Coronavirus and grocery delivery during market influx

Mercatus Radio presents the Digital Grocer - Season 3, Episode #8

This week’s episode, we’re talking about the coronavirus and grocery delivery, and are joined by Guy Bloch, CEO of leading logistics delivery orchestration platform, Bringg.

With the spread of the Coronavirus (COVID-19) outbreak, grocers across all banners are seeing a massive influx in sales, especially through online delivery orders.

Sylvain notes, “I’m watching these sales go online and kind of rapidly increasing in terms of size of the basket, frequency of the orders. And then we were asked to increase the number of time slots for delivery and for pickup. And you start to really think through as volume increases the complexities of orchestration, and if you’re doing delivery, the number of delivery providers you may have that can get into really, really interesting science route optimization determining where the driver is, if there’s going to be an affected refund because somebody didn’t want something in their order or just returning the order in general.”

So how should grocers approach delivery? Guy stresses the importance of:

• Starting small, and scaling up delivery programs
• Owning your delivery program and;
• Communicating with your shoppers

“Grocers need to ensure that they have the right communication and processes in place to provide full transparency to their customers. From when the order is being picked to the substitution management, that when it leaves the stores, until it arrives at the customers. And when the customer wants to return a damaged or unwanted item, if that experience is not smooth, you fall back again into that 84% of customers that will not forgive you.”

Listen to the full podcast to learn more about the Coronavirus and grocery delivery, why grocers should own their delivery experience and what grocery CEOs should do today to ensure future success.

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Enjoyed this podcast? Then you might like these resources:

• Blog Post: Surrounded: Growing threats to traditional Grocery Retail Industry, featuring Brittain Ladd
• Blog Post: COVID-19 and grocery retail: what grocers can do right now

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PODCAST TRANSCRIPT

Sylvain Perrier:              Welcome ladies and gentlemen to the Mercatus podcast, Digital Grocer, episode 32. I’m your host, Sylvain Perrier president and CEO of Mercatus Technologies, and joining me in the studio today is Mark Fairhurst, our Senior Director of Marketing. Mark, thank you so much for joining us.

Mark Fairhurst:             It’s my pleasure. I’m always here.

Sylvain Perrier:              Dude, I went so hard on that intro. Right?

Mark Fairhurst:             That was very professional.

Sylvain Perrier:              Yeah I know, but it’s been a while since we’ve recorded, I’ve been dodging diseases for the last two weeks.

Mark Fairhurst:             Because there was only I think once or twice that you said I was sequestered.

Sylvain Perrier:              Yeah.

Mark Fairhurst:             And it wasn’t because of anything current in the news.

Sylvain Perrier:              No, not at all. You were just self sequestering yourself.

Mark Fairhurst:             That’s right.

Sylvain Perrier:              Nothing to do with diseases.

Mark Fairhurst:             No.

Sylvain Perrier:              Well we just got back from the NGA show in San Diego. It was kind of an interesting show. I walked the trade show floor, took me roughly probably 20, 30 minutes. And parts of the show floor were quiet, and the other parts were a lot busier. We had two retailers that had booths. IGA, Save-A-Lot foods, which kind of interesting. I’m not sure if they were innovation hubs or so on, but I think COVID-19, because we want to be nice to our friends at the Corona beer, I think it put a damper a bit on the mood.

Mark Fairhurst:             Yeah. And it wasn’t as prevalent in the news as it is now. And that was really, it was just a few weeks ago.

Sylvain Perrier:              Yeah, it’s really interesting. You know, up until about, while it was still kind of, I guess held up in Wu Han in China, we hadn’t really thought about the impacts on Europe, the Middle East, North America, how it may affect us. So the news, no, we had some great announcements. You know, Amazon came out with their first larger format grocery store and roughly almost 11,000 square feet.

Mark Fairhurst:             Yeah, a little more conventional than people were expecting.

Sylvain Perrier:              A little bit more conventional. I think that’s maybe the play moving forward. I was thinking on hopping on a plane to go to Seattle to kind of check it out and take some pictures and maybe write a couple of blog posts. But this whole COVID-19 I think has taken the industry by one big fell swoop, and I think they’re really big challenge is right now, talking some Canadian and US retailers, they underestimated the impact this scare would create, and now they’re starting to protect the supply chain.

Mark Fairhurst:             That’s right. It’s critical.

Sylvain Perrier:              It’s critical. I don’t know if you saw it today, Target just joined Kroger, an announcement, they’re going to start limiting the number of items that people can buy.

Mark Fairhurst:             On bulk order or?

Sylvain Perrier:              They didn’t specify, but I think it’s a lot of it… In Canada, close to my home, Loblaws, Sobeys on Longo’s, they were out of toilet paper.

Mark Fairhurst:             Yeah, I was at Costco on the weekend, and it was just flying off the skids. People were like four, five, six-

Sylvain Perrier:              I don’t think you should say toilet paper and skids at the same sentence. I don’t think that’s appropriate.

Mark Fairhurst:             The pallets, sorry.

Sylvain Perrier:              Yeah. In some cases I will tell you the Loblaws Superstore, they were bringing out the pallets directly in, not stocking the shelves whatsoever.

Mark Fairhurst:             Yeah? Wow.

Sylvain Perrier:              Absolutely. And it’s not a cut box format type of retailer. The Superstore. Right?

Mark Fairhurst:             Yeah.

Sylvain Perrier:              Compared to their no frills banners.

Mark Fairhurst:             How do you manage your supply chain in a situation where there’s hoarding going on?

Sylvain Perrier:              Well, how do you manage your supply chain when you can’t get product in?

Mark Fairhurst:             True.

Sylvain Perrier:              That’s the bigger issue, right?

Mark Fairhurst:             Yeah.

Sylvain Perrier:              If you think here in Canada, we’re even more dependent on certain sources outside of the country because of the fact of winter. And you know, unfortunately a lot of our manufacturing when it comes to certain products has completely disappeared and gone south.

Mark Fairhurst:             True.

Sylvain Perrier:              You know, this has had an impact on business in general. If you look at some of the larger trade shows that occur in this industry, if you think Shop Talk that is in March, then you have Grocery Shop in September, those have been shifted.

Mark Fairhurst:             Correct.

Sylvain Perrier:              And this is post the new acquisition, right? Because the group that actually started those shows has been acquired.

Mark Fairhurst:             Correct.

Sylvain Perrier:              And now we don’t know about I3 just yet.

Mark Fairhurst:             No. Or Home Delivery World is presumably still moving forward.

Sylvain Perrier:              Right.

Mark Fairhurst:             I guess depending on what the implications are regionally, South by Southwest is canceled for goodness sakes.

Sylvain Perrier:              That’s right. And now we have the price war on the barrel of oil between Saudi Arabia and Russia, which I don’t think any economist could have foreseen, and this is not helping the situation in the market. The one advice I would give to anyone is, you have to have a long view when it comes to the market and we’ve been through this before. I mean this is reminiscent of ’08, reminiscent of ’91.

Mark Fairhurst:             Yeah.

Sylvain Perrier:              The markets tend to bounce back, and there is a lot of fear being propagated out there right now. We’re a bit more fortunate here in Canada, specifically in Toronto we had the 2003 scare of SARS. So our healthcare system is properly prepared.

Mark Fairhurst:             They have the protocols, they’ve seen this before.

Sylvain Perrier:              Yes.

Mark Fairhurst:             Thank goodness for that, in a bizarre way.

Sylvain Perrier:              Yeah. I don’t know if you know this, next week we will have separate screening centers outside of the main emergency rooms and the larger hospitals here.

Mark Fairhurst:             Wow, I didn’t know that.

Sylvain Perrier:              Yeah. One on the East side of the city and one on the West side though. So those are going to be set up as well. So specifically dedicated for screening people that may have COVID-19. Now, the one thing that came out of this, I don’t know if you and I talked about this, but there’s the rumor that Instacart is looking at setting up MFCs.

Mark Fairhurst:             Really? Where’d you hear that?

Sylvain Perrier:              Well, so I have a couple of people that call me that are pretty big in the investment community saying that they have heard the case of Instacart likely investing in MFCs and so on.

Mark Fairhurst:             Interesting.

Sylvain Perrier:              It’s very interesting. I’m not sure-

Mark Fairhurst:             Because we know Amazon is using Dematic.

Sylvain Perrier:              Yes.

Mark Fairhurst:             That’s what the supposition is.

Sylvain Perrier:              That’s right.

Mark Fairhurst:             In their new retail format.

Sylvain Perrier:              That’s right. That’s right. So I wouldn’t know who Instacart is using or how the retailers may react to this, but I’m sure we’ll find out some more as this develops and we’ll let our listeners know. Now I will tell you one thing that was surprising here in Mercatus when this whole notion or the whole thing about COVID-19 kind of hit the West coast, starting off in Washington and then slowly making its way through California, we saw an immediate spike in online sales.

Mark Fairhurst:             Correct.

Sylvain Perrier:              Coming through our platform.

Mark Fairhurst:             Yep.

Sylvain Perrier:              And the one thing that really kind of blows my mind, in our case, if I go back and I look at one of our projects, Smart and Final, and we had Ed Wong, the CIO or chief digital officer of Smart & Final on one of our episodes, I think probably episode 28. He talked about the complexities of orchestration and how Mercatus brought together Shipt and TForce.

Mark Fairhurst:             TForce, yup.

Sylvain Perrier:              TForce, really for the larger more B2B style formats.

Mark Fairhurst:             Right.

Sylvain Perrier:              And I’m watching these sales go online and kind of rapidly increasing in terms of size of the basket, frequency of the orders. And then we were asked to increase the number of time slots for delivery and for pickup. And you start to really think through as volume increases the complexities of orchestration, and if you’re doing delivery, the number of delivery providers you may have that can get into really, really interesting science route optimization determining where the driver is, if there’s going to be an affected refund because somebody didn’t want something in their order or just returning the order in general.

Mark Fairhurst:             Yup.

Sylvain Perrier:              This space isn’t occupied by a lot of organizations, and when you go out in the internet and you start searching for these things, there’s not a lot of real modern organizations that think API-based, that think platform, that think scalability.

Mark Fairhurst:             That are SaaS focused. Software as a service.

Sylvain Perrier:              That’s very rare, quite frankly, in this space here because there’s a lot of older players I would say in this space. We’ve been fortunate enough here at Mercatus that we’re connected to a pretty large web of some amazing organizations, and we thought it would be best to bring someone in that can talk about the complexities of this space. So we’re super pumped to bring on board in a conversation with us today, Bringg. Now, for those of you who have no clue who Bringg is, it’s the leading delivery logistics solution providing enterprise with the most efficient way to manage their complex delivery operations.

Sylvain Perrier:              And I got to tell you, having done a couple of these projects, if you’re not using a platform like Bringg, it just makes your life that much more difficult. And in some of the world’s best known brands in more than 50 countries are actually using their platform and really changing the way they do business and hitting their key milestones and revenue. Now, to help us understand this whole space, we’re joined on the phone from Israel, the CEO of Bringg, Guy Bloch. Guy brings a wealth of experience. I’ve read some of the stuff that he’s written, his latest blog posts. Last year he gave me a copy of a book at home delivery world in Philadelphia that they wrote, and it’s been amazing.

Sylvain Perrier:              And he’s really in charge of that rapid evolution of his own organization, and prior to Bringg, Guy worked for Splunk. We use Splunk here at the office. It’s a bit of a mainstay in the world of dev ops, and it’s a leading software platform for machine data. And prior to that he held a tremendous number of senior leadership roles and really kind of affected the space. Guy, thank you so much for joining us today. Can you share with our audience a little history of Bringg and the market it serves, and what does it really offer grocery retailers?

Guy Bloch:                    Yeah, for sure. Bringg is the leading, I would say, delivery orchestration platform that serves many verticals, and then many markets including retail grocery, over sides, logistics, field services, and the logistics providers. We actually help a number of leading grocers to efficiently and cost effectively manage the growing, what we call the growing curbside in delivery offering. Delivery grocery is growing, and many grocers are increasingly looking to provide exceptional delivery experiences without cutting into margins. And this is exactly what we are here to do, to help all those merchants out there driving the age of Amazon, the growing customer expectations, by helping them transform the way they fulfill their orders.

Sylvain Perrier:              And so what do you see as the challenges in last mile delivery?

Guy Bloch:                    Well, I see many challenges. Obviously it’s not one, the world is going through a major transformation into a digital world that requires many changes for the market players. And for example, the equalness fractions, some brands have established a clear lead in digital groceries. For example, Walmart and Instacart and Amazon. And now retail grocery, they need to create a compelling diligent digital offering and drive customers to try it. If they don’t do that, they will just see the fastest growing grocery segment, which is really digital. So that’s a good example, and another challenge that we see is the delivery costs. When you use the traditional model, it often costs you 20 to 25% more than… It takes you more in terms of percentage to deliver than what a consumer will be willing to pay for that same delivery.

Guy Bloch:                    So how do you make this work in a 2 to 3% margin business? That’s definitely a challenge. We’ve seen already that when you push the cost on the customer, they just simply don’t buy. You’re going to picking in the fulfillment, which is very relevant to groceries to some degree. Could be less relevant to other verticals there. When we work with customers, we see the retail disruption, and we see that the fulfillment from retail inventory is a challenge. Ensuring picking efficiencies for delivery orders, it often comes at the expense of the positive in store experience for customers. Cost, again, just manual order picking from retail can be very expensive. Retail traditionally is set up to increase the cart volume. But not for efficiency. And again, efficiency, we see that as a challenge that comes back and forth.

Guy Bloch:                    You know, even timing and storage is a big challenge there, right? The number one reason shoppers select digital groceries is convenience. And to meet this convenience, grocers must manage flows. It grows picking, staging, curbside, and delivery across in house and third party drivers. And all of that just to meet the customer expectations. And that’s definitely another challenge. And then, of course, all the MFCs, the micro fulfillment center promise. They promise better automation. It will be interesting to see how these perform in the real world, but we get to see how that comes to play and how we can still drive the customer experiences with the efficiency.

Sylvain Perrier:              Yeah, that’s a good point. The challenge that I see in the realm of MFCs, and Mark and I were talking about this is, it’s one thing to consider implementing an MFC, but reality is do you have the support infrastructure around you to manage that MFC or to deal with it if something goes wrong?

Guy Bloch:                    Right.

Sylvain Perrier:              Now, in the case of your technology, where do retailers, or where are they on their maturity scale when they bring you guys in? Are they typically, they’re starting off in grocery e-commerce or they’ve dabbled with this for 15 years and they realize, “Hey, there’s a great opportunity here for us to make money. We just need to do it more profitably and we want to bring a solution like Bringg to really help us streamline that”? Help me understand where are they in their journey.

Guy Bloch:                    Yeah, it’s interesting. We actually worked on the maturity mobile and we had a lot of conversations also with Gardner on the maturity of the market. And we’re looking at that as five phases. The number one is basic delivery that you do manually. Number five is deliver like Amazon or Instacart, which means you’re fully digitized and you’re fully connected and orchestrated. And at that point you get to very high automation and optimization as you’re creating the customer experiences at scale. What we’re finding is, depending on the verticals, what we find, first of all customers, they realize they need to move into delivery. If they don’t go into delivery and offer numerous delivery options, it’s no longer enough to deliver a couple of things. You need to do click and collect, curbside, same day, next day, in some cases 30 minutes if you’re a restaurant, two hours.

Guy Bloch:                    So if you can’t offer that to your customers, that digital experience with the convenience, cost effective with fast delivery, your customers will go eventually to marketplaces. And they might buy your product, your brand, your food, your groceries, but when they don’t buy that directly from you, they actually buy that from the marketplace, you lose the customer. It’s no longer your customers, it’s all their customers. You lose their data and data is imperative in the digital world and in our world today. You clearly lose the connection opportunity because it’s not your customers so you don’t control their shopping experience. And then of course you think very high margins. So when they come and they make the decision that they want to go and start to track things, the customers come back and buy from them, they understand they need to give more delivery options. They need to provide nationwide coverage because delivering in Chicago, in New York or if you deliver in rush hour, so of business rush hours for the customer, it doesn’t matter.

Guy Bloch:                    SLA is SLA. 30 minutes is 30 minutes, two hours is two hours. And obviously they need to do so much more for that. Also, of course, everything has to be in real time. So they need to see the orders, they need to see the inventory, they need to see the stores and the warehouses. Need to see the different fleets they’re using, maybe they use their drivers, maybe they use someone else’s drivers, they need to see it in real time. And then of course their customers, in order to make very quick decisions, to create the customer experience with very high efficiency.

Guy Bloch:                    So what we’re finding is that some of the customers just dipping their toes in the water, and that means it’s a long journey and we have a very clear implementation strategy to take them step by step and gets more and more proficient in how they do that. But in other cases we work with customers that are already wired to deliver from thousands of stores and MSCs, but at the same time it’s just no decision. And for them to reduce that cost, they have to move into full orchestration and everything. Millions of decisions are made every day automatically in the most optimized way.

Sylvain Perrier:              In some cases. I mean, you’ve been in this space for quite some time, and I’m sure you have a collection of amazing war stories and customer experience and delivery experiences specifically really drives behavior. I mean, can you talk a little bit about what you’re seeing out there in terms of examples of a negative grocery delivery experience?

Guy Bloch:                    Oh, on the the negative side? That’s an interesting one. I tell you, in North America the bar is being set pretty high by Walmart, Amazon, and Instacart. And when you think about delivery experiences, we know that the numbers are tough to think about it. Over 84% of consumers today will not return to a brand after a negative experience. And that’s a tough number to deal with. If you think about digital grocery shoppers, they are really there for the convenience, right?

Sylvain Perrier:              Right.

Guy Bloch:                    And you have to now look at every step in your customer journey, and you need to ask yourself how you can make it easier from online ordering to returns and customer service. These can turn into a positive experience, but also into a very negative one if you don’t do that efficiently. And then once again falling into the 84% of the customers that will not come back to you, you’re not at risk of losing customers. So you’re trying to do something right for your customers.

Guy Bloch:                    But the stakes across the process can actually cost you the customer that you just tried to save. Communication and visibility, I think also played a role here. Grocers need to ensure that they have the right communication and processes in place to provide full transparency to their customers. From when the order is being picked to the substitution management, that when it leaves the stores, until it arrives at the customers. And when the customer wants to return a damage or unwanted item, if that experience is not smooth, you fall back again into that 84% of customers that will not forgive you.

Guy Bloch:                    So we’re seeing all of that, and then when we come in with our platform, part of our implementation methodology, the first thing, the first couple of weeks, we sit down and really take the time to understand the business logic and the use case that the customer is trying to create. We understand the business processes, the rules that accept us. When we have a clear understanding of that, as well as mapping all the different data sources we need to integrate with, this is where we’re setting up the MVP.

Guy Bloch:                    And then we move into the field and start testing that, and that’s where you start seeing the… Usually to tell the customers don’t boil the ocean, let’s start with few locations to perfect them. But once we perfect them, you can really go to scale. So we’ve asked when we go through this process, we allow those mistakes in very limited scope and we work together with the customer and the different stakeholders that are involved in the process to perfect their template and only band that can really scale them. I’ve seen customers scale to 7,000 stores in literally one month, but the core is really figure out the perfect template and only when it’s fine-tuned you roll it out. And then you can avoid those negative experiences.

Sylvain Perrier:              Now I’m always curious to ask a fellow CEO a question. When you think in terms of delivery and orchestration, and you look into your crystal ball to kind of gauge the future, what are you seeing as being some of those major innovations or what may come out of the market?

Guy Bloch:                    Wow, another good question. I would tell you, and this is something I’ve been seeing a lot with our customer base today because regardless if you are a restaurant owner or a restaurant chain or a grocer, a large grocer, or maybe even a big auto parts vendor, or a phone company and on and on, what we do for them, we’re creating what we like to call these mini coalition for them. It’s a group of allies that we bring in terms of their supply chain. It can be flexible warehousing, it can be crowd source a parcel or 3PLS. It can be different inventory methodologies and technologies, but when you bring it all together and you put it around the vendor, around the customer, what we see when all of that comes to work in an orchestrated way and very smooth way, the impact of them is dramatic.

Guy Bloch:                    I have a customer, auto parts vendor that managed to reduce their delivery times to mechanic shops to 22 minutes. You can imagine how driving a car, you broke your mirror, you’re going to the mechanic shop, 22 minutes after that the mirror is there. Within an hour or two you’re out. And that’s a big customer experience that they managed to achieve. So obviously now their sale is growing significantly. We have a phone company that they used to ship the SIM cards after successful sales call. They used to ship SIM cards to the customers, and it took them seven days to ship it. And if something happens in the seven days, then the conversion to activation or revenue recognition was very low. We reduced that down to two hours, and now the revenue activation and revenue recognition is out the roof. And every implementation like that’s allies of vendors to come together and serve them.

Guy Bloch:                    So now when I look into the future and I make my one plus one equals two and even more, I actually see a movement. A movement of the entire market, market forces coming together into a connected lock form in order to provide a viable alternative to Amazon, to Instacart, to all those marketplaces out there. I believe that we, the market forces, are so much bigger than even Amazon itself. Amazon is one, we are many. But when we bring all of us into a connected platform, we will still compete one with another, one fleet with another fleet.

Guy Bloch:                    But instead of competing like direct relationship, we all expose our capacity in one connected platform, that will lead to a big innovation. I like to compare that with iPhone and Android. iPhone started as a closed platform, the markets realized that very quickly. And the next thing you know, Android started to develop as a movement, attracted all the different companies that compete one with another to collaborate on an open platform. The next thing you know, fast forward a few years, and now Android is such… It is so much bigger than iPhone itself. So I can talk to you about the role of innovation, but I think this model, it’s question of time and it will eventually stick. And it will see a lot of those forces coming together.

Sylvain Perrier:              So if you were sitting across from a CEO, from a large grocery retailer, what advice would you give him or her?

Guy Bloch:                    First of all, don’t wait. I was in a panel just a couple of months ago in Miami and I had the same question. I had many CEOs in the room and my message to them, first of all… Many CEOs, it was a C-level panel. And the first thing I say, just don’t wait. The market is changing. The market is changing in front of you. You have to do something. Every day that passed is a day that you fall behind, and you have to wake up to that. So don’t wait. Do something. When you decide to do something, please, please, I said it very clearly, don’t try to do it yourself. Don’t try to do it yourself. It takes a very deep product vision. I almost compare that to the rule of the 10,000 hours, which is anything you do 10,000 hours, you will become the best you can be. But it is what it needs.

Guy Bloch:                    You are a grocer. You’re not a technology player. There are those that have the 10,000 hours to come and help you, so don’t try to do it yourself. It requires very complex technologies. It will take you time to market. It will take you easy a 12 to 18 months to put it together, and meanwhile, you lose time to value. You lose the product vision, the innovation, whatever you create will never be good enough to what the market is introducing. The third thing, if you decide not to do it yourself, please don’t do it with point solutions. Don’t try to take a bit from here and a bit from there and try to piece the puzzle together because that takes integration, that takes upgrades and updates and maintenance, and it’s heavy. And in the end, when you put all of that together, you will still not get the cutting edge innovation that you want.

Guy Bloch:                    So it’s again, it’s a compromise. My suggestion for CEOs, understand that this is no longer a nice to have, it’s a strategic necessity, and you should approach it strategically by looking at a platform. You have to adopt a platform because as a platform that digitize and connect all those moving pieces into one place, you’re turning a very complex problem to a data problem, and then you let the algorithms always find the most efficient answer to you. So my advice is, approach it strategically, save the time, start small, don’t boil the ocean, pick a few locations, perfect it. Are you happy, did you achieve what you wanted? Awesome. Give the green light and scale to all your locations.

Sylvain Perrier:              Well that’s great advice. Now, Guy, thank you so much for joining us on the show today. How do people get ahold of you?

Guy Bloch:                    Guy, guy@bringg, with two G, B-R-I-N-G-G.com. Just send me an email. I’m very accessible and happy to hear anyone. And then go on my LinkedIn, follow my LinkedIn. I try to put a post out there every week and share a bit about the vision and where we see the market heading in the next few years. The same time responding to a lot of the news items that are out there. So very interesting conversations that we have there. So these are the two ways I’d suggest people to follow.

Sylvain Perrier:              Thank you so much. Ladies and gentlemen, thank you so much for joining us on our show today. I would encourage you definitely to go follow Guy on his LinkedIn profile. He is a visionary in this space and certainly the information that he is putting out there is valuable for anyone that’s trying to tackle certain challenges. And Mark, how do people get ahold of us?

Mark Fairhurst:             The usual way. mercatus.com

Sylvain Perrier:              Peace everyone. Bye-bye.