The Modern Shopper brings together the best minds and insights of a diverse group of food retailers and other industry experts to discuss their strategic initiatives and their top of mind challenges. Our focus is around health and sustainability, e-commerce and retail innovation. This series aligns with Spoon Guru’s core mission to help retailers discover a seamless, personalized and accurate product discovery experience for shoppers based on their dietary and lifestyle needs and is hosted by Phil Lempert.
As the CEO of Mercatus Technologies, Sylvain Perrier is a true thought leader in the retail-technology industry. He sat down with Phil Lempert for today’s episode of The Modern Shopper to share some valuable insights on the sustained growth of e-commerce, the big challenges for retailers today, and how smaller grocers have a superpower that they can really use to differentiate themselves.
This interview runs for 20 minutes.
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Phil Lempert: Welcome to The Modern Shopper. This series brings together the best minds and insights of a diverse group of food retailers and other industry experts to discuss their strategic initiatives and their top of mind challenges. Our focus is around health and sustainability, e-commerce and retail innovation. The Modern Shopper series aligns with Spoon Guru’s core mission to help retailers discover a seamless, personalized and accurate product discovery experience for shoppers based on their dietary and lifestyle needs. I’m your host, Phil Lempert.
Phil Lempert: My guest today is Sylvain Perrier, CEO and President of Mercatus Technologies. He’s a dynamic, articulate retail industry thought leader and accomplished President and CEO of Mercatus, who is driving the success of many grocery retailers using pragmatic, easy to use technologies. Highly charismatic and influential with over twelve years of executive level experience in retail technology, he pushes the boundaries in specialty areas, including mobile devices, web technology and in-store solutions. Sylvain, welcome to The Modern Shopper.
Sylvain Perrier: Well, it’s a pleasure being here with you today.
Phil Lempert: So on September 15th, the Food Marketing Institute, FMI, issued their 72nd report called ‘Speaks’. And in it, there are some very interesting things that I’d like you to comment on. They asked retailers to comment on what changes are coming ahead. Number one, e-commerce to improve the online shopping experience. Number two, to continue to improve their curbside shopping experience for customers and staff. Increasing the product selection online. They report that from their members in 2020, the average online sales transaction was $110 versus $42 for what happened in-store and that their tech investments continue to increase. That retailers are saying we’ve got to turn to technology if we’re going to meet consumer needs and profitability. So tell us about what Mercatus is doing to help these retailers. And I know you deal with very large retailers, mid-sized retailers, regional retailers. What are you hearing from them as the future?
Sylvain Perrier: You know Phil, the reality is what you just mentioned in the report is very accurate. Specifically, the increase in basket size is very synonymous with the research that we do at Mercatus. If I can just position it for your viewers, is the reality at the height of the pandemic we saw something fairly remarkable. You know, we saw consumers – this mass exodus back into their homes, back into their daily family lives and minimizing their trips in terms of going to restaurants, mingling with family and friends. And this overnight created this flood of transactions inside grocery retail and specifically around e-commerce. Regardless, if it’s click and collect, shipped to home or delivery, and that became very interesting, and it caused three things to happen. Number one, quite frankly, is – how do retailers present their products back out to consumers when they’re dealing with out of stock conditions? I mean, we’ve heard the story about toilet paper and cleaning supplies, but it’s even more so, more so than that. And what we’re realizing today, we tackle this at Mercatus – it’s a mobile first world, first and foremost, and as that has continued to expand, how do we overlay convenience? Is it delivery? Is it click and collect? Is it running to the store to pick it up? And then how do you enable consumers to discover products, and products are catalogs that are tied to the convenience. So is it a series of SKUs that are, you know, for under 30 minutes? Is it a group of SKUs that are tied for click and collect? And then and then how do you create discoverability in those moments? So if I want to buy something because I’m on a low glycemic index diet, how do I find those items fairly quickly? If I am on keto or I’m on something else or if I’m diabetic – how do I quickly find those items? And those are the challenges we’re finding in terms of how do you create these presentation layers that make it that much easier? The other big thing that obviously you can imagine with the increase in traffic reality is we had a lot of retailers that thought e-commerce was a secondary strategy to their brick and mortar play, but now they’re realizing this is a real business. This can generate a substantial amount of revenue for us. How do we create a profitable line for us? How does it become a strategic pillar, not a secondary one to our brick and mortar? And so we’ve been working with retailers understanding what is the process from the moment an order is submitted into the system and how do you fulfill it across delivery, across click and collect or curbside pick up in a way that is conducive again to the consumer, much like I just mentioned, but also creates these levels of operational efficiency that aren’t necessarily apparent when you’re in the business of brick and mortar. And I think that the big one that we’re seeing right now is when you mesh those two together, how do you differentiate while remaining competitive in this space and using what I like to call commoditized services around you to create distribution – so you go with the consumers are but you still control the data, you still own the experience to certain extent, you having governance over the last mile and so on. And I think those are the challenges that we’re facing today in working with our retailers. And I think it’s a sign of the times for the next little while.
Phil Lempert: So when we talk about the retailers and you know, they pick up the phone, they call you and they say, – hey, let’s talk, we need you. You mentioned some of the challenges. As you describe the strategy of what needs to be thought of in developing an e-commerce platform. What are some of those challenges in retailers discussing their strategy because everybody’s strategy can be different? Albertsons strategy is different than Kroger strategy, then different than a regional player. What are some of the tidbits that you’ve picked up and some of the problems that retailers are having in developing their strategy?
Sylvain Perrier: Yeah, it’s a great question. First one that I come across consistently is – explain to retailers, let’s just park the idea of, you know, the bits and bytes. It’s not, this is not a technology play, it’s a strategic play and first and foremost, you’re now getting into the service industry. Because the reality is retailers today are selling products inside of four walls, and it’s about the placement of the product. But reality is when you get into click and collect or you get into e-commerce in general, it’s you’re offering a service. And I try to coach them into thinking that way because it elevates the process of what they think they can do and not do. And which brings me to the second rule, and this is one that I want retailers to really pay attention to – the providers in the marketplace that are offering last mile delivery. They have crossed this barrier, which we’ve been trying to explain to retailers for years now that you can charge a service fee for convenience. You can charge an up-charge to a certain extent on the products that you sell to cover your cost base. Again, this goes back to this notion: this is a service. And so that’s why we try to coach them on that. And then, you know, we bring in third party researchers to help kind of support the endeavor. And the last bit is – leverage the other solutions that are around you. Yes, great. You control the platform. But if you can bolt on other pieces of technology that are going to enrich that experience, by all means do it. That is what’s going to make you different than the others.
Phil Lempert: So when I talk to retailers, this is probably pre-pandemic to be fair, they thought of entering e-commerce for one simple reason – Amazon. Amazon scared the hell out of them. Is that still a reality? Are retailers, you know, jumping ahead because of Amazon and their fear of Amazon?
Sylvain Perrier: I think – I used to hear the same thing, but I think that narrative has changed that the narrative has changed because we’ve not seen wild and crazy things come out of the acquisition of Whole Foods. I mean, certainly I haven’t, you know, we were seeing some brick and mortar that is coming out of various pockets in the US, predominantly in California and so on. The bigger threat, to be honest, and the one that is certainly on the tip of everyone’s tongue is Walmart.
Phil Lempert: And if we if we take a look at Walmart being a threat, let’s also talk about the third party companies like the Instacart’s, like the Shipt’s of the world, that it appears to me when I go on to Instacart in particular, a lot more retailers are saying prices are higher than in-store. You can’t use your frequent shopper card. You can’t avail yourself of certain specials that are there. Is Instacart a threat to retailers, especially now that they’ve announced that they’re going to open up their own fulfillment center?
Sylvain Perrier: Yeah, Instacart continues to be a threat for retailers. But the reality is today in the business model that they operate, guest retailers are a necessary evil for them to be able to service the industry. But the reality is, and I think our friends over at Barclays did some research on this over a year ago, that the relationship that Instacart has with the end user, to shoppers, is extremely strong. And what I’ve become very fearful now for retailers, is this disengagement with the end user. Even more so now Instacart is positioned itself to be more of a media play than just an e-commerce player. But it’s this duality that exists. You still have to service the retailer. You still have to appease them from a business perspective because without the transaction, if you really can’t feed the ad engine. And I think the first loser in this game is going to be the retailer first and then the consumer.
Phil Lempert: You mentioned Walmart – giant, obviously the biggest food retailer that we’ve got. Are they a threat to regional players and how will regional players dealing with e-commerce differently than Walmart, for example?
Sylvain Perrier: Yeah, I go back to, you know, I think back when Walmart entered Canada many years ago, and the reality is they came in through an acquisition and it really caused a shake up in the industry and specifically on Main Street, which is no different than what we’ve seen happen in the United States. We saw it, you know, a group of retailers learn how to differentiate against Walmart and that’s differentiation on quality on service. We are seeing today some retailers that are doing e-commerce that are considerably smaller than Walmart doing the exact same thing. And that comes through personalized service, the relationship that exists with the personal shopper, with the end user, that they know each other personally. You know, the personal shopper gets to know the family and what they like, what they don’t like. And it’s that just extra little bit. It’s not that hard to do when you have the proper technology. I think that will help retailers continue to differentiate against Walmart. You also again, I go back to this, this idea that I’m trying to educate retailers. You have to think of this as a service because if you try to compete simply at the technical level with Walmart or if you take a status quo approach where – well, we can’t do this because Walmart’s so much better at it – we have to learn it’s a service and also learn to to innovate and increment quickly, try things and consumers will be receptive to that.
Phil Lempert: When I hear you talk about this, what comes to my mind is that many retailers that I talk to aren’t thinking the way you are. They’re not thinking about differentiating with Walmart on an e-commerce platform beyond having prettier pictures, having more nutritional information, having more things that consumers can do. But your point, I think, is very, very important- that if we can have a hybrid that uses e-commerce to order, but also that personalized service that you’re not going to get from a Walmart that you’re not going to get from an Amazon that you know, goes right to the top and says, you know, here’s here’s how a regional player in particular can really succeed beyond their, beyond their wildest dreams.
Sylvain Perrier: Yeah, absolutely, and I’ll give you an example, you have regional retailers that have had loyalty programs that had been around for years and decades and quite frankly, and that data is rich and segmentation information, segment information down into household information that can be really used in an automated way to create this curated experience, not just recommending SKUs but recommending content that is valid for the family. And I’ve always said at the end of the day when when you are worried about nourishing your family and instilling healthy habits in your own household, you normally will turn to the place you go on a weekly basis, your retailer, and you will turn to the World Wide Web to get content off social media and various websites. When the retailer starts to think that way and taking this information, they have to bring this content together, I think this is where you’ll see the power of these regional retailers elevate to the next level and far surpass Walmart, where Walmart have to, they’re so big, they have to really approach everything from a large cookie cutter perspective. They cannot go down to the small regional level and do something really special. And that’s a superpower that our regional retailers have.
Phil Lempert: Are you seeing – whether it be regional or other retailers – doing this or are they using that shopper data and combining it to create this kind of experience? Or is this something we’re hoping that they’re going to do?
Sylvain Perrier: No, we’re seeing the early stages of these things really percolate. But let’s not forget, I think right now, retailers, the big thing that’s on our mind, on their mind is making sure they get people back into their stores and in a safe manner, also making sure that they have associates to service those customers. I think the pandemic in certain places is still quite prevalent for people.
Phil Lempert: So last question, because I know you’re busy and you’ve got to go. But last question, look into your crystal ball. What does e-commerce look like? Hopefully post-pandemic, but in, you know, two to five years from now?
Sylvain Perrier: Yeah, I think what you will see is a further commoditization of last-mile. Transaction level, likely to be decreasing. Rates for those services, decreasing as well. And the survivors out of that space will be those that will know how to amalgamate multiple verticals under one roof, and we’ll learn how to leverage the data across all those verticals. I also think that there will be a, not only a SKU rationalization process that will exist within brick and mortar, but also online. I think, and I’m going to go out on a limb here, I think some retailers that I’m talking to specifically are having conversations on how they reimagine, quite frankly, their brick and mortar operation in a way that can scale up quickly. And again, but this will be tied to the economic rebound right now, which unfortunately is being held back by the return to the workforce. So there’s this duality that needs to occur. I don’t think we’ve heard the last of meal-kits. I think there’s kind of like a 2.0 version coming up really quickly. We’re seeing that here in Canada. And last but not least, I’m hearing this could be some interesting concepts with MFC that are going to come out very shortly that will far surpass some of the items that we’ve seen in the press lately.
Phil Lempert: Sylvain, as always, your insights – so valuable. Thank you for joining us today on The Modern Shopper.
Sylvain Perrier: Thank you and appreciate being on your show.