COVID and Grocery: Retailers need to invest now
Mercatus Radio presents the Digital Grocer - Season 3, Episode #9
COVID and grocery eCommerce is today’s focus on the Digital Grocer Podcast. With widespread impact on the grocery industry worldwide, we’re addressing the important questions surrounding this pandemic: what is COVID-19? How has it impacted grocery retail? And why should retailers invest in owning their eCommerce experience now?
Mark and Sylvain start by considering the progression of the viral outbreak, and response from the population and governing bodies over the past two months.
As the population is encouraged to self-isolate and practice social distancing, we’re seeing a massive spike in adoption of grocery eCommerce. “On the Friday, in three of our markets…we had in the space of 20 minutes, 10,000 new accounts being created.”
The uptick in online registrations will empower retailers to grow their eCommerce, but not if they have outsourced their eCommerce to a delivery-provider marketplace.
“If you’re a grocery retailer and you’re not invested in owning your platform, guess what? You’ve accelerated someone else owning the relationship.”
In anticipation that COVID-19 sales will be short-term and costly for retailers, retailers need to capitalize on increased eCommerce adoption and increase profitability of this line of business by taking ownership of the eCommerce experience.
“So I think if you’re a retailer, and you’re not invested in owning the relationship and building out your platform, trust me, this is something that you need to be extremely mindful of. This will be the new normal…There’s no avoiding it at this point in time. Now is the time to actually plan and solidify that strategy.”
Discover what we learned are the three vital parts of grocery eCommerce you need to own today, from experiencing the Coronavirus outbreak.
Enjoyed this podcast? Then you might like these resources:
- Blog Post: COVID-19 and grocery retail: what grocers can do right now
- Podcast: Coronavirus and Grocery Delivery: Responding to Market Influx
COVID and grocery eCommerce.
Sylvain Perrier: Welcome ladies and gentlemen to the Mercatus podcast Digital Grocer episode 32. I’m your host, Sylvain Perrier, president and CEO of Mercatus Technologies. As always, joining me in studio today is Mark Fairhurst, our Senior Director of Marketing.
Mark Fairhurst: Hello, everyone.
Sylvain Perrier: Now Mark, it’s a beautiful day in Toronto. But I will tell you, and I think you’ve noticed because you drove in, it’s unfortunately eerily quiet.
Mark Fairhurst: It’s middle of the week and it is like a Sunday morning.
Sylvain Perrier: It is.
Mark Fairhurst: Very early.
Sylvain Perrier: It’s not only quiet out in the street. It is actually very quiet in the Mercatus office.
Mark Fairhurst: That’s right.
Sylvain Perrier: Why?
Mark Fairhurst: We are in a work from home mode.
Sylvain Perrier: We are and unfortunately we are being plagued with coronavirus, or more commonly known as COVID-19.
Mark Fairhurst: Correct.
Sylvain Perrier: This disease is gripping our nation. It has a hold of mankind and our financial markets. The markets are tanking. New York State and the province of Ontario are actually, surprisingly enough, and this is where it gets really scary, in a state of emergency. Mark, have you ever been to New Rochelle?
Mark Fairhurst: No, I haven’t. No.
Sylvain Perrier: A beautiful place, but unfortunately it’s also under quarantine. San Francisco, you and I have been talking about this, has decreed shelter in place and some other cities may actually do the same thing. There’s talk about New York, de Blasio, the Mayor, is wanting to instate the shelter in place, but governor Cuomo has said, “No effing way.” There’s talk about LA. I wouldn’t be surprised if that’s not something our mayor here would want to consider doing considering it’s actually one of Canada’s largest city.
Sylvain Perrier: There’s also an international travel ban that’s heavily restricting travel between US and Europe, Canada, Europe, and even more importantly, most people actually probably don’t know this, the longest undefended border on the planet-
Mark Fairhurst: Between our two countries.
Sylvain Perrier: … between our two countries and now it’s being restricted to only commercial trade.
Mark Fairhurst: It’s unprecedented, that’s for sure.
Sylvain Perrier: Then we’re seeing untold number of financial release solutions are being injected into the market to calm nerves and to create some form of stability. Now for the most part, we are in uncharted territory. Unless you’ve gone through parts of 9/11, SARS, H1N1, MERS and kind of some of the other types of unfortunate issues that have hit mankind, you really may not know how to deal with this.
Mark Fairhurst: This is on a scale, and not many people who would be listening to this podcast would remember this. This is the Spanish flu of 1918, 1919.
Sylvain Perrier: 100% and that’s why it’s affecting the entire planet. Which for me it didn’t really start sinking in, to be honest with you. Last week I was traveling into the US. I drove. I had multiple existing clients and prospective clients to visit. I decided to drive. Kevin Kidd our Director of Product was with me and Tim Zimmerman one of our Sales executives with was also with us. It got really real Wednesday night. The reason it got real Wednesday night, I was in a rental. I had CNN playing. You could hear the just the lack of accountability in the White House.
Sylvain Perrier: This is not a political show in any case, but you could hear the lack of preparedness. You could equally get that from our own prime minister here in Canada in terms of the lack of preparedness. I think we’re seeing more activity at the provincial level. I have to actually comment the French province in Canada, Quebec, they’ve been stellar in their response to the public.
Sylvain Perrier: I saw Tim for five minutes Wednesday night. His wife who is a Vice President for a large marketing firm in Minneapolis, she was visiting clients in the Canary Islands. I think it’s the minister of tourism. She flew in through Spain, was flying out through Spain. During the White House press briefing, and I was talking to you from the car around 9:00 Wednesday night.
Mark Fairhurst: Yeah, I remember.
Sylvain Perrier: Remember how the president kind of said they are literally shutting down the border for people coming in from Europe. He neglected to say, “With the exception of …”. Tim calls, “Hey, I’m trying to rush my wife back into the country, trying to get a flight. It’s a zoo. Delta is not helping. I can’t get through to them,” yada, yada. I said, “Well, hold on Tim. She’s okay. She’s a US citizen. She’s fine.”
Sylvain Perrier: He’s like, “Where are you getting this? I was listening to the president talking.” I said, “No, the State Department had to really-
Mark Fairhurst: Clarify the rules.
Sylvain Perrier: … yeah, clarify the rules. Do I want to say the response to this whole issue has been botched? Yeah, I do. I think when we were at NGA, that’s where the heightened sensitivity of COVID-19 really came into play.
Mark Fairhurst: We were talking on the way down.
Sylvain Perrier: On the way down and you came back on the flight the day before me. Flight attendants were wearing gloves. I think they had masks on. There were people on the plane wearing masks. Were you wearing your mask?
Mark Fairhurst: I was not myself, no. I felt pretty secure in the people that were around me. But I know a colleague of ours, Kevin actually, he felt very uncomfortable.
Sylvain Perrier: There were people around him that were sick, that were sick. I wore my mask the next day. On the plane people look at you. Does the mask really help? Yes and no, but if it’s an N95 mask, to a certain extent I think it protects more people from you versus the opposite.
Mark Fairhurst: Correct.
Sylvain Perrier: But I did whatever I could do to kind of create this safety bubble around me.
Mark Fairhurst: A lot of it’s psychological too. But going back to your point, I think this caught a lot of the senior leaders in both countries off guard, which is surprising considering the amount of lead time they’ve had based on the-
Sylvain Perrier: January.
Mark Fairhurst: … results-
Sylvain Perrier: January.
Mark Fairhurst: … from Wuhan in China.
Sylvain Perrier: January. That’s the lead time that we had. COVID-19 is having an interesting impact, some positive, some negative on the retail industry. Considering the nature of our podcast, and Mark you know this better than I, I thought it would be … we’ve been pondering deciding if we should record this episode.
Sylvain Perrier: A lot of value to our listeners to kind of assemble some information from some trusted sources, whether it be Barclay’s, Nielsen, the CDC, the WHO, people decided to call The Who. Humanity has this way of dumbing down words now like The Who. Who is The Who? The Who is a band. It’s a rock band. It’s not the World Health Organization.
Mark Fairhurst: Who leads the Who?
Sylvain Perrier: No, what’s his name?
Mark Fairhurst: Doctor Who.
Sylvain Perrier: Is it really?
Mark Fairhurst: No.
Sylvain Perrier: No. I was like, “Wow. This guy’s taking his job way too seriously.” We figured we would share some of our observations. More specifically what’s happening in industry, what is the short-term, potentially long-term impact and things that we’ve learned as a digital e-commerce platform provider out in the industry.
Sylvain Perrier: I will tell you that moment from that Wednesday to the Friday to this Saturday, it was “Whoa.” This is, “Whoa,” as not who. But it was amazing seeing our senior leaders in our business, our processes and really culminate in a way that we could not only support our clients in the industry at the moment, but even today. The fact that, we had already made the provisions back in December.
Sylvain Perrier: At Mercatus, we have a senior leadership meeting once a week. It’s an hour and a half. We talk about governance strategy, risks and people. HR had raised the issue fairly early on towards the end of December right through in early new year that this COVID-19, we needed to be ready. We had already gone ahead and updated our work from home policy. We immediately were starting to notify our team. We made the call the Thursday night at 7:30 that we’d be advising our team the following day at 2:00 PM Eastern Standard Time that you were going to be working from home, 92 people working from home.
Sylvain Perrier: Luckily, we have the infrastructure, we have the processes, we have the back office technology to do this. It’s been wonderful. I think some of the challenges that we’re seeing when you do this as a business is the culture. We have a culture that’s very, it’s not … how would I say this? What’s the right word?
Mark Fairhurst: I think everyone feeds off everyone else.
Sylvain Perrier: Physical-
Mark Fairhurst: The energy and being in the same physical space.
Sylvain Perrier: Physical presence is really key to the ignition behind our culture. I think that and you combine the lack of that and when you’re confined and you’re trying to do some form of social separation, that becomes a challenge.
Sylvain Perrier: Let’s just jump into it. The first is a disclaimer. We’re not disease experts-
Mark Fairhurst: Nope.
Sylvain Perrier: … at all. I’m not a doctor. I don’t think you are.
Mark Fairhurst: Not when I last checked.
Sylvain Perrier: Yeah, no. Oh, my God. Suddenly he checks tomorrow morning and he’s a doctor.
Mark Fairhurst: There are online courses.
Sylvain Perrier: There are, yes. You know what? The one online course I’ve always wanted to take was to either become a pastor or someone that marries people.
Mark Fairhurst: Awesome.
Sylvain Perrier: The only reason I say that because I watched that Friend’s episode where Joey marries Monica and Chandler.
Mark Fairhurst: Oh yes, yes.
Sylvain Perrier: I’m like, “Hey,”-
Mark Fairhurst: You want to do that?
Sylvain Perrier: Yeah, that doesn’t work here in Canada. It’s unfortunate. In any case, I also do not want to be a notary.
Mark Fairhurst: I don’t know who does.
Sylvain Perrier: Mark, I’m going to ask you some questions. But part of my disclaimer, let me backtrack a little bit. The best sources are if you’re in Canada, Health Canada as always.
Mark Fairhurst: Public Health Agency of Canada.
Sylvain Perrier: Then there’s in the US, the CDC and WHO.
Mark Fairhurst: That’s correct.
Sylvain Perrier: Those are really the most factual three sources on COVID-19 coronavirus that you will find. Not the media, not Fox News, not CNN, not your local affiliate, not the BBC, whatever, not ESPN. ESPN’s not reporting on coronavirus, but really not those sources. Go to those ones, those three that we mentioned.
Sylvain Perrier: Mark, what is COVID-19?
Mark Fairhurst: It is a virulent, contagious respiratory disease.
Sylvain Perrier: Wow. Actually, that’s not that bad. COVID-19 is a severe acute respiratory syndrome, SARS, coronavirus or in the scientific community, it’s also known as SARS-COV, C-O-V-2. We decided to call it, well, not we as in you and I, the community decided to call it COVID-19. It belongs to a broad family of viruses known as coronavirus. Now, other coronaviruses are actually capable of causing certain types of illnesses as simple as the common cold to something actually more severe. Much like, do you remember MERS?
Mark Fairhurst: Yep. Yep. I lived through SARS. I mean, you did too.
Sylvain Perrier: Yeah, in ’03, in ’03.
Mark Fairhurst: Because Toronto was sort of the North American epicenter for it.
Sylvain Perrier: That was ’03. ’12 was MERS, which is the Middle East Respiratory Syndrome, a lot worse than SARS in terms of its death rate. We didn’t necessarily get it here in Canada or in Toronto per se. I remember in ’03 when SARS hit, our medical infrastructure and systems here was completely unprepared.
Mark Fairhurst: Yeah, I think we’re in better stead now because of the lessons our public health community learned as a result of SARS.
Sylvain Perrier: They did.
Mark Fairhurst: Absolutely.
Sylvain Perrier: Remember that concert that we had at the end?
Mark Fairhurst: With the Rolling Stones?
Sylvain Perrier: Rolling Stones, AC/DC, Justin Bieber made his big appearance at SARStock and the fans lost it on him. AC/DC at to come out to calm the crowd. Oh, my God. I suggest you guys Google that.
Sylvain Perrier: Now we know a little bit about what is COVID-19 or the coronavirus. Why the word coronavirus?
Mark Fairhurst: Is that because of the shape of the virus itself?
Sylvain Perrier: Damn, you’re brilliant.
Mark Fairhurst: Am I?
Sylvain Perrier: Yeah, yeah, yeah. The word corona doesn’t come from the beer.
Mark Fairhurst: That was my second guess.
Sylvain Perrier: I feel really bad for the brand managers at Corona. The word was actually introduced by a group of virologists in this really short article titled Coronavirus in News and Views section of Nature in this really big book that was published back in November of 1968. These guys, kind of it claims that the characteristic of the fringe or the virus they were looking at through a microscope was rounded or petal-shaped rather than sharp or pointed compared to some of the other viruses that they were looking at.
Sylvain Perrier: It had the appearance, as you so well said, of the solar corona. From that point forward, the name was used and carried on through for specific class of viruses, so coronavirus in one word. It’s not two words. It’s one word. What are the symptoms of COVID-19?
Mark Fairhurst: It’s very much like the flu if I understand. It’s aches, pains, fever, cough, obviously. I know it takes about five days for the symptoms to really come on.
Sylvain Perrier: Yeah, two to 14. You’re bang on on those symptoms. In some cases you’ll see muscle pain, mucus production, and some sore throats. But again that’s-
Mark Fairhurst: Yeah, I missed that one.
Sylvain Perrier: … very uncommon. The majority of the case results are mild or they can be, but it can progress to be severe pneumonia, in some cases multi-organ failure.
Mark Fairhurst: That’s scary.
Sylvain Perrier: The heart and the lungs, right? Who’s more at risk to contracting COVID-19?
Mark Fairhurst: I think the older segment of the population.
Sylvain Perrier: Yeah, everyone’s at risk. But who is really truly exposed here are people with pre-existing conditions including hypertension, diabetes, cardiovascular disease. Anyone that’s really taking some sort of immunosuppression medication, they are at risk. The stats are really weird. Between the CDC, the WHO and Health Canada, they’re not exactly saying, “Well, it’s people over the age of 60.” Or, “It’s people over the age of 80.” It doesn’t really matter. It’s those types of individuals that are taking these types of medications or have these side conditions.
Sylvain Perrier: My next question is how is it spread?
Mark Fairhurst: Well, I know the new term social distancing. You have to keep a certain distance from those around you. Through cough, sneeze, I guess any droplets that are in the air.
Mark Fairhurst: Any droplets that are in the air and you can actually pick it up from materials, plastics, metals, fabrics. And I think the life expectancy of the virus varies depending on the material.
Sylvain Perrier: It does. Yeah, it does. So you’re bang-on in terms of respiratory droplets that are passed through sneezing or coughing. Typically in someone that it’s normally within six feet of you and it’s why we’re saying social distancing should be six feet or greater. In terms of survivability of COVID-19 on a surface, whether it’s plastic, metal, or material can vary from an hour to three days.
Mark Fairhurst: Insane.
Sylvain Perrier: It really depends on the environment.
Mark Fairhurst: Yep.
Sylvain Perrier: I’m going to assume the more humid it is out, the longer this top mucus doesn’t necessarily dry out, right?
Mark Fairhurst: Well, if you think about it, I mean Australia is just entering, they’re coming out of their summer.
Sylvain Perrier: That’s right.
Mark Fairhurst: Right. Their cases are spiking just as much as anywhere else.
Sylvain Perrier: Well, Tom Hanks and his wife.
Mark Fairhurst: Yeah.
Sylvain Perrier: Yeah. Right there. They’re filming a movie.
Mark Fairhurst: I think that’s what really brought it home to a lot of people. I mean it’s …
Sylvain Perrier: I remember listening to CNN when they said Tom Hanks has it.
Mark Fairhurst: It’s like America’s dad is-
Sylvain Perrier: America’s dad is like Mr. Rogers has COVID-19.
Mark Fairhurst: Yeah.
Sylvain Perrier: Mr. Rogers is going to die.
Mark Fairhurst: No. No, he’s not.
Sylvain Perrier: I know he’s not. Well, isn’t he already dead?
Mark Fairhurst: Yeah. Mr. Rogers is, yes.
Sylvain Perrier: Okay, good.
Mark Fairhurst: Yeah.
Sylvain Perrier: Well, not good, then just … I figured he’s already dead. Now, when you touch or if you get some of these droplets on you or you touch one of these services with the virus, what really causes it to spread or you getting it, you’re putting your finger in your nose and your mouth or possibly in your eyes.
Mark Fairhurst: On average in an hour, how many times does a person touch their face?
Sylvain Perrier: I don’t know.
Mark Fairhurst: It’s up, I think it’s between 20 and 30 times.
Sylvain Perrier: Oh my God.
Mark Fairhurst: On average.
Sylvain Perrier: Wow.
Mark Fairhurst: When we were on a conference call, I was taking screenshots of some of our colleagues-
Sylvain Perrier: They were touching their eyes.
Mark Fairhurst: Yeah. They’re touching their face.
Sylvain Perrier: Well, it wasn’t in their nose.
Mark Fairhurst: No.
Sylvain Perrier: So what are the timelines, this discovery of this COVID-19?
Mark Fairhurst: What are the timelines?
Sylvain Perrier: Yeah, when was it discovered?
Mark Fairhurst: Was it November?
Sylvain Perrier: Yeah. November, December.
Mark Fairhurst: Yeah.
Sylvain Perrier: It depends. So within the community of medical experts in China, would have been November, December, considerably later until the country, China, admitted they’re having this issue. And it wasn’t declared pandemic until March 11th, 2020. Now, today, we’re recording this episode on the 19th of March. The number of the cases in the United States, I think, is it over 8,500 now?
Mark Fairhurst: John might be right.
Sylvain Perrier: It’s 40%.
Mark Fairhurst: It’s going.
Sylvain Perrier: Well, testing is catching up.
Mark Fairhurst: Significantly.
Sylvain Perrier: Significantly.
Mark Fairhurst: Yep.
Sylvain Perrier: Right. How is COVID-19 treated?
Mark Fairhurst: Inhalers? Respiratory ventilation.
Sylvain Perrier: Yeah. Well, so there’s currently no FDA approved medication for COVID-19 now. So people infected with this virus, they receive supportive care. So typically what you would do if you had the flu, BRATs, fluids, fever control, and I also heard that you should be taking Tylenol. You should not be taking, what’s …
Mark Fairhurst: Ibuprofen.
Sylvain Perrier: Yeah. Yeah. You should be taking … What’s Advil made out of?
Mark Fairhurst: I think that’s …
Sylvain Perrier: The other one.
Mark Fairhurst: There’s ibuprofen and salicylic acid.
Sylvain Perrier: I think it’s something like that.
Mark Fairhurst: Yeah. Yeah.
Sylvain Perrier: So Tylenol was the better choice here to kind of help relieve some of the symptoms. Now for severe cases, treatment has to include care to support your vital organs. That’s why there’s continuously conversations that we may or may not have enough respirators in this. Elon Musk has kind of gone out and said, “Hey, guess what? If we do run out of respirators, we’re happy to kind of jump in as a manufacturer here and start building those out.”
Mark Fairhurst: Well, I think it was today that the President had signed into order the Defense Contracting Act, basically government telling industry, “You need to produce this.”
Sylvain Perrier: Well, it’s commandeering lines.
Mark Fairhurst: Yeah, yeah.
Sylvain Perrier: Which hasn’t been done since just before the Korean war.
Mark Fairhurst: Yeah.
Sylvain Perrier: Which is, I think is a wonderful thing to do.
Mark Fairhurst: Yeah.
Sylvain Perrier: I mean were seeing CPGs right now jump in. I don’t know if you saw this, but Jameson and Ireland suspending one of their lines and now are manufacturing, they’re going to be manufacturing hand sanitizer.
Mark Fairhurst: Yeah, that’s the distillery, right?
Sylvain Perrier: The distillery, yeah. Which I think is great. Governor Cuomo decided to actually, or for New York to a manufacturer its own brand of hand sanitizer and so on. Right. You see a lot of people trying to build those make your own at home. But the reality is, is it has to be above 60% alcohol.
Sylvain Perrier: So what should we be doing to protect ourselves?
Mark Fairhurst: Staying home, staying away. I mean if you’re sick, do not go out into community.
Sylvain Perrier: Right.
Mark Fairhurst: Always wash your hands. Don’t touch your face.
Sylvain Perrier: Don’t touch your face.
Mark Fairhurst: And stay away from the elderly.
Sylvain Perrier: That’s tough, especially … You know, your mom.
Mark Fairhurst: Yeah. My mom’s in a longterm care facility and we talked to her last night, but she has no idea this was going on. You can’t go and visit.
Sylvain Perrier: No, no. It’s locked down, right?
Mark Fairhurst: Yep. Yep.
Sylvain Perrier: Yeah. Same with my in-laws. I mean they can’t go out. We’re actually ordering stuff for them where they live. They don’t have e-commerce for grocery quite frankly. But luckily, UPS delivers for Amazon, so we’re buying stuff for them online.
Mark Fairhurst: Oh, great.
Sylvain Perrier: So wash your hands. Avoid touching your eyes, your nose, your mouth. When you wash your hands, use soap and water for at least 15 to 20 seconds. I love it. The CDC has a video how to wash your hands and thank you to the CDC. If soap and water are not available, use hand sanitizer and has to be at least 60% alcohol. Cover your coughs, your sneezes with the tissue and then throw the tissue in the trash. I thought it was going to suggest to throw it in an incinerator.
Sylvain Perrier: Make sure for your household cleaners that you’re using at home that they are the ones that are recommended by the CDC. I think Lysol, Clorox and they have to-
Mark Fairhurst: If you can find them on the shelf.
Sylvain Perrier: If you can find them. Yes. Hoarding. I want to know, we got to talk about hoarding. That is actually a psychological thing.
Mark Fairhurst: It is.
Sylvain Perrier: Yeah, it is. We’ll get to it.
Sylvain Perrier: If you haven’t gotten the flu yet and you don’t get vaccinated, go ahead and get that vaccine for the flu. And I’m sorry to the anti-vaxxers out there. But now this is a matter of life and death.
Mark Fairhurst: Well, it’s community, life and death. It’s the health of the population at large.
Sylvain Perrier: Yeah, absolutely. Absolutely. So how is this affecting the retail industry?
Mark Fairhurst: That’s what we’re here to really talk about.
Sylvain Perrier: Let’s just jump into it, right? So for those of you that have may have gone through 9/11 right? So when the two planes hit the twin towers, the twin towers went down and then there was the incident in the middle of Pennsylvania with the plane coming down and then there was-
Mark Fairhurst: The Pentagon.
Sylvain Perrier: … the Pentagon, right?
Mark Fairhurst: Yeah. Yeah.
Sylvain Perrier: It was a moment of revelation for us because we had a very clear enemy. In this case here, you can’t easily point, can’t point to a virus. But the commonality between 9/11 and now is this what is being called nesting, right? So people lining up to go to grocery stores, buying toilet paper, buying paper products and so on. They’re nesting. So the effect for grocery retail is kind of interesting because sales are skyrocketing. Gross revenue will be just through the roof.
Sylvain Perrier: What we saw here at Mercatus on Wednesday, soon after President Trump speech to the nation, which was around nine o’clock Eastern standard time. We went from a baseline usage to I think it was two to three X traffic immediately, coast to coast. Both in Canada and the United States on to Thursday when the markets opened. And the market started to tank. Financial institutions are talking about concerns about liquidity in the market. We saw a run up compared to our baseline of six X.
Sylvain Perrier: Now for us, that’s easy to handle from a technology perspective because the way that we’ve designed our infrastructure, the way that we’ve designed the architecture of our technology, where we host and the fact that we have a modern IT team called DevOps that are both operators and developers. We’re able to auto scale, but we actually immediately had to implement 24 hour shift work. We had to increase … We’re fully instrumented, Mark. So we’re using tools like New Relic to tell us, hey, if something’s happening, the health of a server, the CPU consumption, memory consumption, and so on will set off alarms. We immediately had to start and we typically can auto scale a server in under five minutes. We actually had to preventively manually auto-scale just to handle the load, which is insane.
Mark Fairhurst: So just, explain that. So what’s the difference between automated and manual process?
Sylvain Perrier: Well, so if you’re not doing that manually where you’re saying, “Hey, when I reach,” this is an example, but let’s say I have a master-slave configuration on my database server. And you’ll have one master and multiple slaves and means you’re distributing the load of read and writes across those servers. So you may set thresholds in your instrumentation to say, “If I hit 60% of connections to my master server, or if I’m consuming 80% of my available memory, sound an alarm and go ahead and spin up another server, auto replicate the database.”
Mark Fairhurst: Gotcha.
Sylvain Perrier: That’s automated. So it happens before you are in a moment of crisis. If you don’t have that technology, now we’ve seen a lot of Canadian, very, very large Canadian retailers and some US retailers, quite frankly, where they could not service their clients. The website went completely dark. And likely because they host their own infrastructure, hasn’t been designed, and they’re not using a virtual infrastructure, right? So they haven’t virtualized their operating systems and so on, their containers, as they’re called. When you’re at peak 100% and you have to go spin up another server, you have to do that manually. You have to provision it, then you have to copy data over to it. You’re introducing a human into something where you don’t.
Mark Fairhurst: That becomes-
Sylvain Perrier: That becomes a challenge.
Mark Fairhurst: And is a risk.
Sylvain Perrier: It’s a massive risk because you’re under pressure as an individual. You need to do this. You may miss a step. You got somebody breathing down your neck. You’re losing money. Now, I will say then on … This is where it got really crazy. On to Friday, we went up 20X to baseline.
Mark Fairhurst: From the baseline.
Sylvain Perrier: From the baseline.
Mark Fairhurst: On Wednesday?
Sylvain Perrier: On the Friday. By the Friday.
Mark Fairhurst: Okay. Between Wednesday and Friday.
Sylvain Perrier: We went six, 12. Over night, 16. By the Friday we were 20X.
Mark Fairhurst: That’s insane.
Sylvain Perrier: Yeah, and today we’re consistently maintaining two to three X, where would be normal baseline.
Mark Fairhurst: Right. Right.
Sylvain Perrier: The cause and effect on our retailers though, those that do click and collect was labor shortage. Supply chain issues.
Mark Fairhurst: Right.
Sylvain Perrier: On the delivery side, and we don’t do delivery at Mercatus. We partner with multiple delivery partners, was the lack of availability of gig economy workers. And that’s rampant industry wide regardless who the provider is. And this is a challenge for the gig economy today, and we’re not even talking about this in this show but-
Mark Fairhurst: It’s another show when itself.
Sylvain Perrier: It’s another show in itself. If you have a choice of being healthy and alive and you don’t have healthcare, that becomes a problem.
Mark Fairhurst: Yeah. The last thing you want to do is expose yourself to the risk.
Sylvain Perrier: Yeah. The additional volume of sales that is coming back into grocery e-commerce or grocery sales in general. You have to consider grocery in this world as an essential service, right? Versus a Best Buy or versus a … Do you really need to go buy a camcorder? No, but …
Mark Fairhurst: Well, we know what’s happened in Italy. I mean, the entire country is on lockdown.
Sylvain Perrier: It’s on lockdown.
Mark Fairhurst: The only retailers that are open are those that do for groceries and pharmacy.
Sylvain Perrier: That’s right. That’s right. In fact, now the new reality when you think of grocery retail is it’s, we’re not far from deeming it an essential service and probably along with the internet. So retailers immediately are being bombarded by an additional series of transactions both online and in store because people are trading out of restaurant. Restaurants are closed and social distancing.
Mark Fairhurst: Yep.
Sylvain Perrier: And the same effect if, you know bars. And so people are not going to go hang out at the bar at 4:30 to hit happy hour. So they’re going to the grocery store.
Mark Fairhurst: Yeah. So it’s the shift of buying purchases, from food away from home to food at home.
Sylvain Perrier: That’s right. 100%. That’s going to be great for their top line. But, we’re not sure of how much of those dollars will flow through to the bottom simply because the cost of having to bring in more labor. I received at least 12 emails from different retailers across the United States looking to hire frontline staff, cleaning staff, staff to stock the shelf, staff to do work at the distribution center and so on. So that’s going to have a knock on effect on margin.
Mark Fairhurst: Yep.
Sylvain Perrier: There is a risk that this also may cause some sort of food inflation, meaning that the cost to … because of the excess demand, the cost to produce, the cost of build up, prices may go up.
Mark Fairhurst: It’s basic law of economics, supply and demand.
Sylvain Perrier: Supply and demand.
Mark Fairhurst: Yeah.
Sylvain Perrier: Now, this is where it gets a little trickier. What we saw in ’08, ’09 and I think we recorded a previous show where we talked about what if we got hit with another recession.
Mark Fairhurst: Correct.
Sylvain Perrier: Right?
Mark Fairhurst: Correct.
Sylvain Perrier: Would the retailers that did not properly bounce back out of ’08, ’09 suffer if they were ever put in a position where there’s a lack of liquidity in the market, lack of access to trade and co-op and so on and so on and so on. So this is where it gets, where I think it’s going to get close to ’08, ’09. Let’s say we get out of this.
Mark Fairhurst: Well, yeah. We hope we do.
Sylvain Perrier: We hope we do. And will it take two weeks, three weeks, six weeks, eight months? I’m hearing numbers as high as 18 months.
Mark Fairhurst: Yeah. I think it could take … Following other pandemics, you know there’s going to be a second spike.
Sylvain Perrier: Absolutely.
Mark Fairhurst: And they’re estimating in the October, November timeframe.
Sylvain Perrier: Yeah. So I think if I’m at the government right now or the World Health Organization-
Sylvain Perrier: I think if I’m at the government right now or the World Health Organization is when we go about flattening that proverbial curve, which is really minimizing the impact on the health care system. If you look at New York, and Cuomo has been transparent with his numbers, he has 56,000 hospital beds and then plus urgent care, blah, blah, blah, all those things. If you just look at the percentage of people that may get hit, take a percentage of the people that may get hit, that may need to be in the hospital, and the ones that need to be on a ventilator, there’s not enough beds, there’s not enough ventilators.
Sylvain Perrier: So we talked about flattening the curve, and this is why we closed bars, restaurants, social distancing, send people to work from home, and enact our BCPs, right? At some point we’re going to get out of this. We don’t know when. The WHO is probably trying to figure out, well, how big will this second wave be? Can we relax the rules at that point? Regardless of when that is, people have overbought.
Mark Fairhurst: You got food in your pantry, you’ve got food in your basement. There’s going to be certainly a letdown following this.
Sylvain Perrier: There’s going to be a let down. And what you’re going to see come out of that is rapid trading out of the channel. Back what we saw, we saw the reverse in ’08, ’09, people trading out of restaurants back into grocery, down from a really high-end grocer down into a lower.
Mark Fairhurst: EDLP, yeah.
Sylvain Perrier: EDLP, right. And from, I hate to say it, if you couldn’t afford an EDLP, you went into dollar store. If you couldn’t afford a dollar store, you were into a food bank. But so the effect here, similar to ’08, ’09, people will trade right out of grocery. They’ll go back to fast food. They’ll go back to their higher end, quick serve restaurant, so on and so on and so on and so on.
Mark Fairhurst: And you’re going to have a fast food or a food service industry that’s going to be desperate to attract that consumer dollar.
Sylvain Perrier: Right. What we don’t know is where does trading co-op fall into this? I know that some retailers have suspended printing their flyers. On average, flyer production is 50% of a marketing budget. There’s some retailers right now, we’re leading up to Easter, I haven’t seen any promotional activity in some stores that I’ve been to, and I’ve visited quite a few stores in the greater Toronto area where they are not activating some of their promotions because it’s like let’s just get stuff on the shelves at this point.
Sylvain Perrier: The reality is FMI has always talked about that at some point X percent of people in the United States will be using e-commerce by 2025. It will represent, I think the number was, was it $100 billion? I can’t remember.
Mark Fairhurst: 100 billion.
Sylvain Perrier: Yeah.
Mark Fairhurst: It’s something like that. In Canada, it’s considerably lower.
Sylvain Perrier: I think we’re going to hit, get to that number much sooner.
Mark Fairhurst: Yeah. I liken this, it’s basically e-commerce was on fire, but this is like an accelerant.
Sylvain Perrier: Yeah, yeah, absolutely. I hate to say it, if you’re in the business of eCommerce platforms, it’s great. Great for you to a certain extent. I think some people will have a hard time switching back out of eCommerce due to fear, will stay in that channel. If you’re a grocery retailer and you’re not invested in owning your platform, guess what? You’ve accelerated someone else owning the relationship.
Mark Fairhurst: Yeah, I mean, that’s a big concern for us at Mercatus because we have been consistent in our messaging to the market about being honest with the retailer as to what was really happening in that shopping relationship.
Sylvain Perrier: Right.
Mark Fairhurst: And you’re right, this is a huge risk to that longterm relationship.
Sylvain Perrier: Yeah. An example on the Friday, in three of our markets, likely having some challenge in being serviced by delivery, and we had in the space at 20 minutes, 10,000 new accounts being created.
Mark Fairhurst: That’s insane.
Sylvain Perrier: It was ridiculous. I’m like, “Are these existing customers? What’s going on? Is this a bug?” And it wasn’t, it was literally 10,000 people that came through coast to coast in a space of 20 minutes creating new accounts, wanting to buy online.
Mark Fairhurst: Wow.
Sylvain Perrier: So I think if you’re a retailer, and you’re not invested in owning the relationship and building out your platform, trust me, this is something that you need to be extremely mindful. This will be the new normal.
Mark Fairhurst: I mean, we’ve had conversations identifying there are those retailers who understand where eCommerce fits strategically and those that don’t. This, if anything, has the attention of the C-suite. There’s no avoiding it at this point in time. Now is the time to actually plan and solidify that strategy.
Sylvain Perrier: So yesterday, there was a question on LinkedIn that was, “Are some retailers actually,” and I’m probably going to get this wrong, but, “Are some retailers actually leaving items on their websites for sale although they may not be carrying them in the store? And are they doing this in a way to transition their customers from in store to online?” You saw my response?
Mark Fairhurst: Yep.
Sylvain Perrier: I said, “No.” It was the quickest response. I didn’t elaborate. I didn’t want to elaborate. I didn’t think I needed to elaborate. I’ll let everyone else elaborate. The reality is that when you understand modern technology and you’ve used modern technology, there are some cases that some of the retail systems that are out there have no availability to present real time inventory levels at an individual store back out to a platform, back out to the website. Quite frankly, very few of some of the retailers that are out there in the industry can do that.
Sylvain Perrier: And so, we offer multiple mechanisms in our platform. That could be when you upload your data to us on a nightly basis at your maximum/minimum thresholds on an individual SKU. If you run out of a product inside of a store, you can log into your console application and de-list a product. So we have the traditional way of doing it through an interface, and then there’s the more modern way of doing it through a data feed. There’s also the capability in our platform to do it through a web service. Right?
Mark Fairhurst: Mm-hmm (affirmative).
Sylvain Perrier: But when you’re overrun with so many issues in the business dealing with lack of availability inside brick and mortar, labor issues, the health and wellness of your employees, it unfortunately fell off to the wayside. Now, I’m not saying that this is something that will continue like this in the long run, but just understand that this is what essentially transpired. So Mark, do you know why people hoard?
Mark Fairhurst: You trying to tell me something?
Sylvain Perrier: No, I’m not. Are you a hoarder, Mark?
Mark Fairhurst: I don’t think so.
Sylvain Perrier: Okay, good. That’s good to know.
Mark Fairhurst: I do have a room in my house, it’s kind of messy.
Sylvain Perrier: Oh, it’s not the junk room, right? Have you gone from a junk drawer to a junk room?
Mark Fairhurst: Yeah.
Sylvain Perrier: Oh, that’s not good.
Mark Fairhurst: It’s the room in the house where you move-
Sylvain Perrier: I have this vision now I’m going to be rescuing you out of the home with piles of stuff everywhere and hair and cats.
Mark Fairhurst: Just a hand sticking up from this pile of paper. Cats chewing on my-
Sylvain Perrier: Your beard all scraggly.
Mark Fairhurst: An eye patch.
Sylvain Perrier: I don’t want to give you an eye patch, but-
Mark Fairhurst: I’m scared of the dark.
Sylvain Perrier: Yes.
Mark Fairhurst: Yeah, so there is a room that’s messy. Anyways, we’re getting off topic. So what defines a hoarder?
Sylvain Perrier: So there’s a professor here at the U of T, and he kind of explains it really interesting when it comes to toilet paper. So going to the bathroom is something vile and primal at the same time in the sense of having access to paper to curtail-
Mark Fairhurst: Nobody can explain this.
Sylvain Perrier: … to curtail it. Why the fascination with toilet paper? And to curtail it gives you, in a moment of stress, gives you a sense of comfort. That’s one side of it.
Mark Fairhurst: Okay.
Sylvain Perrier: The other equation is we’re very perception through our eyes and our emotions. When we see other people in a frenzy buying, we just jump in and mimic. Do you remember when the Cabbage Patch came out?
Mark Fairhurst: No, I’m serious, I haven’t.
Sylvain Perrier: The doll, the Cabbage Patch doll.
Mark Fairhurst: I have no idea what you’re talking about.
Sylvain Perrier: Come on, you’re as old as I am.
Mark Fairhurst: Yes, yeah, I remember.
Sylvain Perrier: DO you remember people fighting over-
Mark Fairhurst: Yeah. And some of these women that bought it didn’t have kids.
Sylvain Perrier: Fist fights in Kmart. I’m like, poor Kmart. Where’s Martha Stewart when you need her? Where is Martha Stewart? Is she hunkered down for this?
Mark Fairhurst: She’s hoarding.
Sylvain Perrier: Well, Martha, there’s a book idea for you what to do with toilet paper. Could make some great crafts, right? Anyway, it’s just an idea.
Mark Fairhurst: I was at Costco, and yeah, I pulled it off the skid, the pallet.
Sylvain Perrier: Yeah. Well, yeah, I bet you did. So in any case, let’s talk about some of the questions that we got. So this is from Raul. So why did some retailers’ website crash? So man, I’ll take this one. So the harsh reality becomes planning, infrastructure management, architecture, and having the right people that understand scalability and being able to act in a moment’s notice.
Sylvain Perrier: And also this is stuff you have to rehearse. So you just don’t wake up one morning and say, “I’m going to set up a bunch of servers, and I’m going to license out a piece of technology,” or “We’re going to build something for our business,” and then suddenly you don’t think of these things. You have to plan this out. So this one is from John-
Mark Fairhurst: Just before, but there’s also the difference between building and owning it yourself, and then using a scalable, headless commerce solution.
Sylvain Perrier: Well, that’s right?
Mark Fairhurst: I’m sorry, it’s-
Sylvain Perrier: That’s why you pay a monthly licensing fee is to pay an expert to understand how to do this.
Mark Fairhurst: It’s called specialization.
Sylvain Perrier: Yeah, and that’s why you have an SLA in case something happens. That’s why you have an application support team. That’s why you have an 800 number you can dial. That’s why you hire these teams to worry about that while you’re more worried about everything else.
Mark Fairhurst: Right.
Sylvain Perrier: If I could give advice, don’t ever pretend you’re something that you’re not.
Mark Fairhurst: Be good at what you’re good at, which is being a class-A retailer.
Sylvain Perrier: Right, I don’t pretend to be a lawyer. I have access to a lawyer. I don’t pretend to be an accountant. I have an accountant.
Mark Fairhurst: Yep.
Sylvain Perrier: So this is from John, “Why are there items for sale on the retailer’s website, but not available in store?” We already tackled that one. Alex sent a question, “Why can’t I get a confirmed delivery time slot?”
Mark Fairhurst: Interesting.
Sylvain Perrier: Well, that’s the reality is there is not an available resource. Same if you’re doing click and collect, if you can’t get access to be able to pick up your groceries between 2:00 and 4:00, likely the time slots have been maximized. Really comes down to resource availability to be able to support that.
Sylvain Perrier: This one’s from Jack, “Why are stores running out of products?” Supply and demand. It’s really that simple. So this one is from Cindy, “Why are people hoarding toilet paper?” So we talked about that. She said, “It’s the least appealing bodily function. I don’t understand why people are hoarding it,” and we talked about it.
Sylvain Perrier: And Luis, I’m going to let you tackle this one, “Is this an opportunity to build loyalty or is it too little, too late, if you don’t already have a good customer experience in place?”
Mark Fairhurst: My response is, absolutely. In situations like this where eCommerce is becoming ever more vital to the shopping experience, it’s never too late, but the retailer has to be able to control that relationship. Bring that shopper back into your business and don’t outsource them.
Sylvain Perrier: Good point.
Mark Fairhurst: But you’ve got to start.
Sylvain Perrier: You have to start somewhere. So this has been a great episode.
Mark Fairhurst: Yeah, I’ve enjoyed this.
Sylvain Perrier: Yeah. This is double the time that we normally record.
Mark Fairhurst: Well, let’s look at it this way, people are at home, they have a little more time to listen, hopefully.
Sylvain Perrier: I think they will. In this moment of time, I encourage all of you to be safe, to take care of your fellow man. We don’t know how long this is going to go, and these are trying times. But I will also encourage you, just pull away a little bit from the media. Stick to to those critical news sources that will provide value to you, and stay tuned. Mark and I, we’ll stay on top of this subject. We’ll come back with a couple more podcasts. And we encourage you, if you have any questions for us, go ahead, you can visit-
Mark Fairhurst: Our website.
Sylvain Perrier: … our website. Email Mark, [email protected], myself, [email protected] And Mark, what’s next for us? I mean, all the trade shows have been canceled.
Mark Fairhurst: Yeah, this has played havoc, but I think a lot of vendors are facing right now is if you’re not going out and meeting the customers, how else are you going to reach them? All I can say is, answer your customers’ questions, provide them good guidance, don’t try to sell, just provide value. And we aim to continue doing that.
Sylvain Perrier: Absolutely. Thank you so much, Mark. It’s been a pleasure.
Mark Fairhurst: It was.
Sylvain Perrier: Ladies and gentlemen, peace.