Sylvain Perrier: Ladies and gentlemen, welcome to Mercatus Radio, our inaugural podcast, episode one. I’m joined here, in studio, with Kevin Glenn at the soundboard and our very own senior director of marketing, Mark Fairhurst.
Mark Fairhurst: Hello everyone. Just got a … It’s great to be here and we hope you enjoy this, ah, very first podcast from Mercatus Radio.
Sylvain Perrier: Now, I’m the host, Sylvain Perrier, President and CEO of Mercatus Technologies. Mark, we have, what I would say is an amazing subject to tackle today.
Mark Fairhurst: Absolutely.
Sylvain Perrier: That is the growing threats-
Mark Fairhurst: Mm-hmm (affirmative).
Sylvain Perrier: -to the traditional grocery retailers out there in the market. I think you know from our own experience, from talking to a myriad of the executives that are out there, from small traditional grocery retailers to extremely large boxes, it’s kind of a fearful time with everything that’s happening in the space.
Mark Fairhurst: It is such a dynamic marketplace. There’s not a day that goes by there isn’t some nugget of news dropping. It’s amazing.
Sylvain Perrier: Yeah, if-if it’s not Instacart, it’s somebody being bought. Whether it’s in the United States, whether it’s in Canada, whether it’s overseas. And that landscape is not only shifting here, in our very own backyard, but it’s actually happening in Europe and overseas, which has a ripple effect, quite frankly, in everything that’s happening in the supply chain to what consumers can do and can’t do and so on. So, this is an exciting time to be doing what we do here, at Mercatus.
Sylvain Perrier: We’re going to go really deep on this subject and to help us out, this is where I’m super pumped. We’ve brought in this expert in this space. He’s dialed in right now. He’s coming live from Dallas, Texas, which is amazing. His name is Brittain Lad. Now, I got to … I have to admit to everyone that’s listening, whether you’re in your car, or you’re at home, or somewhere else. The first time I heard of this gentleman I was in Las Vegas. You know what they say about Las Vegas.
Mark Fairhurst: (laughing).
Sylvain Perrier: M-Mark says … Mark says you lose a month.
Mark Fairhurst: Hopefully my wife’s not-
Sylvain Perrier: Listening. But I was at … I was at Shop Talk and Shop Talk was-was an amazing event because there was … it was the who’s who in retail. It was the who’s who in eCommerce coming together and I remember distinctly I was … I was sitting down in the grocery track. I couldn’t get a seat. Had to sit on the side of the wall, on the floor. There’s a retail executive, ah, comes over to me and says, uh, “Did you read that article on LinkedIn about the Trojan Horse?” I’m like, “What do you mean, like, the Trojan Horse or do you mean like something more pertaining to retail?” And he goes, “Yeah, about-about Instacart.” I go, “No, I have … I haven’t seen the article.” And he passes over his phone, I read the article. And it’s Brittain wrote the article.
Mark Fairhurst: Yeah.
Sylvain Perrier: I’m like, “Wow, that’s amazing.” Then Mark arranged to connect us.
Mark Fairhurst: Yeah, no, he was … he was great.
Sylvain Perrier: He was great.
Mark Fairhurst: He was super responsive and reaching out to him.
Sylvain Perrier: Yeah, and he’s an independent consultant. He’s a brilliant strategist when it comes to technology and retail and all things eCommerce and CPG. We have him on the phone today. Welcome, Brittain Lad.
Brittain Lad: Yes, I’m here.
Sylvain Perrier: Perfect. Well, thank you so much for joining us. Real excited to have you part of our podcast.
Brittain Lad: Oh, thank you for inviting me.
Sylvain Perrier: Perfect. So, we know today that its-its fairly clear that the grocery retail industry is going through some tremendous seismic waves that is causing concern amongst the retail executives that are out there, not necessarily sure what to do, not necessarily sure to react. Can you share with us and ou-our audience what are some of these threats that you’re seeing?
Brittain Lad: You know in all honesty, the threats are many. It’s not just one, or one or two things. The thing that I find so interesting is that most of the press talks about Amazon and Whole Foods. And then you may read stories about Walmart and their expansion, but the thing that I really believe is a threat the most is the number of grocery retailers who really don’t have a solid strategy. And the number of grocery retailers who really don’t understand what’s taking place in terms of advancements in technology. What’s really happening in terms of changing consumer behavior. And I find an awful lot of executives are having knee-jerk reactions, instead of really being able to say, “This is who we are. This is why we’re here. These are our customers and this is what we’re going to do to be able to meet their needs.”
Brittain Lad: Now, certainly, Amazon is a threat. Walmart is a threat. Those things are all true, but I think it really belongs at the CEO level for them to understand what’s going on in their industry. And I’m convinced a lot of executives still just don’t realize all the changes taking place.
Sylvain Perrier: Yeah, and it-it’s interesting you say that and I’ve always, because of what we do at Mercatus, providing eCommerce solutions to the grocery retail space. I’ve always pondered what is driving this lack of preparedness. And I’ve contemplated is it because where they grew up in the organization? Maybe they’ve been at the organization for a long time. Maybe it’s because they’re used to running a brick and mortar operation and then kind of having a … shifting over to doing a dual strategy, or to doing eCommerce. Why do you think that’s the case? Why are they not ready?
Brittain Lad: Well, in-in all honesty, much of what you said is the primary reason. A lot of the executives today have grown up in a traditional brick and mortar retailer. They’re new to the eCommerce game and, in my business, what I have discovered when I have visited grocery retailers globally, an awful lot of executives will say to me, “Well, we’re digital.” And I’m like, “Well, that’s interesting. Why don’t you walk me through what digital is?” And what they start to talk about are things you can touch, as if digital is something you can touch. And really, digital is a mindset change. Digital is an understanding that your business must operate differently.
Brittain Lad: Now, certainly, you have to have the right tools and platform to do that. But you need to have an understanding that to be digital means to be transformational in how you operate today. The other thing that-that I certainly noticed is that an awful lot of executives spend an awful lot of time focused within their four walls only. They don’t look at, what does Amazon do? What does … What do other retailers do? What does General Motors do? What does Tesla do? What does Boeing do? These executives are very insular in their thinking and they have lost that ability, and many of them never had the ability, to really look across industries to learn, what are these other executives doing within their companies?
Brittain Lad: That, to me, are the things that I’ve noticed.
Sylvain Perrier: Excellent. So if you … If you had to, and maybe you have a time machine, I’m not sure, but if you-
Brittain Lad: (laughing).
Mark Fairhurst: (laughing).
Sylvain Perrier: And if … It would be amazing, like you should be sharing with us right now. But if you could fast forward into the future, and look at a successful retailer that truly embodies digital, right, because what you’re talking about is not just having these tangible elements, but it-it’s also having it fundamentally part of your DNA as a retailer. What would that look like?
Brittain Lad: Well, certainly, let’s address the store level. The store of the future looks much differently than it does today. What I believe is going to happen is that the retailers of the future are truly digital. Meaning, they have the technology within their stores. They have the online platform. They have the apps. They have totally changed how they interact with customers, and more importantly, customers have choice in how they wish to engage with their preferred retailer. That’s a fact. But the retailers of the future, what they’ll understand is it’s not just personalization, it’s individualization. It’s leveraging data much more intently, and intimately than they have … than they do today. And, even though a lot of … a lot of retailers will say, “Well, we understand data and we leverage data.” No, the future will look much differently in that the data will truly be able, in almost real time, help retailers better understand what is actually taking place at this moment.
Brittain Lad: What is really taking place within my stores and online? And how do I adjust the inventory? How do I adjust promotions? How do I generate more sales for a specific product? But going back to what I stated earlier about the store, what I believe the store of the future will look like is this; you walk into the store and you shop by how you live. And what I mean by that is I believe the store of the future will have a section where it’s clearly designated, this is breakfast. Then you’ll have a section that, this is lunch. And then you’ll see the store’s design that, this is dinner. And then you’ll see a design that says, “This is for the personal items you need, for the pharmaceuticals that you require.” And if you think about it, the store of today is almost exactly what a store look like in the early 1900s, the 1950s, the 1960s, the ’70s, ’80s, ’90s, and the 2000s. They have all looked the same.
Brittain Lad: In addition, digital is really something where companies are going to have to have expertise in this. And you’ll find that many of those retailers today, who convinced themselves they could just do it in-house, and they can leverage their homegrown systems, and these systems would grow and be able to transition in the coming years. They’re going to find they made a big mistake in doing that. In my business today, a lot of grocery retailers call me in and they’re … and they tell me how they’re struggling. Well, they’re struggling because they don’t have the right talent. They’re struggling because they really don’t have an ability to build and implement the systems that they require. So you will see many more of the grocery retailers in the future really going from established platforms, off-the-shelf software, and they’ll get away from the we-build-it-here mentality to we leverage the expertise that went into this software. And they’re not a vendor. They’re really a strategic partner. That’s what I anticipate.
Sylvain Perrier: So I really appreciate the comment about the w-the we-build-it mentality. And I want to share with the audience out there the Mercatus experience and what we’re seeing as being kind of the transition and potentially what could be the future. We are now seeing historically, and what we’ve seen historically, quite frankly, is the grocery retailers that either want to tackle this themselves or not taking the partnership mentality. And quite frankly, trying to co-exist digital, personalization very much separate from the in-store experience. As of late, and when I say, “As of late,” I’m not talking a generation here. I will say within the last 12 months, quite easily. We are seeing grocery retailers that are entering what I like to call, retail 3.0, maybe 2.5.
Sylvain Perrier: And what I mean by 2.5 is they now understand that they have the ability to acquire. They are starting to understand that they need to bring in the right people, and they are. And the people that they bring in are non-grocery retail related. They could be apparel related, big box related, but deep expertise in the vain in which they’re coming into join the traditional retailer. We’re equally starting to see context around understanding how to merchandise online very much differently than how they would in their brick and mortar operations.
Sylvain Perrier: And last, but not least, and this the-the conversation I’ve had, I think, in the last two weeks, which really caught me off guard was the context of talking about micro-personalization. And in our world we call it hyper-personalization. So-so you as a consumer, very much so, when you come in online the technology, and the platform, understands who you are, what your habits are, so implicit and explicit data, and leveraging it not only to contextualize the data that’s being presented to you, but the container. So if you are a bargain shopper, that’s what we will only show you and tailor that experience to you. I will tell you, three years ago, you could not have those conversations. And that’s astonishing to me.
Sylvain Perrier: Now, in your magic crystal ball that you have in front of you, what is the first step a grocery retailer, an executive, can take to really start to make a difference?
Brittain Lad: You know in all honesty, they need to step back, and they need to do an assessment, an honest assessment, of how are they organized? What talent do they have in the organization to be able to-to have an honest discussion of, do we really know who our customers are? Do we know what our customers want? And what type of supply chain do we have? What type of supplier relations do we have? What type of technology platform are we leveraging today? How are we doing things today?
Brittain Lad: First, and foremost, for an executive to start making a better decision and, what I would really say are the right decisions. They have to really understand where are they starting from? And in my business, what I find is so interesting is the more I talk to executives, especially within grocery retailers, the more I find that there really isn’t an understanding of all the things taking place within their company. Grocery retailers, grocery executives, have a way of compartmentalizing what the CEO will focus on. And other executives have much greater command and control over certain areas and there’s not a lot of discussion taking place, so that the CEO has a complete understanding that this is not just my company, but this is my ecosystem. CEOs have their touch points. CEOs have their levels of comfort and that’s what they like to focus on.
Brittain Lad: And so what I try and do is get those executives to step out of their comfort zone and gain a much better understanding of, what are the facts? What are really the facts within their company? And once they understand the facts, then it’s a matter of saying, “Let us determine what the vision is for how you move forward.” And then the other discussion is, “How do we take this vision and turn it into reality?” Along the way, of course, is identifying the steps that have to take place; investments, and technology, and so forth.
Sylvain Perrier: How much is shareholder priorities, in a publicly traded retailer, hampering a CEO from really jumping in head first into this?
Brittain Lad: You know in all honesty, I’ve heard that excuse more time than I can count. And the CEOs will say, “But Brittain, I’m so tied down with shareholder meeting,” or “Brittain, I’m under so much pressure from Wall Street that I really don’t have the level of comfort to want to make big changes in technology,” or “I’m afraid to say we don’t want to do it in-house, because we’re going to bring in something off the shelf,” or “We’re going to make a dramatic change in our supply chain.” So what happens is, there’s a level of paralysis within the grocery industry where executives are stuck. They want to stay within their comfort zone, because they’re so risk adverse.
Brittain Lad: And so, even though, shareholders and publicly traded companies absolutely want to see performance from grocery retailers, history proves that grocery retailers actually have trended down in what their stock levels have done and growth in those businesses. And so I don’t believe that is a, ah, a legitimate excuse. If anything, I think that now is the perfect time for CEOs to say, “Look at what we have out there. We can reduce cost complexity within our companies by moving away from we-build-it-here mentality. We can leverage new supply chain technology, new vertical distribution technology, from someone like Ocado, or a Takeoff Technologies, other companies that specialize in distribution of grocery products.”
Brittain Lad: And the time is now to be going and looking under the hood, and really identifying were changes can be made. The worst thing a CEO can do is maintain the status quo. It is absolutely the death, now, for-for grocery retailers.
Sylvain Perrier: That’s excellent. So let-let’s assume we find a bold and brave CEO who throws caution to the wind, doesn’t care what the board thinks. What are the steps that, that CEO’s organization, can take to really survive in this … in this space?
Brittain Lad: Well, the-the thing I would say is it’s really not throwing caution to the wind. The best example to look at is Amazon. Internally at Amazon, they make changes all the time. They enter new categories, new lines of business, and they do so freely, and they do so with confidence. And the executives today really need to say, “We can do this. We simply need to have a plan of attack and we have to really understand the roadmap we need to travel.” And … So, I think, first and foremost, find someone you can speak with. Find someone you can partner with and trust. Find someone who has a level of expertise within the grocery industry, across many areas; technology, supply chain. What’s going on in changing demographics and so forth?
Brittain Lad: That’s the first step. Be able to have that partnership with someone who can help you understand, this is how you better engage your customers. Because no matter what, no matter what a CEO decides to do to reduce costs, and complexity, and improve the supply chain, what we need them to do is engage customers and get more foot traffic in stores and more traffic to their online website. And … So everything that they’re working on needs to have those goals in mind. How do we delight customers? How do we provide an exceptional customer experience? And how do we give customers choice to how they interact with us?
Brittain Lad: In essence, if you’re a physical brick and mortar retailer, you want to become omnichannel. If you’re an online only retailer, you absolutely need to have the best platform capability so that customers find it very easy to maneuver within the website, order from the website, and feel comfortable ordering groceries online. And, of course, the quality of the product has to be there. But, to me, it begins with you can’t just say to a retailer, “Okay, go. Okay, Mister Executive, go change things.” They need to really understand, where do they have to go? What’s the vision? And then how do they turn that vision into a reality?
Sylvain Perrier: That’s excellent advice. So I have two more questions for you. And-and you know I consume everything you write. I’m a big fan. I think the audience probably knows that by now. America versus the UK, I mean, we’ve heard the arguments that, if you’re a UK based retailer, when it comes to eCommerce you’re innovating much, and you’re five years ahead of their counterparts located in North America. I can tell you, at Mercatus, we’re Mark … I mean, we’re getting phone calls coming in from the UK, Australia, and New Zealand and I-I-
Mark Fairhurst: Asia.
Sylvain Perrier: -Asia and I want to hear from … I want to hear from Brittain. Brittain, are they really that much ahead of us? Are … Have we fully caught up?
Brittain Lad: No. There’s, um, I think it’s completely false that if we’re going to use the UK, as an example, that they’re ahead of the US. I find no gaps. What happens is that, because of the density levels within the UK, that has greatly changed their business models. Where I do give the UK an edge is in supply chain technology, distribution, but the geographic region that is really leading is Asia, especially in China. There is no doubt to that. And also the thing I want to point out, and you mentioned the fact that I do a lot of writing, I wrote, several months ago, that I believe, and I recommended, that Walmart divest Asda. And I made the argument that, Walmart needs to divest Asda to give them more freedom to how they can operate within the UK.
Brittain Lad: From a strategy perspective, I never understood the value of Walmart retaining Asda. I think they would have been better to acquire CarreFour, or simply go after Beckett Renkiser, or just leave the European Union completely. So the fact that anyone would say, “Oh, the UK is miles ahead of the US, or years ahead of the US,” I just don’t see it. And I have done projects for the majority of the companies over there. It’s China where I see the biggest innovations. It’s South Korea and it is absolutely Japan. The Asian companies are the ones that have brilliantly incorporated robotics, voice-activated technology, eCommerce platforms, automation within stores. Frankly, to where many of the stores you walk in and there are no people, because they really have achieved that level of sophistication, where you do not need to have a lot of people within the stores. And in some stores, you have no one there.
Brittain Lad: So I would dispute if there’s a big gap. Um, I think that the grocery retailers in the UK, and Australia, and these other places, they need to just simply look to the US and saying, “They’re absolutely who we should be looking at in terms of technology. We can feel comfortable buying from companies in the US. They’re not behind, at all.”
Sylvain Perrier: That’s great. Now, you mentioned Walmart and I have to ask you-
Brittain Lad: (laughing).
Sylvain Perrier: -who (laughs) … Yeah, and this is a bit of a loaded question. So I’m warning the audience. So who wins between Amazon and Walmart? Or are they really playing a separate game at this point?
Brittain Lad: Well, again, and we’ll talk about this, I know, in a future … in a future podcast. The thing I stress to-to executives is that there’s an infinite gain and a finite gain. And the reason why Amazon is winning is they play an infinite game. Their goal is to outlast their competitors. Walmart, and other grocery retailers, try, and beat their competitors. And I think that leads them down the wrong path. So today, if I was going to lay money on who is going to win, it will be Amazon, because Amazon understands the importance of an ecosystem. Amazon isn’t concerned with trying to win at every level and every category in grocery retail. Amazon is putting together an ecosystem that gives them an ability to meet the needs of customers across all demographics. And give customers a way to engage with them, that makes it easy for Amazon to sell product.
Brittain Lad: Walmart absolutely has made mistakes over the years. Walmart was too slow to the digital game. And so now Walmart finds themselves in a very dangerous position. And what I wrote several months ago is that, under no circumstances can Walmart lose the grocery war to Amazon. And I stressed that Walmart should invest in Flipkart, which they’re trying to do, but I also gave this warning, Amazon is going to be the first one to recognize the strategic value of Flipkart to Walmart. And I won’t be surprised if Amazon, at the last minute, comes in and makes a bid. And sure enough, today, what happened is that Amazon offered $12 billion to Flipkart.
Brittain Lad: Now, Walmart is going to be in a bidding war. And what Amazon is doing to Walmart is what Walmart should have done to Amazon last year. When Amazon announced they were acquiring Whole Foods, Walmart should have made that incredibly painful. Walmart should have came in and said, “We’ll offer $15 billion for Whole Foods.” Forcing Amazon to either out bid them or force Amazon to walk away. So what we’re going to see in the coming months, and year, is nothing but one battle after another. But I think Amazon’s playing a better strategy. I think Amazon has lured Walmart to India. And I have no doubt that Amazon will do everything to win in India. And, as I’ve stated, in my opinion, if Walmart isn’t careful India will become Walmart’s Vietnam, to where they become bogged down. They are forced to fight, and fight, and win one battle and lose a battle, and win a battle. But what happens is that Amazon outlasts them, because Amazon is playing the infinite game. And Amazon has proof that they don’t care what Wall Street says. They don’t care what shareholders want.
Brittain Lad: Amazon knows they have to outlast the competition, whereas Walmart, Walmart listens to Wall Street. And the more the drum starts to beat, that Walmart is losing money in India, the more the cries will be, “It’s time for Walmart to pull out.” And that’s why I believe Walmart has to be incredibly careful. But from a strategy perspective, I think, what Amazon is doing is brilliant. They have lured Walmart to India and I honestly believe that this could turn out to be Walmart’s Vietnam. It’s just a fact.
Sylvain Perrier: Ladies and gentlemen, you actually heard the expert opine right on the matter. That is amazing. Brittain, how do … How do our listeners get a hold of you?
Brittain Lad: The easiest way to reach out to me is simply reach out to me via my LinkedIn profile. I’m always happy to engage with individuals, no matter what the topic is. I’m grateful that we have LinkedIn and I dearly love interacting with anyone who’s interested in grocery retail supply chain digital.
Sylvain Perrier: Thank you so much for your time today.
Brittain Lad: Thank you. It’s been a pleasure.
Sylvain Perrier: Ladies and gentlemen, thank you for listening to our inaugural podcast episode, episode one. And join us next time and it’s going to be a … I-I’m not sure if it’s even a juicier subject, but it’s certainly something that’s incredibly relevant. Ah, we’re going to be talking about the MNA activity in this space. Mark, share with our listeners, how do they get a hold of us here, at Mercatus?
Mark Fairhurst: Sure. The easiest way is to go to www.mercatus.com, use the contact form there, or follow us on our social channels that are available at the … at the bottom of the website page.
Sylvain Perrier: Thank you everyone. I’m your host Sylvain Perrier, President and CEO of Mercatus Technologies. I’m here with Mark Fairhurst our senior director of marketing. And at the board is our ever amazing sound engineer, Kevin Glenn. Thank you.