Supermarket Trends for 2021 – Grocery Podcast S4 E6

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Supermarket Trends for 2021 – Grocery Podcast S4 E6

What supermarket trends can we expect to see in 2021? Sylvain shares more insights on his top 10 predictions for the coming year and how grocers can plan for success.

 

This year has been like no other, and research from Incisiv and Brick Meets Click have demonstrated just that. As we’ve seen with our retail clients on the Mercatus platform, order volume hit new record highs at Thanksgiving. And it’s already breaking records again leading up to Christmas.

 

One thing is for sure in 2021: grocery eCommerce isn’t going anywhere, anytime soon. Sylvain notes,

We’re seeing customers that historically have not bought online, buying online, not only once, not just for the sake of convenience, but for the sake of safety and that’s just going to continue.

 

How can regional grocers harness their new online traffic, converting new and existing shoppers into long-term customers?

  1. Recognize Amazon and Walmart as real competitors for market share
  2. Harness transaction data to strategize next steps
  3. Commit to an action plan that can be truly executed
  4. And most importantly, differentiate your brand

 

As Mark notes, there needs to be a focus on customer experience.

Not a lot of regional grocers have $300 million to spend on a fully robotic fulfillment center. But what they can do is look at their operations and understand what it would take to deliver the best customer experience possible. And differentiate yourself on that experience.

 

We dive into the top supermarket trends for 2021 and Sylvain shares more insights on each, commenting on another trend not mentioned on the list: voice commerce. Discover why we don’t predict this medium will take off in 2021, by tuning in to the full podcast.

Sylvain Perrier:

Ladies and gentlemen, welcome to Digital Grocer, season four, episode six. As you can tell, I’m wearing this really kind of funky hats. It is the holidays and I’m your host, Sylvain Perrier, president and CEO of Mercatus Technologies. And as always, joining me in the middle of this pandemic from the safety of his bunker and his toasty fire and his Christmas tree, as you can tell, is Mark Fairhurst, our VP of Marketing. Mark, welcome to the show.

Mark Fairhurst:

Merry Christmas, Sylvainta.

Sylvain Perrier:

Thank you. I’m going to have to take this off I’m sure at some point during the show.

Mark Fairhurst:

You’re going to sweat.

Sylvain Perrier:

I’m going to sweat. And you would think it’d be fine because I don’t have any hair. I am much like you, I’ve not been blessed with the longevity of some with hair.

Mark Fairhurst:

Oh no, this is just a lifestyle choice for me.

Sylvain Perrier:

Oh, it is? Oh. That’s perfect. I wouldn’t have known. That’s amazing. So, Mark, there’s a lot of stuff happening in the industry, even in the last few weeks. There was the Nor’easter that hit the Boston area, Pennsylvania and parts of North Carolina and South Carolina. As far north, as I know is, as Albany has been crazy. It’s jumped three to four feet. We saw, in our case, and even talking to other e-commerce providers, we saw a crazy surge in online orders. And I got to tell you, the team over at Brick Meets Click came out with their numbers for November. We’re up to… Is it 5.2, I believe?

Mark Fairhurst:

5.3.

Sylvain Perrier:

5.3 billion. It’s not as high as what we saw at the top of the pandemic. But to kind of give a sense of some of those numbers that were reported by David and Bill Bishop, at the height of the pandemic, what we saw was an incredible surge. I say height of the pandemic. A lot of people will think it’s that Wednesday night, the March 11th, when our 45th president of the United States, President Trump, kind of announced that some of the borders were being closed, they weren’t going to allow international flights in, and so on. And it wasn’t really it. Really the height of the pandemic would have been April when you saw an incredible surge in e-commerce. Now, we predicted, and we’ve had conversations, Mark. You’ve had conversations with IRI, with Nielsen, asking the validity of how we did our research with Incisiv. And luckily, the feedback that we’re getting from those two large research firms that are our methodology is sound. And so, we-

Mark Fairhurst:

Yeah, I think-

Sylvain Perrier:

Go ahead.

Mark Fairhurst:

I think we really sort of double down on doing, with the support of our clients, a lot of very important research to try and gauge the size of the uptick in terms of e-commerce order volume. And it the research has shown that this is not going to go away after the vaccine is distributed. There’s definitely been a change in behavior as far as shoppers go.

Sylvain Perrier:

Yeah, absolutely. And aside from our prediction of 250 billion for 2025, we believe that there was going to be a resurgence in terms of online volume.

Mark Fairhurst:

Yep.

Sylvain Perrier:

And not necessarily because of Thanksgiving, not necessarily because of Christmas. That the effectiveness of the deployment of the vaccine and its ability to get out there rapidly, some of the states, we’re going to have to close shop. Now, we’re living this right now. I am anyways in the area I live, north of Toronto. Mark, you’re going on lockdown Christmas Eve in your area. So this is the rest of the province we live in. We’re seeing certain states that are locking down. California is effectively shut down. I suspect it’s going to happen in other areas, but who knows at this point, right? But I will tell you that before Thanksgiving, we were already hitting the numbers of April.

Mark Fairhurst:

Correct.

Sylvain Perrier:

And throwing Thanksgiving on top of that, we’ve surpassed the height of the pandemic in terms of online sales. Again, my prediction is we’re going to hit that number 2025. We’re seeing customers that historically have not bought online, buying online, not only once, not just for the sake of convenience, but for the sake of safety and that’s just going to continue. So they’re going to buy those, that magical number that we talk about when we’re having webinars or are doing a show with David and Bill, that after four times, you’re kind of into the mix, which is great.

Mark Fairhurst:

Yeah. And I read something just published, I think late last week, Dunnhumby, everyone’s doing research and not knowing that their methodology, but they’re saying that there’s going to be smaller discretionary spend on food items and in the US this holiday. And to be quite honest, we’re just not seeing that.

Sylvain Perrier:

Yeah. No, I would agree. Yeah, we’re equally not seeing that. And we’re seeing basket size actually go higher. And not just because of the number of items, but certainly they’re buying more expensive items.

Mark Fairhurst:

Yeah. And I think what a lot of people don’t realize is that we see this in real time. You open up the dashboard on our platform, and that’s actual purchases happening the instance they happen.

Sylvain Perrier:

Right. Right. And this is where this gets interesting because you and I have talked about this, and it’s probably the first time we do so on air. Having access to these dashboards is really critical in terms of just planning what you’re going to do from an operational perspective. I think my advice to retailers today out there in the industry that actually operate their own e-commerce solution is to say, “Hey, this is likely going to be your new reality moving forward.” So if you’re treating this as a low lying outcast type of solution that you’re doing because you think you need to compete against Walmart and Amazon, my advice is you do need to compete against Walmart and Amazon because they’re competing against you. And so, that’s a first piece of advice.

Sylvain Perrier:

Second one is be mindful of the data that you’re seeing because it can predict a trend for you where you’re properly planning for your operational processes. And we’re getting phone calls from non-Mercatus clients that are saying, “Well, what do I do? What do I need to do? Is it more labor? Is it better technology? Do I throttle the amount of orders that are coming in through my site?” And I think the reality is you have to come up with a plan of attack that you can sustain. But also, if you can’t sustain it, don’t try anything that’s going to fall apart because you’re just going to drive your customers into the hands of the competition. And I will tell you, okay, just to be really clear, Amazon and Walmart are ready to sustain this, and they can scale up and they can scale back. The number of Amazon orders being delivered in my neighborhood in the last few days is astonishing.

Mark Fairhurst:

Yeah. You had mentioned you hadn’t seen FedEx or UPS, but you’re seeing those Amazon trucks, and the nondescript ones who we all know are Amazon delivery orders.

Sylvain Perrier:

Oh, absolutely. Those white panel vans that are just pulling up and you can see that they are. When I was outside yesterday and I see the back doors open up, they were delivering a parcel at my house, and the panel van on the back was just jammed. Just jammed. And, frankly, it wasn’t just parcels, it was also food items you can also sell.

Sylvain Perrier:

A big shout out to the folks over at Sobeys, Voila in the GTA here at the Greater Toronto area. I was recounting the Mark yesterday on a phone call the amazing service that I got last Thursday morning, fairly early in the morning. I think it was around eight o’clock when my order was delivered. The gentleman, you have to assume they’re extremely busy, although yes, we are seeing record growth in the United States. But I am assuming it’s the same here in Canada, if not much bigger.

Mark Fairhurst:

So share what you told me about the experience, because it’s in stark contrast to what you might be getting through an Instacart or Shipt or DoorDash.

Sylvain Perrier:

Yeah. It’s incredibly different. This is what happens when a business puts a stake in the ground and basically says, “End to end, this is going to be efficient. End to end, we’re going to be striving for customer satisfaction,” which is the polite way in the world of loyalty of getting repeat business.

Mark Fairhurst:

Yep.

Sylvain Perrier:

So sure enough, I’m up early. I’m making a coffee phone rings and the gentleman introduces themselves, first name, last name. And then he explains who he’s here for. You have to appreciate this. He’s driving here. Right? So I’m sure he’s being taught safety first, so he’s not just listening to music and picking up a phone and then talking into it. But he introduces himself and he says, “I have your order. It’s ready. I’ll be there in 10 minutes. Here’s what’s not in your order and you’ve not been charged for it. We did not substitute it. I have to practice COVID-19 safety protocols. I will bring the bags out to your door. I will ring. I will step back. I will wait for you to come to the door.”

Sylvain Perrier:

So great. I think this is amazing because there’s no surprises in the last minute of handoff now. So he’s given me the opportunity to object to the substitution and, quite frankly, operationally avoiding him having to pull the bags out, which is brilliant.

Mark Fairhurst:

Yeah.

Sylvain Perrier:

So he comes. Order’s fine, no issues with the substitutions. I take my bag and come in. Great. Now, I didn’t have such a good experience a few days later. But Mark kind of pointed out for me yesterday when we were talking about this, “Hey, listen, the likelihood they are staffing up really crazy, they’re busy.” And what I’m not seeing on the streets now, I am no longer seeing the Loblaws delivery vehicles. I’m no longer seeing Grocery Gateway in my neighborhood, which is Longo’s. And I know that some of those other players in the space, outside of Sobeys, are basically trying to flood the omni-channel solutions that are out there. So Cornershop, Instacart, the whatever, just to try to get a piece of the market. And I think that, to take a page out of Ocado’s book, and Sobeys, and this is part of their CEO’s strategy, Project Sunrise, which is essentially, pick the channel, but be really, really good at it. And their investment, it’s not a small investment. That first CFC was over $300 million. And was something, it’s 392,000 square feet, plus the delivery vehicles and the training. So it’ll be interesting to see where Sobeys takes this next.

Mark Fairhurst:

But I think that story picks up on a good theme, which is not a lot of regional grocers have $300 million to spend on a fully robotic fulfillment center. But what they can do is look at their operations and understand what it would take to deliver the best customer experience possible. And differentiate yourself on that experience.

Sylvain Perrier:

Yeah, absolutely. So if we go back to what our research says, we pick our favorite grocer. We say favorite, but there’s research that just came out of here in Canada that says that basically, not the gen X, not the millennials, but gen Z, generation zed, as we would say here. But gen Z really, in terms of brand loyalty, it’s essentially non-existent.

Sylvain Perrier:

And so if I think of that concept, because that’s really the consumers we should be going after are part of the boomers, the millennials, gen X, gen Z, and if you have that idea, and our research basically says, we pick our favorite retailer based on proximity. You’re not going to drive cross town to go shop your favorite brand. I think with the exception, like if you’re here, a Farm Boy just opened up in the northern part of New Market, Ontario, where I live. Okay, that is a brand that I would drive out to go try. But the reality would Voila by Sobeys. I can order Farm Boy products online. So I kind of don’t really need to go to the store.

Sylvain Perrier:

So if you know your customers come to you because of that, then the second thing they come to you for is basically because your pricing is good. And maybe I have to go to an everyday low-price retailer, or maybe I have to go shop the flyer in multiple retailers to be able to sustain my household. It really on the household’s economical situation.

Sylvain Perrier:

So if you know that as a retailer, I think what you need to be doing is pick the channel that you’re going to control, and less is more quite frankly, in the terms of features and functionality. But really focus on the quality of service. That’s where you’re going to differentiate against the big machines that can afford the 300 million or 400,000 square foot warehouses. And it’s those little extra touches.

Sylvain Perrier:

Now, an example of an extra touch, if you’re a regional retailer doing click and collect. Yes, we are trying to automate as best as possible the back and forth for substitutions. And we have some retailers, the personal shoppers love to call. It is a burden, don’t get me wrong. But just doing that, creating that personal relationship between the personal shopper and the customer will keep the customer coming back.

Sylvain Perrier:

The Christmas card in the bag during the holidays.

Mark Fairhurst:

That’s smart. That’s a nice touch.

Sylvain Perrier:

The thank you note. A thank you text. If you’re a retailer, how many samples can you get from a CPG in the holidays of new product? It’s ridiculous. Throw some samples in with a personal note. That’s so easy to do. And those are the little things that keep customers wanting to come back.

Sylvain Perrier:

And now we’re hearing… My background is in research in employee and customer satisfaction. And I always tell people that the one thing you can do is if you’re… It’s this concept of customer rescue. So if you made a really bad mistake, you need to rescue it. I never believed in customer rescue, because if you’re in the midst of customer rescue, you’ve already kind of given up. You need to be ahead of it, and creating those really personalized moments make a tremendous amount of sense.

Mark Fairhurst:

Yeah. And you and I have talked about this. Keeping the customers you have, the customer lifetime value and the direct contribution it makes to a retailer’s bottom line, over time makes more sense to focus on the relationships you have, rather than trying to do this trench warfare in driving for an acquisition of new customers who it’s getting more and more expensive to acquire.

Sylvain Perrier:

Well, they say a good cable company, it costs them 100, $110 for customer acquisition costs, and considerably less for customer retention, if they call and they’re complaining about something. I can’t imagine what the cost of acquiring a customer is in grocery. I got to think it’s around the same amount, because most retailers will tell you that their best customer acquisition tool is their flyer. And in a moment of the pandemic, when you can’t stock your shelves fast enough and trade dollars are eroding, the dirty little secret of the industry… Yeah, trade dollars are eroding because they’re going other places where they’re more effective. What is the customer acquisition cost? I don’t know.

Sylvain Perrier:

But if I was a grocer, my focus would be on retention, conversion, basket building. It sounds like a simple formula, but it’s not. It’s quite complex. But it requires a retraining of the mind to be able to think this way.

Mark Fairhurst:

Yep. Yeah, a hundred percent. And do you see that as something that’s going to materialize as we move out of the pandemic, latter half of 2021? Or do you fear retailers are going to revert to tried and true methods that may not always have been as strategic or effective.

Sylvain Perrier:

Yeah. I think there’s going to be some wholesale changes across the industry. And I say there’s going to be some wholesale changes. People will say we’ve made more money, retailers have made more money. But the bottom line, it’s probably not as good as it should be because those dollars have to be diverted to the more important areas of the business; protecting your frontline employees, cleaning your stores more often.

Sylvain Perrier:

And a lot of this is predicated on what we think the success is going to be of the Pfizer and the Moderna vaccines. And we just don’t know. When are we going to achieve herd immunity? And now we’re hearing in the UK, the borders are being closed with the EU, Canada today, the US likely today as well. There’s a second strain of the COVID-19 virus that is a little bit more aggressive, not necessarily more dangerous, just a little bit more aggressive in terms of its nature. I think all these things are shaping the industry.

Sylvain Perrier:

But if I were to look into my crystal ball, I would say retailers now are going to have to try to understand how to change the way that their stores are laid out, to create more effective shopping, a little bit more safety. You won’t use duct tape anymore to create lines on the floor. I think those will be factored into the design of the stores. But also I think that when you throw eCommerce in the surge that its seen, it’s creating this blurry line. And I’m not saying brick and mortar is going to disappear. Quite the contrary. I think retailers are going to have to embrace that blur. And that blur is going to be challenging.

Sylvain Perrier:

Now, we’re seeing retailers who have doubled, tripled, quadrupled online sales, and they want to sustain it. And so they’re going to have to start thinking, what we do in the B2B world, we talk in terms of marketing funnels, sales funnels, content that helps create conversion, capture the customer in the buy cycle. And capturing the customer in the buy cycle now is not going to be at the shelf anymore. It is, but it’s not the only place where you have to think in that sense.

Sylvain Perrier:

So when you start to look at your dot com, you’re going to start thinking about merchandising, points of entry, points of exit, and that incremental item in the basket.

Sylvain Perrier:

So if you know 50% of your traffic is going to your flyer page and they’ve bookmarked it, and they’re there once a week, you’re going to put some items in there that are shoppable. Maybe it’s a banner at the top that makes it easier to add something to the basket, as opposed to a static flyer. And some of the flyers that are out there, you can do add-to-cart, add-to-list, but that’s not enough of an incentive.

Sylvain Perrier:

So thinking in terms of conversion, thinking in terms of a marketing and sales funnel will become more critical. And it’s going to be, I think, budget planning. It’s going to come down to marketing. It’s going to be digital first, not digital second. It’s going to be interesting.

Mark Fairhurst:

So we’ve touched on 2021. You’ve authored some other prognostications for the coming year. Do you want to go through those or mention them?

Sylvain Perrier:

Yeah, let’s let’s do it. Yeah this is great. Well, this is why we’re doing this episode.

Mark Fairhurst:

Okay. Super. All right. So number one is reorganizing for safety first, quickly. I think you’ve already touched on that.

Sylvain Perrier:

Yeah. Yeah. I think if you look at the fixturing that some of the retailers have done with plexiglass in between the aisles, or when you’re at checkout, or how people are coming in to pick up their groceries, if it’s a click and collect and so on, I think that’s going to be expanded. And some of these things are going to become a mainstay forever.

Mark Fairhurst:

Cool. Number two, expand two-way expansion of meal kits. So can you expand on that?

Sylvain Perrier:

Yeah. So when the pandemic hit, a lot of people just kind of went… Well, pre-pandemic. So Kroger and a bunch of other retailers made a very strong investment in meal kits. And then you have the standalone ones. HelloFresh is a great example. Here in Canada, in this area, we have LiveFit Foods. We saw a lot of people just gravitate towards the meal kits because we didn’t really know if stores were going to close, grocery stores. Now, luckily they didn’t.

Sylvain Perrier:

I think this is where the opportunity is going to be for retailers to kind of reinvent the whole meal kit process and recreate a resurgence for that. I think for them, it’s a benefit for two folds. One is the hot plate section of certain stores had to be closed, because you don’t want people that may be infected kind of touching the food. I think pre-kitting food in store for easy, quick purchase makes a tremendous amount of sense, and we saw it in some of the convenience stores in New York City right away, that have this large lunch section. So I think there’s going to be a resurgence of meal kits inside of retail.

Mark Fairhurst:

Cool. Number three, making eCommerce more affordable.

Sylvain Perrier:

Well, so there’s an interesting statistic in the United States pre-pandemic, that 30% of the people don’t have… I think it was close to 30% don’t qualify for a bank account. So we’re seeing now over, I think, over 70 million people that are using SNAP benefits. I think allowing those people to use, not just SNAP EBT, but SNAP Cash online to buy their groceries makes a tremendous amount of sense. And I think we’re seeing that spread with Instacart and some of the other ones. I think that the USDA is just kind of catching up on this, and this will become a mainstay period in the industry.

Mark Fairhurst:

Number four, improved accessibility of eCommerce.

Sylvain Perrier:

Yeah. We-

Mark Fairhurst:

Because we’re sort of a leader on this, aren’t we?

Sylvain Perrier:

Yeah. No, we are, because we’ve always had access to a fairly large group of visually-impaired engineers that are part of our team that are supporting everything that we do. So when we build a mobile app, we’re conceptualizing a mobile app, or same for a web application for our retailers, we go as far as actually gauging the brand and the logo, the quality of the colors, and what does it mean for ADA compliancy. We also have access to legal counsel that has a view for us on the next trends in ADA compliancy. And I can tell you that watching our own call center flood with people over the age of 75, just trying to put a credit card in and have had a shopping list that was written by their children years ago, trying to find those products online is very difficult for them.

Sylvain Perrier:

I think there needs to be a re-imagining of how these things are done, and enable and put more power and technology the hands of seniors. It’s not they don’t know how to use technology. I think it’s a more of a question. How do you make the taxonomy of what you’re trying to put out there that much more intuitive and easier for them?

Mark Fairhurst:

And I’m going to put you on the spot. So about three years ago, we had prototyped voice commerce. Where do you think voice commerce is going to be this year, in 2021?

Sylvain Perrier:

Yeah. So again, I think to a certain… I hate to say this, but I think it’s still a solution looking for a problem, and here’s what I mean by that. When we did this really great prototype three years ago, we unveiled it at an event in New Orleans, well received amongst the CIOs and CMOs that we had in the room. But if I gauge what I’m doing today on Voilà, I’m building a 50 to 60-item basket in under five minutes.

Mark Fairhurst:

Say that again. That’s amazing.

Sylvain Perrier:

I’m building a 50 to 60-item basket in under five minutes. And it’s simply because I’ve… When you buy online food, the first few times is brutal. The reason it’s brutal is you have a mental map. This is where you have to understand human ergonomics and the way the brain thinks, and engineers don’t typically do this. And I’m not slagging our engineers. That’s just the reality of it. When you switch online from in store, you are mentally picturing yourself walking down the aisles.

Mark Fairhurst:

True, true. I do it.

Sylvain Perrier:

And you search, and if the search engine is good, you find it. Or then you start drilling down into those sub-menus on the side that are tree base, which those aren’t… Who cares? Retailers are so excited, “Oh my God, it’s going to match our categories.” No one cares about your categories, no one. It’s not about you, it’s about the customer. So forget that. And then you find yourself with the laptop next to the refrigerator and the pantry, and you’re kind of building that… Eventually, you’ve disconnected from that and you understand… Now, you’re honed in as yourself as an individual, and you’re buying online. And so five, six minutes, the amount of data my eyes can take in, which I think is 250 gigs a second the eyes take in visually-

Mark Fairhurst:

You might be a little more advanced than the rest of us.

Sylvain Perrier:

No, no. This was like an MIT researcher. He says, “I think-”

Mark Fairhurst:

Really?

Sylvain Perrier:

Yeah. The periphery, it’s about 250 gigs a second. So imagine if you had to do that with your voice. So you would summon your device. You would say, “Please add a carton of milk.” And then if you don’t specify the brand, the size, the device should come back to you and say, “Did you mean? Did you mean? We also have on sale…” Well, it’s not efficient. So until you combine voice, your order history and some really good AI that can predict what you’re going to go for, it’s not going to work. Now, I will tell you, we’ve bought maybe $1000 in Amazon gifts in the last two weeks, and there is an Amazon voice device in every room of my home because the home is fully automated. The lights, the TVs, the temperature, the whatever. I’m surprised that it just doesn’t make coffee for me in the morning, or tuck me into bed at night. I’ve never used it to order anything, and I’m a technologist.

Mark Fairhurst:

So Sylvain calling BS on voice commerce. I love it.

Sylvain Perrier:

Yeah.

Mark Fairhurst:

All right, number five. I think you’ve already touched on certain aspects of this, a renewed emphasis on omni-channel.

Sylvain Perrier:

Yeah. It’s an interesting prediction, because I think that there is… DoorDash just completed their IPO. We’re seeing the pushing forward of the folks over at Uber or the expansion of Instacart, and Shipt is in there somewhere, not entirely sure where. I think there’s an awakening amongst the grocers out there in the industry that are kind of thinking, “I can have my cake and eat it too.” And that’s by pitting one against the other, the marketplaces against each other to get the best rate. Again, no one talks about this. You’re going to pay 8 to 15 to 16% to one of these firms to use their service. And if you’re selling at parity online versus in store, it’s out of your pocket. So you’re in the hole. You’re in the hole, and all the ancillary revenue streams that they have.

Sylvain Perrier:

So I think there’s this opportunity to go and leverage these marketplaces to your benefit, flood the space, so go where the masses are, get a cheaper rate, but still have this nucleus of control over what you’re doing. And so this sense of omni-channel is going to be find the partners there to give you the distribution you need. So if you’re in New York, Uber Eats makes a lot of sense, tons of coverage. If you’re in the Valley, potentially that’s where DoorDash, Instacart comes in. If you’re in the Midwest, Shipt. So I think there’s this whole mixture of retailers that are going to start to learn how to pit one against the other. If I was one of those CEOs, where I become very fearful is the more players you have in this space and the more retailers start to pit you against the other, you’re just going to become commoditized, because we already know the people you use, you’re treating them as commodities. Give them hand sanitizer, give them benefits, give them a Christmas bonus. They’re just numbers for you, hate to say it.

Mark Fairhurst:

Yeah. It’s a really interesting prediction, and I’m looking forward to seeing how that turns out. Number six, focus on securing online CPG ad dollars.

Sylvain Perrier:

Yeah. So this came out of a webinar that we attended… Where there was top four CPGs in the US, and I would say worldwide, quite frankly. We’re treating a marketplace vendor as a customer, as a client, and it was scary because it undermines a century-old relationship that exists between CPGs and grocers. And I get concerned, because that means those are dollars that are no longer in the hands of retailers. And I think retailers now today that have achieved a level of online success that they historically would not have seen through their own properties need to figure out how to monetize their dotcoms and their mobile applications. But also, I think it’s time to reinvent that relationship with the CPGs and the challenges that exist. I mean, Benjamin Lorr talks about this in his book.

Sylvain Perrier:

I mean, the concept of slotting fees, trade dollars, and kind of the list goes on. This relationship needs to change. Now, CPGs should want to be successful as much as the retailer, but they need certain things to do that. Some retailers have been extremely hesitant in giving them the tools and the data that they need to be, but they demand and demand and demand to the point where it’s virtually impossible for the small local CPG to kind of get into the game. And when they do, they run the risk of being swallowed up. I think this really needs to fundamentally change, and retailers can be successful in getting those digital dollars that they historically would not get. My thoughts is this is the time to start building this, because what I fear, and again this is just a prediction…

Sylvain Perrier:

But Google and Facebook are getting a tremendous amount of pressure from Congress, and it’s only going to get worse. A lawsuit has been filed from some of the states, has been filed against Google. Now I’m not surprised that these lawsuits are coming. The reality is some of these states are underwater so much in terms of budget dollars. It’s very simple to go get a check from Big Tech USA. So they’ll get their check, they’ll settle. Google will get something in their favor, they won’t come back. But if I’m a retailer right now as this turmoil is happening, and CPGs are wondering where they’re going to put their dollars with the fear that Facebook could be broken up or something. Go get a partner, go after those dollars, monetize what you have.

Mark Fairhurst:

Awesome. And I think this also… You mentioned Google, Facebook. What about Amazon? Because I think our next prediction is… You’ve entitled it Survival of the Fittest.

Sylvain Perrier:

Yeah. So if you look at Amazon’s quarterly earnings, there’s, I think, I think it’s believed that 17 to 24% of their cost of goods sold go into shipping. It’s evident, even in my neighborhood, with the amount of deliveries that coming in from Amazon. I think if I’m Jeff Bezos right now, and I think everyone loves to say, “If I wish Jeff Bezos, I’d do this.” I told Jeff Bezos in an article two years ago he should buy Starbucks. He should buy Starbucks, because it just makes sense. Why does it make sense? Because it’s a great drop-off point for the items to be delivered. There’s a Starbucks on every street.

Mark Fairhurst:

They’re everywhere.

Sylvain Perrier:

They’re everywhere. There’s over four or 5,000 of them. Those two brands together make a lot of sense. I think now we know that there’s a relationship with SpartanNash, that there’s been millions in warrants that have been issued in favor of Amazon. I’m not going to predict what they’re going to do with SpartanNash, but I think if I’m at Amazon right now, seeing the importance of food, seeing the layout of the pandemic and their strategy, I would be accelerating much faster in terms of expansion. Quickest way to expand… I will say that we will get a glimpse of what that’s going to be once they open their first store east of the Mississippi.

Sylvain Perrier:

That is a play out of Sprouts Farmer’s Markets’ book years ago. The industry analysts said, “Sprouts will be fine expanding in Texas, expanding anywhere they want, but where it’s going to become really challenging for them is when they expand east of the Mississippi.” Then that’s when they hit Florida and Sprouts hasn’t slowed down. So when you see, when they make that one decision to expand east of the Mississippi, and I’m not saying it’s going to be New York City, I don’t think that makes necessarily sense for them. I think it’s going to be the classic model of suburbia, so on, retailers need to be even more worried at that point, because that means they’re on the cusp or have figured out their logistics. Yeah, so that’d be interesting.

Mark Fairhurst:

Number eight, the evolution of B2B commerce. So explain your thought here, and do you see Amazon getting more into B2B?

Sylvain Perrier:

B2B, so I’ve had to revise my thoughts on this one.

Mark Fairhurst:

Mm-hmm (affirmative).

Sylvain Perrier:

I think B2B makes sense. The basket size is larger, frequency of ordering is a little bit lower, but it is the basket sizes larger. If I look in our world, Amazon is used by our finance team, it is used by our IT group for replenishment of paper, office products, rechargeable batteries, things that IT people need not so frequently that you don’t have to go to a specialty shop. Quite frankly, there who’s left out there that’s a specialty shop for IT? You’re not going to go to Dell for ethernet cabling. Why would you go to Best Buy to buy USB cables? There’s just going to be overpriced for no reason. So you just go to Amazon and you can get choice and it’s less expensive.

Sylvain Perrier:

When it comes to food, B2B makes sense, because if you look at, at our own office, and I think it’s the same for a lot of technology companies, you’re calling the local provider, the guy likely that does your coffee and he’s delivering bananas, apples, and muffins, and whatever on a weekly basis, well, they have that exact same service if delivery is part of it from a grocer. Yeah, I get it. It makes sense. But the pandemic now, who’s going into an office anytime soon? Quite frankly, cutlery, plates, coffee mugs are likely out of the question at this point, until we can figure out something to be safe. I think this idea of B2B will come back when we get a new sense of what we think will be the new normal. So I’m changing my prediction on that.

Mark Fairhurst:

Okay. All right. The rapid adoption of automation, number nine.

Sylvain Perrier:

Yeah, I think this is inevitable. If I look at some of our retailers in the last little while are doing five to 8,000 transactions a day. That is double, triple early volume. That is a lot to handle and you just can’t keep throwing more people at it. It’s not economical. It makes no sense. I mean, we’ve partnered with the right companies to be able to create some efficiencies in this space, whether it’d be zone picking, wave picking and so on, notification at the curbside. But I think there comes a point where if you have enough stores in the right cluster and you’re sustaining more than X number of transactions on a daily basis, automation behind one or two stores make sense, or moving everything into an automated warehouse.

Sylvain Perrier:

But what we don’t know yet, what’s the abatement going to be? What’s the slow down going to be and if there’s going to be one. I mean, have to be mindful of the fact that at some point there’ll be a bit of a regression. We’ve talked about these numbers that are available in our research reports for download on our website. We don’t know what that’s going to be, but if I was a retailer, I would start looking at this. Quite frankly, the cost of borrowing capital right now is… I know in Canada anyways, it’s extremely cheap.

Mark Fairhurst:

That gets to prediction number 10, what you’ve called, revisiting strategy.

Sylvain Perrier:

Right. Retailers need to go back to basics here and understand how are they doing with their operating model? Majority of the retailers that I’ve talked to don’t have the sense of an operating model. Don’t have the sense of measurement. Don’t have the sense of KPIs. Yeah, you get financial reports at the end of a period. Fantastic. Great. Doesn’t paint a picture. Doesn’t tell you what your efficiency on pick is. Doesn’t tell you what your substitution rate is. Doesn’t tell you the number of transactions that failed through on a credit card check. You have to look at everything. You have to take that in. It is time to plot your course, what your next 18 to 24 months are going to be. If not, you won’t be ready. I will tell you, these are the types of things that are done in Amazon and are done at Walmart. Quite frankly, are done at the marketplace providers. That’s why the CPGs are gravitating towards these companies, if you’re not doing it, it’s very critical that it’d be done.

Mark Fairhurst:

Awesome. Well, that concludes our predictions for 2021.

Sylvain Perrier:

That is up.

Mark Fairhurst:

So I just wanted to say… I want to say Merry Christmas to you.

Sylvain Perrier:

Thank you!

Mark Fairhurst:

To your family, everyone in our audience. Happy holidays.

Sylvain Perrier:

Absolutely.

Mark Fairhurst:

Hopefully, fingers crossed 2021 starting off in a much stronger, happier notes for everyone.

Sylvain Perrier:

Yeah, I think, well said, Mark. I think it’s a great opportunity for people just to take the holidays to step back a little bit, enjoy your family and your friends. Let’s just let the negative thoughts of the pandemic just go and be ready for 2021. Take it day by day, that’s the best advice that I can give to anyone listening to this and Mark, how do people get ahold of us?

Mark Fairhurst:

Right. Great easiest way is to go to digitalgrocer.com. Follow us on our social channels @DigitalGrocer and @Digital_Grocer on Twitter. We’d love to have your feedback, your show ideas, and that’s the easiest way to do it.

Sylvain Perrier:

Awesome. Ladies and gentlemen, thank you so much for listening to Digital Grocer. We’ll be back at you with a new episode in the new year. I think we’ll have some interesting things to share with you. Peace.

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