Drawing from your previous experience with Kroger and from your current work at McKinsey, what’s the most interesting or surprising trend you’ve observed for CPGs or retailers in the last few years? How is this significant?
I would say the most interesting trend I’ve seen is just how much digital is influencing sales. This includes ecommerce for sure but digital is having an even bigger impact in influencing offline behavior. Digital is increasingly influencing how consumers plan their shopping trip, how they shop the store, and what they do after they get back home. I think you can see the stats. It’s gone from something where, maybe five or ten years ago, digital was a very small part of the experience, to where most of shopping now is digitally influenced. As much as 85% in some of the reports I’ve seen, meaning that people, in some fashion, are using mobile in particular or mobile/digital to inform their trip and to use it as an aid while they’re actually shopping. That’s really changed a lot over the last few years. You can’t just think of your store as being brick and mortar, you really need to understand how your customers are leveraging digital while they’re in the store but also, before and after they shop.
What major area do you think is currently most challenging for suppliers and retailers in grocery?
I would say it is ecommerce for now, and on a couple of levels.
First, the things you’ve got to be good at in ecommerce require different skills than most retailers or brands have used in the past. On the retailer end, if you’re picking in store, a lot of things are similar in terms of the supply chain, but now you’ve got to figure out how you’re using employees in the store for picking. How do you pick in a store while you also have customers shopping? How do you coordinate delivery of the goods when a customer comes to the store? If you’ve got a mix of frozen, perishable and dry groceries, they’ve got to all come together the moment the customer shows up.
Second, how do you do all this profitably in an already thin margin business? Today, I effectively pay myself to go pick my groceries and I pay myself to drive it to my house. With ecommerce, stores pay somebody to pick my groceries and possibly deliver them to my house. Generally, you can’t raise pricing or charge huge fees for delivery because, again, expectations have changed around paying for delivery fees. Retailers will need to consolidate spending and look for cost savings. There will be big changes in how the business is run.
CPGs will face challenges working with traditional retailers but also with ecommerce providers like Amazon, which don’t allow the CPGs to do promotions and merchandising in the way they used to. Now it’s all algorithm driven. Also, while ecommerce opens up the opportunity for CPGs to create new direct-to-consumer businesses, it’s much easier said than done. For example, a CPG would have to figure out how to reengineer its supply chain to deliver individual items to individual consumers vs. shipping a palette to a retail distributor. It really is going to stress a lot of the existing processes they’ve built over the last 20 to 50 years.
You’ve covered a little of this, but what’s your vision of the future? Are there other things that you see staying constant? Areas of radical departure?
The basics of the business aren’t going to change radically. Retail has always been about a combination of selection, convenience and price. However, we’ve spent the last ten years figuring out how to take customer data to make communications more relevant, to make the items on the shelf more relevant, make our marketing more relevant. I think that will continue to be enhanced over time.
That said, I think a lot business is going to be very different, particularly as ecommerce expands. My vision is that much of the center store is going to wind up being automated; most of it is just replenishment business. I see that going to ecommerce in a way where, people set parameters and maybe there’s some smart device in the house that lets you know you’re running low on an item. There’s not really a lot of reason you need to go to the store to buy laundry detergent.
Earlier this year, the Food Marketing Institute predicted that 20% of the grocery business would be online by 2025, but it was going to be 40% of center-store spending. People will still want to shop in the store, but I think the experience of the store is going to have to really change and become much more engaging and experiential. Maybe it’s where people go to take cooking lessons or get nutrition counselling or find out about new items that fit their lifestyle. Perhaps the center store will be replaced with vertical farms to deliver hyper local produce. The important point is that retailers and their CPG partners need to figure out how the experience changes.
Please give attendees a sneak peek at some of the themes from your presentation at Xcelerate?
Yes, absolutely. I’m going to focus on retail disruption which is a lot of what we’re talking about. I’ll discuss what some of the new technologies are that we’re either beginning to see already, or will be seeing in the next few years, and what that might mean for both retailers and consumer packaged goods companies in particular.
Some of the things you’re already seeing are data analytics, how are people using AI and deep learning to create more predictive and insightful analytics. Another idea you see already taking hold is around conversational commerce leveraging digital assistants like Alexa. In addition, you see contextual commerce which lets shoppers use chatbots on Facebook and other 3rd party sites to place orders or answer question. For example, you can use text messaging to send in a list of the groceries you need vs. having to go to a retailer’s site. By integrating with the retailer’s CRM systems, these chatbots can know when you type “milk” you want 2% organic milk. It makes everything much more seamless and convenient.
Can you share something fun or interesting about yourself with the readers?
I bake my own sourdough bread. Most weekends, I make bread. I have my starter that I keep in the refrigerator and revive every week and use it to make a couple loaves. I do plain sourdough, whole wheat and a variety of different ryes and other sorts of flavors. I really enjoy it. I’ve also been a big runner for years. I’ve gotten into obstacle course racing, so I’ve done a bunch of these runs that include crawling under barbed wire, scaling a wall and climbing a rope. It’s mostly proven that I have a very weak upper body, but at least it gives me an incentive to go to the gym if nothing else.
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