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October 19, 2020: Dollar General unveils its Popshelf concept, Walmart rolls out new tech-desk service, and Aldi tests bigger box format

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Hosted by Julia Raymond

Written and produced by Gabriella Bock

Edited by Trenton Waller

 

TRANSCRIPTION

Julia Raymond:
Welcome to the show today we’re joined by guests, Ron Thurston and Shawn Harris. Ron is the Vice President of Stores at Intermix and the author of a very recently published book, “Retail Pride.” Shawn is the Director of North American Sales at Zebra, where he leads go to market activities for their intelligent retail automation solution. He’s a respected industry commentator and Forbes Technology council member. Ron, Shawn, it’s great to have you both on the show.

Shawn Harris:
Great to be here.

Ron Thurston:
Thank you so much, Julia.

Julia Raymond:
And congratulations Ron, on your book. I know you just launched last week, so really cool stuff.

Ron Thurston:
Thanks so much. It’s been a great success. I’m very proud.

Julia Raymond:
Excellent. Well, the first topic we will go over is Walmart’s news. The big box retailer is making moves to become even more of a one-stop shop after launching its own tech services, pilot. Walmart is testing a tech deck service similar to Best Buy’s Geek Squad. And they’re rolling it out in five US stores in Arkansas and Texas. These service will be staffed by True Network Solutions and will offer customers in-home installation and setup of television, smart home products, personal computers, tablets, and wifi, and 24/7 tech support plan. Walmart says it plans to expand the pilot to 50 US stores by mid 2021, so pretty soon here. Shawn, last year, if we look at Best Buy their Geek Squad services totaled nearly $2 billion. Do you think that there’s room for Walmart in this space?

Shawn Harris:
I think it’s a huge opportunity. Given the times that we’re in, retailers can look to either kind of put up the guards and defend themselves, they can look to differentiate where they can disrupt. I think that this move is leveraging the existing volume that they have flowing through their stores. They are selling a great deal in the electronic space. We know that more and more people are leveraging in-home IoT based technologies, whatever that may be from Nest to smart TVs, to smart speakers and the like. And it’s not always a trivial exercise to get these things to work together in a way that actually makes sense to a lot of buyers. I think it’s a smart move. It’s a smart differentiating move. As I understand it, they’re going to be coming at it from the standpoint of, your margin is my opportunity, right? So they’re looking at attacking it through price. I think that that’s a smart move and for what it’s worth, I can see a lot of people taking advantage of this service. I really think it’s brilliant.

Ron Thurston:
Mm-hmm (affirmative).

Julia Raymond:
Excellent. Ron, do you want to hop in on this as well?

Ron Thurston:
I would. I certainly agree with Shawn. When you think about how we are living our lives today, working from home, the kids are home. All of this has become just that much more escalated. This need for smart home, things that work, things that are easy, and this idea of kind of test and learn from Walmart and kind of going third-party and hiring this kind of True Network Solutions, and kind of build this infrastructure of test and learn, can it work? Does it scale? And from what I’ve read, it looks like they were going to significantly kind of under cut Best Buy in price for some of this as well. So it’s a huge win when you just think about the need for this ongoing technology in the industry.

Shawn Harris:
Yeah. Yeah, I think what’s going to be important as Best Buy is known for electronics, that… And Walmart being more mass, right? They do effectively sell everything, right? In going down that path, I think it’s going to be important for them to really make sure that folks know who is delivering this. That it is this True North, I believe again the other name is, technology services firm. That these folks like a little bit about their background, there’s going to need to be an element of, do we trust Walmart to do this and effectively making sure that you’re bridging and getting to that point of trust by consumers to help you with these things? By making sure they’re clear on, that Walmart acquired or partnered with a company that is, this is their bread and butter, and this is what they do. And now it’s going to be convenient because it’s right here at your local Walmart.

Ron Thurston:
Agreed. I think there’s also a level of just loyalty built into this. So we need to think about buying technology, where you purchase it and then where it serviced then it’s installed. Like every touch point builds loyalty for Walmart. And so I think that’s an important component here, that’s already built into their model that can continue to support this.

Shawn Harris:
Yeah.

Julia Raymond:
Do you think Geek Squad should be worried? I mean, their services revenue accounted for 5% of total revenue last year for Geek Squad. That’s a significant amount and it seems like they can’t get a break. I mean, they went through a lot during the pandemic. They’re finally, really back in gear and everyone is kind of flocking to Best Buy once again. Should they be worried? What should they be doing?

Shawn Harris:
I mean, I would say yeah. Best Buy and also Staples has an offering like this as well, right? So I would say that there should be some concern. It necessarily is one of those things that won’t just happen, but it’ll happen if they just let it. And so being thoughtful about how they begin to differentiate what their services are, that they kind of put out there. Again, continue to drive home the fact that they are experts at electronics, it is everything who they are. This is going to be another loyalty play. But I mean, when Walmart’s talking about cutting prices by 50% or more, that becomes tough because I don’t think… There’s not going to be a per se by many, if you will, a stigma to going to get tech services from a trusted company through Walmart. If it’s 50% less, it’s 50% less.

Julia Raymond:
Mm-hmm (affirmative).

Shawn Harris:
I think they should be concerned in thinking about how they kind of put up their offense and defense.

Ron Thurston:
Agreed. Totally agree. And I think the in-home piece is really interesting because on the luxury side, it seems like Enjoy is the only one that has been really trying to scale about doing in-home, which does… It seems to err on the side of more of a luxury customer than a Walmart customer. But if I can have a similar like in-home experience with really skilled people doing in-home setup, that I think is something that’s completely untapped.

Shawn Harris:
Yeah. Great.

Julia Raymond:
Mm-hmm (affirmative). You both made great points. Shawn, you said Walmart’s leveraging their existing volume, which is great. And this is a great deal, Ron, you said they’re significantly undercutting Best Buy on price. And you both agree that this is something maybe Best Buy should look out for moving forward. And then just an interesting bit of news I saw recently Walmart actually is helping people, 65 and older with signing up for Medicare plans during this season’s enrollment period. So they’re doing a lot of moves. And when I was reading that, I also came across a comment on LinkedIn. And this I thought was really interesting because its history repeating itself in a sense here’s some trivia, Sears actually formed the Allstate Insurance Company in 1931.

Shawn Harris:
Yeah. What has Sears not done?. I mean in a good way in that they were just ahead of themselves. And it’s kind of a shame how things kind of have effectively turned out for them because they were just such so ahead of the curve. I guess I would say with respect to Walmart, they’re undoubtedly going to act like Amazon, want to be the everything store, right? And so if it can be consumed, whether that be apples or it be car insurance. I think that we’re going to find companies like Walmart at their scale, looking to kind of differentiate themselves out into those places. Again, they have the volume, they have the customer base, they just need to make sure that they can get folks to trust that they can deliver quality service.

Ron Thurston:
Agreed.

Julia Raymond:
Mm-hmm (affirmative). Well, good comments guys. We’ll move on to the next segment. This is about something called Popshelf. The second retailer we’re covering is the Dollar General. In case you haven’t heard, the discounter is launching its new retail concept, it’s aimed at suburban women. And coming this fall, Dollar General’s Popshelf will focus on non-consumable seasonal and home decor, as well as beauty party supplies and household products. Dollar General says that 95% of the items in their Popshelf will be priced at $5 or less. And its target customer will have a total household annual income ranging from 50 to 125,000 USD. Popshelf will debut its first two locations near Nashville, Tennessee, and plans to open 30 locations in various markets by the end of fiscal year 2021. Ron, I’ll pass this to you first. What are your initial thoughts on their Popshelf concept at Dollar General?

Ron Thurston:
So I’m not going to be as positive about this as I was on the last. And I’ll tell you why. When I look at this business model and I’ve seen the kind of videos of the inside of the store, it’s really…This is what got us into trouble in the first place, is these stores of just more stuff that you can find in other places that there’s not a particular experience related to it. There are things that, it’s not experiential, you’re not learning anything. It’s just more stuff for less price.

Ron Thurston:
And my point of view is we don’t need more of this, we need less of this. And we don’t need this idea of just filling more retail real estate. It looks like they’ve taken over some, maybe other close businesses which is great, and certainly appreciated. But I think the idea of how do you create something that’s not just about filling it with things that I could likely find at Target, on Amazon, at Walmart and create something that is more meaningful, I think, to the customer base. So I’m concerned about this one.

Julia Raymond:
Mm-hmm (affirmative), Shawn.

Shawn Harris:
I think I see it differently. I think that from what I could gather, they’ve one, done some pretty rigorous analysis on kind of the marketplace and will this work, right? Will there be the… Is there an adjacent customer base to their existing Dollar General that they can put this new offering in front of, and it’ll work? I recall the CEO saying, boy, might’ve been a couple of years ago at this point, but I remember him saying at one point something along the lines of, “The economy just keeps producing more of my target customers.” And I think that is still true, right? Especially given what’s taking place… Especially what’s taking place this year with the impact from the pandemic, but also there’s talk about this idea of this kind of K-shaped recovery.

Shawn Harris:
And that I think the economy is going to continue to produce more customers who would lean this way. I think that also there is a degree of uncertainty that will continue to loom over the economy until there is a widespread application of a vaccine. Which again, I think makes it such that this higher band of income earners will look to ways to save some money. And like I was referring to on the Walmart side concerning this feeling like, “Ooh, I don’t know if I want to go to Walmart, I’d go to a Target.” That this is a little bit like, “I don’t know if I want to go to Dollar General, but I’ll go to POPshop.” Right?

Shawn Harris:
I think that you start pulling people there so they can go and get their last minute gift bags and last minute cards, and things that I’d call them as volatile in nature, whether it be because they’re seasonal or will be consumed. I think it could work. I yeah, maybe I’m being naive, but I think there’s an opportunity to leverage the economic circumstances. And also from a business cost perspective, and Ron, you just mentioned this, the real estate, right? I mean, real estate’s been decimated, so they’re probably getting insane deals on the buildings. And that absolutely factors in to the model, I would imagine as well.

Julia Raymond:
Mm-hmm (affirmative). And Ron, you made a good point. You said, a little bit differently than Shawn. You said, “This is what got us into trouble in the first place, more stuff for less price.” And Shawn, you countered and said, “Well, their target market might be interested in this. And it seems like with how the economy is going and the fact that you can go there for gift bags and last minute things, cards.” I know I shop at the Dollar General for birthday cards and stuff. But I will say I watched the promotional video and when I saw the store, I was like, “I’ll believe it when I see it.” Because it looked crazy. It looked like CVS married Michaels.

Shawn Harris:
Yeah, or Five Below.

Julia Raymond:
Or Five Below, absolutely. And there was, even in one segment of the video, there was a guy testing out these $5 headphones in store, just jamming out. And I was like, “Well, maybe.”

Ron Thurston:
Yeah. And I would just say from a visual merchandising perspective, it will never look like that.

Ron Thurston:
They had a whole team of people set up those couple of prototype stores and I’ve seen the news about them. But the reality is it won’t ever look like that.

Julia Raymond:
Yeah.

Ron Thurston:
And so you’ll just keep restocking the shelves and filling more product in there. And then it just becomes just this big mess. Again, this is retail developed, its reputation based on for kind of opening overexposed and overdeveloped and oversaturated, based on business models like this. So I would encourage them to try to keep that more on websites if possible. The other thing I would just add is, and there’s so much conversation around sustainability and the kind of use of single-use plastic. Stores like this are just full of more things that end up in landfills, or as a member of the on the board of Goodwill, we see a lot of these things donated. So they don’t always… I don’t know that they serve their intended purpose always. And it’s… I’ll be very curious to see how big it can actually get. Yeah-

Shawn Harris:
I did see them and I don’t know all the functionality, what have you. But there was like a part in the video that showed someone flicking on a mobile phone.

Julia Raymond:
Mm-hmm (affirmative).

Shawn Harris:
As if there’s going to be an E-commerce component to it potentially, or maybe even just at a minimum, you would imagine Curbside or BOPUS, right? That could be a part of it. So it’d be interesting to see how that plays into it as well because again, that too help expand who the customer, right? Expand the access, if you will to this new store format.

Ron Thurston:
Yeah.

Julia Raymond:
Mm-hmm (affirmative). Well, we’ll have to wait and see, and all great points, makes a lot of sense. The next retailer we’ll talk about is one of my favorites. It’s Aldi, the grocery disruptor is preparing to unveil its latest store format. The German-owned grocery chain announced it will be opening a full-sized grocery store in Philadelphia next month. And the new Aldi will feature a fresh food section that’s 40% larger than their traditional mid-sized stores. The store will be housed in a mixed use development, taking up the ground floors of a 14 storey tower containing almost 500 apartments and a preschool. Shawn, I’ll pass this to you. What are your thoughts on all these plan to expand the size of its store?

Shawn Harris:
Yeah, so I kind of looked at the rendering. I kind of did a quick scan to see if how close was the nearest Aldi. I think it’s like 1.6 miles and I think that there’s another one at three miles. Given what miles are like in a city versus in the woods where I live here, I can see certainly the need for another Aldi in that location, first, right? Even if a standard one. Second, I think the size is interesting in that it becomes one, certainly an attraction of sorts, but also will serve the people who live in the apartment units above it. I’ve seen a similar situation, if you will, where actually the grocer, and it wasn’t clear to me if this was the case for Aldi, but the grocer in Des Moines, actually it’s public.

Shawn Harris:
So Hy-Vee actually owns in downtown Des Moines, a building. The first floor is their grocery store. It was also a restaurant that they had there. I think they now closed that concept due to the pandemic. And above it was just an immense number of apartments. And it was serving that store very well. It’s funny because when you see this kind of construct where you have known people who live in the building, right? They’re all going to be known. You have, this unit that you have the first floor, which is the store that starts your mind start running with, “Wow, what if that store could become their theoretical pantry?” Right? And you can construct something where people who live in the unit, no matter the time of day, leveraging a widely available, at this point, technology go down there, grab something and go as long as they stayed within the building, and it’s always open to them. There could be something interesting that happens there in that regard as well. I think it, again, not to disagree with everything retailers do here, but I think this one could make a lot of sense as well, in this case.

Ron Thurston:
Yeah.

Julia Raymond:
Mm-hmm (affirmative). Ron, what’s your take on Aldi’s expansion of the fresh foods?

Ron Thurston:
So I had to do a little bit of research about the brand because I live in Manhattan and there’s no Aldi here. So I need to learn a little bit about it. The closest thing we have is it seems to be Trader Joe’s.

Julia Raymond:
Mm-hmm (affirmative).

Ron Thurston:
But this is so interesting because the first thing I thought of is, it’s kind of like Blink versus Equinox, here in the city, it’s like, you’ve got these beautiful Whole Foods markets and other kind of luxury Westside markets and grocery stores, which kind of in my head Equinox and you’ve got Blink right next door, no frills, no towels, no classes, no trainers, no showers. And I’m actually a member of Blink because I actually liked the no-frills. And I like the idea of we work together as a community taking care of our space because there’s no putting your cart away.

Ron Thurston:
There’s no one bagging your groceries.I read that they don’t have phones in the store because they don’t want their team answering the phone. They keep it very simple. [crosstalk 00:20:57] I think that that’s a very fascinating business model. But this kind of idea of warehouse shopping, but in small-scale urban markets and like in an apartment mixed-use building like this, I actually makes a lot of sense. It could be highly popular and the price piece of it. And if you think you really want to save on either both purchase or basic items, if you can get your best price on basic items, that appeals to a very wide audience, even if it’s no frills, like in Blink, I think it’s really smart. Yeah.

Julia Raymond:
Mm-hmm (affirmative). Good points on no-frills. And I’ll just mention that Aldi did announce plans in 2017 to become the third-largest grocer in the US and they’ve made a ton of investments.

Shawn Harris:
Yeah. Certainly, there’s ups and downs but they seem to be on plan to be driving that store growth that they’re looking for. So-

Julia Raymond:
They might not have the most selection of items, but the renovations they’ve done, it looks very upscale. It’s almost a Whole Food’s kind of vibe when you go in. And I would say that Aldi is going to do very well. This might vary by where you live, but I use Instacart and I’ve noticed with our local grocer, they just have a red text that says, “By the way, we charge a slight increase fee on certain products.” But they don’t tell you which ones and for Aldi there’s no additional fees. So I do believe that in some cases they are eating some costs on grocery delivery as a way to get more people in store.

Ron Thurston:
I do though wonder in more of these kinds of metro areas, the fact that the majority of Aldi’s product is private label. Is there an appeal for a customer that also maybe shops in Whole Foods, Trader Joe’s maybe shops for grocery at Target, and that has Aldi, and you don’t really recognize any of the product. I do wonder how that will translate.

Julia Raymond:
Mm-hmm (affirmative).

Ron Thurston:
Across the customer base.

Shawn Harris:
Well, I was thinking that with especially to like their limited assortment, that certainly is a part of their, reducing their cost structure, right? So if you can have reduced queues, you can… Then it just makes you, enables you to be more streamlined from a supply chain management perspective. I think that in this particular case with this unit being again, centrally located that it could be one of those cases where they may not have everything from an offering perspective, but do they have enough? And do they also then lend themselves to substitutions?

Shawn Harris:
Right? Where customers are going to be like, “Yeah, I don’t want the friction of having to go one foot outside of where I live or this is already near me. I’m not going to go through the friction of the additional walk or time. I’m just going to buy the substitute at Aldi’s.” And at that point, if they like it they’re done right. That’s where they’re going to probably do it, buy going forward.

Ron Thurston:
Right. And the pricing messaging around Whole Foods as we’ve read, has not always been well received.

Shawn Harris:
Right.

Ron Thurston:
And so there is, I believe a demand for that price. There’s definitely a customer looking for that value pricing, basic items that you don’t walk out the door every time having spent $100.

Shawn Harris:
Right.

Ron Thurston:
To your point earlier, Shawn, like the idea of the economy has created more of a demand for best possible pricing. And this really plays into it when you go into these kind of inner markets like this.

Shawn Harris:
Yeah.

Julia Raymond:
Mm-hmm (affirmative). Well, Ron Thurston and Shawn Harris, it was amazing to have you both on the show today. And I hope that you will join me again in the future.

Ron Thurston:
Thank you, Julia.

Shawn Harris:
Thank you, Julia. Thanks for having me.