Sylvain Perrier:

Ladies and gentlemen, welcome to Digital Grocer Season Four, Episode Four, which I think is actually maybe overall the 40th episode, which is amazing. I’m your host, Sylvain Perrier, president and CEO of Mercatus Technologies. And connected with me somewhere in the Eastern part of Toronto is Mark Fairhurst, our VP of Marketing. Mark, thank you for joining me.

Mark Fairhurst:

Yeah, a pleasure. Sylvain, you don’t look a day over 39.

Sylvain Perrier:

Thank you, as long as you keep me under 40, I’m happy. That’s amazing. But we’re doing something very different today. Normally we do video, and we decided just to keep it to voice this time around, keep it light. It’s a little bit more pirate-ish, like pirate radio. I like to keep my office here a little bit darker than normal, and it’s just me recording audio. And I kind of like it like this. It just reminds me when we first started episode one, when we were recording at our office downtown.

Mark Fairhurst:

Yeah, we’re back to where we’re doing it old school.

Sylvain Perrier:

We are doing it old school, which is …

Mark Fairhurst:

Which was a great movie by the way.

Sylvain Perrier:

Which it is, but you’re not going streaking.

Mark Fairhurst:

No, no, no. Well, I don’t know, maybe Episode 41.

Sylvain Perrier:

Maybe when we hit the 50th episode. How about that?

Mark Fairhurst:

There we go. There we go.

Sylvain Perrier:

Okay, great. So, hey listen, there’s a lot of stuff happening in industry right now. The one thing that hit like a bombshell, but I think it’s still a little bit underneath the radar, not a lot of the trades are picking it up. It’s actually, Amazon’s new Shopper Panel application on the iPhone. And Mark, can you share a little bit about that?

Mark Fairhurst:

Yeah, apparently Amazon is launching what they’re calling their Amazon Shopper Panel, and they’re going to be asking users to send in 10 receipts per month for any purchases made at non Amazon retailers, and this includes grocery stores, department stores, drug stores, and entertainment outlets, things like movie theaters, theme parks, restaurants.

Sylvain Perrier:

Yeah. So, it-

Mark Fairhurst:

It is a play for all consumables transactional log data.

Sylvain Perrier:

Absolutely, it is. When you shared this with me yesterday, because I hadn’t come across it, I don’t … I mean, I should be reading Tech Crunch on a daily basis. I know you are religious about it, and you have all the media outlets, and the trades that you read quite regularly to keep us on top of this stuff. And I was kind of really astonished, because this was a play that was done by a small Canadian company. I can’t remember the name of the gentleman that started it, but his father was an investor. I believe his father was the CEO of the Ontario Lottery Commission, and he did quite well. Basically what they did is you would take a picture of your receipt, your grocery receipt. They would upload the data, and then they would automatically apply discounts from coupon providers from the CPGs, and then you would get a check, which I think is a great idea. So fundamentally, it’s a way to solicit T-log data.

Mark Fairhurst:

Yeah, and it appears though, as Amazon is actually paying cash money for this, $10 reward applied to …

Sylvain Perrier:

Wow.

Mark Fairhurst:

… their Amazon balance. Or they’ll provide a charitable donation in your name.

Sylvain Perrier:

No, that’s amazing. That’s amazing. The other big news this week, Google and an antitrust suit with the US government. Are you surprised, Mark?

Mark Fairhurst:

No, not surprised. I think you and I chatted about this. I mean, following up from the congressional hearings it’s they had to pick one target, because I don’t think they have the resources to go after all three at once, Facebook and Amazon. But I think this is going to take a long time. I think what did Microsoft’s case take, 10 years?

Sylvain Perrier:

Oh, wow. I think Microsoft was filed in ’98.

Mark Fairhurst:

Yeah, yeah.

Sylvain Perrier:

And then, at least 10 years. But the amount of evidence that they had … And at the time, I think you would agree, Microsoft Windows was, and I think still is today, is the dominant operating system. And you just … It shipped with Internet Explorer. It was, you couldn’t remove Internet Explorer. It was the default. Yeah, at the time you could install Netscape, but it was a little bit more pervasive to do that. And there was the whole … This also kind of spilled into Microsoft Office, and the issues with Corral, and Corral that had bought WordPerfect from Novell. I mean, there was tons of issues around that.

Mark Fairhurst:

Yeah, this is, I think, a little more challenging, because Google provides a lot of services at no charge for consumers. So, it’s going to be a more difficult case to prove, but definitely, the lock they have on the search market, that’s pervasive.

Sylvain Perrier:

Yeah, this will spill over into the likes of Apple and so on, because let’s not forget Apple gets a pretty hefty check from Google on an annual basis, because Safari is defaulting to Google. And yeah, you can change it.

Mark Fairhurst:

$10 billion a year, they get.

Sylvain Perrier:

Well, that’s just … that’s right. That’s amazing.

Mark Fairhurst:

Yeah.

Sylvain Perrier:

Right?

Mark Fairhurst:

It’s astronomical. It’s some company’s entire annual revenue.

Sylvain Perrier:

Yeah. Well, so I’m going to keep an eye on that for you guys, and report back. The other big news that actually came up this morning, Whole Foods launched free one-hour grocery pickup.

Mark Fairhurst:

Oh, I didn’t see that.

Sylvain Perrier:

Yeah, so that came out this morning. So, you have to spend a minimum of $35 to get this. If you spend $4.99, you can do it in 30 minutes.

Mark Fairhurst:

Oh, wow.

Sylvain Perrier:

And part of me, who needs their groceries in an hour? Just, I can’t wrap my head around that concept. I mean, we don’t see it in our data for the retailers that we have in the Mercatus stable that are doing what we call Just In Time. And I’m doing air quotes here, because it’s not necessarily true just in time. I’m wondering if this is a way for Amazon to start putting pressure on other retailers to see … and specifically Walmart, and specifically some of the other bigger ones, maybe Kroger to see what’s going to happen with that.

Mark Fairhurst:

Yeah, it certainly seems like it’s an arm race in last mile delivery or pickup.

Sylvain Perrier:

Yeah, yeah. This’ll be interesting to see how the industry reacts to this one. I want to do a quick followup. So on our last episode, on Episode Three, we talked about Ocado and the IP infringement lawsuit that was submitted against them from AutoStore. And we kind of got into the conversation of … I called it my IP Infringement 101 class. How do you deal when someone raises an infringement matter against you? And especially if you don’t have some form of letter opinion where a law firm has research and interviewed the inventors and have said, “Here’s how you can use this letter to defend against.” So, big move last week, right? So, Ocado has decided to purchase Myrmex.

Mark Fairhurst:

Yeah, I think they bought an interest. I don’t know if it’s a controlling interest, but definitely it’s enough to get a hold of their technology.

Mark Fairhurst:

… get a hold of their technology.

Sylvain Perrier:

Yeah, and their technology is very much specialized in what is called … I think the industry has coined this term and it’s not a familiar one to me. It’s called CPS, which is, essentially, it’s technology that enables click and collect. So automated robots that are installed behind a store or in a store, and they are, along with humans because you just can’t remove humans from the equation, quite frankly. And these robots are going around and they are bringing bins and so on, and the human is picking out of the bins and preparing the order. And then this robot brings these bin to a kiosk and an individual, a shopper on the other side, types in a code. There’s this really cool door that opens. It’s almost like Star Trek, right? The door opens and the bins come up, and then you just pull your bags out.

Sylvain Perrier:

I think the point I want to make is, and John Springer wrote about this on an article for Winsight Media, and I know John, I’ve known him for years. Great writer.

Mark Fairhurst:

John’s been getting a lot of scoops lately.

Sylvain Perrier:

John is the master of scooping stories now. And even I’m jealous, quite frankly. In his article, he said, “I don’t think the industry necessarily understands why Ocado may have bought them outright or an interest in them.” When you are faced with an IP infringement lawsuit-

Mark Fairhurst:

A very public one.

Sylvain Perrier:

An extremely public one, who, by the way, you predicted that maybe Auto Store wants to be acquired. And then suddenly, I guess that day we posted our last episode, people were writing about what you said, which I found very interesting.

Sylvain Perrier:

So when I look at this potential deal here, this deal that has occurred, the way that you defend yourself, obviously, is you can go through the invalidation process, but that invalidation process is very much the same process as going through a formal prosecution. It takes years. You have to convince an examiner at the patent office, whether it’s in the UK, one for the EU, then one for the US, one for Canada, because you have to go through the jurisdictions. Or if you could do it in the US, then maybe an invalidating in the US may spill into the other jurisdictions, because the other jurisdictions do look to the US for primary opinion.

Sylvain Perrier:

So the other defense tactic you can take is if you think you’re infringing … Now, I’m not saying that Ocado is infringing. I haven’t seen the case. I’ve requested it from our law firm because I want to read it because I’m just interested. If you think you’re infringing … And, again, I’m not saying they are … You could prepare yourself a defense strategy where is you’ve bought a series of patents where you may be considering replacing the technology or counter-suing. So there’s so many things that are doing here, or quite frankly, Ocado may be just doing this for the sake of saying, “Hey, by the way, we’re expanding out of the” what they call their CFC, their customer fulfillment center, which they’re large. There’s one Sobeys built was over 396,000 square feet here in Canada.

Mark Fairhurst:

Yeah, big facility.

Sylvain Perrier:

And a facility, it’s a massive facility. You’ve got three more on the books to build, and the one in Montreal apparently is almost ready. They may be just investing, saying, “Okay, I think we need to have a defense strategy against the MFCs.”

Mark Fairhurst:

Yeah. And there was an article this morning. I read it just before the show. Again, John Springer saying the investment in Myrmex is not related to the automated pickup. It’s some super secret new product line. I think a lot of it’s PR, but it’s to deflect from Auto Store case or suit, and perceive Ocado as a intellectual and IP leader. But it’ll play out. It’ll play out.

Sylvain Perrier:

Well, so Ocado is flexing, which I think is great in the end. The only people that went out of this stuff is the retailers, quite frankly. The more choice that you have in this space, quite frankly, the better you’re off in terms of building out your ecosystem.

Sylvain Perrier:

The other big thing, and we don’t talk about social technology or social networks within the context of our show, but the one thing that I was really astonished was Quibi. And I may not be pronouncing that right, and that’s okay.

Sylvain Perrier:

So they raised over 1.5 billion, co-founded by Jeffrey Katzenberg from Dreamworks and Meg Whitman. And they decided to shutter, and get this. This is very wary you hear about this in the industry. They actually return a $315 million back to the investors. Amazing. And did you ever use it, Mark?

Mark Fairhurst:

No, no. I’m not in the target demographic.

Sylvain Perrier:

No, you’re not, and neither am I. So I figured maybe you would know because you had daughters, and maybe they would talk about it. But we know that they did shop it around to-

Mark Fairhurst:

My daughters don’t talk to me about their social platforms. What I don’t know won’t hurt them.

Sylvain Perrier:

Well, there are certain things parents shouldn’t know, quite frankly. I think it’s better that way.

Sylvain Perrier:

In any case, one of the things that you and I are seeing happening in grocery right now, specifically … I don’t think this is specifically due to the pandemic, but we’re seeing a lot of change. We’re seeing executives retire coming out of grocery, coming out of other verticals in this space. We’re also seeing, unfortunately, some small regional retailers shutter. We have companies that are accelerating IPOs. That was announced. Southeastern, right, is it going to be accelerating their IPO, and now they talk about the things that they’ve done, the rebranding, their loyalty program and so on, which I think is great.

Sylvain Perrier:

But we’re also seeing, coming into this space, surprisingly enough, a lot of retailers from the other verticals. Apparel, home improvement, coming into grocery and starting to bring that knowledge that they would see and making this really positive impact. And it’s kind of creating this flood of thinking and ideas that we haven’t seen in a certain while. And one of those such individuals is Dave Abbott, the CMO at Brookshire’s. And guess what? We have him as this as a special guest on our show today. And Dave, welcome to Digital Grocer.

Dave Abbott:

Thank you very much for having me today. Glad to be here.

Sylvain Perrier:

Fantastic. Now, prior to joining Brookshire’s, you were the vice president of integrated media at Home Depot. Really different line of business completely compared to grocery. So how are you applying your knowledge from that space to grocery?

Dave Abbott:

Well, I think, obviously, it’s a different vertical, and there are a lot of differences between the businesses, but one of the things about the Home Depot during my nine-plus years there, everything revolved around the store. Even as big as the eCommerce business became at the Home Depot, when my last full year there was approaching $10 billion, it was still less than 10-

Dave Abbott:

Full year there was approaching $10 billion, it was still less than 10% of sales in the total operation, if you will, here in the States. So when I first went there, my thought was, well, customers don’t need to go in and look and feel and try on stuff. I spent some time in department store world apparel, that sort of thing. But you know what? Customers want to touch and feel the lighting, the light fixture, they’re going to put into the living room that they’ll probably have for a few years.

Dave Abbott:

So it’s interesting during my entire time there the eCommerce business grew, but what really was the benefit to the growth of that business was the impact it had on the store. Even today after COVID, I still have a lot of friends and colleagues there, I left about a little bit over a year ago, that dynamic still exists. When COVID hit, there was a big spike in web traffic and sales and that sort of thing, but it still very much revolves around the stores, and that’s true of grocery, too.

Dave Abbott:

When I joined The Home Depot back in 2010, the company only really decided to get behind digital a year or two before that. The stereotype was, well, why do we have to invest in a world-class e-commerce operation website because customers don’t buy shingles online or paint online, that sort of thing. Which is true. Even today, it’s true. The difference is is that they sure will do research online and they will make a decision whether they’re going to go to The Home Depot or some other home improvement retailer based off the information they’re able to obtain about their local store on the website.

Dave Abbott:

So everything we did, we did have a separate e-commerce operation, but I also a dotted line reporting relationship to the chief marketing officer there because the chief marketing officer, he or she, depending what year it was, owned the marketing budget and one of my first jobs there was the head of marketing for homedepot.com. When I was arguing for my share of resources, along with my peers arguing for their fair share and that sort of thing, we had to demonstrate the ability of the digital dollars to drive traffic in the store and sales in the store.

Dave Abbott:

I think that dynamic exists here in grocery, and not just here at Brookshire’s, but more generally. I don’t see a future during my remaining years on this earth where grocery is primarily an e-commerce business. I think there’s still two main things where you want pick and choose. You want to touch that peach, you want to see that watermelon, you want to see what cut of meat is there, that sort of thing. So the website is an enabler and information provider for the grocery store, just like it was in home improvement. So in that regard, it’s actually very similar.

Dave Abbott:

So when we look at our investments from a marketing perspective, we have to think about holistically what is the end to end journey of that customer, both interacting with the store and the website, and make our investment decisions accordingly.

Sylvain Perrier:

That’s great. Have you seen the pandemic affect consumer behavior in specifically where you guys are geographically?

Dave Abbott:

Yeah, I think a couple of things. We are a regional grocery. We actually can compare notes with other regional grocers, which is great, because my prior retail experience has been with national retailers and you kind of keep things close to the vest, it’s hard to get insights from your peer set. But here we can compare notes with non-competitive groceries across the country.

Dave Abbott:

Obviously, when COVID hit, our sales overnight, as you know, quadrupled, quintupled. We were not prepared for that. One of the favorite sayings I’ve heard pre and post-COVID is what COVID did is accelerated processes that were already underway, trends that were already underway. Just compressed five years into five months, or whatever analogy you want to use. So our volume spiked, operationally, we were not prepared for it.

Dave Abbott:

It’s just very hard because we were on this nice little trend of growth and e-commerce experiments, things like that, whatever, and all of a sudden you get an influx of people who are desperate for toilet paper, and they will go to anywhere, a lot different places, to find those basics that you kind of take for granted before COVID hit.

Dave Abbott:

So I think that also accelerated our thinking in that regard. One of the reasons I came here, I started here in June, so I started a couple months after COVID hit, is the accelerated pace of our digital business. I was fortunate when I joined The Home Depot we were kind of working on the ground floor, didn’t know it at the time, but we really started exploding in terms of the digital business and the influence of digital on the brick and mortar sales.

Dave Abbott:

This goes back a little bit further in my career, but I worked at J.C. Penney back in the day when they were doing a little bit better business-wise than they are today. I joined relatively soon after e-commerce started to become a thing. My last full year there, which was 2007, it was a $1.5 billion e-commerce business. It was actually pretty legit back in the day. So that business has grown from 200 million e-commerce to 1,000,000,005 during my six years there.

Dave Abbott:

My thinking had been at The Home Depot, Home Depot at the time when I started there was about three times the size of J.C. Penney, I thought, “Wow, if we can repeat my experience at J.C. Penney, that’d be awesome.” I’m hoping to hit the trifecta, if you will, here at Brookshire’s. I’ve had two great experiences in being part of businesses that were transitioning digital, and that was what attracted me to Brookshire’s, and so here I am.

Sylvain Perrier:

That’s great. So when you think of your collective experience, right? So J.C. Penney, Home Depot, Brookshire’s, and just the explosion of e-commerce, and quite frankly, e-commerce not just in grocery, but in general in the growth, and I think we’re seeing things accelerate so much faster than what we could anticipate. Mark and I talk about the glut of brick and mortar. How there’s just too many stores, too much choice. In your mind, and I want to get your opinion on this, is brick and mortar still at the center of the experience?

Dave Abbott:

I’m of the opinion, it’s a little bit old school, but I’m of the opinion that it is. Once again, I’m old enough to have started my career before the web took off and things like that, so someone who’s Generation Z or whatever might have a different opinion because they didn’t live in a time otherwise, but I do believe the brick and mortar experience is the center of that from experiential perspective.

Dave Abbott:

Now I know a lot of brick and mortar operations, over time they become basically commoditized to stack it high, let it fly, type philosophy. Just pack a store with a bunch of stuff and it will sell, things are good. I think that time has passed. COVID has kind of accelerated processes in the brick and mortar space, too.

Dave Abbott:

The reality is the United States has been overstored for forever. In terms of if you ever see an analysis, I’m sure you have, square foot per person, United States was so far ahead of everywhere else in the world, Canada, Europe, Asia, it was just kind of a joke, and it seemed inevitable there would be a reckoning of sorts. Candidly, the Amazons and digital players have maybe exacerbated some of those issues, but I think if the internet didn’t exist, that issue would still exist, if you will. We’re overstored, and too make choices, and customers get overloaded with choice at some point and decide, “I’m going to just shop two or three places.” That’s it.

Dave Abbott:

And if you’re not one of those two or three places and you don’t have a good store experience, it’s going to be bad news at some point in time. I think about, once again, this is pre-COVID, take it for what it’s worth. You got the Home Depot, for example, this is public information. Half the e-commerce orders were actually picked up in the store.

Sylvain Perrier:

Wow.

Dave Abbott:

Customers chose to go to the store. They could have it shipped to their home. Now maybe they were in an apartment or worried about security, whatever, but customers chose, they were not forced, they chose to go pick up the items in the stores. I see many customers going with their feet. That they do if they feel safe, if it’s a good experience, they do like going into the store. You don’t get that experience, you don’t get that excitement when you get the box on your front door. It commoditizes the whole experience, if you will. And I think the brick and mortar experience done well is still going to be a center of attention, if you will.

Sylvain Perrier:

Yeah, I would agree. And so I ask this question to a lot of the executives that we interview on Digital Grocer. And if you were to look at your crystal ball, what gets you excited about the future of grocery e-commerce?

Dave Abbott:

Well, I think this is going to sound derogatory. It’s not meant. But grocery as a vertical is behind other retail verticals from a digital perspective for a lot of legitimate reasons. It’s not because the grocery industry is backwards or whatever. It’s just that it hasn’t been as necessary to move into digital as aggressively for a lot of good reasons. Once again, I want to pick my fruit at the store. That’s me, sample size of one.

Dave Abbott:

But I think what’s exciting, though, is that also means there’s ton of opportunity to make a digital experience, tighten the store experience, and do it very, very well from glass half full perspective. If grocery was at the epitome of digital e-commerce store intersection experiences, well, okay, it’d be interesting and fun, but a lot less interesting and fun than what it is today, because we’re all trying to learn what’s relevant from other retail verticals. What’s not relevant, because there are some things that are not relevant. And how do we apply it to grocery?

Dave Abbott:

One of the things that we’ve seen change, you mentioned was changed since COVID, is from a stereotype perspective, it’s always the younger generation that’s ordering e-commerce and that sort of thing. Well, guess what? When COVID hit, especially if you had a pre-existing condition health-wise, and you’re older and are concerned about COVID, well, guess what? That customer is experimenting, too. It’s unfortunate that the circumstances that forced them to do that, if you will, but they like it, too. And I think the whole generational thing that maybe existed before may disappear because of that.

Dave Abbott:

And the customer service area of Brookshire’s reports up to within the marketing team here, so we get the feedback all the time. You would be shocked about how many letters we received say, “You’re lifesavers.” And they really mean that. It’s not like, “Oh, you saved me a dollar on my purchase,” that you’re a lifesaver. No, they literally feel that we’re making them safer. And it’s kind of daunting.

Dave Abbott:

People got to eat, but it’s still, you realize you put yourself in certain situations and part of it’s still going to be convenience. You still have the parent with three kids in the back of the minivan who probably don’t want to drag him to the grocery store. That’s always going to exist. You got the group of customers who are going to use delivery, like Instacart, whatever, that sort of thing. But then you have some customers who we actually may be helping them live their life more safely. That’s very daunting.

Sylvain Perrier:

Amazing. Great. Ladies and gentlemen, Dave Abbott, CMO at Brookshire’s. Dave, thank you so much for joining us.

Dave Abbott:

Thank you for having me. Appreciate it.

Sylvain Perrier:

And Mark, how do people get ahold of us?

Mark Fairhurst:

Yeah. Very easy. digitalgrocer.com. You can access this episode and all the previous ones and others to come.

Sylvain Perrier:

Fantastic. Ladies and gentlemen, keep your ear to the ground. I always wanted to say that on a show. Sorry. It makes no sense saying that.

Mark Fairhurst:

Don’t get run over.

Sylvain Perrier:

Just don’t… Yes, and stay away from the train tracks, folks.

Mark Fairhurst:

That’s right.

Sylvain Perrier:

But keep an eye out for our next episode. I think it will be Episode Five. We haven’t picked a subject yet, but I’m sure it’ll be something riveting. Peace out.