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Podcast #10: Interview with Warren Shoulberg, Award-Winning Retail Journalist

Mercatus Radio presents the Digital Grocer - Episode #10

In this week’s episode of the Digital Grocer, Warren Shoulberg from the Robin Report joins us to discuss important changes in the grocery industry. From meal kits, to data analysis, to partnerships and acquisitions, no hot topic in grocery is left unexplored.

Warren Shoulberg shares his thoughts on what some grocers are doing well, and how he expects the industry will need to adapt to the changing expectations of online and in-store shoppers.

Join us for a fascinating discussion – this is one you won’t want to miss!


Sylvain Perrier:              Hey, folks. Welcome to Digital Grocer. Mark, this is what? Episode 10?

Mark Fairhurst:             Big number 10.

Sylvain Perrier:              Big number 10.

Mark Fairhurst:             That’s right.

Sylvain Perrier:              Yeah, it’s, it’s still younger than me, which is, which is awesome.

Mark Fairhurst:             (laughs) It is a decade in years. It’s a decade.

Sylvain Perrier:              It’s a decade.

Mark Fairhurst:             It’s a decade show.

Sylvain Perrier:              It’s a decade show and we are recording live here at Mercatus Technologies in our beautiful mini studio in one of the boardrooms that we’ve so carefully set up, and it’s a rainy day in downtown Toronto, but it’s crisp here in the office.

Mark Fairhurst:             It’s crisp, it threatens to snow this weekend.

Sylvain Perrier:              I know.

Mark Fairhurst:             And I can see a Christmas tree in the, one of the condos across the street.

Sylvain Perrier:              I know. I actually, the other morning when I was having breakfast in the kitchen, I actually made a makeshift sign and it’s kind of said, “How dare you.”

Mark Fairhurst:             (laughs)

Sylvain Perrier:              Halloween’s not even over, and they had a Christmas tree up.

Mark Fairhurst:             Right, and up goes the tree.

Sylvain Perrier:              Up goes the tree. It’s, it is like retail, folks. Um, we just got back from an amazing event in Las Vegas. Grocery Shop-

Mark Fairhurst:             Was fantastic.

Sylvain Perrier:              Fantastic inaugural event-

Mark Fairhurst:             Yeah.

Sylvain Perrier:              For the whole team at, uh, at Shoptalk, which is kind of no, Grocery Shop is the offshoot.

Mark Fairhurst:             Correct.

Sylvain Perrier:              2200 attendees.

Mark Fairhurst:             Yes. Yep.

Sylvain Perrier:              And the Aria was amazing.

Mark Fairhurst:             Great facility.

Sylvain Perrier:              Great facility. Mercatus was a level five sponsor.

Mark Fairhurst:             Yeah.

Sylvain Perrier:              Our logo was on the lanyards, which was amazing.

Mark Fairhurst:             Yeah, yeah.

Sylvain Perrier:              It was cool to kind of see those things, and our, our logo was on these massive banners kind of all over the, ah, convention center.

Mark Fairhurst:             Well it was, it was kind of a neat happenstance, because when you came back from Shop Talk and said, you know, how wonderfully organized it was and the content and the, and the traffic and the thought leadership that came out of it. So we jumped on Grocery Shop as soon as it was announced-

Sylvain Perrier:              Mm-hmm (affirmative).

Mark Fairhurst:             And I think getting up there as one of the lead sponsors was, ah, was smart, but also a little humbling when by the time the show arrives you’ve got Salesforce, and IBM, Forter-

Sylvain Perrier:              Oracle.

Mark Fairhurst:             Label Insight. Oracle.

Sylvain Perrier:              Google.

Mark Fairhurst:             All up there. Insane.

Sylvain Perrier:              Yeah. And it was, I think, I think for me, this kind of all crystallized when we, ah, Mercatus hosted the friends of the industry dinner-

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              On the Monday night-

Mark Fairhurst:             Yeah.

Sylvain Perrier:              And we got a chance to really spend some quality time with some retailers as well as some fellow partners that are, were attending the event as well. Now, I didn’t get a chance to go to any of the tracks because we were inundated-

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              With 25 one-on-ones and as well as some, some partnership activity on the trade show floor.

Mark Fairhurst:             Right.

Sylvain Perrier:              And you know, the energy alone in the room confirmed that there’s some massive disruption happening in this space.

Mark Fairhurst:             Absolutely.

Sylvain Perrier:              And I think a lot of it is coming in because of, you know, I ah, we did a little bit of press the other day, um-

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              A magazine interview and I kind of decided that, you know, the major pivot point would it been when Amazon acquired Whole Foods.

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              That really, at the end of the day, the industry is taking notice that if a major tech company can come into this vertical in this market, people need to wake up.

Mark Fairhurst:             Yep. It was like a shot of adrenaline right into the heart of grocery.

Sylvain Perrier:              Absolutely. And I think that was felt-

Mark Fairhurst:             Yeah.

Sylvain Perrier:              On the floor at, at Grocery Shop. When I say the energy was palpable, it reminded me, like, felt like a startup.

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              You know? Where you just, you don’t know where you’re going, but you know you need to do something and you got to figure things out because you need to innovate, and if you don’t innovate, and if you’re not moving forward, if you’re not acting like a tech company to a certain extent, I think the market’s going to leave you behind.

Sylvain Perrier:              But listen, folks, as always, we’re not the experts here.

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              So we have somebody, a native New Yorker who’s transplanted in the ATL, who’s, uh, who’s, who’s dialed in and he survives, and he told us, ah, he is proof that you can leave New York City. His name is Warren Shoulberg and he’s a guru in this space. So he’s a business journalist, contributing editor to The Robin Report, Forbes.com, and Progressive Business Media. And he knows retail. As a former editor in chief or several leading business to business publications for the retailing industry and now a media contributor and consultant, he has chronicled the good, the bad, and certainly, folks, the ugly of the business in a career spanning four decades.

Sylvain Perrier:              That’s amazing. God. That’s, that’s way more podcasts than we’ll ever do, right? His award-winning commentaries elicit both praise, and certainly for me it’s all praise and complaints. He welcomes them both equally.

Sylvain Perrier:              He’s guest lectured at the Columbia University Graduate School of Business and been honored by the International Furnishings and Design Association, and the Fashion Institute of Technology. He has been cited by the Wall Street Journal, The New York Times, The Washington Post, ABC, and many other media and is the expert in the field. He expects to be doing this for the duration.

Sylvain Perrier:              Warren, it is a pleasure having you on our podcast today.

Warren Shoulberg:        Well, thanks so much. I, ah, appreciate being here and I don’t know that, but it’s certainly, ah, I don’t recognize that person, so that-

Sylvain Perrier:              (laughs)

Mark Fairhurst:             (laughs)

Sylvain Perrier:              Well, I’m sure you’ll be properly matched by the end of the, uh, by the end of the podcast. I have no doubt.

Warren Shoulberg:        (laughs)

Sylvain Perrier:              And, Warren, you attended Grocery Shop, you attended many of the tracks. What stood out for you?

Warren Shoulberg:        Well, I had a lot of the same observations that you guys did, which is that this is a real tipping point for the grocery and CPG business. Uh, and I guess that’s what astonished me the most is that, as somebody who covers a lot of both grocery and general merchandising, the grocery business is still three to five years behind general merchandising and this digital conversion, and I guess it really hit home how much work the industry still needs to do to catch up to both overall retailing and frankly to its customers.

Warren Shoulberg:        So a lot of people talked about Amazon’s purchase of Whole Foods as kind of the, the defining moment when the industry realized that they needed to get their act together. And, and I think that’s true. So that was about 18 months ago, and we’ve certainly seen a lot of activity since then, but there is a lot more in this, ah, this sector needs to do to catch up.

Sylvain Perrier:              I found it odd. And, Mark-

Warren Shoulberg:        Mm-hmm (affirmative).

Sylvain Perrier:              Tell, tell me if I’m wrong here, but I didn’t get a sense of anyone was talking about meal kits anymore.

Mark Fairhurst:             No, I, I, and again, we didn’t go to all the tracks, but I definitely think that the focus was on online and offline and bringing them together.

Sylvain Perrier:              Right. And we did a, we did a specific episode-

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              I can’t remember what the episode number is, on meal kits. We had, we had Sean Butler on a call with us.

Mark Fairhurst:             Butler, yup.

Sylvain Perrier:              And he’s kind of become kind of the quasi expert in this space in terms of the marketing aspect, the operational aspect. So I expected something more of a presence for the meal kits vendors-

Mark Fairhurst:             Correct. Yeah.

Sylvain Perrier:              To be at the show. I didn’t see them. Warren, what’s your sense? Is this something that has come and gone?

Warren Shoulberg:        Yeah, it’s certainly seemed that way. You know, I think if this conference had been a year ago meal kits would have been one of the top two or three topics that everybody would have been talking about and the potential-

Sylvain Perrier:              Mm-hmm (affirmative).

Warren Shoulberg:        And it’s kind of a little played out. I think there were a couple of meal kit companies that were on some of the tracks. They spent a lot of times kind of defending the- their business model and saying it’s, it’s not over. We’re, we’ve still got a viable position in this sector.

Warren Shoulberg:        But again, a lot of, ah, the bravado and braggadocio that, ah, that you might’ve seen a year ago h- has all but disappeared, and in all the presentations, whether they were the companies themselves making presentations or interviewers, ah, doing Q&A’s with them, the elephant in the room was retention rates, and, and hardly anybody talked about that.

Warren Shoulberg:        In my mind, what you’re seeing on, on meal kits is that they have, they have migrated to, to in store what some of the big grocers are doing, either buying, ah, the meal kit companies outright or connecting with partnerships. That seems to be the model and that’s going to work rather than a, a direct to consumer subscription model. That one just does not seem to have any longterm legs.

Mark Fairhurst:             Warren, you’re absolutely right. We were at the digital food and beverage show in June in Chicago-

Sylvain Perrier:              Yeah, correct.

Mark Fairhurst:             And there was a very heavy meal kit presence there, both on the show floor as well as on the tracks, and it just speaks to the speed of change in the industry that four months later it’s now almost negligible.

Sylvain Perrier:              Yeah, and you know, we could do a whole show on this part-

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              But I’ve always thought, you know, talking to Sean and talking to some others in the industry is the reality is the amount of capital required to do meal kits properly, to eke out any form of margin is pretty intense.

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              And so your capital requirements day one, typically, if you’re wanting to do this at scale. I’m not saying that everyone does this at scale, but if you want to do this at scale, so your costs alone are significant. You know, the equipment that’s required or you’re renting facilities and so on. And [inaudible] is a great example of that. Right? I think they ended up buying some old location and equipment from the folks over at Fresh and Easy on the outskirts of LA. And so are your capital’s high and then suddenly you’re using as some sort of a subscription model. So by the time your subscription model catches up, you’re generating any form of revenue to cover your costs, you’re lagging behind.

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              You’re dealing with depleted stores of, of money-

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              And you’re having to continuously raise. So incomes in the retailer thinking, “Oh, my God. This is another distribution channel for us. Let’s buy this company,” and then suddenly somebody in operations at retail is left with this dilemma to say, “Well, do we continue funding this? And if we’re using the in store channels as, as a next form of distribution, why bother?” Because you as the consumer, you’re going to go in, are you going to go to the aisle where you see a meal kit where you’re still going to have to make it yourself at home?

Mark Fairhurst:             Right.

Sylvain Perrier:              Or are you going to go to the ready made meal where you just scoop it in some sort of container and take it home?

Mark Fairhurst:             I, I, If you’re asking me-

Sylvain Perrier:              Yeah.

Mark Fairhurst:             Convenience is the factor.

Sylvain Perrier:              Exactly. Exactly.

Mark Fairhurst:             So.

Warren Shoulberg:        Yep. Yep. There’s no question about it, and I think you need to put meal kits in the context of the, of what’s going on in the overall subscription based model out there. The apparel folks that have tried that, whether that’s Stitch Fix or t- Trunk Club, have seen their expectations dramatically reduced in that, while there is a customer for it, it’s much, much smaller than, than folks had originally projected.

Warren Shoulberg:        You know, you’re even seeing, you know, a couple of the auto manufacturers try out subscription models. Cadillac had one where you paid a flat fee and you could, you could trade, you could come in every 30 days and pick up a different car and they’ve just discontinued that. So I think what’s happening in meal kits reflects what’s going on in the broader subscription based model, which is, it’s a very limited audience.

Sylvain Perrier:              100%.

Warren Shoulberg:        True.

Sylvain Perrier:              Now I wanted to kind of say also Cadillac as a brand that’s struggling to capture the millennial market-

Warren Shoulberg:        Yes.

Sylvain Perrier:              And they just recently shut down their facility in Manhattan.

Warren Shoulberg:        Yep, yep. They did. Yep.

Sylvain Perrier:              They spent millions on that facility.

Warren Shoulberg:        And then fired, fired the guy who, who was running it. Yeah.

Sylvain Perrier:              Exactly like, God, we can have a separate show on Cadillac that’s amazing.

Warren Shoulberg:        (laughs)

Sylvain Perrier:              And uh, there were two things that this show that I, I was disappointed. And, and, Warren, I want to get your opinion on this. No one’s doing anything sexy with voice. Unless I’m wrong.

Warren Shoulberg:        I agree with you. The, the potential is there. Ah, I think everybody’s kinda stumbling around trying to figure how to make this work. There’s a certain number of people that are certainly still intimidated by it, but I thought somebody had a great point, and I can’t remember who said it, which is that until pay by voice becomes a- an accepted practice and the technology is there and the consumer feels that it’s a cure, until you see that voice is not going to catch on in any great degree until that happens. I think that’s a great point.

Sylvain Perrier:              Yeah, that is a really good point. I’ve also, you know, from our perspective here in Mercatus, when we look at the technical landscape of the various solutions, whether it’s Apple, whether it’s Amazon or Google-

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              No one’s setting the standard, and you’re having to realign on these third party abstraction layers to be able to deploy whatever you build across the different platforms, but that’s not, it’s not perfect yet. I also think that for voice to be really successful, it needs to be paired with some sort of AI technology that streamlines. I don’t think I would stand in front of a device … and I had a senior’s moment the other day, which, which I want to share with you.

Mark Fairhurst:             (laughs)

Sylvain Perrier:              Ah, I don’t think I’d stand in front of a de- device and actually rhyme off my entire grocery list.

Warren Shoulberg:        Yep, yep.

Sylvain Perrier:              So.

Mark Fairhurst:             Right. Just, just to say, Sylvain is not a senior yet.

Sylvain Perrier:              No, but I have a white beard so that kinda, that kinda helps out.

Mark Fairhurst:             (laughs)

Warren Shoulberg:        There’s going to be a lot of Beta Max dead ends here before this thing, ah, actually, actually falls into line.

Sylvain Perrier:              Absolutely. Absolutely. And you know at home we have, you have the Amazon device, we have the Google Home device and early in the morning, like 4:00 AM, I’m standing in front of it to have it turn on the lights, and I, I said to it, “What’s your name again?” I couldn’t re-

Warren Shoulberg:        (laughs)

Mark Fairhurst:             (laughs) Is it Alexa? Is it Siri?

Sylvain Perrier:              I just couldn’t not like, what’s your name again? I felt like I was cheating on it with the other device. I don’t know, like-

Mark Fairhurst:             (laughs)

Warren Shoulberg:        (laughs)

Sylvain Perrier:              That was my senior’s moment at 4:00 AM talking to it.

Sylvain Perrier:              Um, Warren, any sense why we continue to have dialogues about bad data in, in grocery retail?

Warren Shoulberg:        About bad data?

Sylvain Perrier:              Yeah.

Mark Fairhurst:             Yeah.

Sylvain Perrier:              Bad product data, it con- continues to be the theme like, “Hey, we don’t have good data. Hey, we don’t have good data,” That, did that come across in any of your talks?

Warren Shoulberg:        Not so much. I think what I heard more often was there’s plenty of data, we don’t know what to do with it and we don’t know how to interpret it and, and we don’t know where we should be focusing our attention on it. So I didn’t necessarily pick up that it was bad. It just was overwhelming, and the people who need to use that data to, to run their businesses, um, just need a whole lot more guidance and direction on, on how to interpret it, how to use it.

Mark Fairhurst:             I agree with you, Warren. I think there’s two themes here. There’s the business operations component to the data and then there’s also the product information data that at least we’re seeing from our perspective is when you’re going to sell products online, and you’re not getting the quality of the integrity of the data from the retailer and the CPG, that’s problematic. And that’s where we work with companies like Gladson, you know, Label Insights.

Sylvain Perrier:              I, I think when you kind of look at those different corporations, right, a- at the end of the day where it becomes a challenge for us and for the retailers is not all the seasonal content-

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              Is in those systems. Two is forget private label. Because if you’re employing IRI or you’re employing Damon, they kind of control that bucket of data. That may not, may not make itself available outside of the POS systems and into the more pure marketing systems and then trickle down into a company like us or any one of our competitors. So that starts to affect a lot of things. So you get not so positive search results on the integrated technologies that are out there, missing product images.

Sylvain Perrier:              So it has an influence on the shoppers’ confidence in, in the technology, the willingness to use it, and so on. Then it becomes, it becomes solve the problem by brute force.

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              Get a room full of people, buy a bunch of products, and they type the data in. And it was weird that the only session I attended was on the last day, on the Wednesday. It was a, a theme for 45 minutes to talk about product data, and I was just kinda blown away.

Sylvain Perrier:              On my way out I was, I was dumbstruck how Kroger, Target, and Walmart had a really strong presence at the show, and I’m starting to wonder, you know, are the midsize players really gonna start to struggle and how they’re going to stay competitive. Warren, what are your thoughts on that for the smaller regional retailers?

Warren Shoulberg:        Ah, had exactly the same thought. There was one presentation, and I’ll be polite and not say who it was, but it was a, it was a regional upscaled grocer with about 15 or 18 stores. The person knew who was putting, who was running the tech side was talking about how they had, how they have launched their app and all the struggles they had within and the thinking that went into it. That would have been a great presentation three years ago, but the fact that this operation had, had only reached that point in the process, the APP had been up, I don’t know, three weeks or six weeks or something like that, I mean, that’s very disturbing that, that they’re so far behind the curve.

Warren Shoulberg:        And think what you’re seeing is, again, it’s in the grocery business, but it’s in every business, ah, sector that I follow, is that the gap between the haves and the have nots just keeps getting bigger and bigger. And the big companies, the Krogers, the Walmarts, Albertsons, um, they have the balance sheet to be able to finance this. These, these local guys, small guys don’t.

Warren Shoulberg:        You know, I think that’s, that’s a lot of why Whole Foods sold out. Was that they realized that, ah, if they were going to be competitive, they needed, uh, they needed a sugar daddy and ah, and it was Walmart. I’m sorry, so it was Amazon. So those little guys are, are struggling and you’re gonna continue to see them fall further and further behind. At least that’s my impression.

Sylvain Perrier:              Yeah. I would agree. I would go even as far as saying in this day and age, if you’re not taking, whether it’s digital, ecommerce or anything that’s considered Omni channel, if you’re not taking this as a strategic approach, independent of your size as a retailer, and you’re taking a, a me too decision and co-opting your brand and your customers into the hands of a service provider like an Instacart, good luck.

Warren Shoulberg:        Yep, yep.

Sylvain Perrier:              Because I will say, a lot of these retailers never properly b- bounced back out of the last recession.

Mark Fairhurst:             Right.

Sylvain Perrier:              So when the next recession hits, and if you’re cash starved, I’m going to assume to a certain extent, a 15% premium on your groceries coming through Instacart is going to dwindle away fairly quickly and people are going to trade out of the vertical, trade down into food banks, trade down into something.

Mark Fairhurst:             Which they did back in 2008.

Sylvain Perrier:              100%.

Mark Fairhurst:             Yep.

Sylvain Perrier:              And the retailers that have invested in their private label brands, in their stores, did excessively well and have maintained some of the degree of the number of customers that have come in, but they’re going to suffer. So they took the me too approach, the non strategic approach. Which I find very interesting.

Sylvain Perrier:              There is a class of strong regional retailers-

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              That are out there that are going on the partnership trail-

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              Fast and furious and are eliciting support to be able to achieve, ah, what they need to do. Warren, did you get that sense as well at the show?

Warren Shoulberg:        Yeah. The partnership model, I thought, was really evident in, a- across a large number of presentations that even, no matter what size your business is, the ability to hook up with somebody that can bring you something that you can’t do on your own or that’s prohibitively expensive is becoming more and more attractive. And again, the biggest example is Kroger. You know, Kroger hooked up with [inaudible] and said, “What is it gonna cost us to, to set up that, that direct to con- consumer distribution model is going to be so expensive. Let’s connect with these guys who know how to do it and we’ll save a couple of steps. Will save some money.” I think you’re going to see a lot more of that all up and down the spectrum here, from big guys like Kroger to, to some of the regionals.

Sylvain Perrier:              Do you think we’ll see more acquisitions in the future?

Warren Shoulberg:        Yeah, you’re going to see that too. Some of the players are gonna, are gonna keep rolling up and, you know, certainly somebody like Boxed, and you’ve got to look at, at Instacart and some of those, some of those vehicles that get product from point A to point B, to me, that’s where you’re going to see acquisitions. As opposed to Albertsons buyin’ Joe’s grocery store in Idaho. Ah. And no offense to Joe, or Idaho for that matter, but um-

Sylvain Perrier:              (laughs)

Warren Shoulberg:        But those kind of pieces that, that the businesses can’t do by themselves i- is where I think you’ll see the acquisitions. And again, to me that, that distribution piece of it is one that is the most missing from the big guys.

Sylvain Perrier:              Yeah. And the one thing I think the industry has gotten over, and it’s an interesting hurdle, so I, I remember, Mark, many, many moons ago when I was in the research space, we were approached by Walmart.com. The first embodiment of them doing ecommerce. It wasn’t pretty, trust me, this is 1997, 97, 98. The Internet is just really starting up, and they wanted to know why their cart abandonment rate at the time was north of 82%, and they didn’t want to pay us to do the research-

Mark Fairhurst:             (laughs)

Sylvain Perrier:              Because they’re like, “Hey, we’re Walmart and you’ll love our, our logo on your PowerPoint.” So I did, you know, about a week’s worth of research for them. And people were using the online system as a glorified catalog to determine if something was available in store. And you fast forward to Mercatus, and in our research, we’ve clearly demonstrated to a certain extent consumers will pay more for convenience.

Mark Fairhurst:             Absolutely.

Sylvain Perrier:              And whether it’s a pickup in store fee or a personal shopper fee or, you know, a light markup on a product. Nothing to the 10% to 15%, right?

Mark Fairhurst:             Right.

Sylvain Perrier:              There’s a certain price sensitivity. I think the industry has gotten over this notion that this isn’t about price anymore. And, Warren, did that echo for you in your travels at Grocery Shop?

Warren Shoulberg:        Yeah. There was one speaker and I, I think it was a fellow from Box and he said in the beginning buying online was all about price and that, while that’s still a factor, it’s much more about convenience and brand now. In fact, I’m looking at his quote and I couldn’t agree more with that. This is what the consumer wants.

Warren Shoulberg:        Fellow from Walmart, ah, Tom Ward, who heads up their digital operations, said the same thing. And I’m just going to read it his quote too, which is he said, “Everything we hear from customers is that they want to save time.” And, to me, that’s changing the equation as, as to why people shop online. So look at Amazon Prime. It, it may not always be the cheapest game in town, but you know it’s going to arrive on your doorstep day after tomorrow, if not this afternoon. So that’s a biggie.

Sylvain Perrier:              Absolutely. You know, Albertsons has, has just hit $5 billion in gross revenue for their online business. Uh, one of our customers, Weis Markets-

Mark Fairhurst:             Mm-hmm (affirmative).

Sylvain Perrier:              Announced in a press release that their online sales are up 36%.

Mark Fairhurst:             Yep.

Warren Shoulberg:        Okay.

Sylvain Perrier:              That’s a great indication of that. Warren, I’m sure you’re the type of person who has this amazing crystal ball in front of them. What do you see as the future? Anything that, that might be. Are you seeing more tech? Are you seeing a revolution out there? What are you seeing?

Warren Shoulberg:        Well, I’ve been doing this long enough that I’m large enough to make really safe short term predictions and really crazy long term predictions, because I know I, I have a good chance of hitting the short term ones and I know, ah, the longterm ones will all be gone by the time that they happen, so I won’t be held accountable.

Sylvain Perrier:              (laughs)

Warren Shoulberg:        Ah, in, in, in the short term you’re going to see some more consolidation, some more partnerships, but you’re going to see … I like what Kroger’s doing. I think, I think that they are trying a lot of different things and you could look at it and say, “Okay, they’re, they’re, they’re throwing everything up against the wall to see what works and what doesn’t work,” but I don’t think that’s necessarily a bad idea right now, because, ah, nobody has the right formula and there’s, there’s no track record here that says, “You need to do these three things and you’ll be successful.”

Warren Shoulberg:        So I, I like what Kroger’s doing. Doug McMillon at, at Walmart has really changed the culture, ah, there and has instilled a, ah, a new sense of urgency and a dynamic that didn’t exist before. I do think in general merchandise jet.com will prove to be one of the, one of the least, ah, effective acquisitions made in this space. But I think that they, uh, they’re doing a lot of, a lot of the right things. Um.

Warren Shoulberg:        The big factor short term is that, is that nobody is still figuring out the exact model that’s gonna work. To me when I see, ah, a grocery store employee walking up and down the aisles picking an order, gathering it up, and then getting ready to, to get picked up or delivered, I can’t see that being a, a profitable business model. And so these direct to consumer distribution centers such as, ah, Econo is doing.

Warren Shoulberg:        I saw somebody else, ah, just announce in the last couple of days that they were investing in a similar, a similar operation. To me, I think that’s going to prove to be the right way to do it. So, um, I would look for more of that, even though Walmart says we’ve got 3000 distribution points, I, I just don’t think that they’re efficient or cost effective to do it that way. And I think that model is going to go away. And, and the folks that have these dedicated distribution centers, that’s going to be the way to go.

Warren Shoulberg:        The other thing, um, Amazon is certainly never to be under- underestimated, but they certainly haven’t found the right way to make, to make the grocery business work yet.

Sylvain Perrier:              Mm-hmm (affirmative).

Warren Shoulberg:        I, I don’t think that they’re going to have anywhere near the dominance in CPG that they have in general merchandise. If, if you say that they’re doing between 40% and 50% of all general merchandise online sales, th- they’re not going anywhere near that in grocery. And that’s a great opportunity for other players.

Mark Fairhurst:             Listen, Warren, I think that’s, ah, you brought up some good points. In my view. Sylvain will jump in. I think there’s definitely a trend between the automation component and then what do the smaller grocers do from a value and convenience perspective and how do they retain that relationship with their shoppers. And our job as a company that advises in this space is to try to walk both lines and to make sure that we’re bringing what works on the technology side to a smaller grocer who is just trying to compete on, on a level playing field.

Sylvain Perrier:              If you look at the retailers that are investing in, in robotics and kind of the automation

Mark Fairhurst:             It’s cool stuff.

Sylvain Perrier:              Yeah. If I, if I look at Kroger, I mean, their acquisition of Harris Teeter and Harris Teeter being, you know, a small regional player. I’m not knocking their success from a revenue perspective, but you know, they’ve operated a fairly mature, profitable in store pick and pack, click and collect solution. You know, that I think, I can only assume that on certain locations has crossed over the 200 to 300 orders a day, if not more. Um. And I think, you know, Kudos to Kroger seeing that as an opportunity and saying, at scale, because Kroger at scale is what? Over 2500, 3000 locations.

Warren Shoulberg:        Yeah.

Sylvain Perrier:              It would be difficult for them to sustain 500 to 600 locations and in, in that model, because then there’s a compounding effect-

Mark Fairhurst:             Yeah.

Sylvain Perrier:              That happens with the labor and they’re unionized.

Mark Fairhurst:             Yeah.

Sylvain Perrier:              Right. So that becomes a bit of a challenge, and that’s it … I’m on the fence on the robotics aspect of it. I think robots in the context of what Amazon’s done or lately in Canada, Canadian Tire has done in their distribution centers. Or Sobeys is a great example in, in terms of the back end. But the rapid effect of picking and packing, touching food directly. I’m curious. And I say I’m on the fence only because I’ve not seen it physically myself in my own eyes, but I’m interested. I mean, I think it is the wave of the future. I think when you hit that level of maturity as a retailer and you’re cresting over that 200 to 300 transactions a day per location. Right?

Sylvain Perrier:              And you know, and we talk about this, with our own clients that, you know, 20 to 30 to 40 to 100 transactions a day, you’re going to be dealing with two, three, four, five people, and then you’re going to hit the next level. Then you’re going to start streamlining pick solution, which is going to require wave pick, zone pick. And this is dependent on the footprint you’re working with, right?

Mark Fairhurst:             Right.

Sylvain Perrier:              So if you’re a 150000 square feet it’s a big different problem versus if you’re in 45000 square feet. So then if you mature beyond that, then you’re into, to be honest, if you look at [inaudible] or uh, in France they went dark store.

Mark Fairhurst:             Mm-hmm (affirmative). Right. Yeah.

Sylvain Perrier:              They went dark store. So they went as far as saying, “Hey listen, let’s merchandise this facility for extreme efficiency. And now they are carefully looking at the next level, which is robotics, because they’ve crusted the next level. It seems like we’re, we’re skipping a step here in North America, which is the, the idea of the dark store.

Sylvain Perrier:              I know in some cases for some of the companies that are doing just the delivery aspect of it, they’re being asked to do picking and packing in only a few l-, ah, locations, not to cause out of stock issues in other locations. So I think the future is going to be amazingly interesting. Warren, I want to say thank you so much for joining our little but mighty podcast.

Mark Fairhurst:             (laughs)

Warren Shoulberg:        I’m very glad to, to do it. I, I always learn a lot by hearing what other folks are thinking about, so, um, very enjoyable.

Sylvain Perrier:              Thank you. But I think the students today we-, it was Mark, Kevin, and I. So trust me on that one, so thank you.

Mark Fairhurst:             We’re all made just a little bit mightier.

Sylvain Perrier:              (laughs) Thank you.

Warren Shoulberg:        (laughs)

Sylvain Perrier:              And, Warren, how do people get ahold of you?

Warren Shoulberg:        I do write on a regular basis for two general retailing online, ah, services. One is The Robin report, which is Robinreport.com. And one is Forbes.com, and write on a variety of subjects. Also have my own blog, which, ah, I’ve affectionately, ah, called, ah, stupidbusiness.com. And ah, you can kind of figure out what, uh, what I’m commenting on in that site. There’s regular posts on, on all three of those, so please check them all out and you can reach me directly through any of those sites. Uh, my contact information is on all three of them.

Sylvain Perrier:              Perfect. Perfect. Thank you.

Sylvain Perrier:              And you know, Mark, we made a, a major announcement.

Mark Fairhurst:             Yesterday.

Sylvain Perrier:              Yesterday.

Mark Fairhurst:             Yes.

Sylvain Perrier:              Which is the launch of?

Mark Fairhurst:             Mercatus Dispatch.

Sylvain Perrier:              And what is Mercatus Dispatch, Mark?

Mark Fairhurst:             Mercatus Dispatch is our unique capability to facilitate store to door delivery.

Sylvain Perrier:              Yes.

Mark Fairhurst:             From within the retailers branded web or mobile experience.

Sylvain Perrier:              That’s great. That rolled out with Wise Markets?

Mark Fairhurst:             Absolutely. Live.

Sylvain Perrier:              It’s live today. [crosstalk] but I think-

Mark Fairhurst:             And, and we’ll be available to any other Mercatus client.

Sylvain Perrier:              Great. And then we did this, uh, the delivery aspect is in partnership with Shipt?

Mark Fairhurst:             Correct.

Sylvain Perrier:              And ah, we’re going to be making some more announcements with some new partners-

Mark Fairhurst:             In the next few weeks.

Sylvain Perrier:              In the next few weeks.

Mark Fairhurst:             Yep.

Sylvain Perrier:              I’m excited to announce that and I’m going to be traveling all over the country in the next little while to visit prospect clients, existing clients, and existing partners, and, and future partners. So a lot of stuff coming down.

Sylvain Perrier:              And, ah, folks, if you have questions and if you want to reach out to us, Mark, how do they do that?

Mark Fairhurst:             www.mercatus.com or reach us on social. We’re on Instagram, Twitter, and ah, Linkedin.

Sylvain Perrier:              We’re everywhere.

Mark Fairhurst:             We’re everywhere.

Sylvain Perrier:              (laughs) Please send us your questions. Ah. We’d love to pontificate them with our next guest on the show, and look forward to, ah, episode 11 soon down the road. Folks, thank you so much and ah, we’ll catch you on the flip side.

Speakers

Sylvain-Perrier-Headshot

Sylvain Perrier

Sylvain is president and CEO of Mercatus Technologies, and the driving force behind the leading digital commerce platform in grocery retail today.

Warren Shoulberg

Warren is an award-winning retail journalist and regular contributor to The Robin Report, Forbes.com, Progressive Business Media and other media, as well as his own blog, stupid.business.com.


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