Sylvain Perrier: Ladies and gentlemen, welcome to Digital Grocer. I’m your host, Sylvain Perrier. And I think this is episode seven, season four. I mean, I know it’s been at least 42 episodes in, and as always, I am joined by Mark Fairhurst, our VP of marketing. Mark, welcome.

Mark Fairhurst: Thank you, sir. I see you.

Sylvain Perrier: It’s great to-

Mark Fairhurst: How are you doing?

Sylvain Perrier: Considering that we are now back in a state of emergency here in beautiful Ontario, no curfews, but I think we’re doing the best that we can, I think.

Mark Fairhurst: Yeah. I think they just made that announcement though an hour or two ago.

Sylvain Perrier: Yes, absolutely. Yeah.

Mark Fairhurst: Four weeks of restricted retail, no going out.

Sylvain Perrier: Yeah. So grocery stores will stay open, but my understanding was what’s going to change here is the fact that, I don’t want to call a non-essential retail, but non-food retail is essentially going to be working under reduced hours.

Mark Fairhurst: Yeah. Does that include the big box? Because we know there’s been controversy there.

Sylvain Perrier: I don’t know yet.

Mark Fairhurst: The Costcos and the Walmarts,

Sylvain Perrier: I don’t know. The Ford government was very vague, but in any case, I mean, the reality here is they’re doing this to protect the public, and to make sure that we’re safe, in any case.

Mark Fairhurst: 100%.

Sylvain Perrier: Now talking about the pandemic, I mean, it’s a reoccurring theme on our video log podcasts that you and I talk about, I mean, a lot of retailers today have been benefiting because of the uptick in grocery commerce. I think the numbers were just published yesterday, or it was today. I mean, the days are just kind of melding into each other, but Albertsons’s Q3 numbers hit 12.3%, roughly something like overall an 225% increase, it’s a ridiculous number.

Mark Fairhurst: Yeah. It’s staggering. What a lot of retailers are realizing with the way their basket, the order frequency is going up through the roof, and we’re seeing it ourselves.

Sylvain Perrier: I mean, we saw numbers now that are far exceeding, prior to the holidays, minus some of the seasonal events that we’re seeing around snow or bad weather. I mean, that uptick in the basket continues to go, and so on. Now, Albertsons put a interesting decision on the table that I wanted to talk about really quickly, is they’ve made the decision to lay off some of their employees and to replace them with gig workers. And that’s kind of interesting, or specifically with some of the laws that are changing across the industry.

Mark Fairhurst: Right.

Sylvain Perrier: Right?

Mark Fairhurst: And that’s in the wake of Prop 22 being passed, right?

Sylvain Perrier: Right. It’s in the wake of Prop 22, it’s equally there’s modifications that are occurring on Prop 22. What’s unknown here is when they say Albertsons, what’s the impact down at Safeway? I mean, we know historically from the retailers that we talk to, Safeway was the one retailer you’d go to California to kind of see how do they invest in their fleet of vehicles, and how are they setting up their labor model? How are they handling the additional insurance? So it’ll be interesting to see what this means fundamentally for Albertsons as a retailer, but one question, Mark, and I know you and I have been on quite a few calls in the last little while talking to retailers, and we’re consistently asked, what does it mean setting up your own delivery service?

Sylvain Perrier: Do I have to go buy my own vehicles? How do I recruit for this? What are some of the risks? What are my performance standards? And so on, and at Mercatus, we’re a technology company, we’re not necessarily recruiting drivers to do this type of work, and so on. And, and we have a lot of third parties that we’ve integrated to be able to deliver services to our clients. So I really want us to kind of demystify this today. So to help us out with this key subject, joining us from his home, the safety of his home I should say, is Aaron Hageman. And most people, I’m not sure if our team or our retailers have ever heard of him, but he actually is the founder and the CEO of Delivery Drivers Inc., great company, and they’re experts in contract management services for last mile deliveries.

Sylvain Perrier: And so essentially, what does that mean? They actually connect clients with qualified independent contract drivers. And I got to tell you, this is as not as easy as just recruiting people. There’s a lot of business science, there’s HR technology, and there’s a whole heck of a lot of practical knowledge and experience that you’re going to bring together to do this really successfully. Aaron, welcome to the show.

Aaron Hageman: Thanks, guys. I really appreciate you having me on tonight.

Sylvain Perrier: Awesome. So tell us a little bit about your company.

Aaron Hageman: Absolutely. I’m really, really proud of everything we’ve done at DDI, and all the things we’re evolving into doing this year as well. We’ve been in business for over 25 years, and as you really well said at the beginning here, we support last mile delivery programs in a lot of different industries, grocery delivery included, of course, with regards to all of their 1099, HR support needs. Simply, falls into three categories, we spend a lot of time onboarding workers, handling the accounting and taxes associated with workers, and last, but not least, risk management of the workers.

Aaron Hageman: So we’ll be able to dig into different pieces of that today, and running those, because when we think of onboarding, it begins conversations around of recruiting, but detailed conversations I’m excited to have around screening, and evolution, and background checks, and things like that, and diligence and compliance. And, as you had alluded to, onboarding technology, and of course the evolutions we alluded, we talked about Prop 22 already today, a little bit.

Aaron Hageman: And some of the changes that would mean, for example, in benefits, and insurance management, and things like that for the 1099 world. So it’s a complex, and evolving, and exciting. So we help a lot of companies at the end of the day, I’d finished and say with facilitating their delivery programs in-house, through sort of a white label 1099 program, that let you sort of own that customer experience with your customers, as the grocer in this case. So I’m excited to talk about that third party conversation, and how to do this in different ways today.

Sylvain Perrier: Well, that’s great. So let’s take a step back in time, and a little bit of the back to the future here. So it’s Wednesday, March 11th, and President Trump is addressing in the nation, and he’s talking about shutting down the borders at this point. I know from our perspective, the next day was complete chaos. Non Mercatus clients, potential clients, calling us, saying, “We need help.” Mercatus clients calling, “We need to scale our operations.” What happened in your world that next day, and over the course of the last six months?

Aaron Hageman: Yeah. Where to begin, great question. It has been a textbook lesson in entrepreneurial scaling up. And what I mean by that is it’s growth time. So we’ve been hiring a lot, expanding programs, and doing a lot of things, because the scenario you described is exactly what happened with us. Our sales team got phone calls from all different retail sectors, grocery included, of course, that are saying, “Man, we need to pivot to survive, and find a solution to facilitate a delivery program.” Many jumped to some incumbent solutions like Postmates, and Uber Eats, and whatever, Door Dash or partner is in their sector to facilitate some of these things, but a lot of solutions were being looked for. You couple that with some of our big partners and retail partners out there like Walmart, and the grocery program, for example, and it was just, “Buckle down, get ready, no days off.” It’s busy.

Sylvain Perrier: And I’m kind of curious now, how do you recruit drivers? Because I don’t think it’s as easy as posting a job ad out there on JobShark or some of the other job boards.

Aaron Hageman: Not at scale, not at volume, and going through the whole thing. So firstly, it’s part of the answer, it’s a full process where you’re going to look at everything from, as you had alluded to the data, the analytics, and all of the forecasting, the strategy work, the man power planning, looking at a workforce that when we know in the gig economy and last mile has heavy turnover. So you got to be prepared to do that, keep up with growth, and somehow predict trends in a time we’ve never quite experienced before, along the way. So that’s one piece of it is a lot of strategic planning, and work around that.

Aaron Hageman: Secondarily, a lot of technology that leads to automation and speed, and also accuracy, it allows us to move really quickly on that side as well. And last but not least, it’s not as simple as running an ad on Craigslist, or Indeed, or these types of things. So it’s a multi-pronged approach, one driven by a lot of things we might associate typically with marketing campaigns, SEO, search rates, and pay-per-click campaigns, and going to social media for driver recruiting, the same way we may take some of our businesses to social media to buy customers.

Sylvain Perrier: And so this isn’t a question, it’s just you said something that’s kind of interesting, but I think that everything you’re saying is interesting, but in our world, when it comes to e-commerce, there are certain markets that are just more beneficial to operate in. I think the West Coast, I mean the consumers are more attuned, but it’s more of a delivery culture on the West Coast, versus what we see in parts of the middle of the United States. Are you finding today, COVID aside, there are markets that are just more difficult to get, really not just to get drivers, but really good drivers.

Aaron Hageman: Yes. Fundamentally, and two-part challenge the way I would think about it. So one, smaller markets, right? Now there’s suddenly a need in town you’ve never heard of Kansas to find drivers to facilitate our program and to get to our customers that need us. So that is a challenge, right? That’s where we have to be pretty crafty, pretty creative. And I’m not saying this program is economically the cheapest thing out there. Keeping up with driver turnover and labor, it’s a big full-time job. But the second part of the answer, beyond where I think it’s that obvious it’s harder to find drivers where we need them all now, is in the markets that were already in high demand that you referenced. Take a Seattle or a San Francisco or a West Coast market, as you’d said, that might already be attuned to this type of service and convenience in their life, that has scaled up significantly. And so the cost per acquisition of finding drivers in those markets is significantly higher. It’s just more competitive than ever.

Sylvain Perrier: Right. And so let’s say Albertsons, my hypothetical example, they come to you and they say, “We are making a fundamental change in our business, we want to outsource this, it makes no sense.” What’s what’s the lead time that you look to be able to do a full-scale program at the size of an Albertsons?

Aaron Hageman: Well, pretty proud of what we could do at DDI these days, because we onboard thousands of drivers a week in small to large markets, right now, at massive scale. So we have the ability, the software platform, and the infrastructure to bring really most grocers to scale real quickly. My girlfriend always says in Southern California like, “Where’s Trader Joe’s with their delivery program?” Looking for those types of solutions, and things like that, but so we can move real quickly. Usually we have a program that would be anywhere set up with a couple of weeks of planning that we would set up a launch program. We would say to go T minus four, T minus six, here’s sourcing a few weeks out before a launch, and then manage scale for the next 10 weeks after that, till sort of market maturity, you get your driver base, and you can go from there.

Sylvain Perrier: Wow. Well, and so I was having that Mark and I, I think, we’re on a call with a CIO out on the West Coast, this would have been last week. And we were talking about click and collect versus delivery, and so on. And he said, “We don’t want to do delivery right now, just doesn’t make sense for us. We’re concerned around risk.” And I said, “Well, could you give me an example?” “Well, sure, the driver doing something at the door that he shouldn’t, and how do we carry that liability?” So I’d love to hear from you, our expert on the call today, what kind of risks you see out there, and how do you mitigate those?

Aaron Hageman: It’s a great question, because if I was in the room, I probably would have said something similar to what you said, which is, “What risk?” You really got to define the risk, because when we think of driver risk at the point of contact, these days most of my conversations, they just go around safety, PPE, COVID, do 1099 workers through maybe our technology and dispatch have the right to choose on their own volition? Because they’re not employees. The ability to say, “Oh yes, I’m willing to do contact deliveries, non-contact deliveries.” Because I know in grocery, very specifically, all laws in almost every jurisdiction around the country require an ID exchange when alcohol, which is obviously a significant revenue source for our grocery customers, that alcohol is available for delivery. So these require not a dead drop delivery, as I would say, but contact and things like that.

Aaron Hageman: So having the right HR plan, the right technology, and that opportunity, and all those things on that side of the conversation is an example of the risk at the point of content. Liability, I’d still want to know, are we talking about dropping the food and spoiling deliveries? Are we talking about the extended liability around like risk, and theft or things like that, or you don’t malicious crimes that are associated with these things? There are absolutely opportunities to do the best background checks and screenings to approach this conversation for risk mitigation for the corporate brochures.

Sylvain Perrier: And so you’re recruiting thousands of drivers on a weekly basis. I mean, your ramp up time sounds like it’s really fast. How are you managing a consistent brand experience, specifically if you’re deploying so many people?

Aaron Hageman: Yeah. A lot of times drivers these days are deployed to a primary partner. It seems to be the way it works, your drivers find their partner, even when you’re a gig driver. We did surveys recently, I just saw from IT today, I think, from a quick survey, 60% of the network was actively doing other gigs, doing Uber, doing Lyft, and doing other things like that at the same time. So getting them on really fast and working, they’re used to sort of juggling between partners on here. So the brand experience is not so much about the drivers. We’re not making drivers wear hats that say “Albertsons,” and “Safeway,” and things like that anymore. It becomes around branding on owning that experience with our customer as the grocer as much as we can, that’s a conversation I’m having. Are we able to own the customer, the brand, the data and that evolves like, “Are we taking the order initially with that customer? Are we handling customer service communications?” Things like that.

Aaron Hageman: So a detailed conversation, if you really want to get into the weeds around brand experience, because I knew we might bring this up, I was thinking about it. It’s driver communications to the customer varies, I’ve seen with my different partners, and what I mean by that is with partner A, if I’m the customer, and I have a customer service inquiry, maybe a change, maybe this, maybe that, I might have to go to my grocer partner. In scenario B, I might have direct communications with my 1099 delivery driver, but as a customer.

Aaron Hageman: And so there’s I think a conscious strategic decision that we make as the grocer in this scenario, with us at DDI and our partners here, on how is that communication handled then, and how do we want to have that handled? Do we want the driver to have a direct contact experience, or do we want to control that, for lack of a better term, and mitigate that, and do we want to own that? And that latter scenario, a lot of times, customers will have their own rules around that, and they want to do that. So that’s an example.

Sylvain Perrier: Wow. And so Albertsons is going to make this big change shifting from one model to the next, what’s your thoughts? If you had to advise the Albertsons team and say, “You need to be mindful of these things.”

Aaron Hageman: Yeah. To that question specifically, didn’t see that one coming, so that’s a fun question. I had a prep question or two on this one, it wasn’t on the list, so let’s go.

Sylvain Perrier: Sorry.

Aaron Hageman: No, I like it. No, what would be advice be?

Sylvain Perrier: [crosstalk 00:18:36].

Aaron Hageman: No, not at all. I’m ready for that one. I think of the DDI pieces, right? I think of what’s important for enterprise level grocery delivery. We participate in this game, and their conversation around velocity, and risk mitigation, and not ever, in my experience, a willingness to cut any corners on background checks and things like that. So do we have the fastest, best, and let’s be candid at this scale, most economically viable, HR solution out there? Those are the three points of concern. Now secondarily, let’s talk about from my side, I would talk about what we do then. Okay, so let’s talk about onboarding. Now we’re going to talk about the economics of the accounting, and the taxes, the payroll engines, and making sure we have best in market. Because if your Albertsons, to use the name specifically in your example, you’re first in class, you’re one of the big three grocers, right? So you’re going to want to make sure that everybody’s got the best experience out there and all that.

Sylvain Perrier: Amazing. Now I want you to pull out your crystal ball.

Aaron Hageman: All right.

Sylvain Perrier: And we’re seeing a lot of legislative change happening, California is typically the first state to spark a lot of things, whether it’s Prop 22, CCPA, all those great things. And when you’re thinking about the gig economy, a new administration is coming in, in a matter of days, quite frankly, at this point, what do you foresee changing around gig workers and protecting their rights and so on?

Aaron Hageman: Yeah. Great question. I’m excited about what’s going to happen. This has been the core of what we’ve done at DDI for 25 years, it’s 1099 compliance, facilitate all the HR programs, but at the end of the day, making sure that the 1099 game is facilitated correctly. So one, it’s just an insane, complicated roadmap, especially for, I think, the level of the conversation we’re having today, where our business operations in most cases are scaling, even for regional grocers across multiple states, the 1099 definition in New Mexico, versus Texas, versus Colorado is different.

Sylvain Perrier: Oh.

Aaron Hageman: And is continually evolving. And we see things like Prop 22 in California, which is a specific pass on California’s unique evolution to take on what is or is not a 1099 worker versus a W2 worker. Whereas then I can tell you with authority that Oregon has a different test, and Washington has a different test. So if you’re a West Coast grocer, you need to be able to facilitate this labor employment and labor law roadmap with partners like DDI. And that’s where we fit in on these things, to make sure that when we’re recruiting, or when we’re doing the accounting, the taxes, all the different pieces, they’re done right.

Aaron Hageman: How injury insurance is done for a 1099 driver in California is now different than other States, and you asked the crystal ball question, which it’s already started to come to vision in the sense that Pennsylvania, New York, the federal government behind the current outgoing administration has recently passed on January 8th, there’s an updated Department of Labor to federal guidelines on here, which changes the underlying state if the state didn’t make their own rules. So the roadmap is changing, and the sands that we all are sort of working on are very shifting on here. So you need a full-time proactive effort on this conversation.

Sylvain Perrier: This is fascinating. So Aaron, for our listeners that I’m sure are going to want to reach out to you, how do they get ahold of you?

Aaron Hageman: These days, I think I’ve found in this platform the best way is LinkedIn. So you have my name on screen. It’s Aaron Hageman, pretty straight forward, if find me on there and hit DDI, connect with me directly. Happy to engage in a quick conversation there, and then bring you the right team members, whether it’s technology, or business development, or risk management, whoever we need to join the conversation on that side. But for me, LinkedIn is a great way.

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

Mark Fairhurst: Yeah, it’s very simple. It’s digitalgrocer.com, or follow us on our social channels like LinkedIn, Twitter, Facebook, very easy to access.

Sylvain Perrier: Awesome. Ladies and gentlemen, thank you for listening to episode seven, don’t forget to keep your eye out to download episode eight, season four. Peace.