Grocery Retail Market 2019 Predictions with Brittain Ladd
Mercatus Radio presents the Digital Grocer - Episode #11
In this, the final episode of Season 1 of the Digital Grocer, Sylvain and Mark come full circle with Brittain Ladd who kicked off Mercatus’ podcast journey earlier in 2018. The grocery retail industry continues its rapid pace of change. In the last year alone, Albertson’s and Walmart have accelerated their robotics play, on the delivery side Kroger confirmed autonomous delivery using Nuro, and Amazon has announced plans to grow Amazon Go to 3,000 stores. The growth in eCommerce shows no sign of slowing. Quite the opposite. Grocery retailers are teaming up with third-party companies to extend their reach from the retail store to the consumers’ door. At the same time, retailers invested in their in-store pick-up, curbside, and click-and-collect services to expand their brand reach and cater to shoppers’ with greater convenience and value. The omnichannel grocery landscape is now valued at more than $1 trillion dollars with online grocers ringing up $21.6 billion in sales in past 3 years.
It’s within this context that Sylvain and Brittain talk about strategic plays and predict big moves in the grocery retail market in 2019. On the topic of reclaiming your customer, the key questions they cover include: Who owns your shopper data? Are you teaching your future competitor your business? Are retailers losing their ability to innovate? What’s the purpose of your business? And is it too late to reclaim your brand from third-party platforms?
Enjoyed this podcast? Then you might like this resource:
- Blog Post: Surrounded: Growing threats to the traditional Grocery Retail Industry, featuring Brittain Ladd
Sylvain Perrier: Ladies and gentlemen, welcome to episode 11 of Digital Grocer. This is your host, president and CEO of Mercatus Technologies, Sylvain Perrier. Joining me in the studio today is Mercatus’ senior director of marketing, Mark Fairhurst.
Mark Fairhurst: Hello, everyone.
Sylvain Perrier: And Scottie’s at the board. Scottie doesn’t know, in this case, this one does, Kevin Glen.
Kevin Glen: Hey, how’s it going?
Sylvain Perrier: Mark, I have to do a shout out to our friends at DIOVOL, which is aluminum free.
Mark Fairhurst: Good to know.
Sylvain Perrier: It’s good to know, and it’s a new, fresh taste. I wish they were our sponsors, because I am drinking these bottles like there’s no tomorrow. It’s for fast relief of heart burn, acid indigestion, gas, and upset stomach.
Mark Fairhurst: That’s the price of being the president and CEO.
Sylvain Perrier: It is, and you know what is causing this, Mark?
Mark Fairhurst: I’m afraid you’re going to tell me.
Sylvain Perrier: I am definitely going to share with you. It is the wind of change that is blowing through the grocery retail industry in 2019.
Mark Fairhurst: Wow. That is a segue if I’ve ever heard one.
Sylvain Perrier: Thank you. This was planned. This was planned. It wasn’t. Ladies and gentlemen, for those of you who don’t know, I just love the taste of this because it’s a new, fresh taste. That’s why I’m enjoying it. We have enjoyed an amazing break over the holidays. We wrapped up episode 10 just before that where we were interviewing Warren Shoulberg. Things have materialized and changed in the industry in such a short period of 30 days.
Mark Fairhurst: Correct.
Sylvain Perrier: Right? We’ve seen the folks over at Whole Foods make the tremendous leap and decide to move away from Instacart. We are definitely, Mercatus is privileged to be having conversations with other retailers in the space that are considering the exact same thing. We saw the announcement of Kroger partnering with Microsoft to create this retail platform. Retail-
Mark Fairhurst: As a service.
Sylvain Perrier: … as a service. ARAS, I think it’s being coined. Not necessarily as a platform of the service. That will be interesting. We’re on the verge of hitting the NRF 2019, the big show in New York City.
Mark Fairhurst: Next week. Actually, this weekend.
Sylvain Perrier: This weekend, which is apparently going to be quite the event.
Mark Fairhurst: Yes.
Sylvain Perrier: In terms of conversations and seeing the new emerging technologies and the startups and so on, so is quite excited. So to talk about this subject, this wind of change, we wanted to bring back our very first guest, Brittain Ladd, who is a visionary extraordinaire. He’s an expert at a lot of things: ecommerce, operations, contributes significantly to Forbes.com.
Mark Fairhurst: Correct.
Sylvain Perrier: He’s the guy that I go to when I’m perusing my social networks, specifically LinkedIn, not just because of what he writes, because it’s so insightful, it’s to actually read the comments coming in from the other people in the industry, whether they’re on the technology side, the vendor side, or just purely on the retail side. His content elicits feedback, which is interesting. It gives us a bit of a preview of what’s happening there. He’s joined us on the phone.
Mark Fairhurst: Yes, he kicked off our season with our pilot.
Sylvain Perrier: He did.
Mark Fairhurst: He’s going to be closing our season with this episode.
Sylvain Perrier: Even more amazing. Brittain, thank you so much for joining us.
Brittain Ladd: Oh, my pleasure. It’s really fun to be back.
Sylvain Perrier: Thank you. Brittain, you’re at the forefront of seeing what’s happening in the retail space. From your perspective, what do you see in your crystal ball that’s making you go, hmm, that’s interesting?
Brittain Ladd: Let’s touch on something you just mentioned. That’s the partnership between Kroger and Walmart and Microsoft. I’m not surprised at all that Microsoft is working with these companies. The thing that makes me go, hmm, is the fact that Kroger and Microsoft and Walmart are so giddy to let everyone know what it is they’re doing. They’re unveiling stores. They’re talking about a pick-to-light system. They’re talking about what they’re doing with machine learning and AI and all these other things. What these executives are saying is we believe what we’re doing with Microsoft really is what’s going to help us achieve tremendous amount of success in the future for basically creating a new retail experience. Now, I don’t dispute that that may be true. What I question, why in the world do you want to let your biggest competitor what you have planned? Why do you want your biggest competitor, meaning Amazon, know what technology you’re using, how you’re going to deploy it in stores? Literally what Kroger and Walmart and Microsoft are doing is saying, you know what, we’re planning to attack you. It’s going to happen on July 4th at 7 AM. We don’t think you’re going to be ready.
Brittain Ladd: I’m really surprised at how willing Microsoft and Walmart are to talk about what they’re planning on doing, what they are doing, and what they will do. They’ll have something that jumps out at me immediately. I know for a fact that internally at Amazon they are taking copious amounts of minutes and really researching what’s going on in industry, especially with those three companies. What Amazon is doing, frankly, is making sure they don’t go down that same path. That’s just one of many things that jumps out at me in terms of 2019. Really what 2019 is going to be is exactly what I wrote in June of 2017.
Brittain Ladd: Amazon is going to need to 2018 and 2019 to really get their foundation in place. You’ll see that Amazon is going to more than likely open up a new format Whole Foods store. You’ll see Amazon unveil some new technology in the store. Pretty confident that you’ll see Amazon has an ability to eliminate cashiers, even in a larger retail space. They’ll use 2019 as the year where they really start to perfect how they’re going to operate store assortment and technology. Those, at the beginning of our discussion, are just a few things that I’m seeing.
Sylvain Perrier: I found it interesting equally with respect to the announcement coming out of Microsoft and Kroger. Part of me, when I put my investor hat on or board of directors, call it whatever that might be, is it a way for them to elicit support from the investor community to say, hey, we’re not that much at risk here. We’ve partnered with the best of breed that could be available to us in a short order. I also think that I know for a fact that Microsoft really caters to the retailers out there, bringing a lot of those CIOs and VPs of technology up to Redman to work with them. I wonder if this is more of a Microsoft type project where they’re gaining learning from Kroger and exchanging some sort of Cloud infrastructure, free services, a way to better position Microsoft and maybe less so Kroger, I think. 2019, to me, I think what is interesting, I believe we’re going to see probably two things occur. We’re going to see a pendulum swing back from being ultra ecommerce focused, ultra delivery focused, and click and collect. I think those businesses have strong toeholds in the industry. I think they need to mature operationally, mature from a marketing perspective. The pendulum will swing back to the in-store experience.
Sylvain Perrier: I just did that magazine interview this morning where I mentioned to the reporter and said, “The whole Amazon Go format,” and Brittain you just talked about it, “their ability to do things at scale in an in-store environment, which will lead to lower labor cost, less friction for the consumer, better experience overall, I think that some retailers are going to have to learn how to redeploy quality of service from a technology perspective inside the boxes that they’ve historically invested in.” The second thing is this is going to force retailers to be truly on a new channel. Not on a new channel from the technology perspective, but what’s the in-store experience like vis-a- vis mobile and everything else that goes along with that? We’re going to see a lot of things rehashed in 2019. Scan-and-go, we’re going to see it rehashed. Walmart abandoned that in May of 2018, but I think we’re going to see that rehashed. We know Kroger has a successful program where they moved away from their own hardware to a mobile app. We’re going to see kiosks being rehashed. Digital displays and so on. And, I suspect someone’s going to start talking about RFID.
Sylvain Perrier: The third thing that we’re going to see, I think, in 2019 is this notion that on the ecommerce side there’s been too much of a rush of invest into large scale marketplaces and delivery services to the detriment of who owns the data, the brand, the experience. I’m going to make a bit of a prediction here. What I’ve not seen yet, because I’ve not had the chance to test it, what happens to the Whole Foods shopper data within the Instacart app once the logo’s removed outside the app? To Instacart, that’s still a dollar value associated to that consumer that registered in the app. Are they going to try to convince the consumer to migrate to another brand, or are they going to lower their delivery fees? What are they going to do? That reaction alone in the market, there’s a bunch of retailers watching this to understand who owns my data, my customer data, and what do I do with it? I think it’s going to be … I hate to use this word, but it’s a bit of a come to Jesus moment in 2019 for a lot of people. I think we’re going to see these things materialize. Brittain, what’s your sense in terms of the in-store experience and the play that you’re seeing out there in the market?
Brittain Ladd: I agree with really what you just stated. The thing that 2019 is going to be is really a re-level. It’s going to be an opportunity where retailers take a step back, and they realize, you know what, [inaudible] Amazon makes the announcement they’re acquiring Whole Foods, we panicked. We jumped at the only thing we thought could do the job, and that was Instacart. All these retailers reached out to Instacart, signed the agreements. All they cared about was having the ability for customers to order grocers online, have someone who could pick the groceries, and then deliver the groceries. All the retailers were happy and saying, “Look, we’ve really created a firewall. We’re preventing Amazon from taking our customers.” The problem is that Amazon was never going to be a threat to any grocery retailer until around 2020, 2021. So a lot of retailers, frankly, just panicked.
Brittain Ladd: They’re now realizing, you know what, maybe we signed up with the wrong provider. Data especially is something that’s becoming very critical. A lot of retailers are realizing just who owns the data. As all of you know, I write these articles for Forbes. I wrote one article about the Trojan Horse. I wrote it last year. I simply asked this question. Why would any grocery retailer sign an agreement with Instacart when all you’re really doing is teaching Instacart your business, you’re teaching Instacart your strengths and weaknesses, and more importantly, you give all your data to Instacart? Instacart owns that data. [inaudible] didn’t have platforms and systems set up to where they could take the data. Frankly, most of the retailers have never asked for it. Well, now they’re realizing they made a mistake in doing that.
Brittain Ladd: I think in 2019 you’re going to see an awful lot of boards of directors, an awful lot of CEOs, CIOs, CTOs, and they’re really going to be asking internally who owns this, and are we at a disadvantage, because we not only are not collecting our data, we’re really not doing anything with the data. That’s the thing I think is really going to be interesting. Because, there are many companies who signed agreements with Instacart. Retailers, there are literally some retailers that signed up with Instacart, and they do no more than 10 orders a day [inaudible 00:13:24]. The online grocery ordering is less than one percent of their total sales. Why do they need a third party to do this for them? Even these larger companies, Kroger, Aldi, Costco, and especially Sam’s Club, these companies, I think, are working behind the scenes to be able to take over their own destiny. I think they’re really doing everything they can to take this data, to take ownership. But it’s the small to medium sized grocery retailers. It’s those independents. I think what they’re really starting to do is say, who should-
Brittain Ladd: … really starting to do is say, “Who should we have an agreement with?” We signed up with Instacart. That may not be strategic to us, so what platform, what company can we reach out to to where we really have some autonomy, we own the data, but we’re with a vendor who actually is teaching us how to pick orders. It’s teaching us how to stage, how to meet customer demand. That’s what I’m really expecting to see in 2019, so I agree with you completely. Data is becoming more and more important to these retailers, and a lot of retailers are realizing, they’re giving away an awful lot of data to a company I’m convinced [inaudible] Instacart is going to become a competitor. Instacart is 1.5 billion dollars cash on hand. I see no reason why Instacart can’t move into distribution, private label. I see no reason why Instacart can’t make some acquisitions along the way. We know they can raise capital. At 7.6 billion valuation, they’re becoming more valuable than many of the retailers they serve. So, there’s a lot of interesting things going on out there.
Sylvain Perrier: Yeah, I would agree. You know, what you said elicits a bit of the story, and you know I’m a bit of a [inaudible 00:15:14], so I remember being … This is years ago, and I was in the southwest, and I was visiting stores. Just out of the blue, I think I was on vacation at the time. There was no client work, per se. I walk into a retailer who I know at the time very well. You know, I’m kind of dressed in summer attire. It’s very warm, and I bump into the CIO. Really nice gentleman, and I’m launching Amazon fresh people, or Amazon direct, I think, whatever the name of the service was at the time, walking back and forth, in and out of the store, and they’re picking and packing stuff, and I’m like, “Hey, what’s going on?” “Oh, you know, we’re doing a multi-year pilot with Amazon. We’re listed on their mobile app. They’re picking, packing out of our stores to deliver orders within an hour.” And I am like, “Whoa, that’s interesting.”
Sylvain Perrier: I said, “How comfortable are you with allowing a company like Amazon to learn your business?” And he kind of chuckled and he said, “Oh, no, they assured me that they will never become a competitor.” I looked at him and I said, “You know, this is the classic Trojan horse example here. They are meticulously learning your business in terms of what moves, when does it move, what’s the right price point to create a tipping point with the consumer.” And sure enough, within a year after that encounter, Whole Foods is acquired, and he was walked out of his own company. And rightfully so, because if I was a shareholder, was on the board of directors, I would’ve raised probably a red flag. And maybe being naïve at the time, not necessarily myself, but being in that role, I would’ve agreed to it. I’ve always maintained that when Amazon enters a business, it doesn’t enter a business for the sake of just tapping consumers. They systematically create long-term platforms with what they do.
Sylvain Perrier: Take their AWS infrastructure, EC2, their elastic cloud computing infrastructure. They’re literally taking a piece of business from all of us, quite frankly, and Google Cloud and Azure, they just don’t stack up. So, you look at what they’ve done with their marketplace, their eComm infrastructure. Yeah, it started off as books, but kind of migrating to being a marketplace for just anyone to sell anything. My view is, they spent 10 years trying to crack food, and they learned, and then they turned around and said, “The only way we’re going to solve this and make it profitable is we’re going to buy our best customer,” and they did. They bought Whole Foods. What they will create with Whole Foods is not just the largest repository of data, but is the fact that they’re going to be able now to create a true retail platform. So when I see the announcement coming out from the folks over at Kroger and Microsoft, as much as I think it may be to appease shareholders out there and the investment community, I think somebody is retaliating to say, “Hold on here. Amazon’s not going to be the only one in this game here that’s going to be able to do this.”
Sylvain Perrier: Because you know, Mark and I have talked about this. What stops Amazon from turning around once they’ve established this whole play of being able to service their best customer to turning around and being B2B? Do a B2B play on food and grow that line of business? And I agree, Brittain, with your thesis around retailers early on jumping into the fray with the marketplaces that are out there, specifically Instacart. The notion of eCommerce for food, version 2.1 years ago, post-Webvan, was transactional model, charge your customers X, technology providers take a cut of that transaction fee up to the shoppers. Very pervasive for a retailer to jump on board because low transaction volume, high labor cost inside the stores, infrastructure cost, so on and so on.
Sylvain Perrier: Version 3.0 comes out, 4.0, which is where [inaudible] genesis was, really essentially that 3.0 model, which is a subscription model to the retailer. Here’s how much it’s going to cost on that quarterly basis, and unlimited customers, unlimited products listed and so on. But that doesn’t necessarily cure the whole labor element behind it, and the fear that retailers have in not knowing how to market these solutions, and then suddenly you have the Instacart solution that comes in, which creates a bit of a false sense of security because, “Hey, we’re going to market this for you and we’re going to take care of the labor component, but behind the scenes, we’re taking over your data, we’re taking over this.” You have retailers waking up right now in America, even through the shutdown, and saying, “I have a revenue line from eCommerce now north of $100 million, and I don’t control it. I don’t control its destiny. Worse than that, if I was to walk away from it, I don’t know how to walk away from it anymore.”
Sylvain Perrier: And so, what happens is the investments retailers have made into their brick and mortar have been commoditized. Why invest in nice stores when your best customer is migrating out of it? And at the same time, I don’t know anymore who my customer is. Which I think, in my world, we’d be cannibalizing trade and co-op dollars that the retailers could be getting from CBGs. It renders some loyalty programs completely ineffective, and so on. So, really, at the end of the day, what have you done?
Sylvain Perrier: I get it. For some of these small retails, regional retailers, it just makes plain sense. They don’t want to do it, they don’t want the headache, they don’t have the knowledge. There are some big names that have jumped into the fire. When now we see Kroger and Walmart that haven’t really jumped in and they’re doing their own thing, I think that ability in 2019 to innovative, it’s got to be the first one. You’ve got to cut the umbilical cord really quick. Brittain, when you juxtapose what’s happening in North America, are you hearing the same stories in Europe and maybe South America? Are they kind of along the same lines, or are they further ahead, or are they behind? What are you seeing out there outside of our continent?
Brittain Ladd: They’re primarily behind. Actually, an advantage in a way, because what they’re doing is watching what’s going on in the U.S. and they want to make sure they’re not just copying. They’re really wanting to learn, and some of the larger grocery chains out there, so example, X5, the largest grocery retailer in Russia that I worked with, they have 12,000 stores. They could’ve easily just copied what Kroger’s been doing or Amazon’s been doing, but they’ve really been taking an awful lot of time to evaluate what’s working, what’s not working, where’s the industry going? They’re laying down some good bets in terms of technology, an in-store platform for them to do their own picking, their own grocery. They’re implementing dark stores. I actually think they’re going to be in a really good position in the next several months.
Brittain Ladd: South America, they’re a little farther behind, but it’s a completely different customer model, and so they’re really not concerned about having the best of the best in technology. They don’t really worry about eCommerce as much. Whenever I think of grocery retailing, it’s the U.S., the United Kingdom for sure, China, and it’s Russia, and then slowly but surely, India is coming along. But you know, really all points are directed to the U.S., because it’s the U.S. that’s really leading the world in big ways of this is what we’re doing in technology, [inaudible] supply chain, and of course because of Amazon, everyone is watching what Amazon is doing with groceries. And the thing that I keep saying to people is, Amazon has no desire to be a grocery retailer. Amazon wants to reimagine the grocery and the food experience.
Brittain Ladd: But I keep really cautioning people to say, don’t think for a second you know what Amazon is going to do, because if you think Amazon is going to continue to act as a grocery retailer and maintain the status quo in Whole Foods, I can assure you that’s going to be incorrect. Amazon wants to reimagine that entire experience, and that’s why I think we’re going to see some pretty cool things coming out over the next couple of years. But then it puts us in the same position we were in 2017. Industry of the traditional grocery retailers are going to feel, “My gosh, we’re behind,” and then you’re going to have these retailers jumping around trying to copy what Amazon is doing, and again I think you’re going to find some retailers are making some bad bets. I think the smartest thing a grocery retailer can do is [inaudible 00:24:36]. Re-evaluate. Who are your customers? What do your customers want? How do you know who your customers are? What data are you using? What platform are you leveraging to have interaction engagement? [inaudible] are you using a third party? How do you know your customers are happy? What differentiates you from everybody else?
Brittain Ladd: I think retailers just need to go back to the fundamental for a little while in 2019 to establish themselves first as a business. All CEOs need to remember this phrase: the purpose of a business is to create a customer, not maintain customers. You’re out there to create customer. A lot of CEOs [inaudible] have been attracted to every shiny object. You have companies like Kroger that are testing delivery with Nuro, a little robot car that looks like a toaster on wheels. There’s just all kinds of crazy things that people are doing out there, and I think a lot of CEOs have become distracted. A lot of grocery retailers need to step back and say, “What are we even here for? What’s our purpose?”
Brittain Ladd: And you know what? Your purpose is, you have customers, and you need to know what your customers want, and you need to put in the best service and the best platform and the best quality, and you need to be able to really give them a superior customer experience. Because a lot of retailers I think have forgotten that, I think there’s going to be a shakeup in the grocery industry in 2019, 2020, and I think there could be a lot of consolidation over the next couple of years, as I just think a lot of grocery retailers aren’t going to be able to make it on their own.
Sylvain Perrier: Yeah, I would say from my perspective to add to that, clean stores, good associates, fresh produce should be just the mainstay, whatever you do. I think 2017, 2018, historically prior to that, you would not see a lot of mainstream technology so quickly bleed into grocery retail. My cycle at the beginning of every year is kind of interesting. Go to Las Vegas, go to CES, see what’s happening, laugh at Panasonic, they’re trying to beat Sony at TVs. You know? You go around the corner, 103 inches. You go around the other corner, 110 inches. It’s ridiculous, right? And I’m talking about TVs.
Sylvain Perrier: And then you would go into other areas and you would just see this or that. Now, you go to CES and you are almost assured that when you hit New York at NRF, someone will have a prototype of something running on a new piece of hardware you saw at CES, and that makes it very confusing, very confusing to retailers. So I would take, to Brittain’s point, I would take a page out of what’s happening in Europe. My conversations with a lot of the leading retailers over there is, because they were the first to successful eCommerce, again to Brittain’s point, when volume hit, they managed the labor component by doing dark stores. They had not invested in micro fulfillment centers and robotics, per se, with the exception of Ocado, so I’m not going to lump Ocado into a traditional retailer like a Carrefour or an Aldi, or so on, or a Sainsbury. But they did not sacrifice their core pillars as a business. But they had to invest in these monoliths of-
Sylvain Perrier: So … but they had to invest in these monoliths of technology, the early, early [inaudible] platforms that were borne out of the oracles of the world, the SAPs of the world. And those technologies are laborious to implement. They’re very difficult. And they don’t lend to the rapid development and the exciting user interfaces that are very low friction of what we’re seeing borne out of the United States today.
Sylvain Perrier: So the Europeans are flocking into North America, and not just on the east coast. They’re going straight into the heartland, as I like to call it, and into California to see what’s working, what’s not working in their testing. For the longest time, Tesco, the whole fresh and easy concept that went bankrupt a couple of years ago, was borne out of an entire R&D center Tesco operated in, not San Bernardino, but just outskirts of LAX, right, 30 minutes away.
Sylvain Perrier: And so they had this whole test center. And they were working with Safeway. And when Safeway found out that they had this test center, that relationship between Tesco and Safeway soured fairly quickly.
Sylvain Perrier: So the Europeans are going to go to the next level of quantum in terms of what they’re doing from Europe. You know, last year, in 2018, I spent some time in London, got to go experience what Sainsbury’s doing and some of the other … Tesco as well, and some of the other smaller brands.
Sylvain Perrier: They’re still using catalogs, paper catalogs. And there’s this element of freshness to it when you’re a customer and you’re inside the store, and you’re able to pick what you want to buy. And someone goes and gets you from behind the counter. And they’ll deliver it to you if it’s a TV, because when you’re London, bringing a LCD TV on the tube, very difficult. It’s very difficult to do.
Sylvain Perrier: In the United States and Canada as well, and maybe less in Canada, I think, Canada we’re so conservative it’s not funny! We go to bed with socks on at night.
Mark Fairhurst: And that starts out as it’s cold.
Sylvain Perrier: No, and that’s in the summer time. So you can imagine what we do in the winter time, we wear snowsuits!
Sylvain Perrier: And it’s very different in the United States right now because everyone’s taking this shot gun approach, okay, so let’s do micro fulfillment, let’s do autonomous robots!
Sylvain Perrier: And then I’m having conversations around what’ called faceless fulfillment, which you pull up to something that looks like a car wash and something throws the groceries into the back of you car and there’s … there’s this hyper level of wanting to automate so many different things without … what’s the financial backing behind it? What’s the sustainability of this from an operational perspective? Is is really going to drive the value?
Sylvain Perrier: And I will tell you, we will never know what Amazon is truly doing. They are so secretive, it is like Apple. The most that we’ve heard lately is Tim Cook had to go on TV to talk about the decline in the stock and pointed out we make great products and the stock went up two percent. So I think we’ll never know.
Sylvain Perrier: 2019, I would agree with Brittain: people are going to relax and regulate. And if the Chinese economy is slowing down as much as the reporting, Starbucks being one of the latest one to talk about it, and they would know, if our five economical drivers start to dip whether it’s in Canada or the United States, retailers better be ready.
Sylvain Perrier: Mark, what are your thoughts?
Mark Fairhurst: I agree almost a hundred percent.
Sylvain Perrier: Oh! Is that like a ninety-eight percent, or is it ninety-
Mark Fairhurst: Ninety-nine.
Sylvain Perrier: Ninety- nine.
Mark Fairhurst: It’s within tolerance.
Sylvain Perrier: Oh, I’m not sure what that is, but go ahead.
Mark Fairhurst: But the question I want to ask to both of you is: is it too late? If you’ve outsourced a key component to your business if you’re a grocery retailer, can you get it back? And that outsource, do they even care at this point? So.
Sylvain Perrier: Well, I’ll answer it first. I’ll answer from a marketing perspective. I think it depends, who you are and what your brand stands for.
Sylvain Perrier: So what I mean by that is … and here’s the backdrop. We know for a fact that the online buyer is typically the largest basket, is the most loyal and best customer. And they migrate online or they are acquired as a new customer because of the convenience factor.
Sylvain Perrier: It depends, how long have they been using the service? Has the customer now considered everything they’re buying as being strictly commoditized, i.e. a box of Tide detergent is a box of Tide detergent, I don’t care where I get it? And what is their affinity with your private label?
Sylvain Perrier: Okay, so if you’re a mid-sized retailer and you have the great in store experience and they love your private label, like a Loblaws President’s Choice, most people love that brand. I think ninety-nine point nine nine percent of the people love that brand. And same with their Joe Fresh line. And their may be an opportunity to rescue yourself out of this situation.
Sylvain Perrier: But if you’ve become just a commodity and they’re not necessarily buying your private label, and the convenience factor trumps everything else and they don’t care how much they spend, if you de list I’m pretty sure … and you don’t have a good loyalty program, I’m pretty sure you lost your best customer.
Mark Fairhurst: And again, it comes back to differentiation.
Sylvain Perrier: And you can’t do that in the market context, right?
Mark Fairhurst: Right.
Sylvain Perrier: Because you essentially … you’ve become a fulfillment center to someone else’s business model.
Mark Fairhurst: Right.
Sylvain Perrier: And great! Thank you very much. I’m running a business, I premium on top of what you’re doing without the infrastructure costs.
Sylvain Perrier: Brittain, what do you think?
Brittain Ladd: Oh I agree. I agree with what Sylvain just stated, it’s … there has to be some value that’s going to be achieved if you’re going to de list. And by the labels, one of them, and if you’ve become a commodity and if your customer base is like, “We really don’t care about price; we just want convenience.”
Brittain Ladd: So is it impossible? No. But it’s one of those things where you really need to have to understand what’s the value to their customer if we do de list?
Brittain Ladd: The thing that I would recommend is don’t de list just to switch from one provide to another! Really leverage it as an opportunity to say, “You know what? Not only can we de list, but we’re going to really start to do things transformative. We’re going to use this as an opportunity to address some short comings [inaudible] business model. And we’re going to use this as an opportunity maybe to release a new marketing program. Maybe we’re going to announce that we’ve created a new line of products specific to children.”
Brittain Ladd: There’s a way to add some excitement in de listing and going to someone else. You have to be able to package it in such a way that it generates excitement. The danger is if you build up a lot of expectations that this is a good thing for customers, and you’re going after customers who aren’t using the service, then the execution has to be there, the value has to be there, and it has to really at the end of the day be worth it. You have to create something that your customers are going to be saying, “Wow! This is great!” And they start to talk to other people about it.
Brittain Ladd: If you can’t do that, it’s one of those things where you made a bad decision, there’s no easy way to get out of it, and frankly, you might as well just continue doing what you’re doing for now.
Sylvain Perrier: Yeah, absolutely. We had this conversation at a brain storming session here at Mercatus, there’s nothing wrong for a retailer to have a multi prong strategy that says, “I’m going to leverage all of these ‘distribution channels.’ But I have to have at the center of this, the nucleus is control.” And to positively leverage the network affect that could be created, because people are congregating around these solutions.
Sylvain Perrier: I think I gave an example today at lunch with a new employee, right? We have this thing that we do here at Mercatus with new employees. First day, CEO takes them out to lunch, or [inaudible] because I was tardy. And she said, “How do we leverage Facebook? And I said, “Well, the reality is if I’m a retailer what you should be doing is putting your private label, one item for sale through Facebook through some sort of widget or an ad and create not just a buy button, but something that elicits a reaction and automatically comes through from Facebook directly to that retailer’s platform.”
Sylvain Perrier: And that’s be something that should be permeated across these different solutions. But the retailer needs those mechanism to be able to control that versus just giving them the toolbox and saying to these providers, “Hey, how about you go figure it out for us?” It has to be tremendously a partnership, one that is rooted in transparency and honesty, and give and take.
Sylvain Perrier: That used to be the mantra in this business. But that’s changed; that’s really changed.
Sylvain Perrier: It’s going to be exciting, Mark.
Mark Fairhurst: Oh, this year’s going to be full of change, absolutely.
Sylvain Perrier: It almost keeps me up at night!
Mark Fairhurst: Hence the [inaudible 00:37:19].
Sylvain Perrier: Yeah, and like I said, I just love the taste. So we’re going to NRF.
Mark Fairhurst: Yes, you’re leaving tomorrow. Yeah.
Sylvain Perrier: We are busy, in we’re chosen the first half of 2019 we have NRF, and then after that we have-
Kevin Glen: In mid winter at FMI.
Sylvain Perrier: At FMI, we’re sponsoring the dinner, correct, which-
Kevin Glen: And the Friends of FMI.
Sylvain Perrier: The Friends of FMI.
Kevin Glen: Yes.
Sylvain Perrier: Yeah, it’s great. So we’re going to be there, and we’re going to meet a bunch of cool people. And then I’m off-
Kevin Glen: NGA.
Sylvain Perrier: NGA and then Shoptalk.
Kevin Glen: Yep.
Sylvain Perrier: And then Mark aren’t we a level five sponsor again for Grocery Shop?
Mark Fairhurst: We were the first to sign up on the spot, level five again. So it’s a fantastic investment on our part, because Grocery Shop, the event, really brought the market to us. And we’re going to have some really exciting announcements come September.
Sylvain Perrier: Yeah, and I think we have a really compelling announcement that we’re making for NRF as well.
Mark Fairhurst: This week, coming up tomorrow.
Sylvain Perrier: This week. Some really cool tech.
Mark Fairhurst: Absolutely.
Sylvain Perrier: Which I’m not going to spoil the beans just yet, so that’s going to be secret, secret.
Mark Fairhurst: Although by the time this airs, it will be out.
Sylvain Perrier: Scotty, you got to get on it!
Sylvain Perrier: Brittain, it’s been amazing to have you on our show. Again, you’re a gentleman and a scholar and a [inaudible 00:38:35], I think is a key word.
Brittain Ladd: Thank you, it’s always fun to come on here. And I agree with you, 2019 is going to be interesting. And the thing I’m sure you’ll agree with, and you touched on it earlier, it’s not just retail, grocery retail. And we’re going to start to see some interesting things.
Brittain Ladd: But I really think towards the end of 2019 is when we start to get an idea of what’s all this food on demand really about. Companies saying, “Why do you need to go to the grocery store? Why do you need to go buy ingredients to take home and cook? If we actually leveraged stores to prepare food and bring it to you, the higher margin business for us is the grocery retailer.”
Brittain Ladd: Then there are those companies like Zoom and others who basically are saying, “We can just bring you meals on the [inaudible 00:39:25]. You never have to go to the grocery store!” So I’m really waiting to start to see how some of the [inaudible] well, because there’s a tremendous impact to retailers. And I think the smart grocery retailers are the ones who say, “We can’t just be a grocery retailer anymore, we have to become experts in food and meal.”
Sylvain Perrier: Absolutely; absolutely. Brittain, how do people get a hold of you? If they want to tap into that crystal ball of yours?
Brittain Ladd: It’s easy, just reach out to me via LinkedIn, I’m always checking my messages. It’s very easy to reach out to me that way.
Sylvain Perrier: Perfect, thank you. Mark? Quickest way for people to get a hold of us at Mercatus?
Mark Fairhurst: It’s mercatus.com, or listed on all the social channels: Twitter, Instagram, Facebook, and LinkedIn.
Sylvain Perrier: LinkedIn.
Mark Fairhurst: LinkedIn.
Sylvain Perrier: Yes, and Myspace?
Mark Fairhurst: My Space!
Sylvain Perrier: No, sorry. Myspace, what ever happened to Myspace?
Kevin Glen: Is it still around?
Sylvain Perrier: No, no.
Mark Fairhurst: No.
Sylvain Perrier: That was taken care of.
Mark Fairhurst: Before we go-
Sylvain Perrier: Yes.
Mark Fairhurst: This is episode eleven, so we are ending our season one, yes! As you alluded to, we’re going to be extremely busy over the next few weeks.
Sylvain Perrier: Yes, yes.
Mark Fairhurst: Well into March. So we will be kicking off season two shortly.
Sylvain Perrier: Mark, are we going to do a remote, maybe, for the season two?
Mark Fairhurst: That might be a great idea.
Sylvain Perrier: Yeah! We could do a remote.
Mark Fairhurst: Yes.
Sylvain Perrier: You know we did the last one, right?
Sylvain Perrier: Yeah, it was a great, great show.
Mark Fairhurst: Yeah.
Sylvain Perrier: Ladies and gentlemen, thank you so much for listening! This is the wrap up show for season one. Don’t forget to send us your commentary and your questions via and of our social channels. Mark will make sure that it comes to the table and stay tuned for season two, where I’m sure we’re going to have some wonderful guys and some controversial topics that … things that are happening in the grocery retail space. Cheers!