True commitment to grocery eCommerce requires a culture change
Mercatus Radio presents the Digital Grocer - Season 2, Episode #10
Rob Christian: Instacart is a very innovative, wonderful company. There is no question. They ramp these guys up quickly. They got them in the business. The retailer has to get on their own or has to use a vendor that can provide a very different service as this industry matures.
Sylvain Perrier: Welcome, ladies and gentlemen, to the Mercatus podcast, Digital Grocer episode 21. I’m your host, Sylvain Perrier, president and CEO of Mercatus Technologies. And joining me in the studio today is Mercatus’ very own Senior Director of Marketing, Mark Fairhurst. Mark, thank you for joining me.
Mark Fairhurst: Well, you’re welcome. I’m in the unusual position of assuming your seat on this side of the recording table.
Sylvain Perrier: Oh, that’s great. Do you feel more empowered?
Mark Fairhurst: It’s a little more comfortable sitting on this side.
Sylvain Perrier: Thank you.
Mark Fairhurst: But I wouldn’t assume any more power than I currently have as marketing.
Sylvain Perrier: Well, that’s already a lot, to be honest.
Mark Fairhurst: Yes, yes.
Sylvain Perrier: So it’s kind of interesting. Winter’s creeping here in Toronto. The NFL season is certainly well underway. And guess what? For those of you that watch hockey, it’s on.
Mark Fairhurst: It’s on, yeah.
Sylvain Perrier: It’s on, and I think we all know they’re calling for snow for Halloween. I’m not sure if that’s true.
Mark Fairhurst: It is. Yeah. The leaves are falling. The rain and the temperatures are plummeting. It’s here, so goodbye summer.
Sylvain Perrier: Goodbye summer. Now, in our last podcast, we chatted with the team from Replenium, and we talked about the value of data and what retailers could be doing with a myriad of streams of data that they’re collecting and how they could turn it into actionable insights and so on. And knowing kind of the one thing that really struck me is, some retailers are just not doing anything with that data. They may be using it, turning it into information from themselves, but I think there’s this kind of opportunity for them to kind of push this back out to the market.
Mark Fairhurst: Absolutely. Yeah. Yep. And in that episode, it’s just been out I think a little less than two weeks and it’s already generated an overwhelming number of listens based on our history. It’s amazing.
Sylvain Perrier: Well, and it’s interesting, because I haven’t looked at the most stats of our listens, but I will tell you, I have received a numerous amount of emails and phone calls because of that episode. And some have come from ecosystem partners, from startups, and they’re essentially asking very similar questions. They’re asking about what data should they be collecting, what do retailers truly need in the context of data and reporting, and get this, what kind of information are CPG companies looking for?
Mark Fairhurst: Yeah, yeah, yeah, absolutely. Yeah. That I don’t doubt.
Sylvain Perrier: And you know what? This one question really stood out, and it came in from a phone call from a very early stage startup in Boston … Go Bruins. And just right there, I just painted a target on myself by saying, “Go Bruins.”
Mark Fairhurst: That’s true. Yeah.
Sylvain Perrier: And these guys that are running this startup, I wouldn’t say … they’re not younger than you and I. These guys have experience in this space. They’ve actually had two successful exits in the past and they have this really interesting concept. The question really fundamentally that they asked over the phone on Friday of last week was, “How come some grocery digital commerce platform providers out there won’t partner and have decided to fence off their system?”
Sylvain Perrier: And it kind of dawned on me when they asked that question, that seems to be a question that a lot of amazing third party application plugin providers are asking that question, and that was a question that was kind of around our booth at Grocery Shop in Las Vegas. But when you’re in the thick of things and you’re meeting retailers and you’re meeting potential partners and so on, you’re not necessarily so quickly connecting the dots. And I had to explain to the two these two gentlemen that some businesses in this space aren’t necessarily geared to serve the retailer and their needs and that in the long run, and it’s a bit of a prediction here, but I’ve been in this space long enough that survivability for some of these business models is questionable and it will come at a great cost and an ecosystem approach and truly an open mindset to better serve the retailer always wins out.
Mark Fairhurst: Yeah. That is our positioning in really everything that we do is on the side of the retailer as opposed to, as you said, the closed wall approach.
Sylvain Perrier: Absolutely. Now, there’s one person who gets this, and ladies and gentlemen, his name is Rob Christian. Rob is the CEO of ShopHero, and for the listeners who aren’t aware of ShopHero, they’re a Utah-based startup providing e-commerce and fulfillment solutions for the grocery industry. Now, to be completely transparent, they are to a certain extent a competitor of Mercatus, and I want everyone to appreciate one thing and this goes to the core of my own DNA as a businessman. This podcast is truly about the collective, the listeners and about moving the industry forward.
Sylvain Perrier: And so I met Rob during his tenure with MyWebGrocer and eventually when it transitioned over to MI9. He’s a former graduate of central Michigan U. He’s held some amazing positions out there in the industry, more notably IRI, Symphony EYC and Dunnhumby. Now, Rob is probably one of the very few other individuals that I know that actually has been in this space, both on the research side, CPG side, technology side, which is amazing, and he understands properly better than most that you have to put the retailer at the center of the equation and servicing their needs is everything. Rob, welcome to the shop.
Rob Christian: Well, thank you Sylvain, and I’m glad that you started with the transparency because when I did get your invitation, I said, “Wow, this is really special. Very interesting.” And I take my hat off to you for the positioning of serving the industry, because you’re absolutely right. If people don’t come together to serve the retailer, then the industry will not grow and it will not be a good thing for the providers or for the retailer. I kind of laugh. It’s sort of like, you read these stories about in World War I when the opposing pilots would fly by each other and wave to each other because they both respected their position and they respected the overall engagement. So thanks very much for having me on the show for this fly by.
Sylvain Perrier: Oh, you’re welcome. Oh, I tried the waving at Instacart people at Grocery Shop. That didn’t work out so well.
Rob Christian: I think they waved back, but not the way expected them to, right?
Sylvain Perrier: Exactly. So this interview was completely unplanned and it wasn’t until you posted this amazing article on LinkedIn called Ripping Off the Instacart Band-Aid. Mark actually shared it with me first via Slack and he said, “Hey, have you read this article?” And I called Mark, and I often call Mark late at night.
Mark Fairhurst: Much to my wife’s chagrin.
Sylvain Perrier: Well, I won’t go into that conversation. But anyways, and I said to Mark, “What do you think if we got Rob on the podcast?” And Mark’s like, “Yeah. Do you want me to reach out to him?” And I said, “No, I’ll reach out to him. I got it.”
Sylvain Perrier: So early on in your article, you talk about Walmart’s rapid ascent, to the top of the, I want to call it the grocery e-commerce space, but I think it’s an ascent to something much bigger, I think becoming a dominant player, and how they’re trading blows with Amazon. You allude a little bit when you read in between the lines of their purchase of Whole Foods and how it scared many retailers and really the smaller players, and even I would also say to a certain extent from my own experience, the super regional retailers. What’s been the cause and effect from your perspective on that fear?
Rob Christian: Well, it all begins with just the overall e-commerce phenomenon. Look at the way our families have changed their purchasing habits. So it begins with the ground swelling of just e-commerce overall. But hats off to Walmart, right? So let’s name them. Sears, Woolworth, Blockbuster. I’ll never forget being in a Blockbuster store and saying to my son, “This business can’t survive. This is not a good model.” And the cashier is saying, “Oh no, no, we, we definitely will survive because we know you enjoy the social experience.” No, I don’t, right? So there’s a long list of retailers that just did not listen. And Walmart not only listened, but they listened very, very carefully.
Rob Christian: I think that the Amazon buying Whole Foods woke everybody up. Walmart just happens to have the money, the ability to attract great talent to build these things and develop these things on their own. I’ve dealt with Walmart for many, many years and it was always the joke, “Go into Walmart with a great idea and they’ll certainly be able to take that idea and run with it and make it their own,” and hats off to them.
Rob Christian: But what’s happening now is that there is this war that, as I pointed out in my article, every quarter, there is a new bet that’s put on the table. The ante is getting higher and higher, and there’s a whole bunch of other retailers out there that are going to end up as collateral damage in that war. Walmart is not aiming at mid-market. Amazon’s not really aiming at mid-market, but mid-market and small retailers will fall out as collateral damage if they don’t react to the challenge.
Sylvain Perrier: And are you finding to kind of stave off this threat that a group of retailers simply went to Instacart for the sake of surviving, or was it just purely a reaction in the moment?
Rob Christian: Well, it’s a very good question. When the purchase happened, I don’t think there was a CEO in the country or a grocery retailer that did not pick up the phone and call his head of dairy, who’d been loyal to him, head of meat, head of center store and said, “Hey, you’re now head of e-commerce, right? We’ve got to get in this, so take it over.” And that individual, of course, did not have the background nor did they have the training to fully understand what it meant to grow an e-commerce business. And the big gap that existed is that CPG wasn’t there.
Rob Christian: So in my career, as you said, I’ve been on the CPG side, I’ve been on the data side, now in the e-commerce side. CPG has always stepped in with category management, with shopper insight. They’ve always stepped in with the money, the people, “We’ll take over this for you, retailer. Just give me the shelf, give me the display.” But that’s not the case anymore because there’s nothing really to give CPG. As a matter of fact, CPG views e-commerce as a way of getting around the retailer. So without that support, where would they turn to? And Instacart was the very easy decision. Instacart is a very innovative, wonderful company. There is no question. They ramp these guys up quickly. They got them in the business. The retailer has to get on their own or has to use a vendor that can provide a very different service as this industry matures.
Sylvain Perrier: Do you find in your experience now at ShopHero that e-commerce, whether they’re with a third party vendor or whether they are with an Instacart, is getting the attention it truly deserves at the boardroom table?
Rob Christian: It varies greatly and it really is amazing how different one retailer is to the next. [inaudible] that I’ve had in the industry. I do have the privilege of sitting with a lot of the CEOs in the industry and you have some CEOs that say, “We’ve got to be there. We have to make this a part of our culture,” which is another thing that I pointed out in the article. They need to bring it into the culture, just like Dave Dylan when he was CEO of Kroger brought shopper insight into the culture, but you still have CEOs out there, and especially the CEOs that are under great pressure, that say, “Look, this is still only representing 5, 6, at best right now, 7, 8% of my business. I’ve got to focus on the franchise that keeps me in business every day.” So the attitudes really are all over the place, which is I believe part of the challenge for a big market and small grocers.
Sylvain Perrier: And is the reason that this isn’t moving forward … I wouldn’t say it’s not moving forward, but in the sense that it’s not part of the strategic conversation day-to -day amongst the senior leaders in the boardroom, is that because it’s a lack of understanding or fundamentally it permeates itself as being essentially a cultural issue in their businesses?
Rob Christian: Yeah. Well, don’t get me wrong, there are many grocery retailers that are discussing this in the boardroom and they are taking the action, but the ones who are not, I really do believe that is a cultural issue. The culture of grocery retailers does not support the concept of people getting on a computer and making a purchase. There’s another article that I have up on LinkedIn, if anyone is interested, that talks about how the world of proximity has gone away.
Rob Christian: In my years of data, I can tell you that very high in the purchase decision was, “How far away is that store from me?” Well, in e-commerce, now that distance is measured in inches between finger and keyboard. And I don’t think that grocery retailers are quite getting that if they don’t jump in strong, these 50 billion trips that are going to be leaving brick and mortar are going to be up for grabs. And if they don’t grab these trips, these trips go away. So I do believe it is a cultural issue because this is not the way grocery retailers are used to operating. They’re used to flesh-to-flesh contact with their shopper, right? So it definitely goes against the culture.
Sylvain Perrier: So this brings on kind of an interest in question, right? I think when you look in the world of CPG, and Rob, you’re considerably more of an expert in this space than I am, but when I kind of look at the world of CPG and the big challenge that they’re having right now is the lack of what some of their dollars can do and influence online, and they don’t seem to be part of that conversation, so trade and co-op dollars, research budgets aren’t necessarily part of the e-commerce equation. And so any reason or any idea why you think the retailers have not brought the CPGs into the table to be part of that conversation?
Rob Christian: Well, again, it’s process and its culture, right? So in the article, I did point out that part of what has to happen here is that these top to tops have to involve different people than they have in the past. So sitting down with a CPG company and having their EVP of sales in the room, the conversation is going to be around market development fund. Market development fund is not the trough that the retailers should be tapping into for support with e-commerce. You’ve got a marketing department that is part of these CPGs, and now, that marketing guy has got to be brought to the table to talk about how they develop their e-commerce business.
Rob Christian: There’s still a little bit of a stack them high, watch them buy mentality. How can I get the best deal? How can I drive my price down to the lowest point? Will you buy displays? Will you buy shelf space? Will you buy ads? Because this money, quite frankly, is at very much the center of what keeps a lot of grocery retailers going. So those conversations have to keep going. They depend upon that money. But there needs to be a parallel conversation. And that is not part of the culture today.
Sylvain Perrier: So you’re now running ShopHero, and you’ve written this amazing article. So share with our listeners, how do you pull this band-aid?
Rob Christian: Yeah. So the first thing is to recognize that the band-aid needs to come off, right? Very easy to wake up every day and say, “You know what? These guys are doing a great job for me.” As a matter of fact, I just recently had a conversation with a CXO level individual at mid-market and that was one of the statements. “They do a nice job. They come in, they pick the order, they get it and buy it, they deliver it, people like them. And I don’t have to think about it, right?”
Rob Christian: But the reality is, is that you’re losing your brand, right? So of course, Instacart for larger clients does have a white label solution, but take your wallet out. It’s extremely expensive to engage with them on a white label basis. So the first thing that has to happen is just the reality. I can no longer lose my brand. I have to create a seamless shopping solution. So when my customer comes onto my site, he sees my brand, he or she sees my brand, they can shop seamlessly on that same site and when they hit to purchase, they’re not seeing another branding. So it begins with that.
Rob Christian: The second piece of this in terms of what needs to be done is to ensure that this topic does have a space at the boardroom and that different metrics are being looked at. This is really important. One of the things that blows me away, and again, I come from a data background also, is how the retailer’s not looking at the e-commerce data. Now, of course, if you’re an Instacart customer, you’re not even seeing the data, which is another problem. But being able to get into that data and looking at different metrics, “Who’s converting? Is it my best shopper who is shopping e-commerce? What is my growth? What categories are they buying?” All of these things have to be analyzed just like they were analyzed for category management and shopper insight. The difference is, again, there’s not CPG resources, CPG money there to help them.
Sylvain Perrier: That’s great. And so if you had to give that one nugget of advice to a retailer that’s listening to this podcast, what’s that one thing you would tell them today with respect to your article to be mindful of?
Rob Christian: Yeah, I’m assuming you’re talking about retailers that are today Instacart retailers.
Sylvain Perrier: Yes.
Rob Christian: I would take a look at when my Instacart contract was ending and about a year before that contract ends or if it’s within a year, I would definitely issue an RFP. I would definitely see different vendors in the industry. You and I sit in a different class of vendor. We’re very different in many ways, and that retailer has to make a decision not only on the capabilities of the retailer, but also how well that retailer works with them and how well they can blend within their culture. But that would be the first piece of advice I would give Instacart retailers.
Sylvain Perrier: Excellent. Now Rob, it’s been a pleasure speaking with you today. How can our listeners get ahold of you?
Rob Christian: Great. I am reachable at [email protected] Can I give a phone number out on the podcast? Is that-
Sylvain Perrier: Sure. Yep.
Rob Christian: 908-343-9665. Like Sylvain, I’m one of these 24/7 guys, so reach out to me and I promise I’ll get back.
Sylvain Perrier: That’s amazing. Rob’s probably the only guy that breathes and eats and does all those great things with retail. So thank you so much for being on the show.
Rob Christian: Thank you, Sylvain. It was a real honor and a real pleasure.
Sylvain Perrier: Thank you. Ladies and gentlemen, thank you for listening, and don’t forget to download our next episode, where I’m sure Mark and I will be tackling something that’s happening and emerging on the retail landscape. And Mark, are we recording our next show in studio in New York?
Mark Fairhurst: Actually, I think we have one more episode planned here and another episode in New York. Yes.
Sylvain Perrier: Awesome. So how can people get ahold of us, Mark?
Mark Fairhurst: Usual way, just go to our website, www.mercatus.com. Shoot us an email. Follow us on our social channels.
Sylvain Perrier: Thank you, everyone.
Rob Christian is the CEO of ShopHero, a Utah-based startup providing e-commerce and fulfillment solutions for the grocery industry. Christian was previously executive for Procter & Gamble, Johnson & Johnson and dunnhumby. and led the go-to-market strategy for the restructuring of MyWebGrocer, now known as Mi9 Retail.
Sylvain is president and CEO of Mercatus Technologies, and the driving force behind the leading digital commerce platform in grocery retail today.