevitably reflect poorly on the 
retailer, not the carrier, given the retailer's brand 
relationship with the consumer. Survey data confirms that 
retailers who are unable to uphold their delivery promise risk 
losing customers, with 70 percent of consumers indicating they 
would abandon a retailer after one failed delivery.
    Convey was conceived to help retailers solve these 
challenges. We believe the last mile represents the most 
important opportunity for retail innovation. Our application 
ingests millions of data streams from carrier and retail 
systems, and transforms this data using machine intelligence to 
highlight distressed shipments early enough for all parties to 
collaborate, remediate, and head off a potential negative 
consumer experience. From this, our retail customers see 
reductions in call center activity, faster delivery times, 
reduced transportation costs, and increased customer 
satisfaction.
    Emerging technologies like ours that increase efficiency, 
speed, and transparency for shippers, consumers, and carriers 
ensure that the future of the retail experience looks bright. 
Intelligent, self-healing, and adaptive delivery networks are 
not far away. These transportation innovations will lead the 
way for other supply chains beyond retail, including 
healthcare, parts distribution, and more.
    While the consumer clearly benefits from these innovations, 
care must be taken for consumer safety and privacy, 
particularly as more data is produced through the Internet of 
Things, and consumers require more in-home deliveries, whether 
or not they are present in the home. There is also more sharing 
of data across an increasing number of last-mile ecosystem 
participants, requiring diligent and shared accountability.
    In summary, local carrier capacity and connectivity, data 
security, and consumer safety and privacy are all relevant 
issues the subcommittee may wish to consider related to the 
retail last-mile supply chain.
    I want to thank the Members for the opportunity to share 
some perspective with you today.
    [The prepared statement of Mr. Taylor follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Latta. Well, thank you very much for your testimony 
this morning.
    And, Mr. Sanker, you are recognized for 5 minutes.

                    STATEMENT OF DAN SANKER

    Mr. Sanker. Thank you, Chairman Latta, Ranking Member 
Schakowsky, and members of the subcommittee for this 
opportunity to testify before you today.
    My name is Dan Sanker. I am the founder, president and CEO 
of CaseStack. In simple terms, what we do is we bring clients' 
products into warehouses on the West Coast, in L.A. and 
Seattle; in the middle, in Dallas, Chicago, Toronto; and on the 
East Coast, in Atlanta and Scranton. And then what we do is we 
collaborate with retailers, like an Amazon, Walmart, Whole 
Foods, Kroger, Target, and a lot of others, and mostly what we 
do is create multisupplier orders--so, they are destined for 
retailers and consumers--and what that does is it, on average, 
converts what would have been about 16 loads going someplace to 
one efficient truckload. The result for supply chains is less 
time in transit, less damages, less wasted miles and empty 
space on trucks, and less environmental impact, and ultimately 
lower prices for consumers.
    We are currently developing a new division of CaseStack 
called SupplyPike. The expectation there is that we will spin 
that off, and it will be a leading cloud-based platform for 
supply chain management professionals in consumer packaged 
goods. The CaseStack cloud-based technology platform already 
enables consumer packaged goods companies to manage everything 
from merchant interaction, account management, improvements in 
sourcing and forecasting, item setups, sell-through 
optimization, logistics, and business analytics.
    The SupplyPike technology platform is going to open that up 
to probably more than a half a million, we think, people that 
are in supply chain management in our industry.
    One of the other things, our company considers blockchain 
to be important for supply chain. That is probably one of the 
areas it is most applicable to. We are incorporating that into 
the applications. We are already taking Bitcoin as a payment 
mechanism just recently.
    Other big issues for me: sustainability. I moved out to 
Arkansas when Walmart was very focused on a groundbreaking 
sustainability initiative. I started a 501(c)(3) to try to help 
drive that.
    Now what I see, though, is a very big reversal in some of 
the progress that we had made because of all the packaging kind 
of coming back. Packages started coming back with a vengeance 
to accommodate the needs for logistics of e-commerce and long-
tail distribution. We have got boxes that are stuffed with 
paper and plastic dunnage that are driven to people's houses in 
thousands of trucks. Many of those are carrying items that 
might be as small as a box of pencils, but they are getting the 
gas mileage of something like an 18-wheeler. So it is obviously 
not the same.
    Recently I posted an article on LinkedIn that was really 
well received. It got tens of thousands of people interested 
and a lot of comments about how I ordered a box of cereal 
online. I spent about $3.00. It was $3.64, free shipping--it is 
a pretty good deal for a box of cereal. But there is really 
nothing free about it. There is nothing free about free 
shipping. There is not anything really normal or remotely 
sustainable about the fact that it's two pounds of cardboard 
and paper, 6 feet of tape, about a gallon of diesel fuel, and a 
lot of labor to get that box of Reese's Puffs to my house so 
that we could eat the cereal.
    It feeds into the capacity issue. If you were to book a 
truckload from here to somewhere today, you would pay about 31 
percent more than you would have a year ago. You would be out 
vying for that truckload with 5.5 other people looking for a 
truckload. About a year ago, you probably would have been vying 
for that same truckload with one or two other people. So, 
obviously, prices are going to continue to go up.
    Warehousing is also extreme because e-commerce uses about 6 
times as much warehousing as bricks-and-mortar retail. So those 
are some of the challenges.
    Now, some of the opportunity there is this is going to 
create millions of jobs in supply chain. And as the demand goes 
up, salaries will probably go up.
    Finally, I would be remiss if I didn't thank Congress for 
helping with entrepreneurial wherewithal and building 
entrepreneurial capacity. I am in a pretty rural part of the 
U.S. in Arkansas, and we have a really good, budding venture 
scene happening. And some of that is attributable to things 
like the SBA Regional Innovation Cluster funding, the 
Department of Commerce EDA i6 funding, and those are great for 
helping train future entrepreneurs and help the region plan.
    So I am looking forward to answering any questions you may 
have and, again, humbly appreciate the opportunity and 
attention and consideration today. Thank you.
    [The prepared statement of Mr. Sanker follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Latta. Well, thank you very much for your testimony.
    And, Mr. Borris, you are recognized for 5 minutes.

                   STATEMENT OF DAVID BORRIS

    Mr. Borris. Thank you, Chairman Latta, Ranking Member 
Schakowsky, and members of the committee. Thank you for the 
invitation to testify today on the impact of e-commerce and 
online retailers on Main Street small business.
    My name is David Borris, and I serve on the Executive 
Committee of the Main Street Alliance, a national network that 
creates opportunities for small business owners to speak for 
ourselves on matters of public policy that impact our 
businesses, our employees, and the communities we serve.
    The rapid emergence of technologies disrupting and remaking 
vast sectors of our economy unleashes incredible innovations 
but also pose dramatic challenges in the retail sector. Online 
retailers are ever more able to deliver goods and services to 
satisfy ever-increasing consumer demand. But, with the 
incredible growth of e-commerce companies like Amazon.com, 
there is an existential threat to the millions of small 
business owners who form the backbone of the American economy, 
creating jobs and ensuring that local wealth stays circulating 
in local economies. Ensuring that America's small businesses 
remain competitive in this brave new world of e-commerce should 
be a core concern of policymakers, and significant attention 
should be paid to the development of laws and regulations that 
ensure fairness and prevent unhealthy market concentration,.
    Today, I will discuss three key policy issues that we feel 
are essential in ensuring such a fair and competitive 
marketplace for small business: internet tax fairness, net 
neutrality, and affordable, high-quality broadband access.
    Small business owners need policies that level the playing 
field and ensure necessary revenue for local and State 
investments. When e-commerce laws allow for big internet 
retailers to avoid their tax responsibility, small businesses 
suffer and our States miss out on revenue needed for adequate 
funding of education, infrastructure, and public safety.
    Since the 1992 Supreme Court decision ruling in Quill 
Corporation v. North Dakota, Congress has been unable to create 
a proper legislative environment to enable States to protect 
bricks-and-mortar businesses that are the heart and soul of our 
local communities. By exempting online retailers from 
collecting sales tax, current public policy perversely 
incentivizes consumers to shop online, reducing local economic 
activity. Not only does this practice reduce Main Street's 
customer base, it also dramatically undermines State and local 
government budgets.
    When looking across mail, online, and catalog retail, this 
unfair tax gap costs an estimated $23.3 billion to State and 
local budgets annually. Main Street needs Congress to act to 
ensure this lost revenue can be collected.
    Net neutrality. We are concerned that the FCC's regulatory 
changes to net neutrality will significantly and unfairly 
undermine market access and competition on the internet. While 
only a small handful of companies sell internet access, nearly 
every company in the country buys it. Weakening or rolling back 
the 2015 protections would be disastrous for the country's 
small business community.
    Internet providers would gain new power to steer businesses 
and customers in whatever direction they choose. Our customers' 
ISPs could charge us new fees for the right to reach our 
customers, or charge them for access to our sites and services. 
And they could favor our competitors by slowing down our 
traffic or exempting our competitors' traffic from users' data 
caps, or simply block websites and apps outright. Small 
business owners would simply be unable to compete with large 
corporations on a pay-to-play internet. This would create 
immense uncertainty for small businesses in every sector of the 
economy who rely on open, unencumbered connectivity for their 
businesses and productivity.
    While countries around the world embrace strong, 
commonsense net neutrality protections, American small 
businesses would be left behind. Congress must maintain strong 
net neutrality to protect America's small business.
    Finally, access to affordable, high-quality broadband is 
necessary to boost small business owners' and entrepreneurs' 
access to e-commerce marketplaces. This is particularly true in 
rural areas.
    A recent report by the FCC found that nearly 40 percent of 
the rural population--that is over 23 million Americans--
compared to only 4 percent of the urban population, lack access 
to basic broadband service. This report notes that this 
disparity ``disproportionately impacts the ability of small 
businesses operating in rural areas to successfully compete.''
    Without access to reliable broadband service, small 
businesses cannot develop quality online platforms and stand to 
lose out on both sales and relevancy as the number of online 
shoppers continues to grow.
    Internet tax fairness, net neutrality, and access to 
affordable, quality broadband: all policies that create a level 
playing field for small businesses in the e-commerce 
marketplace. This is the recipe for small business success, a 
strong middle class, and vibrant local economies.
    Thank you again for the opportunity to testify today. And I 
look forward to your questions.
    [The prepared statement of Mr. Borris follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Latta. And thank you very much for your testimony.
    And, Mr. Johnson, you are recognized for 5 minutes for your 
opening statement.

              STATEMENT OF JONATHAN E. JOHNSON III

    Mr. Johnson. Thank you, Chairman Latta and Ranking Member 
Schakowsky, and members of the committee. I appreciate the 
committee taking the time to learn about new technologies and 
what laws and regulations stand in the way of their deployment 
and adoption.
    Overstock is a technology leader in the e-commerce 
industry. And to this end, we incorporate two principles as 
business tenets: first, it is all about customer experience; 
and second, our customers' experience improves when decisions 
are made at the knowledge frontier.
    Because knowledge is costly to centralize, we prefer self-
organizing systems and free market solutions. These can often 
be low-tech, old-school ways. For example, Overstock became a 
consistent, award-winning customer service organization when we 
adopted the credit ``the customer deserves justice'' and then 
empowered our customer service representatives to make 
decisions on their own to determine what justice was for each 
customer.
    However, in an ever-expanding and advancing world where 
technology, innovation, and customer expectations quickly 
evolve, we are constantly incorporating new technology into our 
business model to improve our customers' experience. Much of 
this technology empowers the customer herself, or those working 
directly with the customer, to make decisions in a more 
informed way.
    Let me give four current examples.
    First, our mobile application. Overstock's current award-
winning mobile application incorporates the latest technology 
to increase its speed. We have learned that every 100 
milliseconds of average page-load time decreases the conversion 
rate by 1 percent. In other words, customers are less likely to 
buy something on our site when it takes longer to load a page.
    We have also launched an augmented reality tool on our IOS 
mobile app. This tool lets customers use their phones to 
accurately visualize our products, like a sofa, in the room 
where they are going to use it, like their living room. They 
can see the size, the dimensions, and the colors, and how they 
fit in their room. This allows our customers to make more 
informed decisions.
    Importantly, this AR tool was an idea of one of our IT 
developers borne out of his own desire to improve his shopping 
experience on our site. It was not conceived or directed by 
senior management at the company.
    Second, personalization technology. Both our website and 
our digital ads are highly personalized for each customer based 
on their past searching, browsing, and shopping experience. For 
example, if two customers come to our site and search for a red 
couch, they will receive different content based on their past 
experience on the site. This technology understands customers' 
style preferences and incorporates these preferences into 
search results and served pages. It uses customer feedback 
loops to increase personalization and, in turn, has increased 
our shopping conversion rate.
    Importantly, this technology was developed during a 
developer ``hackathon'' where we allow our developers to work 
on whatever projects they think will be best for the company. 
Again, it was not conceived or directed by senior management.
    Overstock is an e-commerce industry leader in shipping 
large furniture items without damage. That is a difficult thing 
to do. We do this by using state-of-the-art technology in 
manufacturing, packaging, and shipping. These technologies 
include designing products that are less prone to be damaged in 
shipping, using packing optimization such as tailored boxes, 
and breaking less-than-load large items into multiple packages 
which can be shipped more easily. And then, of course, we use 
geographical warehousing to keep the product as close to the 
customer as possible.
    Again, many of these improvements were suggested by 
sourcing and warehousing employees most familiar with the 
problems of shipping.
    In January of 2014, Overstock became the first major 
retailer to accept Bitcoin as a payment mechanism. We now 
accept nearly 50 different cryptocurrencies. This calendar 
year, our weekly volume of cryptocurrency revenue is ranging 
between about $100,000 and $250,000 a week. While this is a 
minuscule percentage of our weekly revenue, it is a growing 
percentage. And so, Overstock has created a wholly owned 
subsidiary called Medici Ventures with the aim of advancing 
blockchain technology.
    We think blockchain technology will be used for three 
significant things: first, democratizing capital to allow 
everyone, including the poorest members of our society, to 
participate in the local, national, and global markets; second, 
blockchain technology can eliminate middlemen, which add 
unnecessary time, difficulty, and cost to transactions; and 
third, we think blockchain technology will rehumanize commerce 
so that you and I can conduct business together without 
middlemen in between. Our digital handshake becomes the 
physical handshake of years past.
    Again, thank you for this opportunity to testify in front 
of the subcommittee. I look forward to answering your 
questions.
    [The prepared statement of Mr. Johnson follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Latta. Well, thank you very much for your testimony, 
and to all our witnesses for your testimony. And we will now 
move in to the question-and-answer portion of the hearing. And 
I will begin by recognizing myself for 5 minutes.
    Mr. Sanker, if I could ask, start with you. How important 
will improving the supply chain be to e-commerce and retail 
growth? And what kinds of supply chain strategies does 
CaseStack provide to its clients?
    Mr. Sanker. Thank you. Yes, I mean, there are a lot of 
changes that are required. Really, I think the most significant 
thing is, as we move to long-tail distribution, if you take a 
look sort of historically at retail, there was a group of 
people at a retailer who would sort of protect the shelf, and 
they would protect the whole supply chain behind the shelf. So 
you have got a bricks-and-mortar store layout with limited 
shelf space. Then, if you were a buyer at a big retailer, you 
would buy the best-selling items. You would sort of curate what 
was in the box.
    That would then protect what was behind it, which was 
usually a distribution center network. There was a lot of 
technology that was built around best-selling items, as opposed 
to lots of items, which is what we have now.
    So, everything up the whole supply chain is sort of 
changing, and we are trying to work with that to make that 
economical and feasible. So that one of the major things I 
mentioned that we do is consolidation. So it takes a lot of 
collaboration and a lot of technology to figure out how could 
we consolidate the stuff that is going out to a retailer, and 
eventually all those packages that are sitting at all of our 
front doors.
    When you think about--I oftentimes come home to my house, 
and I will be gone for a couple of days, and I have what is 
really about a quarter of a pallet of products. But they didn't 
come in on a pallet. What they did is they came in onesies-
twosies a box, a box, a box at a time. It is really expensive. 
It is not an environmentally sustainable thing to do. And a lot 
of people really aren't making any money on that.
    So, what we see as a change, and one of the things that we 
are working on that is in that area, is take the consolidation 
that we have done for retail and do the same thing for 
consumers. So, instead of that coming in as a box and in lots 
of little boxes, bring in something that would be a larger 
delivery, something like a pallet or a quarter of a pallet--it 
might not look exactly the same as it does now--and then you 
wouldn't need as much of the plastic and paper dunnage and all 
the packaging. And you get one delivery--maybe one delivery 
every couple of days or once a week, as opposed to one at a 
time.
    And that will make--you know, e-commerce companies will 
actually be able to make money on that. And then it is just 
better for the consumer, doesn't have a pile of boxes to deal 
with. I am sure people are familiar with the trash that they 
have to take out, which is really--it is not convenient at all 
to have to open up all the boxes, dig through it all, and then 
figure out what to do with, you know, these piles of trash.
    So we're trying to--our biggest objective, really, is ways 
to collaborate with retailers, with e-commerce retailers, 
anybody, to consolidate.
    Mr. Latta. Thank you very much.
    Mr. Taylor, how do you leverage data to help clients 
improve their cost structure and improve efficiency?
    Mr. Taylor. Well, at our core we are a data-ingestion, 
transformation company. And so, one of the challenges that our 
retail customers face today is a lack of visibility into those 
in-transit, out-for-delivery shipments to customers. And the 
reason they don't have visibility is because they don't have 
the data.
    Their carrier networks are more complex. Each of those 
carriers produces data differently. And so, through our 
technology, we ingest all of the data from their carriers, we 
transform it, we put a predictive layer in it. And that enables 
us to identify exception cases or distressed shipments very 
early in the process, which then allows our customer, the 
retailer, to be proactive instead of in today's world being 
reactive to customer complaints.
    Mr. Latta. Now, do you use algorithms to help in that?
    Mr. Taylor. We do, yes. We absolutely do.
    A very good example of this would be--and we get data from 
various places, so carriers provide us data on behalf of our 
customers, we take feedback from consumers, and then we, as a 
company, through these algorithms create our own exception or 
distressed states on shipments.
    Just an easy example would be, given all the data that is 
flowing through our platform, we know that a terminal, a 
carrier terminal in North Dakota, products should be moving 
through that facility in 6 hours, and we notice a shipment, 
through the machine intelligence, that has not moved in 18 
hours. And so we will actually create an exception case out of 
that shipment, even if the carrier hasn't told us there is an 
issue. And that enables then our retail customer operations 
team to work with the carrier to understand what is happening 
with that shipment.
    Mr. Latta. Thank you very much. And my time is just about 
to expire, so I yield back the balance. And I recognize the 
gentlelady from Illinois, the ranking member of the 
subcommittee, for 5 minutes.
    Ms. Schakowsky. Thank you. And while I have most of my 
questions for Mr. Borris, Mr. Sanker, I wanted to just, I was 
just fascinated. Yes, I have the boxes all over, but we have 
big, big recycle bins. But it does seem to me that the 
environmental concerns are really big. And I would love after 
this hearing, maybe my office could be in touch with you about 
that. I think it is a really important question, including the 
gas that is used. So, thank you.
    Mr. Borris, I really appreciate your being here. We have 
worked together a lot on issues that deal with small 
businesses. And that voice is so important at this table right 
now, I think. And I want to--you noted how the inequities in 
the State sales tax laws favor internet retailers with no in-
State presence at all. And Congress has looked at legislation 
to create a level playing field for tax collection but, 
unfortunately, those efforts have stalled.
    If all retailers, Main Street and online, had to collect 
sales taxes in the State where the consumer buys the product, 
that would generate revenue for, as you pointed out, for State 
and local government, as well. It is not just a problem for the 
retailers. How would that revenue in a fair playing field help 
Main Street businesses?
    Mr. Borris. Well, sure, so in Northbrook, where I conduct 
my business, you know, we have 9.75 percent sales tax that we 
have to collect. So right from the beginning, you know, you 
have got to discount your product by almost 10 percent.
    The business that I happen to be in--and I don't really 
compete necessarily in that space because we tend to produce 
more full-service events, which is a more difficult thing for a 
online business to try to recreate what we do in my business--
but if I am in a different business and if members of my 
network are in those businesses, many small businesses are 
operating on trying to drop 8 percent, 9 percent, 11 percent of 
the bottom line. When you strip away that amount of money, they 
are suddenly not in business any longer. So it is----
    Ms. Schakowsky. Opponents of marketplace fairness have 
argued that small businesses would struggle to collect the 
correct sales tax for each State. Do you share that concern?
    Mr. Borris. So, even in my small business--we operate our 
core business in Northbrook, Illinois, but we operated a 
satellite business in Rosemont, Illinois, and a satellite 
business in Glencoe, Illinois, and a satellite business in Lake 
Bluff, and a satellite little business--these were all seasonal 
type businesses or small cafes. So, you know, when we fill out, 
you know, five sales tax return sheets as part of our Illinois 
sales tax return, yes, that is a little bit of a pain in the 
ass, right?
    But what we are talking about is, on a monthly basis, for 
me to do that, it took maybe 45 minutes instead of 15 minutes 
to do 5 instead of 1. I think that is just the cost of doing 
business. And when we look at that and say, well, if I am going 
to go into an online retail business, I need to understand that 
that is what is going to happen.
    The other thing I would say is that the software 
solutions--the day that every online retailer has to pay sales 
tax in every municipality that they do business in, the day 
after that there will be a boatload of solutions available by 
good software developers that say, whoa, there is a market 
here. So, we will pay a little bit to obtain those software 
solutions. We will turn them over to our administrative staff, 
and they will incorporate them in the same way as we 
incorporate all new technologies into our businesses.
    Ms. Schakowsky. I wonder if you--you also talked about net 
neutrality. And I have never received more communications from 
constituents on any issue as net neutrality. It is incredible. 
Probably every millennial particularly in my district, 
including my grandson who called to lobby me, has definitely 
been involved.
    So if you could elaborate on the extent to which day-to-day 
operations depend on fast, affordable internet service, and 
what it would mean to small businesses not to have net 
neutrality.
    Mr. Borris. So, I think the conversation on net 
neutrality--and when we say, well, you know, certain businesses 
flourished 10 years ago when they were born, or 13 or 14 years 
ago when they were born, and we didn't have, you know, the net 
neutrality regulations in place--but the internet was not the 
presence in our lives 10 years ago, 15 years ago as it is 
today.
    You can't function any longer, right, you can't--you can 
barely function as an individual, you certainly can't function 
as a business in anywhere approaching an urban environment--
without working with the internet on a daily basis, both to 
look for vendors and where you are going to source your 
supplies, as well as finding new clientele and interfacing with 
your clientele.
    I think that the reason you see surveys that say that 
somewhere near 70 or 73 percent of Americans are in favor of 
net neutrality rules is because we intuitively understand--and 
I think small businesses do, as well--we intuitively are 
concerned about concentrations of power in the marketplace. And 
to believe that something as fundamental to my business and to 
our network of small businesses, and everybody's business, 
something as fundamental as access to the same speeds, and the 
same data, and the same ability to utilize the internet, to 
believe that a concentration in market power could subvert and 
change that ability is a frightening prospect.
    And once we get there, it is going to be way, way harder to 
go, ``Oh, we made a mistake, now we have to undo it,'' because 
the market will have already spoken. It is a frightening 
prospect.
    Ms. Schakowsky. I wanted to say, as Mr. Johnson testified, 
slowing the load time for a web page by just 100 milliseconds 
can cut into sales. So it is significant.
    Thank you, I appreciate it. Mr. Chairman, yield back.
    Mr. Latta. The Chair now recognizes the gentleman from 
Illinois, the vice chairman of the subcommittee, for 5 minutes.
    Mr. Kinzinger. Thank you, Mr. Chairman, for yielding.
    Mr. Borris, I appreciate your passion. I agree with you: 
Concentrations of power are exactly what folks my age and 
younger are concerned about, which is why we are getting this 
out of the Federal Government's control and changing the rules 
from what the last administration did.
    I also would welcome you--I notice you have a lot of, you 
know, restaurants and places around Illinois--come out to real 
Illinois sometime in the flat part, the not suburbs. We will 
welcome you at any time. So we would love that, even. Thanks 
for being here.
    Mr. Johnson, you note in your testimony that Overstock was 
the first major retailer to accept Bitcoin and now accepts over 
50 different cryptocurrencies. I know there are a lot of people 
that try to kind of be, you know, new day and say, ``Hey, the 
cryptocurrency thing is cool'' and everything. I have a lot of 
concerns about it. I have actually kind of evolved my thinking 
on this in the last even year.
    Let me ask you a question. What are some of the benefits 
that cryptocurrencies can provide, and what are some of the 
risks and challenges? I am more concerned about the risks and 
challenges. But if you could give me both, that would be great.
    Mr. Johnson. Sure. So, Overstock decided to start accepting 
cryptocurrency because we are in the business of making it 
easier for our customers to transact with us. Whether that 
means accepting credit card, or PayPal and Apple Pay, or 
cryptocurrencies, we would like our customers to be able to 
purchase with us.
    One of the benefits to us is it has significantly cut our 
fraud prevention department down. People often say that 
cryptocurrencies are a tool of fraud and used by criminals 
worldwide. I will tell you this: So are credit cards, and 
Overstock employees somewhere between, depending on the time of 
year, 30 and 40 people in our fraud prevention department to 
fight credit card fraud.
    With cryptocurrencies, it is like a cash transaction. It is 
a final sale for us. And we have a low--we have almost no 
interchange fee and no risk of fraud. So part of the benefits 
are we are reducing internal costs we can then pass on to our 
customers.
    Mr. Kinzinger. Well, let me ask you then if you with, for 
instance, Bitcoin with the massive fluctuation in value, how 
does that affect your bottom line?
    Mr. Johnson. So, when we first started accepting Bitcoin, 
we converted all of it into U.S. dollars immediately. Over time 
we have begun to----
    Mr. Kinzinger. And what do you do that through?
    Mr. Johnson. Through our integration with Coinbase. So, if 
you came and purchased a sheet set on our site with Bitcoin, it 
would immediately be converted into dollars, because we are 
paying our bills in dollars.
    Today we have vendors, and others, who take payment in 
cryptocurrencies, so we keep up to half of our cryptocurrency 
revenue in Bitcoin. Most of it still goes to dollars, we keep 
the other half, up to half, in Bitcoin and we let our treasury 
department manage that, selling or not. So we don't hold much 
risk in that sense.
    Mr. Kinzinger. So, obviously, you are exposed to 
fluctuations but maybe not. I mean, you are also exposed to 
fluctuations in the value of a dollar or whatever.
    Mr. Johnson. Sure. And we are exposed to fluctuation in gas 
prices and the cost of shipping, all kinds of things.
    Mr. Kinzinger. Yes. And also, in your testimony you 
emphasize that care must be taken for consumer safety and 
privacy, especially as retailers continue to deploy internet-
connected applications to enhance customer experiences.
    We know that with an increasing number of IoT devices, 
cybersecurity is of the utmost importance. What do you think 
retailers must do to protect consumer information? And what 
approaches to cybersecurity are you seeing?
    Actually, this is for Mr. Taylor. I am sorry. And what 
approaches to cybersecurity are you seeing retailers apply?
    If you need me to repeat, I will, because you probably were 
zoned out when I was asking Mr. Johnson.
    Mr. Taylor. I got the gist of it.
    Mr. Kinzinger. OK.
    Mr. Taylor. Yes, so there are a number of issues around, 
you know, data security, consumer privacy. and safety. I mean, 
I will touch on a few of these.
    So, you know, with the consumer's desire for more, ever 
more convenience, ever more control in their deliveries, you 
know, this is resulting in innovations like Amazon Key and 
Ring, where now delivery drivers are going to be able to enter 
consumer homes, even potentially without them being present. So 
clearly there are considerations for consumer privacy and 
safety in a world like that.
    On the data side, some of the, you know, one of the things 
we see, at least in our business--again, our business is last-
mile, you know, visibility, and distressed shipment management. 
But one of the things we see, you know, we are a good example 
of this. We are a technology company. We now sit in between the 
retailer and the consumer and the carrier in terms of the data 
that is being produced. So there are more companies like us, 
there are more carriers that retailers are working with that 
produce more data.
    So, with more nodes of data production and data use, that 
just inherently creates some risk, as well. So how we manage 
this, you know, we don't require personally identifiable 
information from consumers to provide our products and 
services, but our products are certainly enhanced if we can 
have basic PII, such as a delivery address, email, and phone 
number.
    Mr. Kinzinger. OK.
    Mr. Taylor. And we hold ourselves to high standards around 
that.
    Mr. Kinzinger. Thank you, I yield back. Appreciate it, Mr. 
Chairman.
    Mr. Latta. Thank you very much. The gentleman yields back. 
The Chair now recognizes the gentleman from Kentucky for 5 
minutes.
    Mr. Guthrie. Thank you very much. Thank you for being here. 
It is an interesting hearing.
    I founded the Congressional eCommerce Caucus. And 
Louisville, Kentucky, a few years ago, probably a generation 
ago now, was the winner of the Worldport location for UPS. So 
most UPS flights, planes that fly in and out, fly out of 
Louisville. It is a great place to locate. Not much snow, 
center of the country, of this part of the country, so other 
people are looking for it.
    But what I guess we didn't see happening with the internet 
moving forward and when that happened, is what's happened--I 
don't have Louisville, but my district just south of there, 
Sheperdsville, Brooks, Hillview, if you drive through there you 
will see Zappos, Best Buy, bestbuy.com, amazon.com, Geek Squad. 
I mean, all those are there because of the access to Worldport. 
And so it is something I have been very interested in, because 
it is a big driver of economics in my district and a big driver 
for trade, quite honestly, because they ship stuff all over the 
world from there.
    And so we're looking at these centers like are in my 
district. The centers, there are warehouses, sorting hubs. How 
do they contribute to the last mile of delivery? This is for 
Mr. Sanker and Mr. Taylor. With the drive for 2-day, next-day, 
and even same-day delivery, have you seen an increase in the 
need for more fulfillment centers? And you two can take it.
    Mr. Taylor. One of the things we certainly observe with our 
retail customers, again driven by consumer demand for 
convenience and immediacy, is certainly more assortment in 
inventories moving closer to where demand is. And so this is 
really, really being done in two ways.
    One is additional capacity. Fulfillment centers are being 
built.
    And the other is, for our omnichannel retailers that have 
physical presence with stores, many of these stores, in a world 
where retail is constricting, many of these stores are at least 
being partially used for warehousing. And so they are sort of 
parcel store operations and then e-commerce fulfillment center 
all in one facility.
    Mr. Sanker. Yes, and similarly I think we see a little bit 
of everything, which I think is the market at work, really. We 
see, you know, fulfillment from stores, fulfillment from new 
distribution centers. There is no doubt there will be a lot 
more new distribution centers. And I think there is no doubt 
that the current retail square footage that is out there is 
going to have to shrink and the current square footage of 
warehousing and distribution center capacity is going to 
increase.
    And then you do have some of what you mentioned, which is 
this clustering effect, which is great for the areas that can 
do it. I know one of the key issues that we are going to have 
is a workforce that is capable and trained and can handle all 
this growth.
    Mr. Guthrie. That leads into my next question I was going 
to ask you. As you are going down that path, the biggest 
concern you have when you go through these is they are 
incredibly high tech, I mean unbelievably high tech. Of course, 
you need sorters, just people that are there helping with the 
boxes moving forward. But they really need people who have 
industrial maintenance, computer skills. And what are you 
trying to do to retain talent?
    We just lack that talent, at least in our area. But I think 
in the whole country, you hear that from everywhere you go in 
the country?
    Mr. Sanker. Yes. I mean, we have this issue where next week 
I go back and we are having what we are calling the Nowhere 
Developer Conference, because we are sort of in the middle of 
nowhere out in Arkansas. And we are attracting technology, 
hardcore sort of technology developers to the area.
    We are also working with high school students. We have got 
interns, high school interns come into the office every week. 
We have got meetups and conferences. So, everything from high 
school students--and I think that is probably the--it is a 
challenge. I mean, you can't just invent more people.
    So the two areas that we see that are great opportunities 
is, start younger. So anything that anybody could do to support 
getting high school students some real-life experiences. These 
kids that are 13 and 14 have unbelievable talent--I think you 
probably all see it in other areas--that I don't think I, my 
generation, ever had.
    And then we have had H-1B people that were rejected who, 
you know, are master's degrees in computer science. They come 
to schools in the United States. And we pay to train them. And 
then, you know, we have got two--one is in China now, one is in 
Canada--helping to create jobs for Chinese people and 
Canadians, and helping build venture capital there and new 
companies. Things like that, I think, are huge.
    But, mostly, it is start with high school students, train 
them, give them real experiences. They are eager. That has been 
great.
    Mr. Guthrie. Thanks. And I did have a couple more 
questions. I am about out of time. But I was going to talk to 
Mr. Johnson, so I will just--you won't have time to answer, 
but, you know, and so we are trying to figure out, I know what 
Mr. Borris always talks about, those teams. We need to be 
hearing those businesses in our communities, that's names on 
the backs of Little League jerseys. That is what we like to 
talk about, the local folks. We have to be cognizant of that.
    And maybe there is a way as the last stage of same-day 
delivery, some of these retail operations also become almost 
warehousing opportunities, where you buy online and ship, goes 
to a local store, and comes to your business. Or you go to 
the--I like to buy books online, but I go to the local store 
because I want the local store to still be there. So I go there 
to make the purchase because I don't want it all to become 
online and the local bookstore with the coffee shop and 
everything goes away. And so that is something we need to be 
cognizant of.
    But I am out of time. So I appreciate the opportunity to be 
hearing you guys here today.
    Mr. Latta. Thank you very much. The gentleman yields back. 
The Chair now recognizes the gentleman from West Virginia for 5 
minutes.
    Mr. McKinley. Thank you, Mr. Chairman. I am sorry I missed 
some of the earlier comments. We were, we have got a hearing 
going on upstairs, and so it has been back and forth on this.
    But if I could, just to kind of focus in on perhaps on the 
postal delivery, with the U.S. Postal Service. We have had 
enough testimony in other meetings, other hearings, about some 
of the deficiencies in our Post Office, and handling the 
products, and security and the like. Are there some suggestions 
that you would make, and how we might be able to improve our 
Postal Service to handle what potentially could be, as this e-
commerce continues to pick up, what we should be proactively 
moving on? Any of you, any of the four of you.
    So, everyone is satisfied the Post Office is running fine? 
Thank you.
    You look like you want to jump in.
    Mr. Johnson. I will say something. I think the Post Office 
served a wonderful purpose before we had private companies like 
UPS and FedEx delivering to any small and rural town. We use 
the Postal Service for about 2 percent of our deliveries, 
mostly small items, very small items.
    The UPS and everyone else gets anywhere and everywhere for 
less, and so I think trying to run it more like a private 
business than a Government bureaucracy would make sense.
    Mr. McKinley. I was just curious because of that last-mile 
delivery. Often they will hire the Post Office to make that 
delivery. So I'm aware of that.
    But let me go to another--because I am fascinated with 
this, how it changed. I can remember back when I was in college 
back in the '60s when the first computers came out. To think 
how we have evolved in the last 50-plus years with this. But I 
am curious with deliveries going to homes. When we have--we go 
to an airport, they always ask, one of the first things, your 
chain of custody. ``Did you have possession of your items the 
entire time?'' Yet now we are leaving products, could be one 
day or two days, sitting on a porch that are, they have 
custody.
    How do you deal with that? And what are some of the issues 
that perhaps get into it, in terms of people having access or 
you are telegraphing to the bad actors there is no one home? 
What is the process, and what is your liability as the shipper, 
or someone that is shipping products, how does that, how do you 
come into that? Anyone?
    Mr. Sanker. Yes, I guess I can address some of that.
    Yes, you definitely have packages that are just left on 
doorsteps now. And there is a growing bad-actor group that has 
sort of figured that out and is stealing those packages, I 
think.
    But I think that the market is also addressing that. The 
lockers that you see popping up--there is, you know, Amazon has 
got lockers in Whole Foods, there are whole locker companies 
that just make, sell lockers to apartment complexes and things 
like that. I think that does, goes a long way to addressing it. 
So, you will use your phone to unlock your package. And that is 
pretty convenient.
    Mr. McKinley. I don't know of too many lockers in rural 
West Virginia.
    Mr. Sanker. I mean, I think this is a pretty new concept, 
really, I think. I live in Fayetteville, Arkansas. We have got 
lockers in the apartment building across the street from my 
office.
    Mr. McKinley. OK.
    Mr. Sanker. We have got them in the Whole Foods.
    Mr. McKinley. The last question I want to get towards is, I 
have had the experience in a highly secure area to classified, 
which they hear about the dark web and all the e-commerce that 
is occurring over that. What suggestions would you make on e-
commerce on the dark web?
    Mr. Johnson. First, I would just comment. One of the things 
we do on that package delivery issue is, we sell a lot of 
larger goods, couches, and pieces of furniture. We allow our 
customers to arrange for a delivery time. And I think that 
helps stop that.
    The thing I would say, the dark web is a problem. And I 
think a lot of cryptocurrency purchases on the dark web are 
often said to be a problem. But, as I have talked to law 
enforcement officials, they have said one of the things they 
like about cryptocurrency on the dark web is it leaves an 
electronic footprint. It is not an anonymous transaction, it is 
a pseudonymous transaction, and they are able to track those 
purchases and, if they are illegal purchases, see who 
ultimately did that.
    And I noticed the other day that the U.S. Marshal was 
selling a lot of Bitcoin. Not because they had bought Bitcoin 
or had been mining Bitcoin, but it is because they had seized 
it through illegal transactions, most likely on the dark web.
    So I think that something that leaves that electronic 
footprint is actually helpful in solving problems that may 
arise out of it.
    Mr. McKinley. Well, in conclusion, I just hope we can keep 
up with the speed of the transformational economy right now and 
be able to keep the control. So I hope you are right on that 
and we can, because it is very concerning when we think 90 
percent of the web, the internet, is not what we use, and it is 
not easy access, it is the dark web. So, I am hoping we can be 
careful with that.
    Thank you. I appreciate it. I yield back my time.
    Mr. Latta. Thank you very much. The gentleman yields back. 
And the Chair now recognizes the gentleman from Indiana for 5 
minutes.
    Mr. Bucshon. Thank you, Mr. Chairman.
    Mr. Johnson, how do you see the impact of e-commerce 
affecting rural parts of the country? I represent a broadly 
rural district and, I mean, no one wants to be left out of the 
consumer revolution. So that, and what kind of technology and 
innovation is changing the way industry is thinking about 
servicing rural areas of our country?
    Mr. Johnson. Great question. As I have traveled around, 
rural Utah, in particular, quite a bit, I have been asked that 
same question. I think one of the things that e-commerce does 
that can help rural America is it gives them access to a 
customer base outside of their city or county lines.
    We have lots of suppliers that drop ship from their homes 
and warehouses in rural parts of America that list product on 
Overstock, are able to access all of our marketing, our 
backbone of processing their credit card, et cetera. So I 
actually think that e-commerce helps rural America because it 
allows people that are manufacturing or have a good idea, good 
product, greater access to all 300-plus million people in the 
United States.
    Mr. Bucshon. Yes. And I agree with that. And I think that 
brings up--someone mentioned broadband access. And so I just 
want to point out again that some areas in my congressional 
district don't, can't get--you know, they have dial up almost 
still, you know, for their internet access. They do. And so it 
does bring up the importance of where they are going to have 
access at getting rural broadband.
    I want to just ask a question about the healthcare space. I 
was a surgeon before. And I guess I will start at that end. I 
mean, where do you see this type of industry going as it 
relates to the healthcare space? Because we have a cost problem 
in the healthcare space. It costs too much. And are there 
innovations out there that can help us overall bring down the 
cost of what it is costing us to provide healthcare services to 
our citizens?
    Mr. Taylor?
    Mr. Borris. Well, I would weigh in on that and just say 
that, when we look at the cost of healthcare and when we look 
at where those costs are--certainly in end-of-life care, right, 
which is a whole different conversation culturally, I think--
but there is also the single most preventable, a driver in 
healthcare, and that is adult onset diabetes and obesity. And 
when we look at that, I think that--and this might be anathema 
to some of you guys--but I think this Government has a role to 
play in understanding what our food chain looks like and how we 
use tax policy to incentivize that.
    Mr. Bucshon. OK.
    Mr. Borris. And I think there is a spot there.
    Mr. Bucshon. Mr. Taylor?
    Mr. Taylor. Yes. So, again, our world at Convey really is 
around trying to find efficiencies in last-mile transportation. 
And while our core market is retail, we are beginning to do 
some exploration in last-mile, you know, business-to-business 
deliveries for healthcare. So this is, you know, distribution 
to pharmacies, distribution to hospitals.
    In some sense there are some similarities to retail where 
this last-mile transportation involves different modes of 
transportation. It is not just small-package delivery, but 
there are large-item deliveries to hospitals, there are medical 
devices to hospitals, where predictability of those deliveries 
is very, very important.
     So I think, you know, if we can get better visibility into 
those deliveries and make them more predictable, that will 
result in efficiencies and cost savings.
    Mr. Bucshon. Yes, because historically, I will just give an 
example, like a hip prosthesis or something, you know, used to 
be hospitals would have inventories of those, right? Now it has 
kind of gravitated to where the device company itself will come 
that day when you have a procedure and bring their inventory, 
and you use the one that you want. That is the way it is done.
    It seems kind of cumbersome to me, but there may be 
opportunities there to further decrease cost by, you know, if 
you can get things delivered accurately and efficiently in the 
healthcare space.
    Anybody else, do you have anything?
    Mr. Johnson. I think you can cut all kinds of costs out of 
it by having things centrally warehoused and shipped. I am 
friends with a fellow who runs a company called PillPack, which 
sends out prescriptions to people every month in daily 
packages, so they are going to be more likely to take their 
medication and stay healthy than if they have to go to the 
pharmacy when the bottle runs out.
    Mr. Bucshon. Yes?
    Mr. Sanker. Similar to that, we have a company in town that 
is working on more home diagnostic kits so that people can sort 
of figure out their own issues without having to actually go to 
the doctor, which I think also stems from some of this.
    Just I think, if anything, it is going to help access, give 
people access that wouldn't have otherwise had access and make 
it easier to take, you know, your meds and manage that, and 
also diagnostics.
    Mr. Bucshon. Yes, I mean, I am not an IT person, but I 
think there is a lot of opportunity in the healthcare space for 
the use of technology to improve efficiencies and get our costs 
down.
    Thank you, Mr. Chairman. I yield back.
    Mr. Latta. Thank you very much. The gentleman yields back. 
The Chair will now recognize the gentleman from Florida for 5 
minutes.
    Mr. Bilirakis. Thank you. Thank you, Mr. Chairman, I 
appreciate it. Thank you for your testimony today, as well.
    Mr. Johnson, retailers are no longer competing just on 
products, as you know, but instead for people's time. In 
particular, you mention in your testimony new innovations like 
the Overstock mobile app, cryptocurrency, personalized 
recommendations that can help shoppers save time by providing 
an array of tools and options. How has this changed the way 
companies operate?
    Mr. Johnson. Well, we have been in business for 18 years as 
an e-commerce company. If you went back and looked at our 
original site 18 years ago, it feels almost cavemanlike 
compared to today. We are always trying to make the customer 
experience better, easier for them to interface in, and to make 
it more pleasing.
    We now put up, for example, videos so that they can see all 
around the product. We have better sizing and color. You know, 
sometimes your computer screen has a little bit different color 
than the actual thing.
    We do all this to make the customer experience better and 
to reduce the potential of returns to us. So, I think 
technology lets us find ways to make it easier for the customer 
to access what he or she wants.
    Mr. Bilirakis. Yes. And again, you have a lot of 
competition, so you have to keep up with the times, correct?
    Mr. Johnson. The competition is fierce. And, you know, 
frankly, we have gone from a place where it was brick and 
mortar or e-commerce, and most companies today are more like a 
brick and click. You can buy something online and pick it up at 
the local store or return it to the local store. Competition is 
fierce, and I think that means the customer is ultimately the 
winner, because businesses are competing hard for the 
customer's time and money.
    Mr. Bilirakis. What is the percentage of revenue on e-
commerce as opposed to the brick-and-mortar store?
    Mr. Johnson. It is certainly going up over time, and I 
think that is because customers find convenience in it. It is 
the convenience factor, it is not whether they have to pay 
sales tax or not. Every customer who buys online has to either 
pay sales or use tax. It is a convenience factor.
    And I know when wedding invitations come into my house, my 
wife always shops online because they can ship it. She doesn't 
have to do all the extra work. People like e-commerce because 
it is easier.
    Mr. Bilirakis. She doesn't mind not having to try something 
on, you know, and maybe getting it online as opposed--and I 
guess she would send it back if it didn't fit?
    Mr. Johnson. And I think companies have gotten so much 
better at helping us size. I bought a pair of shoes the other 
day online, and it was very specific in its sizing on this 
company, saying if your, you know, foot is wide, buy a size 
extra. When they showed up--I bought a size that is not my 
natural size kind of following what was on the website--when 
they showed up, they fit perfectly.
    Mr. Bilirakis. Yes. I hate trying things on anyways.
    Mr. Johnson. There you go.
    Mr. Bilirakis. I just gamble.
    Mr. Johnson. You and me both. You and me both.
    Mr. Bilirakis. I take a risk.
    All right. Mr. Taylor, I am always concerned about the 
welfare of my senior citizen constituents from the great State 
of Florida. Are there new last-mile and independent contractor 
services that will help the elderly and disabled live more 
independently?
    Mr. Taylor. You know, this is a really interesting issue. I 
mean, we don't directly deal with this specific question in our 
business, but I do think that consumer demand around 
convenience, the ability to be in our homes and shop from our 
homes and have delivery gratification quickly, will certainly 
benefit those who have more difficulty getting out to a 
physical store.
    But, as I mentioned in my testimony, I think care must be 
taken around a world where delivery drivers are more and more 
coming into our homes. We are ordering more and more large-item 
deliveries today than ever--couches, other furniture, patio 
furniture, appliances--we no longer have to see and touch these 
items. And so all of those items require delivery appointments 
and strangers to come into our homes.
    So, I think it is an interesting issue that this 
subcommittee may wish to address.
    Mr. Bilirakis. Very good. Thank you. Next question--well, I 
don't have time. I will submit it for the record, Mr. Chairman. 
Thank you so much. Appreciate it.
    Mr. Latta. Thank you very much. The gentleman yields back. 
And the Chair now recognizes the gentlelady from California for 
5 minutes.
    Mrs. Walters. Thank you, Mr. Chairman.
    So, I am actually one of those women that does shop online, 
yes. I almost exclusively now buy my clothes online. And I love 
it because it is so much easier, although I think it is costing 
me a lot more money. I don't think my husband is too happy 
about that.
    Mr. Johnson. The more you shop, the more you save.
    Mrs. Walters. There you go. And I look for all of those 
special deals that I can get.
    Anyway, my questions are going to be for Mr. Johnson. 
Consumers are increasingly utilizing voice-activated assistants 
to play music, check the weather, or set cooking timers. One 
company's voice-activated assistant product saw a 325 percent 
increase in its users from May 2014 to May 2017. Voice-
activated assistants are expected to see continued growth in 
the coming years.
    One estimate predicts that a majority of U.S. homes will 
have one of these smart speakers by 2022. There are expected to 
be over 800 million of these devices worldwide in coming years. 
Since current technology is somewhat limited, purchases via 
voice-activated assistants are typically limited to small or 
replenishment purchases because it is difficult to compare 
prices or visually inspect a product.
    Mr. Johnson, do you have any thoughts on how voice-
activated assistants could offer an improved shopping 
experience by leveraging personalized and behavioral data like 
other platforms offer, or is this platform's usefulness in e-
commerce limited?
    Mr. Johnson. We have not looked at this a lot, so I am not 
sure I will speak really intelligently on it. But as we use 
voice-activated assistants in my home, it is just an easier way 
to do things. It is convenient. It is less typing. It is more 
talking. And I think it, you know, lets you access data 
quickly.
    But I am afraid I can't give a great answer because we are 
not using it a lot in our business.
    Mrs. Walters. OK. Then, I don't know, let me ask this other 
one and see if you can answer that.
    Are there ways to benefit consumers who shop by voice-
activated assistants so they receive recommendations for the 
best-reviewed product or the product that best fits their 
needs, as opposed to products that pay for enhanced placements?
    Mr. Johnson. Sure. Absolutely. And our view is we want to 
be serving the customer and not have suppliers buying shelf 
space. And so we are serving up recommendations. You know, as I 
mention in my testimony, if you search for a red couch or a 
specific style of red couch, the other search results that come 
up underneath that will be based on your browsing experience, 
or your voice-activated browsing experience, so that it will 
fit you.
    Our goal is to please the customer, not to necessarily push 
one product over another.
    Mrs. Walters. OK, thank you. That is the only questions I 
had, so I yield back the balance of my time.
    Mr. Johnson. Thank you.
    Mr. Latta. Thank you very much. The gentlelady yields back. 
The Chair now recognizes the gentleman from Pennsylvania for 5 
minutes.
    Mr. Costello. I always thought that it was the more that 
you shop, the more than you spend. But I appreciate the 
perspective that you actually save more when you shop more. 
That is a good way of looking at it.
    Mr. Johnson. At least on Overstock.
    Mr. Costello. And you were quick with it, you were so quick 
with it. That is very good.
    I have QVC, which is actually now Qurate Retail Group, is a 
constituent company of mine, and I have been very interested to 
see them navigate the new digital economy as they are, 
modernizing their television platform and marrying it with 
internet sales as they have.
    The question I want to focus on is sort of what is around 
the corner, Internet of Things, IoT. And I am just curious--and 
this is a question for each of the witnesses--explain or share 
with me how IoT is being used to enhance your supply chain, 
both in terms of getting consumers their packages, in 
situations potentially where consumers need to return items. 
Sometimes Mrs. Walters gets the package, she decides she 
doesn't want it then, and so it needs to get back to you. So 
share with me how technology is changing the face of the 
consumer experience as well as the supply chain.
    Mr. Sanker. I can talk a little bit about supply chain.
    From a transportation and warehousing perspective, there 
are a lot of new IoT devices that are now connected, so that as 
we build out our new supply-side platform we are building APIs 
so that it is easy for all these IoT devices to connect. So 
things like, you know, when you order or you buy in a store 
your food, it was supposed to be refrigerated. You know, you 
have got IoT devices now in the trailers that can track to see 
if it actually was refrigerated for the whole ride or even 
internationally.
    I think things like that are all throughout the warehousing 
and transportation industry. And they are going to just keep on 
growing because they get less expensive each year.
    Mr. Johnson. I think one of the things that IoT can help 
with is knowing when the replenishment purchases need to be 
made. If you have the Internet of Things telling you when you 
are out of milk, or when at a farm you need, you know, more 
fertilizer or whatever, that is particularly useful and can 
help in the replenishment.
    Mr. Borris. Well, certainly when we purchased small wares, 
equipment 12 years ago, we would call four different potential 
suppliers and they would have to fax over spec sheets. And then 
it would come up murky and we couldn't read them. And then we 
would have to bang back and forth with working on price back 
and forth, and what are the shipping costs. And now probably 80 
percent of what we purchase for supplies are purchased from 
Webstaurant or any one of a half a dozen other sites.
    The negative to that, you know, in my community long-term 
is that we don't pay sales tax on that, which takes out of 
Northbrook and takes out of North Chicago and takes out of 
Waukegan or wherever the vendors were located. That is an 
issue. I mean, for me it puts a little bit more money in my 
pocket as a business owner, but certainly nothing is going to 
change on that, right? I mean, the Internet of Things is here 
and it is going to be used and exploited. And it works in many 
ways to the benefit of a company like mine.
    Mr. Taylor. In last-mile delivery, you know, we are sort of 
early days in Internet of Things.
    Mr. Costello. Right.
    Mr. Taylor. But we are excited about it. I mean, again, our 
business is connecting data from all these disparate systems, 
and as these physical devices get deployed in last-mile retail, 
you know, we will be able to ingest, unify, and make sense out 
of all of this data that is going to be produced. So, we think 
it holds great promise and are excited.
    Mr. Costello. How about the issue of, you know, oftentimes 
it is brick and mortar versus e-commerce. But I thought The 
Wall Street Journal has done a pretty good job in cataloging 
how, sure, it can be viewed comparatively, but if you look at--
there is a decline in retail jobs but the increase in 
warehousing jobs, or what is traditionally termed a warehousing 
job, but it is much more sophisticated, requires much more tech 
savviness than one might expect. Just share the future of your 
workforce, and how it may more than compensate potentially for 
the loss of jobs that are being displaced as a consequence.
    Mr. Sanker. It does seem like that there, you know, the new 
jobs will be warehousing instead of retail clerk-type jobs.
    Mr. Costello. More ergonomically friendly.
    Mr. Sanker. Yes. We also, it is interesting, we are also 
working with a company called StrongArm. What they do is 
ergonomic tracking so they can actually track people in the 
warehouses and see----
    Mr. Costello. Yes.
    Mr. Sanker [continuing]. That they are lifting properly. 
And there is a lot of new technology around that.
    So the jobs in warehouses. I think if you go back 5 years 
ago some of the retail warehouses that I used to visit, you 
would not want to work there. But I do think it is improving.
    And I think what we are going to get is a whole new crop of 
people who will start out in warehouse jobs, move up, salaries 
will increase, they will become skilled, and then there are so 
many new technologies that they have to learn that it is not 
going to just be, you know, lifting boxes. So I think it is a 
good thing for a whole new group of people to get into the 
supply chain management workforce.
    Mr. Costello. Good points. Thank you. I yield back.
    Mr. Latta. Thank you very much. The gentleman yields back. 
The Chair now recognizes the gentleman from Oklahoma for 5 
minutes.
    Mr. Mullin. Thank you, Mr. Chairman.
    One point I just want to follow up on, on the jobs to which 
my colleague from Pennsylvania brought up. Yes, those jobs may 
be getting replaced in numbers, but they are not on Main 
Street. They are not in the small towns, which--I am all about 
business, but you can't compare apples to apples. I love the 
idea of creating new jobs. Every industry needs to create new 
jobs. That is awesome. I am very pro-business. But we have got 
to be careful there that we are not comparing them.
    Because the guys and gals that lose their jobs on Main 
Street, they are not working at your warehouses, because they 
don't live there. They are centrally located in areas that most 
places aren't.
    Going on to some questions. And, Mr. Chairman, I appreciate 
you holding this hearing. Appreciate the witnesses for being 
here, too. I want to talk to Mr. Johnson for just a second.
    I know my colleague from Illinois brought this up a little 
bit, about cryptocurrency. The question that I have is, are 
there tax consequences with this?
    Mr. Johnson. Yes. And I think that the IRS ruling on it has 
made it difficult. Today cryptocurrencies are not treated like 
a currency, but they are treated more like an asset or a stock.
    So, if I were to receive a Bitcoin today, I need to know 
the price when I received it. And then when I spend it or any 
portion of it, I need to know its value or price when I spent 
it. I need to know how long I held it, whether it is going to 
be treated as ordinary income or capital income or a loss. It 
makes it very difficult to transact in Bitcoin or 
cryptocurrencies on a daily way because it would almost be like 
being a day trader in stock. And most of us don't have 
accounting systems set up to do that.
    Mr. Mullin. Sure. I can see the difficulty in that.
    Staying on the topic of taxes, you are aware of the case in 
South Dakota right now?
    Mr. Johnson. We are a defendant in the case.
    Mr. Mullin. Right. That is what I said, you are aware of 
it.
    Mr. Johnson. Yes.
    Mr. Mullin. What do you think the reaction is going to be 
with the States and local municipalities if this case gets 
overturned?
    Mr. Johnson. Well, I guess it depends how it is overturned. 
If it is overturned and remote sellers now owe taxes that they 
weren't required to collect, now have to pay out of their 
bottom lines, it is going to be a problem.
    I have long been a proponent of Congress acting and taking 
the invitation that the Supreme Court gave it in Quill and 
putting together fair legislation. I don't think that the court 
should be legislating, but I think the Congress should be. And 
I think that the ideas of Chairman Goodlatte and others have 
put out are good, fair solutions that work for both remote 
sellers and----
    Mr. Mullin. Right.
    Mr. Johnson [continuing]. Point-of-sale sellers.
    Mr. Mullin. Mr. Johnson, Mr. Goodlatte, his bill--he 
doesn't have a bill. It hasn't been marked up. There hasn't 
been a bill placed. But Representative Kristi Noem's bill is 
out there.
    Do you support her bill, RTPA?
    Mr. Johnson. So, we worked very closely with Mr. Chaffetz 
in the previous Congress----
    Mr. Mullin. Right.
    Mr. Johnson [continuing]. On the same bill. We do support 
it. We think it has some extra burdens for remote sellers that, 
for example, Mr. Sensenbrenner's bill does not. We are 
concerned that it allows the States to reach across borders and 
put regulations in place that aren't appropriate. But we have 
expressed our support for it.
    Mr. Mullin. It would be--I get your concerns. They are 
legit concerns. However, I do agree with you: RTPA is a much 
better solution than allowing our court system to make this 
decision. I believe at that point we have a potential for a lot 
worse consequences for retailers, because you are going to have 
a hodgepodge, possibly, of rules and regulations that you are 
going to have to deal with.
    And so we are encouraging that RTPA be brought up, too. I 
am helping Congresswoman Kristi Noem on this and appreciate 
your support for it, too. That means a lot to us.
    Mr. Johnson. You are welcome.
    Mr. Mullin. With that, Mr. Johnson, I am done. And, Mr. 
Chairman, I will yield back the remainder of my time.
    Mr. Latta. Thank you very much. The gentleman yields back. 
The Chair now recognizes the gentleman from South Carolina for 
5 minutes.
    Mr. Duncan. Thank you, Mr. Chairman. I apologize, with 
multiple committees going on. But we are dealing with electric 
vehicles upstairs, AI, and now we are dealing with 
cryptocurrency and digital commerce. And I think it is pretty 
fascinating.
    I don't know how many Members of Congress actually own 
cryptocurrency in some form, but I do. And the reason I do is 
because I wanted to educate myself on how to purchase it, the 
different exchanges. I look at it every day just like I look at 
a stock portfolio, just to try to understand these type topics 
that we deal with here in this committee and are talking about 
today.
    So, Mr. Taylor, what specific consumer preferences or 
trends do you see being the driving force behind a lot of the 
retail innovations?
    Mr. Taylor. Well, certainly the consumer's appetite for 
convenience, for fast and free, are driving many of the 
innovations we see in the last mile. And I think that, you 
know, the Amazon effect is very real here. And, you know, we 
are helping many other retailers be able to provide similar or 
even better, better level of service.
    And so the innovations we see and that we are directly 
involved in is helping our retail customers gain much deeper 
visibility in last-mile delivery, and the ability to be truly 
proactive in helping the distressed shipments get back on 
track, and then communicate with the customer in a proactive 
way as well.
    Mr. Duncan. Right. I guess this is for the panel. Because 
of the demand for speedy delivery--and my wife and I use Amazon 
a lot for, you know, household goods, I mean, just because of 
the convenience of it--but do you see more trucks taking less 
than full trailers, and how is that affecting the trucking 
industry? And that is for the panel.
    Mr. Sanker. Yes, I mentioned earlier, we spend most of our 
time trying to figure out how to consolidate, again, because 
things have become deconsolidated as we have all ordered less 
than, like, really tiny packages going all over the place and 
coming from all over the place. So I think consolidation is the 
answer.
    And I think that what a lot of it--some of the 
subcommittees you just mentioned--I think it all kind of gets 
back to math, really. It is not our favorite subject for most 
of us, but all this stuff is going to be solved with 
algorithms. And we don't really have the people. It all comes 
down to the people that can do the math.
    So the consolidation example is a great one. We use some 
pretty sophisticated algorithms that I couldn't possibly 
understand, that we have got some great developers that do. And 
I think that is the key to a lot of everything now.
    Mr. Duncan. Yes. I have visited some fulfillment centers, 
like Walgreen's, where the stores are actually sending in 
orders, done automatically, I guess, that they need, you know, 
three or four bottles of aspirin and 10 bottles of 
formaldehyde, or whatever, you know, hydrogen peroxide. And 
they don't have warehouses in the back of the stores anymore. 
It is all just-in-time fulfillment.
    But the box may only have four items in it that's going to 
that store. And so, and it is just, that is going to take up a 
lot of truck space for a box that only has three or four items 
in it. I can think only how that translates to individual 
consumers that are purchasing one item and that truck has got 
to go to Eureka, Montana, right, that delivery truck.
    So let me move on in the little bit of time I have got 
left.
    Mr. Sanker, CaseStack is considered a third-party logistics 
company, or a 3PL. What are the primary functions of 3PLs 
within that supply chain? And why do companies hire 3PLs to 
handle parts or even all of their logistics?
    Mr. Sanker. Yes, I think the bar has gone up a lot on all 
of this stuff. So it is not something that anyone can do 
anymore. So you need expertise. So third parties that provide 
logistics services are becoming increasingly relevant and 
having to invest quite a bit in technology.
    So I think the divide that is happening is, you have got 
low-tech and you have got high-tech warehousing and logistics. 
At some point, you know, the higher-technology-based logistics 
operations are the ones that will be surviving and the lower-
tech ones won't because there is just demand for instant 
visibility, immediate shipping, and the things that you have 
mentioned, like the consolidation of packaging so that it is 
efficient.
    And when I say sustainability, there is an environmental 
impact to allow these things that is pretty serious. And then, 
from a business standpoint, like I mentioned the $3.00 or so 
box of cereal I ordered, you know, it was less than a dollar of 
profit in that for businesses, too. So, really, nobody could 
possibly make money if they spent, in order to get me a $3.00 
box of cereal they used a gallon of diesel fuel, 2 pounds of 
paper and cardboard, and 6 feet of tape, plastic tape. And you 
can imagine that cost more than a dollar.
    So, at some point, the market figures this out. I think 
some of the retailers are a little bit ahead of the consumers. 
Consumers, some of the surveys I have seen for consumers is 
they are all right waiting a little while for some of the 
deliveries. But right now the businesses haven't really given 
them the incentives to do it. It's free shipping. I mean, a lot 
of times--I imagine everybody in here has the same experience--
I ordered something on a Friday, that is this Friday, I got it 
on Sunday. I didn't really need it for a week, but it is there. 
And I didn't need all that.
    So that is going to change. I think the market will adjust 
for that.
    Mr. Duncan. Definitely a paradigm shift going on all across 
the globe, I mean, not only in the U.S. with your companies, 
and Amazon, and other fulfillment companies like that, but you 
are seeing Alibaba and JD and some others in the Asian markets.
    We have a logistics system in this country with good roads, 
good trains, and good airports. But I am just curious and 
really watching what is going on overseas with companies like 
Alibaba and JD and how they are getting those items to their 
customers in much ruraler areas than we have in this country.
    It is a great hearing, Mr. Chairman. I appreciate the time.
    Mr. Latta. Well, thank you very much. The gentleman yields 
back.
    And seeing that we have no other Members to ask questions, 
I want to thank our panel for being with us today. It has been 
very, very informational. We really appreciate it.
    And before we conclude, I would like to include the 
following documents to be submitted for the record, by 
unanimous consent: A letter from the U.S. Chamber of Commerce 
Technology Engagement Center; and a letter from RILA.
    And without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Latta. And pursuant to committee rules, I remind 
Members that they have 10 business days to submit additional 
question for the record. I ask that witnesses submit their 
response within 10 business days upon receipt of the questions.
    Without objection, the subcommittee will stand adjourned. 
And, again, thank you very much for being with us today.
    [Whereupon, at 11:44 a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
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