Grocery retail strategy and execution that grows shopper loyalty – Grocery Podcast S4 E8
Sylvain and Mark kick off this show with a chat about hot industry news: Marc Lore is leaving Walmart and Instacart is hiring a veteran from Goldman Sachs as CFO.
The duo then welcomes back to the show David Bishop, Partner, Brick Meets Clicks, who’s here today to share key results from his firm’s latest survey: State of the US eGrocery Market, November 2020. David points out that
“customer satisfaction is a leading indicator for repeat purchases. And it also tells us a lot of other things around the fulfillment methods and areas of opportunity that the retailers can really explore to continue to grow the business in a more sustainable way.”
In this episode, David shares his technique of “interrogating insights” to reveal the truth behind the stats:
“the real question is, do we believe the forecast going forward? How much confidence do we have in that? And that comes only from really interrogating insights. …you really have to start by asking the right questions and then understanding what those insights mean.”
The first slide to be interrogated looks at online shopping rates, which in David’s hands offer up important insights around acquisition and growth moving forward. Among them:
“We need to keep in mind, it’s going to be harder to steal away customers from other retailers. And the simple reason is the other retailers are going through a very similar process where their customers are maturing. We now have the bulk of customers who are actively shopping online with grocers past their fourth order. And at that point, their likelihood to repeat is near certainty. It’s 95%. The number of people who are considered first time orders … it’s close to 15%. It used to be around 25% a year ago. And that’s really key for driving top line growth because a lot of the growth accrues from onboarding that first time customer and bringing them to the more established fourth or more order. So it’s an orientation where there’s this kind of subtle shift from a thematic standpoint, from growing via marketing on the internet to really focusing on merchandising with your existing customer.”
Sylvain asks David what are the key things that retailers need to recognize in today’s online consumer? David’s response: “the expectations that customers have at your stores are being influenced by [their] experiences at others.”
The next graph compares customer experience scores for ship-to-home, delivery and pickup. David notes that while the “perfect order” rating for delivery was nearly equal to ship-to-home, pickup lagged significantly.
Why? To get to the bottom of this, David then deconstructs the third graph, Customer Satisfaction scores. He analyzes two friction points that customers encounter more with pickup than delivery: “Selected preferred time slot” and “received order in a timely manner.”
Combining a customer-centric viewpoint with his insider’s knowledge of the retail grocery business, David unlocks insights around the strategies and executions grocers can use to increase CuSat ratings and grow customer loyalty: Investing in pick productivities and proactive geolocation and communication tools to reduce friction on the customer.
“this is a retention tool. This is a way to maintain the satisfaction, especially if you realize that in some malls, someone’s stopping at the Target, doing their drive up, and then driving right down to your store and having a terrible, long experience that’s five, six, seven minutes long. If that happens, people aren’t going to be as forgiving, going forward.”
The real magic lies in the way David dissects the stats, revealing strategic insights that can help you improve your pickup program and grow shopper loyalty. Check it out by tuning into the the episode.
David Bishop, Partner, Brick Meets Click
David Bishop leads Brick Meets Click’s consumer research, retailer benchmarking, and market forecasting programs while also working closely with grocers to improve results flowing from their omnichannel strategies.
Sylvain Perrier: Ladies and gentlemen, welcome to Digital Grocer, Mercatus’s very own, I want to call it podcast, video series. Doesn’t really matter at this point. We’ve been doing so many episodes. Season four, episode eight. And as always, joining me from the safety of his home office is Mark Fairhurst, our VP of marketing. Mark, welcome to the show.
Mark Fairhurst: Good to be back. Good to be back. It’s not a bunker anymore. It’s not a bunker?
Sylvain Perrier: Why is it not a bunker anymore?
Mark Fairhurst: It’s elevated to home office.
Sylvain Perrier: Oh, it’s 2021. I just got to change it up at this point.
Mark Fairhurst: That’s right. That’s right. It’s as comfortable as ever. I got one heater going. If I turn the other one on, it blows the circuit.
Sylvain Perrier: Okay. Well let’s be careful in blowing any circuits in your home. I’m surprised you got rid of the Christmas tree and the fireplace.
Mark Fairhurst: Yes, I got my Yoda, my little Yoda here.
Sylvain Perrier: Yes. And is that a Monet sunset in the back or what is that? What’s going on?
Mark Fairhurst: Yeah, that’s just a winter scape.
Sylvain Perrier: Oh, winter scape.
Mark Fairhurst: Winter scape with a light that’s causing some awesome glare, unfortunately.
Sylvain Perrier: Awesome. Yeah, no worries. Hey, listen, there’s a lot going out in the industry. You and I have been keeping tabs on the trades. I think the big news that kind of came out of Walmart is Marc Lore is gone.
Mark Fairhurst: Yeah. Yeah.
Sylvain Perrier: Any sense? Is he gone? Was it amicable? Do we know?
Mark Fairhurst: Well, I think a lot of people are saying it’s about time. Everyone suspected that this would happen. And for those who don’t know, Marc Lore came over in the Jet acquisition and basically re-engineered Walmart’s e-commerce experience. Yeah. So I think he’s on staff or available till September.
Sylvain Perrier: Interesting. Okay. [crosstalk]
Mark Fairhurst: [crosstalk 00:02:17].
Sylvain Perrier: Right. Do we know any sense of where he’s going? I mean, when I got the news, I was thinking to myself he would make an interesting addition over on the Instacart team.
Mark Fairhurst: Yeah. Yep.
Sylvain Perrier: And so we don’t know yet?
Mark Fairhurst: No. Media speculation, one, yes, he would be a pretty strong fit at Instacart. The printed speculation is his food truck business, which I think his brother is running. Or this new venture, something about the Digital City. But that was the first time I read about that. He was mentioned in a Recode article.
Sylvain Perrier: Yeah. And we would know something about Digital City. I mean, the partnership that the city of Toronto had with Google in terms of kind of developing out … What’s it called? Is it the Don Lands at the bottom of the Don River at the bottom of the highway in Toronto? I mean, which is prime for redevelopment and it’s a beautiful space, but Google backed out. There were some privacy concerns.
Sylvain Perrier: The other big change is, it seems there’s been a CFO change over at Instacart. So they brought in a veteran from Goldman Sachs, been with Goldman for 20, 23, 24 years. I mean, great indication likely that they’re going to go IPO. Their former CFO, Sagar, no idea where he’s going. Was it an amicable split? Markc, are you hearing anything on the streets from your contacts?
Mark Fairhurst: No, it’s basically the same as you. It’s the ever closings Instacart IPO. So this is just another step along the way, I think.
Sylvain Perrier: Yeah, I would say. So, listen, guys, we love to banter and share with you guys what’s happening in this space and in the news. But we have an action packed show for you today. Marc and I are bringing on board one of our favorite guests and his name is David Bishop.
Sylvain Perrier: David works for Brick Meets Click. We’ve done tons of webinars with them. We’ve done an incredible amount of research. And research gets, quite frankly, a lot of traction in this space, and really insightful in terms of when you put this in the hands of grocers that are trying to figure out how to deliver profitable experiences when it comes to click and collect, click and deliver and so on. And I enjoy getting the reports. I enjoy reading them. I love the back and forth that we have with David. It just kind of crystallizes that at the end of the day, if you’re going to run a business in the modern era, and especially around e-commerce, especially in grocery, you want to have that tangible asset of insights to help you drive your strategic vision forward. And he has just recently released or about to release this report. We felt it just kind of made sense to bring him on board to chat with us. This is a man who really needs no introduction. David, welcome to the show.
David Bishop: Oh, thank you very much. I appreciate it.
Sylvain Perrier: You’re welcome. You’re welcome. I had to do that. Sorry.
David Bishop: No, for the people out there, there are about a hundred people outside. This is like The Today Show. Some people hanging … Oh, keep your shirts on ladies. So let’s get going here.
Sylvain Perrier: It’s crazy. I-
Mark Fairhurst: I got to tell you, originally we played hard to get with David. David reached out like three years ago and it was only I think in the last year that we’ve actually been able to develop a pretty complementary relationship between what Mercatus does and what Bricks Meets Click does. And I think it’s turned out really well.
David Bishop: Yeah, I think you guys have always had some very thought provoking insights. I think having a point of view is important in this space. We’re all learning it. And so the more we can share with one another, the smarter we all collectively get.
Sylvain Perrier: Yeah, absolutely.
Mark Fairhurst: 100%.
Sylvain Perrier: Yeah. So before we kind of jump into these really three key slides that we’ve kind of decided that really made sense to share with the audience, give us the lay up on the research, the process and so on, because I know that’s really juicy tidbit information that the audience really likes.
David Bishop: Yeah. We actually started with this research all the way back in 2011, believe it or not. We started primarily working with retailers to understand their specific markets. And then there was a growing realization, hey, there’s interest for more of a national macro view. So we adapted our methodologies that we use with retailers specifically starting in 2015 to start looking at the national. It informed a lot of the things we do, like our three A’s growth framework, our seamless shopping scorecard, things of that sort. But more recently we had been on a cadence of doing this once a year up until COVID, simply because we were on a slow, steady incline. So we normally would have done it in August. All of a sudden March came around and we dusted off what we did, updated it a little bit, and turned on a monthly cadence. And you guys had participated in, helped us add some additional insights to that.
David Bishop: We went to a quarterly in August sensing the markets were settling down and we’ve done that through the fourth quarter of this year. And now we’re getting a lot of interest from retailers to go back to monthly. Frankly, because we’re in the lane of the blind where the one eyed monster is king, or like that famous fable, if that’s the right term, seven blind men feeling the elephant all from different parts, trying to describe what it looks like.
David Bishop: So we take a very customer centric view. We start with the household and take a 360 view in terms of where, when and how they shop online for groceries so they that’s shipped to home delivery and pickup. And then we really focus on what we consider the most relevant segment of that, the monthly active users, because after all, people are going to the grocery store at least once a week. So to have a hurdle of shopping online once a month, it’s not a really high standard, but it is a relevant one, especially in an emerging area.
David Bishop: And then we really dwell into the most recent experience to get a lot more insights into how are those experiences being had from the customer standpoint? And what does that mean going forward? Because we know the customer satisfaction is a leading indicator for repeat purchases. And it also tells us a lot of other things around the fulfillment methods and areas of opportunity that the retailers can really explore to continue to grow the business in a more sustainable way.
Sylvain Perrier: So before we jumped into the research, I want to ask you a question. I mean, I remember years ago … Shoot, not even a year ago. I would say same time last year. If you talk to a retailer and you say, “We speculate that the market will be this size by this date. Our data is teaching us this. You should be mindful of that,” I would, and maybe because I don’t have a research pedigree, would be met with a lot of skepticism from retailers. But you’re a researcher. You’re an expert at this. And when you find yourself, call it we’re in the, I don’t know, I guess the first year of the pandemic, are you finding that your retailers that you’re interacting with now are saying, “Yeah, I absolutely believe these numbers now”?
David Bishop: Yeah. I think the first thing, if we look at kind of the laws of retail first and foremost, it’s always defend the base. But if you listen to what I’ve said, defend the base, it’s reactionary/ it isn’t until you’ve defended the bases that you focus on profit, and then beyond that focus on differentiation. In a business where you’re facing increasing threats, differentiation kind of gets put on pause. Profits also gets paused and we try to lower price as a way to maintain that.
David Bishop: When we look at e-commerce, obviously if people had their druthers, go back to 2016, 2017 folks would be looking at this saying, “Well, it’s not a large portion of our business. We’re not really inclined to make the move.” But then we have the announced acquisition of Whole Foods in 2017. And that’s a defensive reaction to what was happening, which was this perceived threat that my business is under attack, therefore I have to respond. So reactionary. And retailers very quickly made choices in terms of how they were going to go online. But at that point, that was an executional response. It wasn’t a strategic one.
David Bishop: And we’re still seeing that play out today. What we’re seeing is that if we look at performance today, most of the issues that we see, while obviously they’re operational in nature, they’re actually derived mainly by the absence of a sound strategy. So when COVID happened, we actually had done some strategic planning just prior. We wrapped up at the end of February. We would have unfortunately had the final meeting in March, but we accelerated it fortunately. And at that time we were doing a five-year plan.
David Bishop: And the five-year plan was based on no black swan event, and still there was a degree of healthy skepticism and doubt. Obviously as a retailer looks at this, if they say, “We don’t necessarily want to motivate our in-store shopper to shop online. If it’s too easy, then they will do that and we, from a contribution margin standpoint, will have lower margins. So we want to be very mindful of that.” So profit over sales has always been the orientation of a brick and mortar retailer, and that makes a lot of sense.
David Bishop: The challenges, the motives of the new entrants, aren’t driven by the same business model. They’re driven by possibly a digital footprint that rewards them with ad dollars, and they don’t have the same operating model and they put sales over profit. And so that really puts the traditional brick and mortar in a pickle. And then what do you do about that?
David Bishop: Obviously COVID really focused on, “Oh my gosh, we have this surge in demand. Now we have to meet it.” Again, an operational challenge that’s been met for the most part, but what we’re still seeing today, and in fact, we’re engaged with retailers as we speak, different retailers, on their five-year strategic plan. And now the question is, okay, what does the future look like? Do we get back to that slow and steady incline from an albeit larger base? Or does it continue to have these massive swings where we have to deal with surge capacity? We don’t know. So you have to have those contingencies or scenarios planned out, but ultimately there’s some even bigger decisions now because now people are looking at large capex investments and things like micro fulfillment. And the real question is, do we believe the forecast going forward? How much confidence do we have in that? And that comes only from really interrogating insights. And by interrogating insights, you really have to start by asking the right questions and then understanding what those insights mean.
David Bishop: We often find that people will be looking for those in somewhat of a haphazard fashion to support a specific issue without looking at the bigger picture. So again, we wrestle with constantly reframing the discussion around, is it an operational issue or is it a strategic issue? I think right now, many of the retailers have probably more of a strategic issue in front of them than an operational one. And that’s important because as we start to get into 2021, we have one more quarter of easy comps, and then we have to figure out what do we do from there?
David Bishop: And so if they’re not already looking at ways to build the basket, retain those customers that they’ve engaged, and make more money on a contribution margin basis for the online shopper, they’re already going to be behind the game because other retailers… Take Target, the gold standard out there today, really has been clicking and has been doing that probably for about two and a half years. It’s just becoming clear to people that their strategy made a lot of sense. And you can see even now, Walmart is actually imitating Target’s stores fulfillment strategy, really indicating or confirming the soundness of that move because it improves the number one fiscal asset that every retailer has, the physical store, and leverages the main strategic asset that we set in 2017 that every physical retailer has, and that’s proximity to the customer.
Sylvain Perrier: Got it. Okay. That’s amazing. Let’s just dive in. Let me put up the first slide here.
David Bishop: Let’s go for it. Fire.
Sylvain Perrier: Tell us what you see.
David Bishop: Ooh, that’s a lot of stuff. Well, I see a big chart here. So we got this donut hole chart over there. In the middle it says 89.1 million. I want to just kind of put this in context. That is 89.1 million households within the last year have gone online to buy some groceries. Now, this number here in particular is really representative of households that might’ve gone online, let’s say to Amazon’s marketplace, ordered something, their favorite cookies for instance. They got them put in a box, shipped via UPS or FedEx or even Amazon, and arrives at their doorstep. Includes your home delivery. Most notably people like Peapod and FreshDirect, but also from other retailers. And your store pickup. When you look at that 89.1 million, that’s about, just under, I should say, just under 70% of the U.S. households.
David Bishop: So why did I say that? Well, if you’re wondering what’s going to motivate someone to go online, we just had a major event. It’s called COVID-19. And even so, 30% of the U.S. households did not go online. Now, there are reasons for that. About 10%, don’t use the internet, as hard as that is to believe, but there’s still another 20% that you would say, “Why didn’t they?” That’s because they prefer to shop in the physical world, and that’s fine.
David Bishop: Now, today, the blue, that’s 60.1, that represents around 46% of all of U.S. households. And if we were to only focus on those who use delivery and pickup looking at November’s numbers, of the 60.1, it would be just under 39 million. Now, that’s 30% of the U.S. households that went online during the past month, in this case November, and placed an order and received it via home delivery or store pickup. That 30%, put it in context, versus August of last year, which we’re using as our pre-COVID kind of indicator, we only had 16 million households or just over 12%. So we went from 12% of households actively using delivery and pickup during the prior month, to 30%. So just an extraordinary acceleration in adoption, or what I also say trial. And we have COVID-19 to thank largely for that.
David Bishop: But I think the other part of it, and the reason why you have the two parts, the smaller sections highlighted, is that you have 18.2 million households, that roughly equals 14% and 10 or almost 11 million, which is 8% of all U.S. households that have gone online to buy groceries within the last year, but just not in the last month. So the gray bar we would consider lapsed or potentially infrequent. And the red, most likely we would say is lost because this is someone who bought maybe three or more months ago. And the reason that’s important is, again, if COVID didn’t bring you online, what will?
David Bishop: Well, what we know from our November research, and we didn’t share this publicly, is that a financial incentive may attract 35% of those people who haven’t bought online during the past 30 days. Or word of mouth referral may be about 25%. But the number one reason that would cause someone who doesn’t shop online to shop online is a medical issue. Right? I broke my leg. I hurt my back. I got COVID, I can’t go to the store. Over 50% of the customers say that’s the reason.
David Bishop: So absent further retail restrictions or worst stay-at-home orders, we can see that we have a pretty good ceiling relative to what’s the customer pool that we’re now fishing in relative to retailers. And so retailers need to now take heed, and one, obviously build engagement with that blue section, the 60 million, and ensure that they’re really delivering against their expectations and increasing the customer lifetime value they have and helping them become brand ambassadors to spread the word that we’re the place to shop at. Short of that, then if we’re looking at, okay, how do I acquire new customers? We need to keep in mind, it’s going to be harder to steal away customers from other retailers. And the simple reason is the other retailers are going through a very similar process where their customers are maturing. We now have the bulk of customers who are actively shopping online with grocers past their fourth order. And at that point, their likelihood to repeat is near certainty. It’s 95%. The number of people who are considered first time orders, and we define first time as it’s the first time you’ve gone and shopped with a particular service online within the last three months is going down, and now it’s close to 15%. It used to be around 25% a year ago. And that’s really key for driving top line growth because a lot of the growth accrues from onboarding that first time customer and bringing them to the more established fourth or more order.
David Bishop: So retailers need to really look at how they’re allocating their marketing dollars and how they’re trying to target and acquire either a lapsed customer, which is theirs, or a lost customer, maybe from someone else who said, “Yeah, I just wasn’t happy with the experience. I had to wait 10 minutes.” And that as opposed to just simply spending dollars, trying to chase people on the web.
David Bishop: So it’s an orientation where there’s this kind of subtle shift from a thematic standpoint, from growing via marketing on the internet to really focusing on merchandising with your existing customer. And that comes through in terms of how effective search is to your recommendation engines, to your various suggestive and upselling tools, as well as your CRM applications in terms of making sure that you’re engaging those, especially those who you would define as lapsed. And again, we would define a lapsed customer as a person who hasn’t place an order with you within the last month. We would probably consider them lost once it got past three months, because unless we’re in a very unique situation, that’s just not a good sign.
Sylvain Perrier: Now, I’m kind of curious here at this point. If I was to talk to a retailer, or if you’re talking to a retailer, what are you telling them are the key things that you’re seeing in terms of what they need to recognize in today’s online consumer?
David Bishop: The expectations have continued to change. One thing I try to say to the retailers is the expectations that customers have at your stores are being influenced by experiences at others. And I’ve shared with you before that the magical moment of my Target drive up. Target internally has the goal of delivering a drive up order in two minutes or less, and they do a very consistent job with that. So I take that to my grocery store and say, “Okay, if Target can do it, let’s see how my grocery store does.” Well, unfortunately, a lot of grocery stores haven’t invested the same way and don’t have the soundness of strategy that Target does. As a consequence, I have a very different experience, and I’m not happy by it. And I’m not happy because I wonder, “Well, if Target could do it, why couldn’t you?”
David Bishop: And so it’s that realization that we need to recognize the customer’s expectations continue to change. They’re becoming more familiar with how to use the technology, they’re becoming more experienced, and they have a deeper well of experience across channel. And if people say, “Well, that’s Target, it’s not a grocery store,” well, we have seen, as you know, that we’re now north of 20% crossover shop between a person who shops online during the last month at a grocery store and also doing the same in a mass merchant, like a Walmart or Target. So it’s very much relevant to say expectations at Target or Walmart are going to influence the expectations at a grocery store.
David Bishop: I should say the experience at a Target or a Walmart will shape your expectations at a grocery store.
Sylvain Perrier: Great. So let’s just dive into the next slide. Let me bring it up.
David Bishop: Yeah, yeah. So we’re looking at here kind of a horizontal stack chart, looking at the distribution of customer experience scores across the three ways online orders are received. We don’t say fulfillment. Fulfillment is a broader term, but in terms of received, ship to home, delivery, and pickup. Obviously, we’re not going to dwell on the ship to home. That’s something that most households have done. Again, you buy something, and it gets thrown in a cardboard box, taped up, and sent to you. That’s a pretty straightforward model, and you can see the average score on the far right, just about 51. But, again, the averages are just that. They’re just averages.
David Bishop: So we break it into this stack chart, looking at the distributions, and many of the retailers we work with, as you know, Sylvain, is they like to have a perfect order score. So that perfect order score is based on whatever metrics that they are including in that. We have six, and we’ll touch on it in a minute. But one, when we look at delivery, first of all, delivery scores exceptionally well against ship to home, and that’s really noteworthy, because home delivery is a very challenging and complex order. It’s not just throwing it in a cardboard box. We have eggs. We have ice cream. We have tomatoes and avocados. We have alcohol, and we have a whole range of items, on average between 30 and 40 in the basket. So there’s a lot of issues with perishability, time-sensitive and pressure sensitive products that we have to handle, and the point is from a perfect order score, delivery’s scoring exceptionally well relative to ship to home.
David Bishop: Now, when you look at pickup, obviously, it’s lagging considerably on the perfect order. Now, if we expand the definition of perfect to near-perfect, we would include the 90% and above, and we can see that pickup does close the gap considerably, but still the question is, why is that? So this is interrogating the insights, because that’s where the actionable value really comes. We say that because pickup, really, from a strategic and economic perspective is where physical brick and mortars win. We’ve been saying that since 2016. So to have an indicator like this, it’s almost as if we have a flashing red light saying, “We need to look into that,” which is exactly what we did. I think that’s what we’ll have on the next slide.
David Bishop: So, again, putting aside ship to home, we’re now looking at what we consider that near-perfect order. So the customer across six friction points, you can see the six friction points on the chart, from “I was able to order everything that I wanted” to the very far right, “I received all the items I ordered in good condition.” In this case, again, this is based on a national survey of households across channels. So these numbers reflect not just grocery, but grocery en masse. So there are some issues with the sampling that make the numbers sometimes harder to interpret, which, for instance, got all the items you ordered, we see pickup is really trailing here. That’s kind of not the message I want to focus on, but this is a function of the realities we’re at. We may have had some orders that unfortunately in the pickup spot just did not get a substitution made, so we had more item voids. We could have had poor performance in that.
David Bishop: I say that’s more of a function of the surveying, because when you look at the one to the left of alerted of out-of-stocks, very similar. If we were doing this for a specific retailer, we would expect the alert out-of-stocks and got all the items you ordered to trend in a very similar direction and magnitude, because they’re generally going to be fulfilled from the same locations, at least today.
David Bishop: So moving that aside, the two that I want to focus on as relates to explaining why pickup’s getting the lower score and, more importantly, what does that mean to a retailer and what should they do about it, first is “I was able to select the preferred time slot.” Here, the customer satisfaction, again, essentially 90% and above, we have a ten-point lag in the percentage of customers using pickup indicating that they were very to extremely satisfied with that component of the shopping experience.
David Bishop: Now, you have to say, “Why is that?” Well, we know there’s been a surge in demand. Most of the time, people say, “Well, it just means the pickup slots filled up faster.” That’s true, but here’s the rub. The rub is, and I did this just yesterday for a client, I went on at 8:30, and even though their lead time that they promote is three hours or four hours, let’s say, I couldn’t get a pickup order until 5:00 at night. So 8:30 in the morning, 5:00 at night. So the reality is that lead time at least that they promote is meaningless and, in fact, almost incendiary, because you basically told me I could get something quicker than I really can. So clearly a capacity issue there.
David Bishop: But at the same time, if you were to toggle over to delivery, at 8:30 in the morning, all of a sudden, you find, “Oh, I can now get the order within two hours.” So if I’m inclined to just get it faster and I don’t have a strong preference for delivery or pickup, well, then I’m going to switch over to delivery. The problem with that for the retailer is that’s a higher cost to serve, whether it’s first party or third party. So you’ve just compressed your own margins, because you don’t have the capacity. So shame on you, retailers.
David Bishop: At the same time, the issue is why does that happen? Well, most of the delivery today is being handled by third party, either a third-party logistics provider, like an Uber or a DoorDash, or by a full-service provider, like a Shipt or an Instacart. With that model, they’re able to have much more capacity in the system to flex up and down to meet that demand. On the pickup side, that’s almost entirely on the retailer and a function that they haven’t invested in building the capacity. What do they need to do to build the capacity? First and foremost, they need to add the ability to pick more orders more quickly in the store.
David Bishop: Now, what some have simply done is added bodies, thrown bodies at the problem. The issue with that simply is that’s just a band-aid to the problem. The problem is the pick productivities. So enhanced stocking or pick and pack solutions like ShopperKit are one of the very first things we would recommend that a retailer evaluate, because you could see a reduction of up to 30% by moving from a manual single pick to a pick.
David Bishop: So that’s the first part. The second is receive the order in a timely manner, and this is really fascinating. A year ago or more, it would be the other way around. Delivery would have had the lower score, and that’s because the perceived wait time is really related to the time window. So most deliveries are one-hour or two-hour time windows, and the customer felt compelled to have to stay around the home to receive the order, because, after all, they were mostly attended orders. Well, now, partially because of the COVID-19, we’ve shifted from attended to unattended, or contactless, as they said. But more importantly, the communication tools that the delivery providers are using are proactively sharing information and updates or alerts with the customer.
David Bishop: So my wife ordered the other day, and she got the alert that the shopper was just leaving the store, which meant they’ll be there in the next five minutes, just based on where the store’s by our house. So she’s not going to jump in the shower, because she wants to be there. But at the same time, it’s an unattended delivery, so she doesn’t have to be present to receive the order, just like what Amazon has done with their parcel drops. There’s a notification once it’s been delivered. So those proactive communications are present.
David Bishop: On the pickup side, again, the responsibility of the retailer, there’s very little, if any proactive communication from the retailer to the customer. It’s all reactive, and that is triggered by the customer. Most of it is pretty friction-filled. I pull up. I now have to pull out my phone, worst, call a number or text or open the app and hit “I’m here.” Those all require additional steps, which are friction points. It’s not easy, nor is it quick.
David Bishop: So the solution, obviously, is investing in technology that utilizes various geolocation tools, geo-fence and beacons, and embedding that within the mobile app as a way to automate the notification system, take the burden off the customer, and proactively communicate in advance of arrival. That’s what Target does. I mean, Target has a geo-fence that’s about 100, 150 yards away from the pickup point, and once you trip it, they’ve got about a 30-second jump on you. So in their internal two-minute time, they may be factoring that in. I don’t know for a fact. But from the customer standpoint, I’m not consider that wait time until I pull in and put my car in park. That’s why in the video I shared with you before, it was actually amazing to see the person come out 15 seconds after I pulled up, and that’s because,. in reality, they were already working on the order, retrieving it, assembling it, getting it ready 30 seconds before I pulled up.
David Bishop: So as we look at that, retailers really need to now invest in these areas, and that’s part of the strategy, something with the geolocation services. Retailers still, believe it or not, look at it as a cost of doing business, but that’s not a justification for why I do it. It’s almost a justification for why I don’t do it, which is it’s just adding costs. If I reframe it another way, this is a retention tool. This is a way to maintain the satisfaction, especially if you realize that in some malls, someone’s stopping at the Target, doing their drive up, and then driving right down to your store and having a terrible, long experience that’s five, six, seven minutes long. If that happens, people aren’t going to be as forgiving, going forward, because it’s just simply a reflection of where you’re placing your value. That’s not valuing the customer’s time, and the customer won’t be appreciated, then the worst, maybe change to another retailer who does do a better job delivering in a more appropriate timeframe. So that’s kind of I guess the 411, if you will, of those slides, Sylvain.
Sylvain Perrier: That’s great. So question for you. This is where I need you to pull out your crystal ball.
David Bishop: I’ve got it right here, my little orange. I got this from the orange Walmart pickup point in Lincolnshire, I think.
Sylvain Perrier: It’s perfect. Perfect.
David Bishop: Lincolnwood. Lincolnwood.
Sylvain Perrier: Lincolnwood. Did you get it in under ten minutes?
David Bishop: I can’t recall. I had a few senior citizens with me who were complicating efforts.
Sylvain Perrier: Oh, that’s okay. That’s okay. That happens, right?
David Bishop: Yeah.
Sylvain Perrier: So tell me issues, actions that you anticipate happening this calendar year.
David Bishop: Well, I think from a theme standpoint, strategic theme, it’s really owning the customer connections.
David Bishop: So we talked about owning the customer. What we’re really saying is, wherever there’s direct face-to-face interaction with a customer that matters, we want the retailer to own it. So in the case of delivery, for instance, if the trend continues to be contactless or unattended, well then there isn’t necessarily a direct face-to-face interaction, which means the strategy should shift to optimizing based on capabilities. And that’s where the third party logistic providers, again, people like Uber, DoorDash, and some others can offer white label services on behalf of the retailers. They’re already doing that. But it also does then mean reclaiming some greater degree of control over their ordering platforms. And this is a nuance. It is a difference with a distinction. You could be a first party platform but not have control over, for instance, your search algorithms or your advertising algorithms.
David Bishop: So these are important as you start to look at the customer experience and say, for instance, if a customer specifies a particular brand in a search… I won’t name any, and what comes back is not that specified brand but rather feature products in advance of the brand, we would argue that the retailer should be the one who determines whether that’s in effect what happens with their customers. We understand there may be some ad dollars that are at play there. But from a customer perspective, we believe that if intent is specified like that, a seamless shopping customer-centric retailer would absolutely adhere to the standards that if a brand is called, a brand is delivered. If they say a generic term like peanut butter, have at it. Throw all the features and promotions at them, put the private label first. But the minute they put the brand in there, respect the brand, respect the customer. Put it first. And customers and retailers need to have that ability to do that. They don’t, unfortunately, today.
Sylvain Perrier: Yeah. It’s interesting. There seems to be this… And you may hear about this in your conversations, this lack of understanding of organic search that really, at the end of the day, a vendor that influences the algorithms to their benefit, it is to the detriment not just of the retailer but fundamentally to the consumer. And it’s interesting that you raise that. Are you seeing anything else in your crystal ball, orange clementine?
David Bishop: Yeah. I think there is, at least in some of the conversations we have, a growing appreciation for the role of strategic pricing. This notion of parity pricing, you really have to then actually ask, “What do you mean by that?” Because there’s a lot of different layers to that. Someone may say, “Well, we want the same price online as we offer in store.” Then the question is, are you saying if you have a first party platform, that’s the case? Or are you also saying if you’re also on a third-party marketplace, you want that? We would argue that the latter you don’t want. There are reasons why the retailer, if they want to own the customer connections, would be motivated to have a bifurcated pricing strategy online. And I think I wrote a blog about this with Mercatus, but more importantly, you don’t want to create disincentives for them to actually use your service.
David Bishop: Because after all, if it’s your customer, you want to own those connections. And if you’re working with other parties, you want to make sure that those partnerships are in alignment with your strategy. The fundamental challenge is if you don’t have a strategy, you don’t know whether you have alignment or not.
Sylvain Perrier: Yeah, absolutely. I’ve got to say, I always love having you on the show, David. Mark, any last questions for David you can think of.
Mark Fairhurst: No, I was just going to ask what happened to the rest of the clementines? Did you just buy the one?
David Bishop: No, this is just a stress ball that they gave. And they had a few other sundry items with it. I keep it in my drawer. I sometimes throw it at the wall, but it’s more of a stress ball than anything.
Sylvain Perrier: Yeah. Mark, you get it free if you wait for more than 30 minutes.
Mark Fairhurst: Oh my God. Yeah, I’d be out of there, man. No.
Sylvain Perrier: Doing donuts in the parking lot with the car, just like, “Where’s my-“
David Bishop: Well, the funny story I had was I was in another market doing all my market research for another retailer before COVID, and I forgot I used my pseudo name when I signed up. So when I pulled into the parking lot they actually had the attendant come out and they asked, “What’s the name of the order?” And I told him my real name. They went in and said, “Sir, we don’t have it.” I said, “Man.” I was trying to be patient. And I’m like, “You guys are really incompetent.” And then it was about five minutes in. And then they’re like, “Sir, the only thing we have in there is something for…” Should I say my pseudonym?
Sylvain Perrier: Yeah, yeah.
David Bishop: It’s John Wayne. I’m like, “Oh. Oh, that’s me. That’s me.” I said, “I’m sorry, I must’ve forgot.” So it’s like IT, it’s only as good as the user. In this case I fooled myself, so shame on me.
Sylvain Perrier: That’s awesome. David, thank you so much for joining us. Listen, how do people get ahold of you?
David Bishop: Well, they could reach me at my email. david.bishop@brickmeetsclick. They could always call me, but you’d need to know that number. So email me is the best way. You could like me. I don’t want to say like me. I guess link with me, connect with me. Whatever the right term is on LinkedIn. And that’s about it. So reach out via email, connect with me on LinkedIn, and we’ll go from there.
Sylvain Perrier: Awesome. That’s great. Mark, another great show. I’m looking forward to the next one.
Mark Fairhurst: Yeah. That was fantastic. And very good on the transitions.
Sylvain Perrier: Thank you. This is new for us. We’re experimenting, trying all these crazy things. And Mark, share with our wonderful audience. How do they get hold of us?
Mark Fairhurst: Please like and subscribe, follow us on YouTube @DigitalGrocer. Follow us on Twitter. Keep posted on when we release new shows. Easiest way is just to subscribe to the channel.
Sylvain Perrier: Yeah. And I got an interesting question from one of the senior managers at the YOTEL in New York City. The YOTEL’s that funky hotel that’s not far from the Javits.
Mark Fairhurst: Yeah, yeah.
Sylvain Perrier: And on the Sundays they have the brunch. It’s open bar and everything. Anyways, that’s another story. He asked… He and his colleagues at the YOTEL have been listening to this show and he’s been asking-
Mark Fairhurst: Really?
Sylvain Perrier: Yeah. He asked me on LinkedIn, how do you start a podcast like ours? Because they’re considering doing one for the hospitality/hotel industry. So Alex, if you have any questions, just send them to Mark or I via LinkedIn and we’ll tackle them on the show.
Mark Fairhurst: Yeah. Happy to help. Happy to help and educate other people who can get their voice online in this way.
Sylvain Perrier: Absolutely.
Mark Fairhurst: My thanks to the Duke.
Sylvain Perrier: To the Duke. Ah, yes. To the Duke. That was a great show. That was a great show. Ladies and gentlemen, thank you for tuning in. It’s been amazing being with you on your journeys of listening about digital grocery. And don’t forget to keep your eyes and ears open for episode nine, which I’m sure we’ll be tackling another amazing topic. Peace out.