Sylvain Perrier: Welcome ladies and gentlemen to the Mercatus podcast, Digital Grocer, episode 37 I’m your host, Sylvain Perrier, President and CEO of Mercatus Technologies. And joining me remotely today from the dungeon under his house is Mark Fairhurst, our VP of Marketing. Mark, thanks for joining.
Mark Fairhurst: I’m still in the dungeon.
Sylvain Perrier: You’re still… I know.
Mark Fairhurst: Still.
Sylvain Perrier: It’s our third podcast and you’re down in the dungeon.
Mark Fairhurst: It’s my pleasure. Yeah.
Sylvain Perrier: And so we just got some interesting news from our Premier. I think we’re going to go through another series of lockdown processes. I think we’re forecasting with the current measures 1600 deaths, 80,000 cases.
Mark Fairhurst: Yeah. Yeah. That’s just in our province.
Sylvain Perrier: Just in our province, which is… Population in our province is 14.5 million people, which is almost half of the country’s population. So it’s kind of interesting time, right?
Mark Fairhurst: Staggering. Staggering numbers.
Sylvain Perrier: Yes. Well, we recently hit over a million COVID 19 cases worldwide, and with over 10,000 in Canada, 230,000 in the US, over 50,000 deaths worldwide. And this is unprecedented.
Mark Fairhurst: Yeah it is. It’s scary. You know this, see my mother is in a what we call a longterm care home. Can’t see her, they refuse to have any outside visitors and she’s 82 and they’re projecting 20% of that age group to-
Sylvain Perrier: Oh God.
Mark Fairhurst: … to pass away.
Sylvain Perrier: That’s terrible. Well, I’m sorry to hear that Mark.
Mark Fairhurst: Yeah. Well, she’s healthy so far.
Sylvain Perrier: Okay, well that’s good. Could you not go knock on the window?
Mark Fairhurst: No, no, they won’t. No, she’s up on the third floor.
Sylvain Perrier: Oh, it’s kind of awkward.
Mark Fairhurst: Yeah, I might get arrested if I try to do that.
Sylvain Perrier: Well, I don’t want you on a ladder Mark.
Mark Fairhurst: No, no, I don’t want…
Sylvain Perrier: No, let’s avoid that.
Mark Fairhurst: I’m scared of heights.
Sylvain Perrier: Okay, well that’s good. That’ll keep you off the ladder then. But what’s even worse is discretionary retail is being or has been decimated with the shuttering of the cities and tons of states and Macy’s last week furloughed actually 135,000 employees. And countless other retailers are actually facing the same issue, which is terrible. Now, guess the shining star in this or the silver lining as they say is non-discretionary retail. So grocers, they consider you to be on the front line. They’re making sure that our communities are fed and then there’s at least some sort of sense of normal. And trust me, I have no definition with that means, but it’s not without its challenges. Was it this week that Kroger announced that they had a sales increase for the month of March of 30%?
Mark Fairhurst: I think it was early this week. You’re right. Yeah.
Sylvain Perrier: Yeah. And but I think at the end of the day, there’s still going to be some…. There’s risks for those guys. I mean, reality is, is that, is all that money going to trickle down to the bottom line? Probably not. I mean, they’re having to hire more employees, they’re having to spend more time cleaning the store. There is the risk of inflationary price increases on food. In the midst of all this, we’re having some gig worker issues and they’re hard to come by. We’ve heard in some cases on the East coast, you have marketplace organizations that have partnered with Marriott and Hilton, thank God, and taken in those employees that would have been laid off to put them to work. But nonetheless, what an amazing time or crazy time to be a grocery retailer. Now…
Mark Fairhurst: Definitely on the front line of the public health crisis.
Sylvain Perrier: Well they are, right? And we should be thankful for them.
Mark Fairhurst: Yeah, absolutely.
Sylvain Perrier: And Mark, is your grocery store, did they have now the plexiglass shields?
Mark Fairhurst: Yeah, they just went up I think on Monday this week.
Sylvain Perrier: Yeah. Well, and it’s like going through customs at the Toronto Pearson International Airport now when you go into the liquor store, there’s lines on the floor, they wave you over, you pull out your passport, you buy your booze and then you go. But I get it. I mean, it’s about protecting those people, right?
Sylvain Perrier: And the challenges that we’re all learning how to deal with this on the fly and we’re…
Mark Fairhurst: This has never been… No one’s experienced anything like this. Not in this century.
Sylvain Perrier: No, I was talking to John D’Anna yesterday who’s the Chief Strategy Officer for Berkshire’s and he’s saying that the senior team is seven days a week, 15, 16 hour days just to make sure that operations continued to run, to make sure that the supply line is moving forward. And I can’t imagine what it is. I mean, we’re being inundated with calls on our side from small retailers that need support, large retailers equally as well. But listen, like I’ve said in all of our other podcasts, we’re not experts at this and we want to bring someone on that we can talk to and give us a better sense of what US retailers are doing during the pandemic.
Sylvain Perrier: So we’ve invited an old guest and thank you for joining us all the way from Sacramento, Zac Wilson, the manager of e-commerce at Raley’s. Zac, welcome back to our podcast.
Zac Wilson: Thanks for having me back Sylvain and Mark. Glad to hear you guys are doing well.
Sylvain Perrier: Thank you. And we’re happy that you’re safe and your entire team and your family as well are safe. And I was telling in that Mark and I were recording a previous show today and I was recounting back on March 11th, I was driving through the Dakotas and it was when the WHO, I don’t know why people call it the WHO, but it’s the WHO. Because The Who is a band, classified COVID-19 as a global pandemic. And then President Trump addressed the nation that night and that’s when it really started to sink in. What were the first series of wheels that were put in motion at Raley’s when you guys got the word at that point?
Zac Wilson: Yeah. Well the first thing that we did was we always keep that team member focus and then secondarily the customer focus. So once it was declared as a global pandemic, we started running the processes through our head. How do we make it safe for our team members to work inside the stores? And how do we make it safe for the customers to get the products that they need? The biggest challenges that we saw out there were around the sanitizing stations and just the hand sanitizer and the supply behind that. Because as you can imagine, when it’s declared a global pandemic, that’s the first thing that everybody’s going to go and try and buy up from the customer standpoint. But it’s also one of the things of the supplies in which the stores are going to need to do this.
Zac Wilson: So luckily being from California, we were one of the first areas of the country that started doing the Shelter in Place ordinances and some of the other proactive steps to prevent the spread the COVID 19 so we took those action steps into our stores as well. We enabled the social distancing probably two weeks before it was mandated by the state of California just to make sure that the customers were staying apart and the team members and everybody felt more comfortable. Because you can imagine that once the pandemic was out there, there was a lot of chaos and unknown happening from the customer standpoint.
Zac Wilson: Some of the other things that we did right off the bat was just go and look at our overall cleaning regimen that we had for areas in which customers are really focused on. Check stands, the handles of all the cases that you would open for the freezer doors, even the shopping carts. So right away took those practice steps.
Sylvain Perrier: It’s interesting. I mean, the run on toilet paper, I hate to say it was continent wide. And it was so bad, and I grew up outside of our nation’s Capitol which is quite well known for pulp and paper production, two types of pulp and paper. So paper used for photographs, but that industry is long gone. No one’s necessarily printing photographs anymore. The second one is a newsprint and that’s the kind of the smallest, I mean there’s a third one, it’s paper towels and toilet paper. They refired up two of the mills and were cutting fresh wood off of what’s called crown land, so owned by the government, to get the mill going as fast as possible. That is how crazy we’ve gone in terms of buying toilet paper. And just kind of a sidebar so it’s interesting you mentioned that. Now I’m assuming you guys saw a crazy increase in sales and did you have to change the way you orchestrate your e-commerce?
Zac Wilson: We did. And similar to what Kroger saw as far as the increase goes, we were around that same increase. And the amazing thing is that customers, we already had a pretty loyal following when it came to e-commerce, so we had a decent volume to begin with, but as you can imagine, as Mark was talking about his mom, a lot of the folks that are on that 65 and older age are now using our eCommerce platform. So we went from doing our normal volume to tripling that in a matter of hours, not days. So as you can imagine, we had to change the process in which we fill and pick our orders with the current constraints the teams have. So we went and enabled more of an assembly line pick than we did before. Most of our picking had been done by a single person picking multiple orders and then processing those orders all at the same time.
Zac Wilson: But we turned it into a, we have pickers, those are the ones that select the items that are in the store. They’re picking three, four, five, six orders at a time. And then we have another set of people that are just packaging, storing, and then putting those orders up. And then lastly we have what we call payers, the ones that are operating the POS and the ones that are running those orders out to customers so they don’t have to come inside the store.
Zac Wilson: One of the things that we ran into almost immediately was we didn’t have enough team members to support the volume. So we went out and hired 700 team members in a matter of three days.
Sylvain Perrier: Wow.
Zac Wilson: And then trained all 700 in the next 48 hours. So as you can imagine, your influx of new team members who are unfamiliar with the systems and your existing team members, the process had to be simplified as much as possible. So the other thing that we also had to do, and you alleviated to it earlier Sylvain, around paper products and some of the other products that we had a tremendous run on right out of the gates, that’s very hard supply chain wise to build back up. We had to dramatically go in and limit the number of products that we were showing on the website for customers to choose. So it was a completely different experience from that standpoint as well.
Sylvain Perrier: Did you find, I’m not sure about Raley’s, are you guys using some sort of CGO system?
Zac Wilson: Yeah, so we have a system, it’s called Computer Assisted Ordering, that we tap into for our eCommerce fulfillment. The issue with that though is it’s all based off of the sales that goes through the POS. So as far as real time inventory tracking goes, it’s very difficult. And then it does look into the supply chain, but if the supply chain is fulfilling at 15% on some of those categories, it’s a toss up if you’re going to get those products in or not.
Sylvain Perrier: Yeah, I was speaking to a couple of retailers. Some of them decided to bypass their CGO and they’ve still haven’t turned them on. They’ve gone really old school in managing the supply chain. I don’t know if it’s a sense of confidence it’s giving them, you guys didn’t experience that did you?
Zac Wilson: We did to a certain extent because some of our suppliers that we have and some of the warehouses that we get the products from went to the allocation because we share warehouses with other market competitors as well. So they had a number of orders that were coming in from those different retailers, but only a certain amount of products coming into the warehouse each day. So the inbound versus the outbound, the outbound was almost four times the amount what the inbound was.
Sylvain Perrier: Hm. Interesting. Did you find, and we saw this here as well as talking to non Mercatus customers that there was this tremendous surge of people over the age of 65, first, maybe second time e-commerce users and it had put an incredible strain on the help desk. And the strain that it caused was, “Please help me build my order.” Did you guys have that same experience?
Zac Wilson: We did. In fact that’s where a majority of my team is focused now is we had a traditional call center or help desk of about 15 associates and our call volume went from 200 calls a day to almost 12,000 calls a day. So what we did essentially is we took and stood up a secondary call center with 15 more associates team members to help field those calls. And majority of those calls were from senior folks that had either one, never used the website before, or two, they’re not technologically savvy so that a lot of questions and a lot of time on getting orders and trying to place those orders.
Sylvain Perrier: Yeah. Number one question for us was, “Where’s that password reset email? I think it’s in my junk folder.” So yeah, that was the number one. Now since you guys are in California, what surged for you guys? Because I know you do curbside pickup, do you guys do delivery?
Zac Wilson: We do. We offer delivery in almost every single one of our locations as an option. And the interesting thing is after we onboarded all those new team members and we got our stores staffed back up, we went and basically doubled the time slots that we offered before. And we saw a dramatic increase in pickup, but the demand for delivery was just as great. So we had a go at a 70 30 mix before this all started, on 70% pickup, 30% delivery, to almost a 50 50. And it was due to the senior community that didn’t have the capability of getting out to get those groceries that needed to have it delivered directly to them.
Sylvain Perrier: And did you guys go ahead and… Because I know that our clients, what they did is, “Hey, it’s great that you guys are surge buying all these things.” They did like you guys did, limit the quantity. They’ve also went as far as saying you can’t return certain products. Did you guys institute the same thing?
Zac Wilson: We didn’t go down the path of instituting that. And the main purpose behind that is we didn’t necessarily sell a bulk majority of those items to single individuals. So the customers here that shopped with us Raley’s in the tri banner, they understood the process from the beginning. That’s one of the things that we put out there was the eliminating the number of products they could purchase. And so they did a good job of self-governing. I know that there were some stories that I heard about Costcos and Walmarts where people were buying as many as they could, using toilet paper as an example, products and walking out with truckloads rather than what they actually needed.
Sylvain Perrier: Right. Now, what are you guys doing to protect your associates?
Zac Wilson: So we’re doing a couple of things. On the in store purchasing side, we’ve put up those plexiglass shields at all the check stands. We’ve enacted a new rotating schedule with all of our checkers and what we call courtesy clerks, the baggers, where every 15 minutes they pop out of the check stand and go wash their hands, get cleaned up, make sure that they don’t have anything on them before they trade back out.
Zac Wilson: We also have looked at our hours of operation as well because one of the things that we also have to maintain, and you’d mentioned it about what the company you were talking about earlier, Brookshire, where their executive team is working seven days a week, 14 hour days. A lot of our store team members are doing six days, seven days right out of the gate because initially we thought it was going to be a sprint and now it’s turned into a marathon. So making sure that they have time to rest and recover in between is one of the big things.
Zac Wilson: And then on the eCommerce side we’ve enabled the no contact drop-offs and pickups for customers. So customers come in the parking lot, they text us or call us that they’re there, they’ll open their trunks, we’ll put it in, we’ll close it, and they’re on their way. So trying to eliminate as many touch points as possible. And then on the delivery side, doing the same thing. We no longer are taking signatures to accept the delivery or we’re making eye contact with the customer and then we’re running away just to make sure that everybody feels comfortable.
Sylvain Perrier: And the last time we spoke and on previous podcasts, you had this really well laid out product roadmap. Do you find because of the pandemic you’d decided to, “Hey, we’re not going to do this now. We’re going to focus on certain key things that will make life a lot easier for us?”
Zac Wilson: Yeah, it’s dramatically changed what we had as far as our roadmap goes. The concentration has been fully on the customer experience and team member experience. So we’ve ramped up all of our production around increasing capacities for the pickers and the associates inside the store on their devices. And then at the same time, also increased the capacities on our white label solutions and our vendor servers. So with the increase in volume, the one thing that we wanted to make sure that we didn’t have happen is have the website crash or have our delivery partner, their systems crash as well.
Sylvain Perrier: And did you, besides the requesting your partners to fortify their IT environments, did you guys have to do any form of fortification?
Zac Wilson: Yeah, we also did the same on our IT side, as far as increasing our capacities. We actually increased it enough that if we have to go down the path to do similar to what Kroger announced last week of standing up just a fulfillment store, a dark store for pickup, that we could maintain that. In addition, we’ve brought on additional team members here in the support center to help support not only that secondary call center, the help desk, but also maintain the systems and monitoring the systems.
Sylvain Perrier: And I get this question a lot, I actually was at a CEO round table discussion last Friday evening actually it was, I think it’s 5:30. And people are asking me, “Do I need to rush out to buy $1,000 worth of groceries?” And I kind of explained to them our situation here in Toronto is a little bit different. We have two very large retailers that control 70% of the market in the country quite frankly. So I said, “They managed quite well and they have a lot of strength on the supply side.” Do you think the supply chain where you guys are is resilient enough to manage the demand?
Zac Wilson: I believe so in certain categories. The issue is is that we had a lot of the panic buying right out the gate. So the supply chain took a huge hit for a period of four days. And as you can imagine, getting that inbound and outbound logistically set up from all of our vendors and our merchants that we get product from has been a huge challenge. We are confident that the supply chain has enough food in it to not have customers do the panic buying and spending $1,000 on groceries. With enough time, we see that there’s a forecast of our in stock conditions improving back into the eighties, 80 percentile, within the next I would say couple of weeks at this point. Our fresh products such as meat and produce, those ones we are back in the 80s right now. So customers have the capability of purchasing those products and for the most part other perishable items as well.
Zac Wilson: It’s really the center store items like toilet paper, cleaning products that we’re seeing the biggest challenge on. And then one of the things that we’ve done as well to help alleviate some of the pressure on the senior community is we’ve created these essential bags. And basically it consists of products that customers will need, seniors will need, that will meet their dietary needs from a perishable standpoint and also from a meal standpoint. So the second bag is more of those premade ready to go eating options. And we’re actually selling them at a break-even to a negative because we know that the demand is there and the need is there for those communities and we want to make sure that we take care of them the best that we can.
Sylvain Perrier: That’s a great idea. We tried to pitch that idea and we were kind of stonewalled on that one. And I said, “That’s an idea where you can really control or try to control shrink in these times where people will go for certain other items.” Any advice for the retailers listening today?
Zac Wilson: I’d mentioned it a little bit earlier, but right out the gate we all assumed that it was going to be a sprint, that this would end after two weeks of self-distancing and self-quarantining. And as we look out at the next two to eight weeks, it’s turning into more of a marathon. So whatever the other retailers that are listening right now are looking at is just prepare yourself, your teams to understand that we have to continue to build for what’s coming and also take care of our team members, take care of our customers, and most importantly, take of your families. So it’s great right now that everybody’s putting in the time and the energy, but at some point everybody’s going to get rundown. So make sure to take care of yourself and then just continue to plan for what this looks like because we imagine coming out of this on the eCommerce side, our new runner rate being double what it was coming into it. So this is really the pivotal point in which customers are now going to choose to use that option more than they did before.
Sylvain Perrier: Yeah. Well I think we’ve hit the FMI magic number of $100 billion by 2025. I think we’re there. You know? Zac, I want to say thank you so much for joining the show again. It’s always a pleasure having you as a guest. How can people get ahold of you if they have any additional questions
Zac Wilson: So they can find me on LinkedIn under my profile, Zac Wilson, Manager of e-commerce at Raley’s, or through… Feel free to send me an email. It’s [email protected]
Sylvain Perrier: Perfect. Mark, be safe.
Mark Fairhurst: You too.
Sylvain Perrier: Be careful where you are underground and you may have radon in that basement. Have you checked?
Mark Fairhurst: I’ve been in the house five years.
Sylvain Perrier: Oh, well you’re fine.
Mark Fairhurst: No affects, so I’m fine.
Sylvain Perrier: You’re fine. How do people get a hold of us Mark?
Mark Fairhurst: www.mercatus.com and I’ll also put to Zac’s contact details on the podcast landing page so they can reach out to him directly from there.
Sylvain Perrier: Thank you. Ladies and gentlemen, really appreciate listening to our podcasts. Please be safe. Take care of your family and your friends and if we all work together, we’ll get through this. Make sure to tune in to our next episode where we will be tackling an interesting subject and likely interviewing an amazing guest. Peace.