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Groceryshop 2019: Straight from the Mercatus Booth part 2

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Mercatus Radio presents the Digital Grocer - Season 2, Episode #6

Recorded live from the Mercatus booth at Groceryshop 2019 in Las Vegas, Sylvain and Mark pick up on their earlier conversation and are joined by Rob Sanchez, CEO of Mouthmedia.

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Rob Sanchez:                So here, what I’m seeing is there’s a lot of innovation and then there’s a lot of work to get that to work. Fashion is, for me, one of the best parallels, because you have the issue with hand-feel. People had to get comfortable understanding how fabric felt before they could buy online. That’s shifted now, and now there’s complete comfort, and there’s a massive shift in the industry towards it. I do think one of the barriers for grocery is always going to be trust of somebody else picking your produce-

Sylvain Perrier:              That’s true.

Rob Sanchez:                … and then how much good produce is out there, and what’s left in the store after.

Sylvain Perrier:              All right, ladies and gentlemen, welcome to Digital Grocer, Mercatus’s very own podcast. We’re live here in Las Vegas at the Grocery Shop 2019 event, day number two. It was a whirlwind day yesterday, right, guys?

Mark Fairhurst:             It was, it was.

Sylvain Perrier:              Joining us is Rob Sanchez.

Mark Fairhurst:             Yes.

Sylvain Perrier:              Rob?

Rob Sanchez:                Hey, how’s it going?

Sylvain Perrier:              Explain to the audience who you are and what you do.

Rob Sanchez:                For sure. I’m the CEO of MouthMedia Network. We’ve been working on the podcast with these fine gentlemen here for a while now. We cover a lot of different industries, and grocery is our focus right now. It’s blowing up in a way that fashion was 11 years ago-

Sylvain Perrier:              Yeah.

Rob Sanchez:                It has that same excitement and drive. And yeah, it’s a good moment.

Mark Fairhurst:             It was [inaudible] because, as probably our audience knows, we were producing this show out of our office in Toronto, and it becomes such a heavy lift, we wanted to make sure that we were doing it well and continuing to do it well. The opportunity came to work with MouthMedia, and we jumped at it, and I think it’s going to work. This is what, our third, fourth show already?

Rob Sanchez:                Yeah.

Mark Fairhurst:             I think so, yeah.

Sylvain Perrier:              Well, when we started the podcast, it was just at the bar at the end of one day by the office, saying, “Hey, I think we should do this,” and, “Let’s buy some equipment and let’s if it works.” Then you suddenly realize you have to prep for the shows, you have to get your guests, then there’s the audio editing, which we know nothing about. I think we were lucky just to figure out how to connect the telephone line to a board. And it’s like “What’s a telephone line? Why don’t you use the internet for that?”

Mark Fairhurst:             And it’s funny, because I know our audience, I know the industry is consuming podcasts. I know there’s other organizations out there in our space that all of a sudden are starting up their podcasts.

Sylvain Perrier:              Well, I think everything we do from a marketing perspective, we’re probably the template to a lot of our competitors, as well as some of the other smaller players in the industry. If we do some sort of trade publication with some really good type of story on the operationalization of something, I know there’s someone’s going to follow with some similar story. It’s the story of our lives, right? In terms of what we do.

Mark Fairhurst:             Well, as they say, imitation is the sincerest form of flattery.

Sylvain Perrier:              Yep.

Rob Sanchez:                Yep.

Sylvain Perrier:              Absolutely. So what’s going on in the trade show floor, Mark? Yesterday, you walked around. Did you see anything that hit you?

Mark Fairhurst:             Well, I’m looking at the Takeoff Technologies booth right now. It’s quite impressive. They’re demoing their robotic picking capabilities. I know we have friends over there in the Miracle booth showcasing their marketplace tech. There’s some big players. Microsoft’s booth is over yonder.

Sylvain Perrier:              Over yonder?

Mark Fairhurst:             Over yonder.

Sylvain Perrier:              Over yonder. That’s a unit of measure. But I didn’t go to the Microsoft; what are they showcasing? Do you know?

Mark Fairhurst:             Off the top of my head, no, but they’re here, which is significant.

Sylvain Perrier:              Well, they have to have a presence in retail. I remember the day when Microsoft had an ad network, and this was years ago. They did that partnership with those couple of agencies out of Chicago and New York, and they unfortunately didn’t really go anywhere. But I think they’re trying to be active in retail. I’m surprised Oracle’s not here. Yeah, actually. They’re not walking the show, are they?

Mark Fairhurst:             I know Pinterest was here last year.

Sylvain Perrier:              Yes. They’re not here this year.

Mark Fairhurst:             Not here this year.

Sylvain Perrier:              Yeah. It’s interesting show. I think there’s, traffic-wise, gut feel, it’s feels less people.

Mark Fairhurst:             I think the exhibit space feels smaller. We’re positioned right beside the general session, so we know there’s bodies, but as soon as the general session ends, they have other places to go. And from that perspective, although we’re having good traffic based on our booth position-

Sylvain Perrier:              Yes.

Mark Fairhurst:             … looking forward today to see if we get more conversations going.

Rob Sanchez:                Are you getting feedback on the content?

Mark Fairhurst:             The content-wise, there’s nothing new. It seems to be a rinse and repeat from last year.

Sylvain Perrier:              Yeah.

Mark Fairhurst:             And a lot of the same speakers.

Sylvain Perrier:              Yeah. My sense from from talking to some people is the content, I don’t want to say the word dated. I think there’s this appetite in the industry to say, “Oh, content should be, something needs to be new and innovative every three to four or five months,” right? I think [inaudible] probably in the cycle, every time Apple releases a new phone, they’re should be new content-

Mark Fairhurst:             Right.

Sylvain Perrier:              … in this space. But the reality is, this space doesn’t grow by leaps and bounds on a quarterly basis. I think there some rehashing of some content. I heard Walmart spoke yesterday. P&G had a good presentation. So there’s been some okay pockets of content, but I would agree. Generally, the feedback I’m getting is that it feels kind of rehashed.

Mark Fairhurst:             Yeah. Yeah.

Sylvain Perrier:              Right? They’re dated.

Rob Sanchez:                Yeah. It does remind me a lot of the early days in fashion tech, where there would be a big spike, and then everyone would talk about that for two years.

Sylvain Perrier:              Okay.

Rob Sanchez:                And then it would happen again-

Sylvain Perrier:              Right.

Rob Sanchez:                … and it would happen again. And then this beat started picking up.

Sylvain Perrier:              Okay.

Rob Sanchez:                So here, what I’m seeing is there’s a lot of innovation and then there’s a lot of work to get that to work.

Sylvain Perrier:              Right.

Rob Sanchez:                And then it happens again. And so, you have these boom and bust cycles on new conversations.

Sylvain Perrier:              Oh, that’s interesting. That’s probably in line with the cycle of innovation, which is every two years, time to absorb it, a time to make a better, mature, go to the next level. I think it’s familiar to what we’re hearing in this space as well, in this vertical, Mark.

Mark Fairhurst:             Yeah. As you said, you had the big announcement two years ago, Amazon/Whole Foods. And that’s still working its way through the industry. There will be another shoe that drops, right?

Sylvain Perrier:              Yeah.

Mark Fairhurst:             We just don’t know what it is and when it will be.

Sylvain Perrier:              Yeah.

Mark Fairhurst:             And that’ll kick off another dialogue or conversation spike that Rob was talking about.

Sylvain Perrier:              Well, what I heard yesterday from talking to some smaller retailers, and [inaudible] talking about these are retailers with below 20 locations, they are having similar conversations in their boardrooms that some extremely large retailers are talking about, about owning their customers, about being, as per our campaign, back in charge.

Rob Sanchez:                Right, right.

Sylvain Perrier:              These smaller retailers are starting to have those conversations, and that becomes extremely grassroots in terms of the level that’s happening. And there’s some interesting fear out there that maybe they gave up too much, and they’re starting to think about it.

Rob Sanchez:                Well, it’s interesting that you say that. I think the fact that what’s informed our positioning in the market now is the conversations that you’ve had over the last little while with our clients and prospective clients, and what their objectives are in really owning their grocery shopping experience online.

Sylvain Perrier:              Yeah. We also had some CPGs visit us yesterday.

Rob Sanchez:                Interesting.

Sylvain Perrier:              We’ve always talked about, at some point, the CPGs are going to consider how do they go direct. And [inaudible 00:07:24], I think most of them are reluctant to spread themselves thin across the multiple channels, whether it be Amazon, so on and so on.

Sylvain Perrier:              But the one conversation we had yesterday that struck me as being really interesting is wanting to partner in terms of being able to influence what’s happening on a .com perspective across multiple retailers. And I’m not talking about advertising.

Rob Sanchez:                Right.

Sylvain Perrier:              No, that’s not the conversation. It’s about product placement, product bundles, product influence in the consumer, and educating the consumer in a way that-

Rob Sanchez:                Interesting.

Sylvain Perrier:              … that isn’t … It’s easier to get educated consumer online than it is in store, but it’s so infrequently done well.

Rob Sanchez:                Right.

Sylvain Perrier:              And obviously, yesterday, I was doing an interview with, I don’t know if you know this, I don’t even know if we organized this interview, but it was a very small newspaper in the Midwest.

Mark Fairhurst:             Was that Produce Retailer?

Sylvain Perrier:              Yeah.

Mark Fairhurst:             Yes.

Sylvain Perrier:              Was that organized by us?

Rob Sanchez:                Yeah. She was a lovely person to talk to, and she had some amazing questions. And she talked about, when you’re in the category of produce, what are the barriers to adoption to buying produce online? Blah, blah, blah, blah, blah. Fast forward. Her core question is, how do you educate consumers on produce? And this goes back to that CPG conversation. Buying produce on a good day is intimidating. And it’s usually the most expensive part of your grocery shop. So, how do you pick an avocado? How do you teach someone to do that? What to do with the avocado? What’s the health benefits of it?

Mark Fairhurst:             Right, right.

Rob Sanchez:                Because we stick to the staples as human beings, right? Lettuce, carrots, celery, onions, peppers. And radicchio, some of the other stuff, you’re like, “Well, how do you find that in a grocery store?” Right?

Sylvain Perrier:              I need kumquats for this recipe.

Rob Sanchez:                And you have to Google it, right? You’re like, “What is this stuff? Are they supposed to be green?” You don’t know. You don’t know, right? And suddenly, you eat them and you get sick, because you’re supposed to wait for them to be ripe.

Mark Fairhurst:             Right, right.

Rob Sanchez:                We try to educate, explaining to her that’s the big thing. And that theme across the CPGs that visited our booth was consistent, which was really interesting.

Sylvain Perrier:              Did you see that in other industries as well?

Rob Sanchez:                Well, so, again, fashion is, for me, one of the best parallels because you have the issue with hand-feel. People had to get comfortable understanding how fabric felt before they could buy online. And that’s shifted now, and now there’s complete comfort, and there’s a massive shift in the industry towards it.

Rob Sanchez:                I do think one of the barriers for grocery is always going to be trust of somebody else picking your produce.

Sylvain Perrier:              It’s true.

Rob Sanchez:                And then, how much good produce is out there and what’s left in the store after.

Sylvain Perrier:              Yeah.

Rob Sanchez:                And then, I don’t know if, have you seen Misfits?

Sylvain Perrier:              No.

Rob Sanchez:                They have a pretty brilliant marketing campaign in the New York Subway right now, but it’s a marketplace for all of the produce that looks weird.

Sylvain Perrier:              Oh, wicked.

Rob Sanchez:                Yeah, it makes a lot of sense.

Sylvain Perrier:              And you know it’s going to show up ugly.

Mark Fairhurst:             Oh yeah, yeah. It’s so good. [crosstalk 00:10:08]. Your expectations are being managed.

Sylvain Perrier:              Yeah. Let me deal with your expectations.

Rob Sanchez:                Right? I like that idea too, because they’re basically saying, “Okay, the food is still good, but it’s going to be mismatched on the way it’s presented.” And that fixes some of that and also gives the stores an offshoot for it, deals with a little bit of the food waste.

Sylvain Perrier:              Yeah, it’s fascinating. Well, it’s interesting you talk about the fabric, because yesterday, I was having a pretty in-depth conversation with an individual that suggested, “Well, I think there is imaging technology that can be used to pick the right piece of produce or steak, and it could be easily implemented in store.” And being a technologist, I said, “That’s a solution looking for a problem.”

Sylvain Perrier:              And no, the individual did not respond well to my comment. And I suspect because he’s made a heavy investment in that technology. I tried to explain to him, I said, “Technology, number one, technology doesn’t solve everything. Two, at the end of the day, deploying technology in retail at 3% margin is difficult on a good day. And high turnover rate.” And also, we know from experience that when we’re writing user guides or we’re writing training material for inside the store, it’s got to be really, really easy so the adoption rate can be really quick. It can’t be overly complicated. And quite frankly, if it’s too much to support, it loses traction.

Rob Sanchez:                Exactly.

Sylvain Perrier:              Really quick. I wrapped up my conversation, and this individual cut off our conversation, because again, I wasn’t supporting his idea. And I said to him, I said, “You know, what’s really important to understand, at the end of the day when you’re dealing within grocery retail, that no matter what you build, if the input in terms of quality of meat and produce, if that input into the supply chain is already not good, if half the stuff you’re buying is already spoiled, I don’t care what technology you’re going to put it in. It’s not going to solve the problem.”

Rob Sanchez:                That’s why I think, the further back in the supply chain you tackle the margin issue, the better.

Sylvain Perrier:              100%.

Rob Sanchez:                In the same way that one of the reasons that margins were crap in the fashion industry was because the supply chain was archaic and you had to order a year, 18 months and longer, in advance. You never actually knew. So they actually just built in spoilage. There is this big, the idea that they’re burning clothes, there was this big kerfuffle about that. But that’s actually common industry practice-

Sylvain Perrier:              Wow.

Rob Sanchez:                … to decrease the prices. You have a similar issue if you’re not handling the agriculture correctly, if you’re not dealing with the soil and the light for the crops, if you’re not handling pesticides, and so on. And it’s going to be interesting. One of the things I’m fascinated with right now is the impact of the lawsuits against-

Sylvain Perrier:              Roundup, Monsanto?

Rob Sanchez:                Yeah. It’s going to be interesting to see that ripple through-

Sylvain Perrier:              Yeah.

Rob Sanchez:                … because that’s going to have a huge downstream impact, especially since most of our crops now have been genetically modified to support that.

Sylvain Perrier:              Yeah.

Rob Sanchez:                So yeah, I think that’s a place to take that innovation, move it, deal with that at the-

Sylvain Perrier:              At the farm level?

Rob Sanchez:                … at the picking and the farm level, yeah. What becomes compost? What do you ship?

Sylvain Perrier:              Yeah.

Rob Sanchez:                What goes in the store?

Sylvain Perrier:              Well, there’s some interesting statistics that say, I think in the United States, I think it’s over 30% of the food is wasted on an annual basis.

Rob Sanchez:                Yeah.

Sylvain Perrier:              That’s ridiculous when you think about it.

Mark Fairhurst:             And you think the cost is baked into what consumers pay now in terms-

Rob Sanchez:                Yeah, that’s your margin.

Mark Fairhurst:             And to your point, if you’re able to better operationalize, rationalize your cost from source, and that’s the challenge that you have with some of the innovators in the grocery space, is that they’re setting up distribution centers or dark stores that bypass the traditional grocery supply chain.

Rob Sanchez:                Right.

Mark Fairhurst:             And they’re able to either lower the cost or they’re going to pocket that margin to their benefit. And the typical grocery retailers continue to be hamstrung.

Sylvain Perrier:              Yeah. I think it’s like yesterday, I made a prediction. If I was Albertsons, I think Albertsons is an unsung hero in this space. No one talks about them necessarily, they’re very covert as an organization, and I understand that with what they’re doing. But if I was to reinvent myself as a grocery retailer, if you can move the majority of your commodities to an online sale, right, your detergents, your toilet paper, all your cleaning supplies. You can go through the list. Your pet foods and everything, right? Your canned goods.

Sylvain Perrier:              And then everything else, then you end up with smaller stores that are dealing with the items that are more susceptible to shrink, right? Your prepared foods, your fruits, your vegetables, your meats. The margins a retailer would save, it would be huge. That’s the cost.

Sylvain Perrier:              And then, on a labor, store development, and so on, then you could really-

Mark Fairhurst:             Shipping and stocking.

Sylvain Perrier:              Shipping and stocking, and then you could do something super innovative with the brand and really differentiate yourself out there.

Rob Sanchez:                That’s a Wegmans, right?

Sylvain Perrier:              That’s a Wegmans. But Wegmans still deals with those extremely large stores that they have, right?

Rob Sanchez:                Yeah. But their experiences and their restaurants-

Sylvain Perrier:              Their experience is amazing. Right? I think one of the Wegmans I went to in Rochester had 75 different cheeses. I was just dying and going to heaven without a cardiologist next to you. Right? I was surprised. And the only vendor that’s on the floor I think yesterday and today that’s talking about supply chain and food tracking is IBM. IBM’s here, which I, well, I nearly tripped in front of the booth. I said, “Where have you guys been for the last 25 years?”

Rob Sanchez:                Yeah.

Mark Fairhurst:             Yeah.

Sylvain Perrier:              Right? That’s pretty insane.

Rob Sanchez:                Avery’s doing some stuff with supply chain on the using barcodes and RFID to decrease shrinkage in the actual prepared foods.

Sylvain Perrier:              Oh, I didn’t know that. That’s amazing.

Rob Sanchez:                That’s one of the innovations that they’re [crosstalk 00:15:46].

Sylvain Perrier:              Wow, interesting.

Rob Sanchez:                But yeah, it’s pretty interesting.

Sylvain Perrier:              I’m excited. Today, I think we’re recording three more podcasts.

Rob Sanchez:                Is it three?

Mark Fairhurst:             Yeah. Three. I know we have one at the end of the day.

Rob Sanchez:                Yeah.

Sylvain Perrier:              We have Fit for Commerce.

Mark Fairhurst:             Fit for Commerce a little later this afternoon.

Sylvain Perrier:              And then we have the boys from Radius Networks-

Mark Fairhurst:             And ShopperKit,

Sylvain Perrier:              ShopperKit, We’re excited to work with those guys. They have some amazing tech that just blows my mind.

Mark Fairhurst:             Yep.

Rob Sanchez:                Yep. They’re good partners of ours.

Sylvain Perrier:              They’re great partners. They’re amazing.

Rob Sanchez:                We’re looking forward to it.

Sylvain Perrier:              So, ladies and gentlemen, thank you for listening to this episode and stay tuned to download the next one. Again, straight from the trade show floor here at Grocery Shop 2019. Rob, thank you so much for joining us.

Rob Sanchez:                Yeah, it was a pleasure.

Sylvain Perrier:              And Mark, how do people get ahold of us?

Mark Fairhurst:             mercatus.com.

Sylvain Perrier:              Awesome. Thanks, guys.

Mark Fairhurst:             Bye-bye.


Sylvain Perrier

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

Mark Fairhurst

As Senior Director of Marketing at Mercatus, Mark is responsible for leading the overall market strategy development, planning and execution to support Mercatus' multi-year revenue growth and customer acquisition and retention objectives.

Rob Sanchez

Rob Sanchez currently is the CEO of Open Source Business Inc., the corporate parent of MouthMedia Network, Founding Partner of Helios Delphi, public speaker at Badassery, and an Adjunct Professor of Law at Fordham Law School where he also serves on the Entrepreneurial Law Alumni Council.