Why Grocers Need to Measure Customer Lifetime Value – Grocery Podcast S2 E12

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Why Grocers Need to Measure Customer Lifetime Value – Grocery Podcast S2 E12

In this the season finale episode of the Digital Grocer Podcast, Sylvain and Mark discuss predictions for grocery retail in 2020 and why measuring grocery customer lifetime value is vital to a retailer’s business.

Mark points to the shift that has been happening in the industry. “We started this podcast series with our friend Brittain Ladd, and he was talking about retailers being surrounded and having to play the infinite game and being more strategic. And I certainly hope that the retailers that we’re encountering and talking to on a regular basis are really heeding that message and understanding that e-commerce online, offline, there is no division. It’s all about a unified commerce approach. Shoppers are going to purchase where, when, how they want and you need to be ready to serve that.”

Sylvain and Mark consider how grocery customer lifetime value (CLTV) is a critical part of a retailer’s business. “Once you start to understand those types of customers, that CLTV metric, you start to understand how do you market to those people…You can’t be everything to everybody. In order to maximize your revenue, you need to cater to that segment that is generating the most value for your organization.”

This is an episode you won’t want to miss! Tune in now to hear more about what’s in store for grocery retail in 2020 and the strategies and metrics retailer’s need to focus on to keep building and growing their businesses, both online and in-store.

Mark Fairhurst, VP of Marketing, Mercatus

Co-host on The Digital Grocer Podcast and as VP of Marketing at Mercatus, Mark brings to the show a marketer’s perspective on the rapidly evolving grocery tech landscape. He applies a strategic lens focused on a continual search for the next big trends and best practices. Mark enjoys exploring not just how things are changing in grocery retail, but also why they’re changing — and where they’re headed.

Photo of Mark Fairhurst

Sylvain Perrier, President and CEO, Mercatus

Named as a Top 10 Influential in Retail 2020 and a 2019 Grocery Game Changer, Sylvain Perrier is a true digital retail trailblazer. As President and CEO of Mercatus, he is the driving force behind the leading digital commerce platform in grocery retail. As host of The Digital Grocer Podcast, he infuses these conversations with his vast understanding of retail, grocery operations and technology, as well as his quick wit and good humor.

Photo of Sylvain Perrier

Sylvain Perrier:
Ladies and gentlemen, welcome to Digital Grocer, Mercatus’s very own podcast, episode 23. It’s actually the end of season two.

Mark Fairhurst:
Yes it is.

Sylvain Perrier:
Is that right Mark?

Mark Fairhurst:
Yes it is.

Sylvain Perrier:
And this is your host, Sylvain Perrier, president and CEO of Mercatus Technologies. Joining me in the studio today is Mercatus’s very own senior director of marketing, Mark Fairhurst.

Mark Fairhurst:
It’s good to be back.

Sylvain Perrier:
It’s good to be back and it’s… Christmas is just literally around the corner. I think what two weeks now? A week? 10 days.

Mark Fairhurst:
Hopefully it’s two weeks because I haven’t done any shopping.

Sylvain Perrier:
No, I have not done any shopping and we are without our trusted engineer. So I’m going to apologize a way ahead of time right now. Kevin is sick. Bubonic plague, is what I’ve been told.

Mark Fairhurst:
You’ve got to stop giving that to him.

Sylvain Perrier:
Well I thought it was smallpox. You know it is. Smallpox is in fashion now, by the way.

Mark Fairhurst:
Is it?

Sylvain Perrier:
I apologize for everyone who’s listening who may have smallpox or have had a distant, very old relatives.

Mark Fairhurst:
Is that because the-

Sylvain Perrier:
The anti-vaxxers?

Mark Fairhurst:
The anti-vaxxers.

Sylvain Perrier:
Probably. I don’t know anymore. It’s really hard to-

Mark Fairhurst:
It’s making a comeback.

Sylvain Perrier:
Its making a comeback. In my district where I live, Mark, the school boards are actually putting their foot down. If you refuse certain vaccines your child can be sent home.

Mark Fairhurst:
Yeah, For the common good and of everyone. In my opinion it makes sense.

Sylvain Perrier:
Yeah, I would agree. I would agree with that. But everyone’s entitled to their opinion, right. That’s the beauty about living in a democracy, and apparently that’s what I’m told, right. But in any case, so today we have… It’s kind of an interesting show, and we’re going to be bouncing around here on a bunch of topics. It’s the 2019 wrap up. There’s been a lot of stuff that’s happened in the industry. We’re going to be talking about the predictions that were published in, I think it was Grocery Dive, that published the Mercatus 2020 predictions?

Mark Fairhurst:
That’s right.

Sylvain Perrier:
We’ll talk about a new way of measuring customer value, so CLTV, customer lifetime value. It’s something that’s more traditionally used in the SAS industry, Mark?

Mark Fairhurst:
Yeah, it is. I mean it’s not a metric that I think typically is used amongst our industry, the grocery industry in particular, but in the technology SAS world where I come from, and then you’ve been immersed for…

Sylvain Perrier:
Quite some time.

Mark Fairhurst:
A lot of years, it is definitely one of the key benchmarks for any subscription service.

Sylvain Perrier:
Yeah. It’s also what we’re finding in our world, right, because we do B2B sales to our retailers, and we license our technology into very focused sales and marketing process.

Mark Fairhurst:
Correct.

Sylvain Perrier:
So we deal with stuff like marketing funnels, sales funnels, and that’s something we don’t hear about in the grocery space.

Mark Fairhurst:
No, it’s bizarre if you think about it. A grocer is, they need to cultivate the relationship with the shopper. They obviously would like to get more shoppers in their stores.

Sylvain Perrier:
And especially for the retailers that have loyalty programs, there is no reason why they can’t do that.

Mark Fairhurst:
Exactly. I mean that’s the whole reason for having a loyalty program, is to keep the shopper coming back.

Sylvain Perrier:
Absolutely. Now, the last subject we’ll tackle on the show today is, and we just got back from New York city, I think it was literally a week ago. We were invited to the Barclay’s event. Eat, sleep, play, pray. I don’t know. There was no pray part.

Mark Fairhurst:
No, no. No.

Sylvain Perrier:
It was a great event. It was serendipitous. We were invited to the event by Karen Short. Karen was a guest and I think it would have been mid season two when we were talking about, I think the title was The Myth About Instacart.

Mark Fairhurst:
Yeah, the Instacart addiction.

Sylvain Perrier:
Yeah, the Instacart addiction. And then she was on the show and she dialed in from New York and we had a bunch of stuff. Oh, Emmy’s coming in.

Mark Fairhurst:
Emmy?

Sylvain Perrier:
Emmy’s in our marketing team.

Mark Fairhurst:
She’s an integral part of the [crosstalk 00:04:00].

Sylvain Perrier:
Yeah, she is. And she’s going to be watching us recording today and if we do something wrong, she’ll throw something at us, I’m sure.

Sylvain Perrier:
So let’s start with the predictions. Let me go to these prediction things. People always ask me how hard are they to come up with and so on. The reality about when you go through some of these things, it’s not like there’s a dartboard in my office and I just throw something out there. The reality is that it really comes about from talking to people in this space, whether it’s a CMO, whether it’s a CIO, and just listening also to the undercurrent.

Sylvain Perrier:
And what I call the undercurrent is attending vendor meetings, attending vendor presentations, attending, quite frankly, majority of the trade shows in this space, whether it’s Grocery Shop, whether it’s FMI Midwinter, it’s not so much of a trade show but it’s a gathering of retailers, or quite frankly going into WCA Jean in California and so on.

Sylvain Perrier:
And then you cultivate these contacts in this space and then you find out what’s happening, and then reading the trades and not just the traditional trades in the grocery space, but also just consuming a tremendous amount of media.

Sylvain Perrier:
The really big thing out of the 2020 predictions that stood out for me in any case is the notion of marketplaces. And that’s mixed with the first prediction that we publish on Grocery Dive, which is the reverse Amazon model.

Sylvain Perrier:
And it was interesting because the moment we had submitted our predictions, was it Loblaws?

Mark Fairhurst:
I think it was the day after that, the article was published that Loblaws, which is the largest grocery retailer in Canada, had announced that they have launched their marketplace for drop ship products.

Sylvain Perrier:
Mark, they did something a bit different as opposed to partnering. They decided to buy the technology outright.

Mark Fairhurst:
Outright. The team now made, I think, part of Loblow Digital. the company, the purchase was PF Tech out of Las Vegas.

Sylvain Perrier:
Yeah, Las Vegas.

Mark Fairhurst:
And I think they had been working on this for the last year.

Sylvain Perrier:
It’s really odd. We don’t see a lot of tech coming out of Las Vegas.

Mark Fairhurst:
It may be that there’s an undercurrent of tech companies there that we just aren’t aware of, but obviously Loblaws knew about them.

Sylvain Perrier:
Yeah, they did. Did they move them, do you know?

Mark Fairhurst:
I don’t know. I don’t know.

Sylvain Perrier:
So in any case, what the concept was is essentially we know that in the world of Amazon, what truly makes them interested in grocery, aside from the data, is grocery has an extremely high household penetration rate. It’s something north of 95%. so what does that mean, is essentially majority of the US consumers are actually buying groceries, at least one point X times a week.

Sylvain Perrier:
So call it 1.2 to 1.5. In e-commerce, we’re seeing 1.6 to 1.9 so it really, really depends. And then you go down into the other verticals in retail, and then that household penetration rate seamlessly gets much lower. Now we know that a majority of US adults actually use amazon.com. We know that from our own research. I remember when we did research out in the West coast, 86 to 92% of the households we actually surveyed were using Amazon on a monthly basis.

Sylvain Perrier:
And if you look at Amazon’s core verticals and what they do, right? So it’s not just about selling things online, it’s about enabling the consumption of media. So their Prime videos, their music and so on. They’ve also gotten into the more commoditized space with the Echo devices and so on. And they tried their hand at phones, which was a catastrophic failure for them. And also their whole tablets and so on.

Sylvain Perrier:
So for them it’s getting more eyeballs, more frequently consuming content as well as potentially buying something. So getting into the grocery space makes sense. So if you’re a grocer and you have a lot of weekly visits, so let’s take Walmart for example. There was this wonderful book that was written on Walmart, can’t even remember the title. I ended up reading it and buying the audio tapes, for those of you who may remember cassettes…

Kevin Glen:
Kevin here with just a brief interruption, the book that Sylvain is trying to recall is The Walmart Effect by Charles Fishman.

Sylvain Perrier:
… and listening to this into my car. And there was a famous quote in the book, which was 90% of the United States. Now this would have been in the 90s right? So 90% of the United States actually lives less than 16 miles from a Walmart.

Mark Fairhurst:
Yeah, I would believe it.

Sylvain Perrier:
And that’s pretty impactful. It’s probably even more now. And so we know they’re the largest seller of food in the United States. They actually, I think they eclipse Kroger. I’m pretty sure they do. If they don’t, I apologize.

Mark Fairhurst:
Oh, they do.

Sylvain Perrier:
Okay. They do. So if you know that, so that means Walmart has a high household penetration rate. So why wouldn’t they in their dotcom space layer in a marketplace? And if you take that concept even further to a traditional grocer who actually doesn’t do hard lines or soft lines. I don’t know, a good example could be an H-E-B. It can be a smaller retailer like a Schnucks in the Saint Louis market.

Sylvain Perrier:
If you go out and you layer in a marketplace which enables organizations to come in through your dotcom to sell items, dishware, cookware, barbecues. I mean the list goes on. Anything that’s complementary to food. I’m not yet convinced that this needs to be like a Best Buy approach. Or in the day where a lot of these electronic retailers went out and actually stopped selling what was called the white goods, white goods being refrigerators, washers and dryers, and they replaced it with the DVDs and CD racks. And there’s some of these, Comp USA, it would have been their downfall, quite frankly, and some other ones.

Sylvain Perrier:
But if you take the concept of adding items to your marketplace, you have the eyeballs, the margins are excessive. I’ve been told the return on investment on some of these marketplace solutions is a 10 to one…

Mark Fairhurst:
That’s amazing.

Sylvain Perrier:
… which is amazing.

Sylvain Perrier:
But for the retailer, quite frankly, if you do it right, and doing it right is understanding where your brand and where your brand needs to go from a business perspective, it can be extremely powerful in terms of the margin that you can make. So that’s what we’ve dubbed at Mercatus the reverse Amazon model.

Sylvain Perrier:
I applaud Loblaws for doing it in Canada. It’s gutsy.

Mark Fairhurst:
To your point, they will be curating the content…

Sylvain Perrier:
The products, yes.

Mark Fairhurst:
… that will be complimentary to their president’s choice brands.

Sylvain Perrier:
Well, this also makes them a formidable challenger not only to Amazon here in Canada, which Amazon dominates e-commerce here and for food and the Canadian space. But what it also does is it puts them head-to-head now with Walmart from a digital perspective here in this country, which is great for them. Competition’s good.

Mark Fairhurst:
Yeah, competition’s always great.

Sylvain Perrier:
Well, in Canada we have three retailers that own 88% of the marketplace. But let’s also understand, we have some amazing niche, smaller grocery retailers in the Canadian space that are independent or sometimes are owned by some larger conglomerates that are… People are fanatical about and do quite well. I mean, if you think of Farm Boy, Friesen and Brothers over in Alberta. And then you have Longos, and the GTA, and I’m an exclusive shopper at Longos, and you know why?

Sylvain Perrier:
Because their produce is amazing. The staff is extremely efficient and friendly…

Mark Fairhurst:
The quality of the goods throughout the store, top notch. And the store’s clean.

Sylvain Perrier:
I’m a destination shopper, so to go into a box that’s 150,000 square feet just numbs my mind for some reason. It’s kind of like, “Yeah, I’m here for the food experience first,” and I think everything else like the more hard lines and soft lines, I’m less of a… I don’t have that exploration bug in me to want to go through those things. I want to get in and out as fast as possible. That’s pretty critical.

Sylvain Perrier:
And one of the other predictions that we made that’s very topical for the podcast is, now we called it the commoditization of delivery. When you hear the word commoditization, some people may think, “Oh my God, that’s really scary in terms of what does that mean?”

Sylvain Perrier:
But at the end of the day, I think we’ve seen the pendulums swing really far towards delivery to the point where some of our organizations have really stifled the innovation capabilities of a lot of the retailers that are using some of these technologies. And the ecosystem has been shut out. And a lot of 2019 was focused for us on talking about, in that case, around Instacart. We’ve gotten a lot of phone calls and a lot of LinkedIn messages saying how we’re unfairly picking on Instacart.

Sylvain Perrier:
And the reality is that it’s not just an Instacart conversation. What we’re trying to open the eyes of the retailers here and to say, “Hey listen, at the end of the day you as a retailer, you own your brick and mortar, you own everything around it, you own the in store experience, you own your private label brands and so on. So why are you sacrificing everything else?”

Sylvain Perrier:
And a lot of applause has come in from a lot of the ecosystem partners that also are getting shut out of that experience when a retailer decides to go with such a solution as Instacart.

Mark Fairhurst:
Just picking up on that, I mean, as the marketing lead I’m sensitive to the criticism that we’re unfairly picking on a competitor. And to my earlier point, I do honestly believe competition’s good, pushes everyone to Excel in the interest of the end customer. But at the same time, the customer needs to be educated as to what the full range of options are so they know what they’re getting into.

Sylvain Perrier:
Right.

Mark Fairhurst:
And that’s the position that I take and I think we imbue all of our content with that position.

Sylvain Perrier:
Yeah. I think the big difference for 2020 is a lot of the retailers are understanding now what we’re saying, and are starting to make some really tough decisions in terms of, “How do I get the best of both worlds? How do I enable control of my own digital roadmap, and at the same time bring in the right partners, not just one, to the table to really maximize the…” And when they might not say maximize, but eliminate all friction points around the customer journey.

Sylvain Perrier:
And there’s one prediction we didn’t write, and I was actually reflecting it on this week. There’s a lack of understanding, or there’s a lack of pure digital natives in the space.

Mark Fairhurst:
Yes.

Sylvain Perrier:
Right?

Mark Fairhurst:
Yeah, absolutely.

Sylvain Perrier:
Where we normally see them at Mercatus, at agencies that can actually sit down and say, “Hey, this is more than just a veneer on a website. It’s more than just call it an operational process and so on. What is the strategic endeavor and benefit what we’re trying to achieve and how does that convert into the world of digital marketing?”

Sylvain Perrier:
There is a lot of pretend people out there that I’m now uncovering more so than ever when you start to look under the cover and start to ask questions. And my fear is that we’re still, for some retailers, in check the box mode and that’s why they’ve gone with these more commoditized solutions. I think in 2020 that’s going to change, or we’re going to have to change it for them. I think there’s no choice.

Mark Fairhurst:
We started this podcast series with our friend Brittain Lad, and he was talking about retailers being surrounded and having to play the infinite game and being more strategic. And I certainly hope that the retailers that we’re encountering and talking to on a regular basis are really heeding that message and understanding that e-commerce online, offline, there is no division. It’s all about a unified commerce approach.

Mark Fairhurst:
Shoppers are going to purchase where, when, how they want and you need to be ready to serve that.

Sylvain Perrier:
When I look at the landscape today, there are two retailers that get this really well.

Mark Fairhurst:
Walmart.

Sylvain Perrier:
Mm-hmm (affirmative). I think they have rapidly excelled quite frankly, not just through their acquisitions, but I think in the cultural shift in their head office. They’ve brought the right executives to the table. I think it’s still, the challenge for them is the balancing act between the dollars that they’re… Capital they are spending in their e-commerce realm and what they’re losing, and the attention that they need to draw towards their brick and mortar operation.

Mark Fairhurst:
I mean they’re still held to a different standard than say Amazon is. Amazon leverages the revenue they get from other services.

Sylvain Perrier:
Correct.

Mark Fairhurst:
And there’s a tolerance for Amazon to spend much more so than, say, a Walmart.

Sylvain Perrier:
Absolutely. Absolutely. The other one is Target. I think it’s a brand that, when they came into Canada, I think in the US they were on the decline. How many cyber attacks were they hit on? Twice that I can remember. There’s also a business that was heavily engaged with Amazon in the day and they decided to pull out, they had I think two years in a row on the Black Friday, they had a complete system failure. So two cyber attacks, damaged brand that came in into Canadian space. So they’ve really reinvigorated themselves and I think they’ve done well digitally. The acquisition of Shipt was a very interesting one.

Sylvain Perrier:
I’m kind of curious to see where that relationship is going to go into 2020, and most people know that we are partnered with CHIP. I mean we work well with them and a couple of retailers so far to date. The one retailer, stepping outside of grocery, Shawn Gensch who was the former CMO over at Sprout’s Farmer’s Market, so he’s now over at JC Penney.

Mark Fairhurst:
Oh yeah, at JC Penney.

Sylvain Perrier:
And I think JC Penney has brought in Jackman here out of Toronto to help them out and they’ve opened up their new… I don’t want to call it flagship, but I think it’s one of… A store where they’re trying to create a new immersive experience for shoppers. So they’ll have a barber shop, I think they even have yoga classes inside the JC Penney.

Mark Fairhurst:
Oh wow.

Sylvain Perrier:
Yeah. So they’re really trying to go after that more millennial shopper who’s got probably more disposable income and so on and so on.

Sylvain Perrier:
And I think, I’m wondering if the days of… JC Penney used to be known kind of like a Macy’s, like an excessive amount of couponing, right? I went to a Macy’s in Miami to buy a shirt and the shirt was already discounted. And because I was nice to the cashier, she pulled out a 35% off coupon when I told her I was Canadian. And suddenly I think the shirt was like $10 and it would’ve been $40 shirt. It was just ridiculous.

Sylvain Perrier:
Ladies and gentlemen, if you’re Canadian, you go to the Macy’s in Miami, down by the Dorau and Dorau one gives you a whole other experience.

Mark Fairhurst:
So what did you say to the cashier to make her…?

Sylvain Perrier:
Well, she asked me if I had a Macy’s card and I said, “No, unfortunately I don’t have one. I’m Canadian.” And she goes, “Oh my God, that’s so great. I have family in Montreal and oui, oui.”

Mark Fairhurst:
It’s a little known fact. Canadians are the largest tourist group attending or visiting Florida on annual basis.

Sylvain Perrier:
Absolutely. And I would say probably in Phoenix and Scottsdale as well. We have people coming down from Alberta and Saskatchewan.

Mark Fairhurst:
And so all these snowbirds who seek the warm weather.

Sylvain Perrier:
Yeah. Shout out to everyone in Regina.

Sylvain Perrier:
So the other prediction that we put forward was recession-proofing the company. And it’s a tough one because the five US economical drivers coming out of probably out of Q4 this year are looking great. I mean the US added over 200,000 jobs in November, versus Canada where there was a decline, I think it was negative 71,000 or 72,000 jobs. And there’s some concerns here in the Canadian space. Food prices are going up here in Canada, so likely the same thing in the United States, the commodities market is shaping up in the negative side for the consumer because costs are going up.

Sylvain Perrier:
There was a trucking company that just declared bankruptcy on Monday. Over 3,400 truckers were stranded. The trucking market is in decline. So what’s not clear, is that a result of the trade war with China that is having an adverse effect of things coming over here? I’m not seeing consumer confidence being shaken anytime soon.

Sylvain Perrier:
I think the reality is you prepare for these things in the best of times. Right?

Mark Fairhurst:
And again, that’s part of being strategic.

Sylvain Perrier:
Absolutely. And that’s looking at supply chain. It’s actually looking at your investment in private label. I remember in ’08, being on the ground in Charlotte and people that would traditionally go to, who could afford a Harris Teeter would go into a Bottom Dollar Food, and then the people that couldn’t afford a Bottom Dollar Food were either going to a dollar store and if they couldn’t afford that, they were going to a soup kitchen.

Mark Fairhurst:
Yeah, absolutely.

Sylvain Perrier:
Right. And there are some retailers in ’08 who, and this is a testimonial to our chairman at the time, who had made massive investment in along with a bunch of business partners, to some shipping lines that were carrying goods out of China, out of Asia, and to the Caribbean, out of Asia and to Vancouver, and some of the ports on the East coast of the United States. They were seeing a decline already in terms of the flow of goods.

Mark Fairhurst:
So is that one of the early indicators?

Sylvain Perrier:
It’s usually an early indicator. I think the one thing that people dismiss, and there was an amazing article at a time, and I think it would have been in the Wall Street Journal, how 7/11 predicted the decline in the economy. So 7/11 is owned by a large Japanese conglomerate that does a tremendous amount of research.

Sylvain Perrier:
So kudos to them for getting a sense of what was happening. But the prediction is, I think in 2020 you have to start focusing on your supply chain, focusing on anything where you can squeeze out costs, maximize the return on your investments inside your brick and mortar, whether that’s in private label and so on.

Sylvain Perrier:
I’m always leery when I hear grocery retailers trying to fight on price against Walmart. I think that’s a difficult differentiator.

Mark Fairhurst:
It’s a losing game. Well, it’s a losing game because it’s a race to the bottom, right.

Sylvain Perrier:
So that’s why certain grocers do excessively well, like a Farm Boy, right? Like an H-E-B and so on and so on. It’s not that they’re necessarily more expensive, but they focus on quality and experience. And the ratio with price, and the experience in store and so on.

Sylvain Perrier:
And I think there are certain retailers, I don’t want to say they’re recession-proof, but I think that they won’t bleed their best customers. And I think if you’re a grocer, you have to be mindful of that.

Mark Fairhurst:
On that point, and this gets back to something we talked about earlier in the show, it’s making sure that you don’t let anyone else come between you and your customer. Right? So if now is the time to make the investment to secure that customer relationship, then take it.

Sylvain Perrier:
Absolutely. Absolutely. So Mark, those were the 2020 predictions. So let’s talk a little bit about CLTV.

Mark Fairhurst:
Yes.

Sylvain Perrier:
Now for those of you who might not know, in the world of software as a service, right? So those SAS, the reality is, is there a bunch of metrics that we look at in our business, right?

Sylvain Perrier:
Reoccurring revenue, monthly recurring revenue, annual recurring revenue. We look at CAC, churn, our CAC is customer acquisition costs. So what is it really? What’s our cost of sale, cost of marketing for bringing onboard a new customer, or quite frankly, for the entire process of doing the marketing?

Sylvain Perrier:
And then there’s this other element of what we call CLTV, right? So CLTV stands for customer lifetime value. And essentially what it is, it’s just a very easy to understand metric, which is a total revenue that you could be generating or reasonably expect from a consumer, right? And I think that’s, in our world, that’s easy to understand because we’re not dealing with millions of consumers, but it’s more complex in the world of grocery retail.

Sylvain Perrier:
But the thing that I try to encourage our retailers to understand, when you start to think in the context of CLTV and you start looking at who are your top revenue generators, right? So let’s say you only have 10 clients, right? But it’s assume it’s millions. It’s very easy for your system provider or service provider to be able to generate a report that says, “Here’s your top 100 customers,” model them out, and then see who else fits in that “segment.”

Sylvain Perrier:
And that’s very critical because once you start to understand those types of customers, that CLTV metric, you start to understand how do you market to those people. Does that make sense, Mark?

Mark Fairhurst:
Yeah. You can’t be everything to everybody. In order to maximize your revenue, you need to cater to that segment that is generating the most value for your organization.

Sylvain Perrier:
Yeah. It’s an interesting story to go along with. I remember years ago being at a large Canadian retailer and I was with their CMO and we walked into the store. We’re visiting the new concept that they have, so we grab a cart because we’re going to pretend we’re shoppers.

Sylvain Perrier:
The store didn’t know who he was and no one knows who I am, so there’s a flyer in the cart and the flyer literally has items that are circled with a pen and I look in it and I said, “Oh, this is interesting.” He goes, “The challenge we have in our business today is 80% of our revenue actually comes from 20% of our shoppers. And unfortunately what happens is we have people that exclusively will only shop our flyer and it’s a drain on our margin.”

Sylvain Perrier:
He actually over the years developed a process to minimize as best as possible the investment in that group of consumers that erodes margin.

Mark Fairhurst:
Amazing. That’s smart.

Sylvain Perrier:
Very smart. And so they deployed, at the time, an amazing loyalty program that they very much have leveraged…

Mark Fairhurst:
Oh, big time.

Sylvain Perrier:
… to understand CLTV and to specifically offer points and easier redemption process to those top consumers, and now have started to target that middle layer of consumers that they think they can convert to where they can get better, more in the basket.

Mark Fairhurst:
But in tandem with that, it’s also developing this passion for data. Data governance and the insights that come from proper data governance.

Sylvain Perrier:
Absolutely. Absolutely. And you know, data governance in certain retailers is non-existent because you’ll get a sense of that when you have retailers that aren’t happy with their search experience on their websites, or are not happy with the fact that they’re missing a tremendous amount of images. Or quite frankly, they can’t get an alignment between the nutritional information or FDA tagging on the shelf down into what’s in their e-commerce experience. And it’s not necessarily a vendor problem. I think vendors create a lot of friction for no reason in some cases, but it’s really understanding that the retailer may not necessarily know how to better do that.

Mark Fairhurst:
I love the background noises in Toronto. I think there’s like a fire truck or a dump truck or something.

Sylvain Perrier:
This is garbage day.

Mark Fairhurst:
Oh, well, at least it’s not a hearse picking up a body on the street. So anyways, I apologize for those background noises, but any case. Yeah. But I think when you think of those things, it’s not only about sales by square foot. It’s not just gross [crosstalk 00:28:39].

Sylvain Perrier:
That’s a very insightful comment.

Mark Fairhurst:
Yeah. And it’s difficult to change that tide, right? It’s especially, and again, going back to you or your earlier point in the show when you don’t have that talent base that is understanding unified commerce.

Sylvain Perrier:
Right. Now mark, we we should dig this up and recirculate it, but we have a piece of long form content on the Mercatus blog.

Mark Fairhurst:
Actually it was a white paper.

Sylvain Perrier:
That’s right. That’s right.

Mark Fairhurst:
Or I’m sorry, an ebook. Who uses ebook anymore? It’s a dead form of marketing.

Sylvain Perrier:
Yeah. I mean we’ve been noticing that content consumption needs to be much more morsel sized. Yeah. We’re, we’re actually going to be deploying everything through TED Talk now.

Mark Fairhurst:
Shh, don’t tell [inaudible 00:00:29:25].

Sylvain Perrier:
I know.

Mark Fairhurst:
Yeah. It’s a great piece of content that we’re going to breathe a new life into early in the new year. It essentially is the top 10 metrics a grocery retailer needs to measure and follow.

Sylvain Perrier:
Yeah. And we do our best to try to work with our retailers to talk through these metrics. But it’s a challenge. But I encourage the listeners to go through on our website and the blog section and then go through, just click, I think there’s a dropdown where we filter…

Mark Fairhurst:
Resources.

Sylvain Perrier:
… resources, and you can filter [crosstalk 00:29:53].

Mark Fairhurst:
Or just reach out to either of us directly and we’re happy to send it to them.

Sylvain Perrier:
Absolutely. Absolutely. So our last topic is, we were in New York. We stayed right in Times Square which I will never do again.

Mark Fairhurst:
It’s a little noisy.

Sylvain Perrier:
It’s not just it’s noisy, it’s just you’re inundated with tourists. And when you’re very much focused to get to your destination, to do what you need to do on a daily basis, and somebody stops in the front of you to raise their camera to take a picture of…

Mark Fairhurst:
You didn’t jump in and get your photo taken?

Sylvain Perrier:
No. I’m like, “You can buy that same image with a better quality for a lot cheaper than coming here.”

Mark Fairhurst:
Just capturing the memories, right?

Sylvain Perrier:
Yeah. Little did they know. But any case, we, we were invited to go to Barclay’s to do a fireside chat, which was myself and Tom Farida from Point Pickup. Tom’s just a really nice guy, super gentleman in the space, tons of Wall Street experience. Point Pickup has what I would equate to an extremely interesting technology platform that really marries retailers with drivers to do delivery.

Mark Fairhurst:
Yeah, what they call micro level fulfillment.

Sylvain Perrier:
And it’s kind of the whole democracy behind that whole idea of pairing a retailer with a driver. So we announced even just before we got up on stage for our one hour session, we announced our technology partnership. We’ve introduced Tom to a bunch of our clients. So he’s off to the races on that. I think internally we’re going to be discussing how’s that whole integration now going to unfold?

Sylvain Perrier:
The fire side chat was interesting. It’s a different world for us, right. And we don’t go, Mercatus doesn’t go and meet with investment bankers and so on. And so when you’re up on stage and you’re being interviewed in real time. Yeah, because there’s not much preparation we can do as a business to that, we started off kind of the Mercatus what do we do, what do we work with?

Sylvain Perrier:
Tom did the exact same thing, and then Karen just opened up with her questions and she left the crowd… She shared an interesting question. Where do we see the growth of digital commerce in the grocery retail space up to 2025? Karen’s very specific when she wants numbers and and I think quite frankly, if you work at Barclays, I think everyone does, right?

Sylvain Perrier:
I hesitated to answer the question because the numbers that we are seeing are very different in this space. We’ll have IGD, that grocery shop talked about that 2023 we’re thinking US will be $60 billion. You have FMI that’s going to be, that’s reported $100 billion US. Canadian space is entirely different. I mean I think we’re in the $100 million range this year.

Mark Fairhurst:
Much smaller.

Sylvain Perrier:
A lot smaller. By 2023 it’s probably, I think it’s sub $2 billion still or is it 2.7? Anyways, I can’t remember. That’s what’s from the presentation I did at the Canadian grocer event, but we’re going to have a report published today by Incisive, that has actually the numbers closer to $157 point something billion US.

Mark Fairhurst:
Huge. It’s the highest number that I’ve seen.

Sylvain Perrier:
It’s the highest number.

Mark Fairhurst:
2025, I think they’re saying?

Sylvain Perrier:
Correct. Yeah, correct. It’s actually $57 billion higher than what FMI is reporting. So when I said that I think Karen was like, “Whoa, where’d you get these numbers?” And I explained to it. I think the interesting thing about being at Barclays is the conversation is different and Barclays has, and it’s an amazing institution, has great relationships with a lot of the retailers, not just in Canada but overseas. And we were just before Walmart’s CEO. And I was just astonished how transparent he was with the challenges they’re having as a business, but where they want to take the organization and this whole idea of services and what they’re doing with healthcare, and their next clinic that they’re going to open up in the Atlanta market.

Sylvain Perrier:
And the fact that he shared two things. He had spent the week, the previous week, I think he was in this Kansas city market doing delivery. So Walmart has that new service where you go, they will actually bring the groceries into your house and put them in your refrigerator and the stuff in the pantry, that even some people have invested in additional refrigerators in their garages and then Walmart will go in. And then somebody asked him, “What’s the attrition rate?” Or the churn as we would say in the world of SAS software.

Sylvain Perrier:
Zero. And that was just, that blew my mind.

Mark Fairhurst:
Because I think when Walmart first announced it, people were very skeptical as to what, who’s going to let a stranger into their house. But when he had said that, that was surprising.

Sylvain Perrier:
Yeah. But that’s one of Point Pickup’s clients and I think Tom was quite clear the great relationship they have with Walmart and how Walmart’s being very progressive in this space and is not taking anything for granted, and I think is really trying to orient itself around customer service.

Mark Fairhurst:
Yeah, that’s interesting.

Sylvain Perrier:
And that was it. That’s what we did at Barclays and I think we’re looking forward to 2020. There’s a couple business trips that we have to tackle before the remainder of the year. And then we’re going straight into in the new year NRF.

Mark Fairhurst:
Yep, we’ll be at NRF booth 1418.

Sylvain Perrier:
And then what’s after NRF?

Mark Fairhurst:
Then we’ll be attending the FMI Midwinter event, and I think that’s it until around March.

Sylvain Perrier:
God, that’s not that far away.

Mark Fairhurst:
No, no it’s not.

Sylvain Perrier:
And then we go through the whole thing all over again.

Mark Fairhurst:
It was amazing.

Sylvain Perrier:
Ladies and gentlemen, before I let you go, I want to say happy holidays and certainly looking forward to connecting with you guys for our next season of Digital Grocer, which I think is… We’re going to kick it off at NRF?

Mark Fairhurst:
Yeah, we’re already lining up a lot of podcasts to be recorded in the booth. I’d like to try video, add video to the mix.

Sylvain Perrier:
I think we need to.

Mark Fairhurst:
Yeah, just to… People say you and I look alike.

Sylvain Perrier:
Well, I mean people are going up to you, “Oh man, great presentation at Barclays.”

Mark Fairhurst:
And I say, “Yeah, sure, thank you very much for the compliment.”

Sylvain Perrier:
“Sir, you’re not allowed to jay walk.”

Sylvain Perrier:
That wasn’t me! That was the other guy.”

Mark Fairhurst:
That was the other guy.

Sylvain Perrier:
So hey Mark, how do people get ahold of us?

Mark Fairhurst:
Go to our website, www.mercatus.com. All of the contact details are there. Happy to hear from anyone.

Sylvain Perrier:
Awesome. Folks, if you want to hear anything specific in season three, just don’t hesitate to send Mark and I some topics. Or if you think there’s a guest that you’d like for us to interview, please let us know. And again, looking forward to catching up with you guys in 2020. Thank you.

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