Modern Grocery: Driving Customer Loyalty and Revenue | RETHINK Retail
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Webinar – Modern Grocery: Driving Customer Loyalty and Revenue

Grocery Insight CEO Steve Dresser and One Door CEO Tom Erskine join RETHINK Retail host Paula Macaggi for an exclusive panel discussion on the modern grocery store.

 

 

 

TRANSCRIPT

Paula Macaggi:
Hello, everyone. Welcome to this panel discussion on the modern grocery store. Today, we’re going to learn how they’re driving customer loyalty and revenue. I’m your host Paula Macaggi, and today I’m joined by two amazing guests with incredible experience and insights on grocery. And before I dive into the topics, let’s share a little bit of your background. Let us just start with you, Tom.

Tom Erskine:
Yeah. Hi, good morning everyone. I’m Tom Erskine. I’m the CEO of One Door, which is a software company that provides technology to retailers. I’ve been in the software side of this business for 25 years, providing enterprise software solutions. And so I think we have a bit of a unique perspective as the enablers for a lot of what’s happening today in all of the supply chain, but very much focused on the last mile of the supply chain to the retail location. So that’s a little bit about me and our company One Door, but back to you.

Paula Macaggi:
Thank you. How about you, Steve? Our top retail influencer.

Steve Dresser:
Hi, yes, Steve Dresser here, CEO of Grocery Insight, and we’ve been operational at 10 years now. And we provide insight, advisory, and help to our clients. We visit a lot of physical supermarket locations every single week and take a lot of images of what we see. And we just allow executives to really see what’s going on, both in their own stores and indeed in the wider market too.

Paula Macaggi:
Okay. So let’s coach the questions. Of course, we’re going to start with the pandemic and how it accelerated a lot of changes in grocery. What has changed for you as a consumer, Steve?

Steve Dresser:
Personally, for me, indeed, my family as well, we’ve done a lot more online shopping within grocery. We used to do, I think like a big shop maybe once a week, and then we’d pick things up around the week, which we still do, but in the convenience stores. But we’ve become more online focused for the big shop. I think it just makes things a lot easier, especially with a growing family. Obviously, you’ve still got issues with availability, so you’re not always guaranteed to get what really what you order, so you’re in the hands of the gods really in terms of substitutes. But generally, the retailers are good in terms of adjudicating what’s suitable to send, and you do get forewarned around that. So, that’s been the big change for us.
I think as well, obviously you’re always looking for inspiration around meals as well, and certainly being more aware of what we eat, particularly with COVID. And obviously the healthy emergency, knowing that it does impact people who are more unhealthy. So we’ve certainly more aware of what we eat and, and portion size and things like that, certainly.

Paula Macaggi:
Okay. How about you, Tom? What changed for you personally?

Tom Erskine:
Yeah, it’s so funny that that Steve mentioned inspiration, because I think for us in our family, that’s been a huge factor. And really, I think it’s psychological, in terms of wanting to spend more time and just taking more care preparing meals, because frankly, I think we all just get bored. When you have to make dinner a hundred days straight, I think things get pretty boring if you’re just rolling out the same old pasta Bolognese every night. So I think for us, it’s been a lot about that. And obviously I think our shopping habits have changed too because of that. That we’re in many ways going to the store looking for inspiration, versus going to the store and just picking off a list. And so I think that’s probably been that the biggest habitual change we’ve noticed in our family as well.

Paula Macaggi:
Nice. Well, I went 100% online and I love it. But I’m single, just by myself, so that’s easy for me. Okay, and as we are continuing to recover, if I can say that, during the pandemic, what are the changes that you think are going to stick, Tom?

Tom Erskine:
Yeah, so it’s funny, recover. Maybe our perspective on this is skewed, but I think we perceive the disruption related to COVID as more of an acceleration for changes that were already underway than we do a big distraction for grocers. And the move to a much more omnichannel environment and the move towards rethinking the role of the store and the fulfillment equation, as trends that were, to some extent, already pretty well underway. And our perspective is that COVID just accelerated maybe 10 years of change into about a year, or 18 months.

And so from us, a perspective of what sticks, the future being a much more omnichannel future for grocers, and omnichannel is a big term, but basically meaning the breaking down the barriers between channels and the role of the store and that. And there’s no question for us, it’s changed as a family, our habits, which I think bodes extremely well for grocery performance, just overall, in terms of sales, because we eat out far less than we used to. We rely on fast food. I can’t remember where you’re all based, but as you can appreciate, United States, you can’t swing a dead cat without hitting a McDonald’s or a Burger King. And that’s true. And we’ve certainly relied on those doors less in the last 24 months.

Paula Macaggi:
Okay. How about you, Steve? What is going to stick in grocery?

Steve Dresser:
Yeah, and I was agreeing with Tom until the fast food element. I think if anything, we’ve gone the other way. We haven’t eaten out as much. I think that’s very true. And that is a bit difficult, obviously, if your loyalty’s to a certain restaurant, you do feel bad for the owners, because obviously with the pandemic and all that’s gone on,. But we have used their takeout service that they developed as a result of COVID, because they couldn’t open with the restrictions.

So, we’ve seen some of the merging channels, even in food, in food service. But in terms of fast food and McDonald’s, we’ve used that, I would say more often, really given that it’s there and it’s convenient. I think when McDonald’s reopened in the UK, the queues were huge and that’s not really gone away. And if you sit in your car and eat McDonald’s, you can’t fail to notice the number of Deliveroo, and just the delivery partners for the online platform that are just literally going in and out and delivering fast food locally. So, that’s a really interesting trend that I think has made the quick commerce engine that we see go off coming over to the UK from the US, and acquiring outlets. I think we’ll see that stick. Based on that, whether it’ll merge to grocery, I’m not really sure.

I think from a star viewpoint, I agree with someone on fulfillment. I think, particularly with the acceleration we saw in the UK, that it exploded overnight. It’s been growing steadily and it’s doubled and almost over doubled in share, within a matter of months, which you would never got organically, which wouldn’t have happened. We have seen the numbers fall away, certainly on Kantar, who provide the data in the UK, which have been very interesting, because you’ve then got a situation of over capacity in a space which can lead to diminishing returns, particularly when …
… space, which can lead to sort of diminishing returns, particularly when you think about delivery costs that for some retails in the UK is zero. So you sort of look at that and think, how can the retailers maybe turn a profit there where they’re basically taking the whole picking, packing delivery cost away from the customer.

Obviously we know it’s about long term loyalty, of course we do. But I think in terms of the role of Star, I was heartened as a former Star colleague myself to see at the start of the pandemic when colleagues were really treated as heroes on the front line, almost a forgotten army still out there serving food, stocking shelves and serving customers at a time of real uncertainty for their own safety let alone what was going in the wider world.

And the investment in people for [inaudible 00:08:48] et cetera, et cetera, was really good to see shops were really well staffed. And obviously retails can’t always go back to those levels of staffing because we know and understand there’s a cost, but a certain look across the world retail and think that there’s been a huge reduction in headcount and the tech savings perhaps haven’t progressed at the same time. So we’ve seen a real reduction in people in and around stores and then the availability is faulted as a result of that. And it was nicer to see stores fuller really, obviously you wouldn’t want COVID to happen to drive that.

But I guess just for colleagues to have a little bit more love, rather than just being sent over the front line to get on with their job, just have a bit of love and a bit of training and just a bit more of a focus on their jobs, because it is often an unforgivable job. I often say store managers they should be working for NASA. They’ve got to defy gravity by delivering this scorecard of all these various KPIs and targets but they’re barely given the resources to do it.

They are literally defying gravity and it’s important I think within the store role that we remember the guys working there and their role in making whatever’s deemed the way forward, a success.

Paula Macaggi:
Okay. And well, now that… I can’t say that the pandemic is over, but because here in Europe things are picking up again, but with more store topics, everybody is talking about the criticality of having e-store experience and what for you, it’s the most critical points that the retailer should be looking at when it comes to his experience, Tom?

Tom Erskine:
Well, I think, I’m so happy that Steve mentioned the store associates, because I think for us, that’s the big deal, which is that there’s just an incredible amount of pressure now being put on the last mile of the supply chain. You know, if you think about everything retailers are trying to accomplish, whether it’s experimenting with new formats, creating more localized assortments to meet customer tastes, update the presentation of the existing space to generate more inspiration. They’re trying to do all that.

And in very many cases, the tech stack that they have underlying that to support that really doesn’t deliver for the associate in the store. And so it ends up putting a huge amount of pressure on those store teams to deliver a superior customer experience in many ways with maybe a hand tied behind their back.

And so I think what we’re trying to do as a company is we’re trying to shift the retail thinking to be a little bit more store inward and a little less supply chain outward to help provide the associates in the stores with the right digital tools so that they can actually deliver ultimately that experience that in this case, the grocer’s trying to deliver for the shopper. And what we find in virtually every scenario where we get involved in a project is that the technology that they’re being asked do this with is not really anywhere close to what’s possible.

We think we can make a big difference there, both in the lives of the associate and ultimately in the lives of the shopper, but in terms of the associate, a lot of it is making life simpler for them. And that a lot of it is helping them make better decisions by giving them help that they just, again, don’t get today. They’re just forced to sort of work it out for themselves.

Paula Macaggi:
You’re right. Yeah. How about you, Steve?

Steve Dresser:
Yeah, no, I agree with Tom. I think it’s so true. We see it a lot where… we see it in an initiative that’s landed in a store from a central office. Well-meaning, it’s not designed to sort of ruin anyone’s day, but all too often it’s sort of like a ball of wax and maybe 70% of it’s there and you can tell us must be a 30% of the head office thinking, or the central function thinking, you know what, the store will work that out, we’ve got X number of shops and everything’s different. We can’t do everything. We can’t prescribe everything. And then you get that uneven execution piece. And I think if you look at particularly availability, you look at a planogram on some modern systems you’ve got, the planogram is absolutely central, that if that’s wrong, the whole thing is wrong until it’s right.

And that’s one of the most vital jobs you would argue alongside maybe clocking in when you arrive to work and putting your name badge on and making sure your planograms are correct. If that’s the system that the retailer goes down. So for them not to put absolutely everything behind that to get that right, you’re almost setting them up to fail, I think.

I think there’s a lot of value in the tech conversations. I know retailers, there’s a capital expenditure budget and there’s arguments about who gets what, the latest flavor of the month who we want to invest in and this, that and the other. And I think some of it’s just what’s the most broken. And then I think planograms are probably one of the many examples where, because it’s not really broken and stores can adapt, it’s not ever viewed on anyone’s list as are real to do because stores make it work.

It’ll take longer than they get the hours for, but they will make it work. And any issues are probably down to supply chain or general availability problems. It’s never really identified as a root cause, but I think just on that focus on the future, really, I think standards tied with that, they remain so important. I know that we can all identify costs that we can remove from stores and we can save X by removing these hours and putting your focus on growing sales is hugely uncertain. Because who knows who’s going to buy what?

But the reality of it is that store standards are really important and those real basic disciplines, we can’t really put a value on it because it’s so hard to do. But you know, you would hope that what is acceptable and unacceptable remains… that that line remains very well drawn and everyone knows which side of the fence they’re on because the risk with COVID is that whilst the guys that have been rock stars in stores and done a fantastic job, you can also have the element of what I call a COVID shield, where the COVID shield comes up as an excuse for anything else that’s not quite right.

And whilst the guys have done a great job, there’s no question and they are, often one, two hands tied behind their back, in some cases. COVID can’t be allowed to be an excuse to sort of excuse standards that really should be sharper. So I think it’s a little bit of give and take in that respect, but broadly I would agree with Tom whole heartedly on tech stack, often the front end of any tech for colleagues works and needs updated to look better on your devices. Behind the scenes often it’s held together with sticky tape and perhaps a little bit of rope and string, if you’re lucky.

But because it’s not broken and other things are more important, then that just goes down further down the list, but it’s just changes like that for associates really help the company get out of the way of the associates serving the customer better because often it’s the…

… of the associates serving the customer better because often it’s the retailer themselves that puts up more barriers to customer service than anyone else within the chain. And that’s hard to reflect upon, of course, but the reality of it is that is what we see nine times out of 10.

Paula Macaggi:
Okay. And well, we are in two different parts of the world. So we are in Europe. Tom is in the US, and we’re all having supply chain issues. What are grocers doing to ease the supply chain challenge that it’s happening now? How is in the US and how is in the UK? Let’s start with the UK.

Steve Dresser:

[crosstalk 00:16:43] Yeah. So big, deep breath. We’ve obviously got an issue with Brexit as well. So we obviously UK has left the EU, which whatever anyone starts at, that’s what happened and there’s been a deal. So we don’t have tariffs and, but we do lose access to the single market. So basically you can import goods without checks because everyone basically plays by the same rules within the EU. We’ve left that. We’ve sort of left it. We’ve done a deal, but not really sure what the deal is because at the minute, we’re not checking anything coming in, even though we’ve left and we’ve taken back control as a country, we’re not checking import, but when exports go out to the EU, they are checking, the European countries are checking based on our rules, but we’re not checking for what anywhere. So basically, we have got supply chain issues in that respect in terms of the transit time of things coming in, which has made it even more difficult to really look at, again, root causes. There’s so many aspects within that that is so hard to really cherry pick which issue is the biggest.

Within Brexit, obviously, there is a change in around European work has been able to move freely around the 26 countries and work because we’ve left, and we now on a work permit system. We’ve lost a number of [HGV 00:17:58] drivers who’ve gone back over to Europe where they’re able to drive. So we’ve now got a HGV driver shortage as well. So there has been some movement around retailers, poaching other drivers from other companies with signing on fees effectively. The challenge is that that’s meant that we have, then, companies in the supply chain who’ve lost drivers. So the issue just been pushed back down the chain.

So there’s been a significant amount of work by retailers. And you can only do so much. There was a lot of stock held for Brexit. I think a lot of that’s being used. There’s a lot more transit time now in the tank, just from the EU, which maintains that retailers are to hold more stock, which obviously impacts working capital position. And there isn’t the tolerance of reducing shelf holding of products anymore. You’ve really got to try fill the shelf and then it’ll hold until the next delivery. In terms of the wider world, in terms of the ports, yeah, I think the port in [Felix 00:18:57] store was overloaded till those deliveries got moved over to the EU and those content is now coming over to the UK. So there’s real issues in terms of the Far East and those imports and that are still on the water in some cases.

I wouldn’t say a meltdown, but there is a degree of challenge around where stock is, particularly if we approach Christmas now, where it’s the first year at [inaudible 00:19:20] gift sets and things being later. They’re almost as late as they’ve ever been dropping. And I think you’ve really got, as a retailer, you’ve almost got a concern of, if something comes in now, do you take the cost and warehouse it for next year and hopefully sell it full price? Or do you bring it in almost to reduce it straight away and take the markdown because the stock flow’s so disrupted and also you’ve still got COVID issues. Whilst the rules are strict as they were, you’ve still get elements of isolation if people are testing positive and things like that. There’s still that aspect as well.

So incredibly difficult. I feel looking at the UK, we are out of the worst of it now, but it’s taken a Herculean effort because of Brexit and also because of everything else. And I think just going into 2022, there’s a huge amount of food price inflation that’s start up now as a result with the oil price, fuel through the roof as well. So yeah, there’s been a lot of work and I think there’ll be a lot of work ongoing because we’ve got to navigate so many different things. And I’ve often said if this was a war game scenario to see how well adjusted a company was for a real disruption to the supply chain, the current thing that we’re dealing with in UK wouldn’t be allowed because it’d be considered to be too unrealistic to have border issues alongside global supply chain issues, pandemic, fuel shortages. You’ve no drivers for the trucks. So it is just unheralded times and where it’s so difficult. I think it’ll take a while with a lag to catch up, but we will get there. It’ll just take some time.

Paula Macaggi:
Okay.

Tom Erskine:
Yeah, I think on our side, the thing I would add to it is, I don’t know about the UK and Europe, but to add to the complexity here in the States, besides just the problems up and down the supply chain, there’s just also a massive labor shortage. So it’s really a double whammy because, again, back to sort of imagining the last mile of the supply chain and the store itself, finding labor is causing massive headaches and driving up costs because it’s a very much … Labor is just, in this case, in the states, a very simple supply and demand game with regards to pricing, of pricing of labor, and how much it costs. And so that’s, I think, also conspiring to create huge challenges at the shelf because it, inventory availability is one thing, but then the labor to actually stock the shelves is another.

And so I think sort of the way we see it is, again, maybe we may be a bit of a hammer and search of an nail as a technology company, but we do certainly see many retailers working to figure out how to mask the supply chain issues that they’re facing in that last a hundred feet sort of at the shelf and filling the missing teeth and filling the gaps in a 16 foot gondola with anything that they’ve got that they can find to fill it with. And so I think that as we go into the holidays with a bit of an unprecedented set of challenges, there’s going to be a lot of improvisation happening at the stores and in the stores themselves to deliver a customer experience that’s acceptable and doesn’t look like a sort of a some type of apocalyptic movie from the 2040s or something.

Paula Macaggi:
Do you think everybody’s going to have a Turkey for Thanksgiving?

Tom Erskine:
I know we’ve already ordered ours, but I’m not a 100% confident that we’re going to get it.

Steve Dresser:
Really? I think we’ll be okay for Christmas. We ordered about two, two weeks ago, maybe longer. I think just to add … Tom’s absolutely right around the labor shortage. Obviously, we’ve got the EU issue, which means that the pool of labor has diminished further really, but we’re seeing this big wage growth, and retailers in the UK haven’t been famous for recruiting, really. Temps at Christmas sure, but the actual head count numbers have been falling. That’s that sort of been their focus. They’ve often looked to really drive savings, which means you reduce your overall fixed cost of employees, but we’ve seen a lot more around recruitment. And obviously, if you’re going work in a retail stores or seller of retail versus some of the other jobs you could get, whether that pays equivalent or better, you are hiring into nothing in some cases within retail. Often, you barely get-

… adding to nothing in some cases within retail. Often you barely get trained. You get handed a name badge and away you go over the front line to deal with the customers. So I think there’s also that attractiveness of the industry element, where you’ve got… Not that temps off the street are looking for a career, but in retail, you used to have quite a defined career path. Now with the management restructures, it’s very difficult to see how it becomes a real career, because you can almost get a manager’s job for turning up solidly for a year and you’ve no credentials. You’re just given… Put your [inaudible 00:24:34] and tie on. Away you go.

And I think that’s a real challenge for a number of sectors, but retail is a big one. And tech should help with that. But again, in terms of shortage, online delivery drivers as well, I mean, I think there’s one supermarket maybe that’s offering a 500 pound signing on bonus for anyone who wants to drive online deliveries for a food retailer. Again, versus careers for parcels, food delivery is hard work. You’ve got to load your own van. Sometimes you’ve got to go however many flights of stairs with a huge shop. It’s not a glamorous job. It’s a very difficult job. And I think often you’ll get people starting thinking it’s a nice way to earn some money, driving. Actually, when you get there, customers want you take into their kitchen and you got to stand there while they unload their crates.

I think there’s a lot challenges in around the labor market. We’re going to see a bit more of a reset. And it can’t just be around purely pay, because I think it’s like anything in the world, money or incentive to work for money. It only takes you so far. We have to, as an industry, really look at other ways to make the jobs more attractive, because in a labor shortage time, employees have the power and it’s quite a nice way for it to be. It should drive everyone to be better rather than just, “Let’s just pay people $1 or two more.” But then load the work on those guys who are left.

Paula Macaggi:
Yeah. It has to have appealing, a career that you want to be part of and not just like, “Oh. Just a short time plan for me until if I find something else.” That’s definitely something. Okay. And the last question, let’s keep, as we’re almost the end of 2021, which I still feel I’m in 2020, I don’t know why, but what are you most excited for grocery for the next year? Tom?

Tom Erskine:
Well, I think that when you’re an arms merchant, a good war is a nice thing. But I guess what we’re most excited about is that all of these pressures are really conspiring in a positive way to force retailers to make the investments in their upstream technology stacks to help deliver again sort of a better environment for the store teams. And one would’ve never wished a pandemic on anybody, of course, [inaudible 00:27:13] God, but we are… It’s nice to see sort of an acceleration in real investment in technology to create a better environment for the store team members and to create ultimately a better customer experience for the shopper as well. And so I think what we’re looking for is sort of seeing some of these investments pay off and really ultimately seeing store teams smiling, because they’re finally getting the technology and the tools that they need to deliver the experience that they know they’re under pressure to deliver.

Paula Macaggi:
All right. And what are your expectations for 2022, Steve?

Steve Dresser:
Yeah. I think to echo Tom to an extent really, I think the pandemic showed people, showed retailers, what you can do when you need to change instead of finding 12 million reasons why we can’t change. And I think probably retailers as they come out of it hopefully will come out of it, they probably surprise themselves at what they managed to achieve, turning on food delivery boxes overnight almost and the almost pure, basic retailing of getting stock to stores on the shelf to sell without all the other stuff in between that we obsess over, that customers don’t really care about ultimately. That was really refreshing. And I agree with yourself as well. It’s so hard to work out what year we are in. I think everyone’s time perception is just absolutely skewed, because we’ve not really had… It’s just so strange to look back.

But heading to 2022, I think for me, particularly the labor shortage, there’s got to be a real focus on the colleagues now and Star teams and what it means to work in a Star now with the endless number of restructures and it should retailers when things are invested in, such as availability, for example, which it almost can be… Availability can be blood dry. You can not send enough fresh in because it’ll just get wasted and you can game all kinds of systems to sort of get the end result. But ultimately customer satisfaction’s the most important thing. And I think every retailer, food retailer, within COVID, customer satisfaction rates were really high, because customers appreciate what was going on. And shops were full and there were colleagues around to help.

But I think I would like to see almost that COVID spirit, if you will, of togetherness expand into 2022 and not just become another year of the same, “Let’s try take as many hours as we can until someone really screams,” which is probably like a year later. And I think there is so much tech out there as well, which is a challenge, but actually fixing some of the jobs that you really need doing. And I think it’s the same in sports. You often will plan and prepare for the things that you know are going to happen. So within soccer, probably you are going to get a throw-in at one stage, so practice those, because it is a basic. I think food retail’s the same. You are going to have to change plans. Central offices love changing planograms at the drop of a hat sometimes.

So having the best possible tool available to make sure that that is executed 100% seems almost so basic we don’t need to say it, but I’m sure we all find ourselves looking at each other all the time thinking, “Tech’s the answer, but not here.” And I think whilst tech’s important, it’s important to cut through the noise and make sure that it’s real improvements for the colleague, the shelf edge, and indeed the Star, not just the headline grabbing technology that we’ve all seen that doesn’t really stand the test of time, but looks good on social media. So yeah, I would hope for 2022 to be a better year for a real focus on the Star teams and what they have to put up with, that every single job almost needs documenting and questioning by someone in a central office, because if it doesn’t have an owner there, then the Star shouldn’t be doing it.

Paula Macaggi:
Thank you, everyone, for watching this conversation I had with Tom and Steve. If you want to participate in any further conversation we have, please reach out to me at media@rethink.industries. Thank you so much for watching.

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