Jason & Scot Show Episode 150 GroceryShop 2018 Recap

A weekly podcast with the latest e-commerce news and events. Episode 150 is a recap of the 2018 GroceryShop trade show in Las Vegas.

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Amazon plans to split HQ2 to two cities

GroceryShop Recap

GroceryShop is the first year of a new show focused on disruptive trends, technologies and
business models in grocery & CPG that includes both established and startup CPG brands, supermarkets, c-stores, drug stores, discount stores, ecommerce players, warehouse clubs, grocerants and non-traditional grocery retailers.  The show took place October 28-31 in Las Vegas, at the Aria Hotel and Convention Center.

Jason’s Activities

  • Jason interviewed Sanjiv Mehra, co-founder and CEO EOS products for a keynote fireside chat
  • Jason moderated a panel “Evolving CPG Retailer relationships” with Constellation Brands, e.l.f. Beauty, and Fairway Market
  • Jason moderated a panel “Using product content to build brands” with Boston Beer Company, Chobani, and The Wonderful Company

Keynotes

  • Yael Cosset, Chief Digital Officer, The Kroger Co.
  • Andy Katz-Mayfield, Co-Founder & CEO, Harry’s
  • Sanjiv Mehra, Co-Founder & Co-CEO, eos Products
  • Apoorva Mehta, Founder & CEO, Instacart
  • Chieh Huang, CEO, Boxed
  • Nina Barton, President, Global Growth, Kraft Heinz
  • Luke Jensen, CEO, Ocado Solutions
  • Narayan Iyengar, SVP, Digital & eCommerce, Albertsons Companies
  • Nick Green, Co-Founder & CEO, Thrive Market

Key Themes

  • Digital Disruption of Grocery
  • Store picking vs. Dedicated Fulfillment Center  
  • Startup Brands vs. New products from established Companies
  • Private Label/Owned Brands

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Episode 150 of the Jason & Scot show was recorded on Monday, November 5th, 2018.

http://jasonandscot.com

Join your hosts Jason “retailgeek” Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, Founder and Executive Chairman of Channel Advisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show this is episode 150 being recorded on Monday November 5th 2018 I’m your host Jason retailgeek host Scott Wingo.

Scot:
[0:41] Jason welcome back Jason Scott show listeners.
Jason you just recently got back from sunny and blazing hot Las Vegas Nevada for the first annual grocery store.
And that’s what really to see what today show is going to be is a grocery shop recap but before we jump into that we did want to cover some breaking.

[1:03] Amazon news your margin is there a opportunity alright well we’ve been talking about this on the chauffeur
about a year ago Amazon announced that they are going to look for a second headquarters that would has 50000 employees.
I am if it was kind of this huge process and we’re coming down to the end of it and there’s two I’m confirmed reports out today,
one from the Washington Post one from your times and it looks like Amazon is first of all going to split this is also not confirmed us the Wall Street Journal says Amazon’s actually going to do two cities instead of one
so it’s kind of like HQ one and a half and hq2 and they’re splitting the jobs pretty even Lisa 25,000 jobs in to eat City.
The two cities that seem to be most rumored are Crystal City which is a suburb of the DC area and Northern Virginia.
The other one is a suburb of New York City called Long Island City Jason what do you think about this result if it’s true and how true do you think it is.

Jason:
[2:17] Yeah well it does sound pretty true there’s a lot of rumors earlier in the week and it seem like Amazon was actively.
In some cases refuting them and or scolding the leakers and they they seem completely silent about this which makes me feel like.
It is on the markings pretty credible news organizations that are setting multiple sources so seems pretty credible and if it’s true it.
It reaffirms a lot of people’s hypothesis that this was,
sort of largely a marketing stunt in it it makes me feel like Seattle is actually the big winner because.
Like these this would definitely would not be co-equal headquarters now that they’re dividing up the jobs and I’m going to assume that that the center of gravity and most of the senior leadership are going to continue to put on in Italy live in the,
in the Seattle area in this scenario.

Scot:
[3:18] Yeah yeah it’s my Logic on this was.
It never made sense to me that they could hire 50,000 people cuz to my logic is the retail part of Amazon is pretty stacked up in packs you know robots replacing humans a lot of times in the,
Commerce part of Amazon so this feels like largely AWS engineers and you know it’s very hard to go find
5000
much less 2000 50,000 folks that can work on AWS so so I think they started kind of come to that same conclusion the dust splitting them up and I imagine those 25,000 10 years or something.
You could possibly hired that mud many AWS qualified people even in those dense text cities to to work on stuff so it’ll be interesting to see how this lands.
So we just wanted to cover that really quickly because it’s been the source of so much speculation but we want to spend the bulk of our time tonight on grocery shop
so it’s Jason. I was not able to go but you went on for so how was House Las Vegas did you end up making money losing money.

Jason:
[4:31] I go to Las Vegas too often so I am no longer much of a wager or so I I did lose some money but I lost it spending a week in Las Vegas not at the table.

Scot:
[4:43] Visit your favorite Starbucks.

Jason:
[4:46] I did not so
dedicated listeners or remember I spent like 18 days in a row in Las Vegas at the Venetian earlier this year which I wouldn’t wish on my worst enemy this show was at the Aria so
I did not make it to the Venetian Starbucks but I I did get to reacquaint myself with a several Starbucks in the vicinity of the Aria.

Scot:
[5:10] Awesome so so for the the grocery shop show maybe Orient for listeners you know how this show came to be who puts it on and how did this compare to kind of shot Talk Money 20/20.

Jason:
[5:25] So that the show did the first year of the show is put on by the same folks.
It started shoptalk and money 20/20 as you mention money 20/20 was their first show and it started at the Aria as well.
And then it eventually it it felt like the show doubled in size every year and it eventually outgrew the Aria Convention Center and then had to move to the Venetian.
I’m in after 3 years of growth.
They actually sold the show to another event company and they started simultaneously they started the second show shop talk and Shop talk also started.
At the Aria and it also doubled every year last year it outgrew the Aria and moved to the Venetian.
And they this year they started to new shows or show I don’t know a lot about this in the healthcare ligori and they started this show grocery shop which is all about digital grocery.

[6:19] And the show started the Aria it.
It felt very similar to the first year of money 20/20 or shoptalk and I mean that in a good way I feel like these guys have.
Have built a pretty good template for an event so they they do a really good job of recruiting.
Interesting speakers that people want to hear from and they’re great digital marketers and they Market the heck out of their speakers which causes other people to want to go in network with those folks.
And you know at this point kind of three or four shows into their their progression.
I feel like they have a a really solid template eyes execution,
did they run and you know they invite me to speak at all of them because they use caricatures of you and I feel like I’m just cost-effective because they already paid to have my character children.

Scot:
[7:10] I’m sure that’s what it is.

Jason:
[7:12] Yeah I think that’s my main value-add a fun fact for speakers is that they.
Send you a coffee mugs with your charger on it so I have a complete collection of shop talk,
money 20/20 and now grocery shop mugs that my mother-in-law has claimed so if you ever get coffee at my mother-in-law’s house be prepared for the jarring image of my face and this year they upped the ante they sent us a
cookie with my my characterture on the front of the cookie in frosting.

Scot:
[7:48] I remember I had jokingly asked one of the folks at shoptalk who does the character in the show that’s her that’s her most closely held Secret.

Jason:
[7:58] Yeah so you know what’s funny about that I I believe they did say that to you if you went to an early money2020 that guy was working in a a shop a money 20/20 booth and you could stand in line to get your own character children.
And eventually apparently he became so so popular and beneficial to them that they they hit him behind the scenes but like there were attendees from those first money2020 is that actually got there,
their characters are drawn while they were attending the show but the big controversy among the speakers on Twitter earlier this year when the cookies went out was.
Can you infect eat your own face like is that is that weird.
And you know there was a lot of talk about that and I defended we solve the The Dilemma when I tweeted out a picture of my three-year-old gleefully.
Diving into my face to eat it.

Scot:
[8:48] Eaton Trinidad face.

Jason:
[8:53] So more than listeners want to know about the logistics from the show
but I feel like at a high level they picked a really good topic for a show I think they were hoping like a thousand people would attend in the show and they sold out the show
at 2200 people which is the capacity for the the convention center they had so already.
Don’t be surprised if you see the show move from the Aria to the Venetian next year or I guess there is a rumor that the Aria is expanding their.
Their facility so maybe maybe I’ll stay in this expanded facility but it definitely felt like there there was unmet demand
for folks in this industry to be able to get together and share some ideas and best practices and I feel like,
a lot of people were we’re excited to come people are super engaged and all the feedback I got from people on the way out of town or from
from my own team after we got back was was super favorable that it was a good event and everyone wants to have a,
a bigger participation next year so congratulations to the the folks at grocery shop on on doing a great job for the first year.

Scot:
[10:02] Awesome. Let’s dig into some content first of all as mentioned you were quite busy so that I kind of thought they should have called it Jason talk
so you gave the keynote and you led to panel so it was kind of go through those and sequencing and not good to some highlights of what you learned there
I’ll start with a keynote I saw on Twitter that a lot of people took this one picture where it looks like you were putting some lipstick on tell us about that one.

Jason:
[10:29] Yeah I’m a very Metropolitan dude what can I say
so I feel like you’re being slightly generous and calling into keynote so that it it it it was a keynote but I’m not sure I gave it so what this was a fireside chat format so I was interviewing,
gentleman named Sanjeev who was one of the founders,
I have this cool company that that listeners are probably familiar with that may not know called EOS products and it cos it actually is a acronym for the evolution of smooth.

[11:04] And,
little over 10 years ago they invented a new lip balm for women that was in this sort of round egg-shaped format in there now ubiquitous in super popular,
but anyways go sort of,
invented or was an early Pioneer in influencer marketing they they started out with her than affiliate program where you could earn credit and free product by getting your friends,
to share EOS products on social media and back then sponsored social media was not a thing,
and a bunch of celebrities sort of got in on the ACT in organically started promoting this product and so you know today the the the sort of early
eye doctors of this product it was like Miley Cyrus and Kim Kardashian and and all these
these people that would today would cost millions of dollars that they got to sort of endorse the product early which caused this product to,
completely take off in Skyrocket so one of the the very first sort of.

[12:15] Influencer viral product out there so it’s interesting to talk to sanjiv about his.
His experiences with that and you know I just got a chance to interview him and I I did in fact apply some some EOS lip balm during during the talk so I think that’s maybe the tweet that you saw.

Scot:
[12:33] I can’t right now in Las Vegas I never really need like chapstick type stuff but in Vegas I do the kisses so during dry out there.

Jason:
[12:41] I’m 100% with you I normally would not use lip balm but I do always bring ChapStick and like to Saint jeans credit like.
Part of the genius of this product is whip-whip Bomb is predominately bought by women and all of the products were
not very women-centric right and so they’re all convenient form factors for you and I to put in our pocket but a lot of women’s apparel doesn’t have pockets and so these things go in purses and so they designed
a product that was very well intentioned
to live in a woman’s purse which ironically makes it super inconvenient for guys until I had to smuggle it onto the stage because it would have look silly in my pocket.

Scot:
[13:20] Now that’s kind of a healthcare item not something you’d find in a grocery store symbol surprise that’s so
am I done for this kind of had also kind of the drug stores in the whole thing and the healthcare are the the beauty category as well.

Jason:
[13:37] Yes I think they would characterize this is more Beauty than then Healthcare and it’s it’s sort of.
Affordable impulse Beauty and so it is so like actually at the cash wrap and a lot of grocery stores and also drug stores and convenience stores and I do think there was some overlap I think
that the show is primarily targeted at grocery which meant,
a lot of the retailers that attended where Grocers but then equal or more attendees were brands that View Grocery as a super important Channel,
and it just so happens that a lot of those brands also sell in,
mass and and the convenience and Drug so you had a lot of the the Wakulla food and non-food cpgs
and so yeah I definitely think that that many of the conversations and takeaways expanded Beyond pure grocery but grocery was sort of the epicenter.

Scot:
[14:42] Cool and then you’re so you let that keynote you Fireside chatted that up and then you had a panel called a balding cpg retailer relationships that sounds pretty intense.

Jason:
[14:53] And so that panel was we had three panelists and they’re talking all about the Dynamics of retailers and Brands and how they work together in a lot of the challenges in in the new world of digital marketing.
You know how there’s there’s a lot of frustration on both sides retailers generally feel like.
The brands are behind and aren’t really ready to partner with the retailers digitally and retailers are asking for like a lot of support for e-commerce initiatives that Brands aren’t always.
Well prepared to meet so there was a lot of talk from the retail side about Heather they expire for the brands to sort of catch up.
And on the brand side there’s a lot of talk about like the lack of.
Of data and transparency and and you know it it not feeling like an equal partnership on the part of retailers to this panel was a lot about best practices and started making that relationship work and so we had.
Wingo on who’s the VP of e-commerce at constellation Brands which is a well-known alcohol.

[16:00] Manufacturer with a bunch of popular brands.
The Wayne also had formerly been on the e-commerce team at Walgreens so he kind of talked about his experience at both places.
We had that the VP of brand from Elf Cosmetics which is another affordable Beauty brand that kind of represented the brands perspective in this.
In this a dynamic and elf 10 years ago started out as a direct-to-consumer brand then they they sort of got really popular and became like 90%.
Wholesale and now they’re starting to shift the balance again and then we had a retailer whose.
A well-known Market in New York City called Fairway Market.
Well known local chain with a bunch of like really high-end Gourmet products as well as a full.
Call grocery store and so Jason is work there long time and talk about their overall perspective but today the portfolio he mainly owns is.
Private brands for Fairway and so he talked about some of the unique Dynamics with partnering with brands on on exclusive products so that was.
A good set of conversation in the audience that seem engaged and we got some nice feedback about that panel.

Scot:
[17:18] Did you get to the so we talked up private label then you started using the term owned products have to have you as a cut on what’s what’s what’s the difference between the two.

Jason:
[17:31] Yeah they question if it’s definitely one one of the themes at the show maybe we’ll talk a little bit more about later but.

[17:38] In general I call private label sort of this hundred-year-old practice of a retailer offering a a,
more value oriented version of a national Brand Products what has the exact same product attributes as the national brand it just sold at a lower price point without the brand name on it,
generally a hundred percent of the marketing for the product is simply the fact that it’s on the Shelf next to the National brand so you get a headache you go to Walgreens to get Advil and on the Shelf next to Advil as well bupropion.

[18:11] And it says right on the package compared to the active ingredient in Advil and it’s a little cheaper right so to me that’s private label and there’s this show there’s a lot of talk about private label and it’s an important part of the mix for retailers in it obviously
has an impact on profitability and there’s there’s a bunch of good reasons why private label is important but to me,
the thing is getting more traction is this evolution of that idea,
where retailers actually wants their own unique products that are different from the national brands
in most cases the retailers using their intimacy with the customer to design a product that’s in a gap that’s not well met by the national Brands and in most cases retailers,
have to learn all of the skills that the brands have in terms of building a brand and marketing and advertising it and so to me owned brands are these,
all brands that just happened to be owned by a retailer versus private label are these sort of value-oriented alternatives to the National brand and there’s a lot of talk about both of those at the show.

Scot:
[19:13] And then your last panel was called using product content to build brands.

Jason:
[19:20] Inside,
what you’re not getting a lot of practitioners at the show so there a lot of like directors and VPS that are trying to learn best practices and I’m both sides of the fence like one of the primary areas were Brands and retailers really have to work together is on this digital Shelf.

[19:37] And so you know one of the ways this comes up most often is oh my god Amazon didn’t used to be relevant in this category and now it’s super relevant and.
You know increasingly searches are shifting from Google the Amazon and so how are we going to get our products to show up in the Amazon search engine like they used to show up in the Google search engine.
And once people find our products how are we going to get them to learn enough to decide to buy a product and send it alternative instead of the the that what we in e-commerce called that product detail page.
You know brands are thinking of is the digital equivalent of their retail shelf and so there’s a lot of conversation amongst friends about what the best practices are in content.
For that digital shelf in the overwhelming majority of cases Brands create that content and then they syndicated to the retailer.
To show up on all these various e-commerce sites and so there’s.

[20:32] Different retailers have different request and criterias and preferences about how to execute that content different brands have different philosophies about how much to invest in and what the best practices are so we had a really good rub us conversation about.
Like what what some of the the best practices are and what some of the new ideas are and what some of the pros and cons are tough.
The various approaches in investing in.
This content to you notes or to build a brand in a in a world in which a lot of purchase decisions are are substantially digitally influence.

Scot:
[21:09] Are these guys struggle with just basic digital assets cuz you know in the traditional grocery store model them really had to provide much chaga tea or short long title or,
all that kind of stuff.

Jason:
[21:24] Almost all of them have followed this way great like slow progression of maturity so when you’re selling Oreos to Walmart like you you if it
at the base level needed to provide about six attributes about the about the Oreos bike how many cookies were in the bag with the net weight of the bag was like what you know a basic description that could show up in ER P&B printing on the on the Shelf label in the store,
it’s always super simple and every brand new how to provide the six attributes that Walmart wanted as e-commerce really took off.
You know Amazon Walmart ask for for 60 and increasingly more attributes about the product is a gluten-free is it you know does it have any allergens in it.
You know what’s all the nutrition information in the in the old world they just provided a picture of Ninja trition label to the store,
now they have to provide all this data and is you alluded to a super important attribute is images and how many to take and what should they be pictures of,
and is there any rich media going with that and you know any any comparison copy and they’re off all of these.

[22:29] Evolutions of best practices and so you know his you kind of alluded to,
early on you know that’s a Walmart sales guy like you know filling out an Excel spreadsheet and emailing it to his buyer at Walmart.
And frankly in the early days not caring very much because.
99.9% of sales were happening through the the Walmart by owner in Bentonville and only you know .1% of the sales were happening on walmart.com and so you know.
It’s in the walmart.com guy with what he needs to go away.
You know that rapidly evolved and you became a very meaningful part of sales very quickly and eventually retailers you know sort of used the,
their store volume is leverage and said hey we’re going to give you a shelf face in the store if you’re not complying with all the the new digital content requirements we have and we want you to send the Kate ratings and reviews and want you to do all these other things inside of the kind of like.
Sales guy hiring some company to fill out a spreadsheet turned into.
These internal teams and centers of expertise creating all that content and and you know,
buying or building the kind of tools that they would use for product information management in
content syndication in all that and if I’m not mistaken I think Channel advisor plays this pretty significant role in in parts of that echo system for a lot of Brands as well.

Scot:
[23:51] Yep yep you know we talked about the capability to take your eCommerce products and,
push me around and under the hood it’s very similar to a set of capabilities
2
so those were the things you got to speak about and then did you tell if you were super busy between Starbucks runs applying lip balm and in all the stuff
did you get a chance to go to any other talks or can you summarize some other things that we should know about.

Jason:
[24:26] I did I think I made it to all the Keynotes and I made it to as many of the other breakout sessions as I could and then of course there
we’re a couple of friends of the show former guess that were also with the show by tweeting a lot of the sessions and so is pretty funny a lot of times I was in one session
you know trying to consume the content myself and I’m following
like Michelle who’s been on the show from euromonitor who is doing a fabulous job of what I’ve tweeting the.
The session she was at and so so I feel like I got a pretty good feel for the overall show despite the fact that that.
There and she’ll like this there is a fair amount of fear of missing out that you’re going to go to one session and it’s going to.
Not be what you hoped and and you’ll miss some really good content in another.

Scot:
[25:14] Yeah, so what were the highlights.

Jason:
[25:17] So high level I kind of broke the show up into these for big themes and the biggest Theme by far is this overall digital disruption of grocery.
That essentially you know grocery ad in pretty stagnant for.
For a long time and that now digital shopping for groceries digital influencer sales in grocery and increasingly.
Delivery and curbside pickup of grocery is gaining huge traction it’s going to be a meaningful part of grocery I think emarketer publishing data that it’s like.
1.3% of grocery sales right now or digital the grocery same stories e-commerce groceries growing at like 2%.
But digital grocery is growing at like a 20% K Garceau.
You in the next five years that 1.3% is going to be more like 3 or 4% of all Grocery and it’s
the overwhelming majority about growth in the grocery category so you know all the other themes and most of the content in the show is all about how Brands and retailers and consumers are responding to this,
this digital disruption of the traditional grocery model.

[26:34] So then the three sub themes under that that I felt like came up a lot is there’s a lot of conversation and opinion and evolution of,
the idea of how you get all the groceries into the grocery bag right so there’s a lot of traditional grocers that own a bunch of stores.
That you know feel like.

[26:59] Sending professional employees to pick groceries off the shelf and put them in the bag is the most cost-effective model because it leverages all this fixed assets that the retail already have it leverages all their existing inventory it shares the inventory between,
in-store customers and digital customers you know it’s it’s the Leverage is all these fixed assets that that that retailer already has
and so you think about like what Walmart curbside pickup and Kroger curbside pickup are both.

[27:30] Are both sort of in store picking models and you know most notably instacart which is now past like 3 billion dollars in sales is all
sort of in-store picking in so a lot of traditional grocery all feel like that’s the preferred model but then there’s a lot of digital startups that have said actually
that’s super inefficient in the unit economics are really challenging there because
in a traditional general merchandise e-commerce site you know an average you’re lucky if you sell two or three items per order and so the amount of picking
her order is pretty small but a typical grocery order might have 30 to 60 items in it and so the cost per item to pick is is a much bigger part of the overall cost.

[28:19] Of an e-commerce order and paying people to walk around stores that are not
efficiently assorted for Pickers but instead are designed for Discovery and browsing is really inefficient and so
you you have dedicated digital Grocers like Fresh Direct or Peapod or a super successful digital Grocer in the UK called or Colorado
that all have this model where they use dedicated automated.
Grocery up fulfillment centers that are much more optimized for picking costs and in one interesting case ocado which is based in the UK is partnered with Kroger and they’re there.

[29:03] Opening fulfillment center using okada’s technology and software in the US so Kroger is both doing store picking and there now piloting these microfilaments centers Albertsons which is like the second largest.
Dedicated Grocer in the u.s. made a big announcement that they were launching micro fulfillment centers and they felt that that was a superior more cost-effective model in the long run so they’re like,
it’s still early days but there’s a lot of pros and cons on both sides in this whole whole conundrum of what’s the efficient supply chain.
You know when you’re dealing with perishables and fresh and and you know cold chain and all these these products that have to be kept at.
A particular temperature so that it was an interesting pros and cons from various practitioners around those picking models.
So that was kind of something one sub theme to is this whole debate about.

[30:02] New start-up Brands versus new products from existing brands in so you think about like a Harrys Razor which would be appear startup brand.
Or a new product being launched by Kraft.
And you know a lot of the buzz in the industry is all about these new digital native startup Brands we talked about a lot of them in general but there are also a lot of them that are in the grocery space.
And get a lot of buzz but also in the grocery space are more products.
That our new products that are either launched by big companies or.
New products that are launched by companies that are intended to be sold through wholesale versus.
Direct-to-consumer so you think about like Chobani yogurt for example like that emerged in quickly disrupted the industry and took a huge chunk of Dan and sales because,
Dan and didn’t you know jump on the Greek yogurt trans quick enough in Chobani like became a very big company.
Shivani doesn’t really focus on selling yogurt direct they sell it through all these grocery wholesalers.
It’s a lot of interesting discussions about the pros and cons there and like my big takeaway is.

[31:16] All of these dedicated startups that are focused on direct to Consumer are making more Innovative products and they’re iterating them faster and they’re getting them out in the market and getting initial customer adoption much quicker.
Then that the big brands are or than the wholesale distributed products are but all of them seem to hit this plateau and really struggled the scale.
So I’m calling the the direct to Consumer startups really good at Innovation and product development and early launches,
but the really challenging to scale in on the big side the products that they get to Market are doing much better and scaling and becoming much more significant in the marketplace,
but in general are there’s far fewer of them in there they’re much slower to come to Market and there’s in general that’s innovation in them and so there’s kind of this interesting thing that you had these two models that he.
Each have their pros and cons and you know how do you kind of get the best of both worlds and is is that.
Harry’s launching is a direct-to-consumer brand and once they hit that plateau.
You know they they shifted to today the majority of their sales are now wholesale then and so you know there’s kind of some of those those conversations.
Internet the third big trend is this whole private label owned Brands thing that we discussed earlier.

[32:40] But I would say both of those Trends are becoming increasingly prominent in so you think about like all the Keynotes at the show and like Kroger,
I have a huge private label it’s the most successful,
organic food brand in the US called Simple Truth and Kroger’s grocery store in the US but in China Kroger’s a brand because they’re selling simple truth on Alibaba,
in China we’ve talked a lot about boxed on this show which is an Innovative a retailer that started out selling wholesale Goods today a big chunk of all their sales are own products that they’re developing.
One of the founders of Thrive Market which is sort of a online version of Whole Foods in a way talked about.
The overwhelming success of their own products and how you know they were differentiated in the marketplace so that that was a big Trend in those.
You know I think of you up there all the key notes in a lot of the breakouts you did see them like pretty neatly fall into those three big trim.

Scot:
[33:43] How how do you nod out on jobs pick one so we talked a lot about delivery versus curbside was there any conclusive evidence on either of those.

Jason:
[33:55] No I think the jury is still out I will say like I have in a pretty flippantly run around saying hey the big winner is going to be curbside that the unit economics really don’t work.
For for home delivery for grocery in perishable and kind of the Reader’s Digest on my Logic for that is.

[34:16] General merchandise e-commerce is generally what we call a route based delivery like you get 300 orders you put them all in the UPS truck the guy drives to 300 addresses,
and deliver them all and so you know each one of those delivery is paying for one 300 that trip.
And the UPS driver could show up at your house or work any place within kind of a 10 hour window and deliver the goods and it would be no problem.
And fresh and perishable if you order milk or you order ice cream.
You need to be home exactly when that delivery arrive so that you can put those products in a refrigerator or freezer.
And generally the way that that retailers have to do that for most of the country is that to do a point-based delivery which means a guy drive straight from the store or fulfillment center to your house,
and now that delivery has to pay for 100% of that trip instead of one 300th and so,
in general because of that the unit economics are much more favorable to curbside pickup.
And curbside pickup is good enough from a convenient standpoint like a lot of families fine,
super convenient to order their groceries digitally pick them up at their convenience maybe on the way home from soccer practice and they’re stored in a climate controlled storage facility and they they get put in your trunk really efficiently.
And that’s a really high customer satisfaction experience for most consumers so.

[35:40] Put all that together and curbside pickup is the big win and I still believe that’s true but I got to express that point of you do some really smart operators that a bunch of these grocery stores,
and and they’re kind of feedback which I do take the heart is hey Jason you’re probably mostly right,
but you’re actually under estimating the fact that the picking is way more expensive than the delivery and so you know that the unit economic problem is more around,
if you if you have a really expensive pic of 30 or 60 items you then can’t afford to do a point delivery,
but that if you have a really efficient fulfillment center and you can get the picking cost down a low enough.
You can put those deliveries on a refrigerated truck and you may not be able to do the
the 300 deliveries that a UPS driver can make in a day but you still can make multiple deliveries,
guarantee tight delivery windows in a climate control truck from a dedicated fulfillment center and so they were arguing that that you know maybe there’s more.

[36:47] Communities that have enough density to support delivery than I was originally thinking so I’m I’m starting to amend my thought process I think the clear answer is,
that the world is going to have all of these delivery modalities sometimes you’re going to want to go to the store and pick the stuff out yourself and that’s going to be your preference sometimes you’re going to want to leverage curbside pickup and other times you were going to want delivery and so you know good good retailers
are going to have to figure out a way to support all those modality.

Scot:
[37:16] And then in the whole kind of digitally native vertical brand startup versus brands from existing companies where where did Jeanette Allen.

Jason:
[37:27] Yep that that is interesting so the it feels like then the.
Digitally native brands have more Tools in their their tool belt to overcome,
their deficiencies than the big brands do right now right like so you you go talk to the big cpgs and you talk about what their strategy is to infuse Innovation and have a you know a faster pace of new products
and have product that are better suited to the consumer and you frankly get a lot of blank stares and you get a lot of.

[38:03] Kind of the same unfulfilling answers that oh we’re going to set up an innovation team or we’re going to act as a venture capitalist in and go unifund a bunch of projects,
but you know these big brands have just not demonstrated the ability to get much faster and get much more Innovative and
these big brands that are exclusively selling through wholesale are fundamentally disintermediated from the customer so they do not have the customer preference data to use to
design and execute new products very well and I I just haven’t seen any of them you know really like,
clearly articulated solution to some of those deficiencies whereas the the the native direct to Consumer products
have the ability to take advantage of all of the strengths of the direct to Consumer space and when they get to the point where they kind of max out on the scale they can reach direct-to-consumer they they have the option to them in pivot to a
a wholesale distribution model or a blended model or they’re in a position to establish a reasonable valuation and get acquired by one of these big companies and so it,
like
you know why there are challenges on both sides it appears there’s more ways to overcome the hurdles if you start out as a new digital native brand then there are
if you start out inside of one of these these big brands at least least for now that’s that’s how it seems to me.

Scot:
[39:33] If I come pull the thread on that so we talked about so some of these grocery stores like Kroger creating their own private label or our own Brands but then if I’m a cpg
it it seems like.
That’s another reason to go direct other than the channels kind of being complicated to navigate without a team so cpgs going director or is that just not happening in grocery.

Jason:
[39:57] No no no it so it’s often discuss there’s not a ton of success stories right and so usually when a cpg tells you about their direct-to-consumer 6s they’re going to be telling you about a direct-to-consumer brand.

[40:10] But they’re all talking about it and frankly like I strongly advocated and I think you and I have talked.
In general I feel like developing a direct-to-consumer capability and strategy needs to be an important part of every one of these Brands because if yeah.
You you sort of look at this at the moment and you’ve got a bunch of brands,
dinner depending on on wholesale retailers and you look at the retailers and they’re they’re super distressed and have them bunch of head winds
their number one tactic for overcoming their head wins is in differentiating themselves from our our friends in Seattle or when I’m soon going to have to say our friends in,
Seattle New York Virginia.
Is to have exclusive products and have owned Brands and said the retailers and brands that used to be you know super synergistic have
are increasingly becoming Frenemies or direct competitors
and it and the retailers are frankly having a lot more success with that at the moment then the brands are so a bunch of retailers are becoming super successful at building Brands we talked about a couple in the groceries Facebook like.
Yeah oh my God I target has one strike three brands that sold over a billion dollars in their first year none of the digital native brands that we talked about on the show have and have done that right and so retailers are getting successful at making.

[41:39] The transition to build products,
and in that world there is a left there’s less shelf space for the brands in a world that’s increasingly becoming have a winner-take-all you kind of imagine some future when.
When you know we’re all going to get the bulk of our purchases from.
In Amazon Monopoly in North America or maybe a Amazon Walmart duopoly there’s a lot less points of presents to carry that brand product and so.

[42:07] That brand is going to lose all the leverage to the unit few set of aggregators at the top of the echo system on the less.
They’re also able to sell the wrecked unless they can build a relationship direct with the consumer even if it’s not high volume and profitable in the short run.
I feel like they need to develop the skills just so that they get some customer intimacy so they can start building more relevant faster,
more agile products and I feel like they they need a lab to test and learn all this digital shelf content and all these digital best practices that we.
Been talking about on Today Show so when they execute at Walmart,
they’re not just you know sending an image that they have no way to test and hoping it sells well in Walmart like far better to be able to test all that content on your own direct-to-consumer channel
Gatorade it really quickly and then take a hero image that you know work since indicated to Walmart so for a variety of reasons I think that’s an important
a scale for cpgs to evolve and I would say they are they are doing that cautiously and slowly.

Scot:
[43:09] We haven’t done it wouldn’t be a Jason in the sky show that will Amazon and we recovered at the top of the show but
I didn’t see anyone from Amazon speaking on I may have missed that but sometimes these conferences it’s funny people are avoiding talking about it and stay 800-pound gorilla in the room was was there a lot of Amazon talk to at least find the scenes.

Jason:
[43:31] Yeah so
to my knowledge Amazon really didn’t have a presence at the show which on the one hand isn’t surprising but on the other hand I would say
the founders of this show have actually been pretty decent at getting Amazon speakers to their other shows now admittedly the speaker’s they get are the ones that you don’t have the most vested interest in.
In selling their products to the industry so not shocking that
pay by Amazon is happy to go to money2020 and talk about their digital wallet right and
not shocking that that the Amazon Marketplace when that used to be a separate and into the you know was was happy to go to shop talk and kind of Recruit new Sellers and things like that.

[44:18] The but they did have the prime now folks I have spoke at several of the shop talk shows and so you might have thought they would be there,
it would have been fascinating to hear from
some of the Amazon Fresh people are now that you know that the folks responsible for the Amazon Whole Foods in a graichen in and none of them were publicly there I’m sure Amazon secretly had some people there but.
Almost every conversation when you say digital disruption of grocery,
everybody points to the same event that like there was a lot of talk about digital disrupting grocery but nobody nobody was personally experiencing it or nobody was very worried about it until the day that Amazon announced today,
they purchased Whole Foods and that that really sort of Kick this whole.
Disrupt digital disruption of grocery in a high gear and caused by you know almost all the people we saw speaking were people that got hired as a direct result of that acquisition.

[45:19] Mom said they were definitely on everyone’s mind even if they weren’t there in 4 in in person.

Scot:
[45:26] Put in the other high like showing it.

Jason:
[45:29] I think those were the big ones it is interesting that this is one of the spaces that I like doesn’t feel like Amazon has one yet and they actually,
probably have some intrinsic disadvantages versus some of the other players so.
I’m by no means prepared to say oh my gosh they’re not going to win
Amazon on the Rhone you know dabbled in in fresh fresh,
for I want to say amazonfresh is like 10 years old right and never really got a ton of traction and then after they bought Whole Foods I’ve been really impressed by how fast.
Amazon’s been able to integrate a lot of their digital chops in a Whole Foods and then some test markets like the one I live in
they have some really compelling Whole Foods delivery options and Whole Foods curbside pickup options which are great but the reality is
Whole Foods is a tiny percentage of the whole grocery market and they’ve you know implemented these tests in a tiny percentage of the whole food so you know you look at the
the folks that Walmart or Kroger is touching with digital grocery versus the amount of customers Amazon’s touching and right now.
Walmart and Kroger have a head start now I would argue Amazon the way faster more agile company than Walmart or Kroger and so
you know I think we can expect to see Amazon continue to make up ground but it is always interesting to see see a market where Amazon probably has to try harder than some other folks if they want to win.

[46:58] I don’t know. What do you think.

Scot:
[47:00] It’s going to be interesting so you know they are pushing the Whole Foods pretty hard I’ve noticed in my Prime now recently there
they’re kind of integrated Whole Foods delivery right in the prime now in her face which is used to separate set of inventory and yeah I think it’s
too early to call account Amazon out of any fight.

Jason:
[47:20] No
no I I totally agree I’m so in and it’s going to be fun to have a ringside seat to watch it all play out I will throw one other teas are out there
we did get to talk to several of the friends of the show that have been on the show a number of times before and so shortly after this episodes available will have a couple episodes live from the grocery shop show and we will get some other folks perspectives on the show in the industry and so you know
if you’re if you’re trying to figure out the the digital grocery space I would encourage you to look for those upcoming episodes as well
and with that this is going to be a great place to rap because we have used up our allotted time so as always love to continue the conversation on Facebook if you have any questions or feel
like we got something wrong we love to hear from you and as always if you love this show we sure would appreciate if you jump on the iTunes and give us that five star review that’s the
the biggest favor you can do for the show.

Scot:
[48:24] Awesome thanks everyone for joining us and thanks Jason for being our Jason Scott representative in the field in Las Vegas.

Jason:
[48:32] It’s it’s never as fun without you but you were that you were certainly there in spirit so hopefully next year we’ll get to do it together and in total next time happy commercing.

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