How Technology Is Shaping The Future Of Grocery - TopShelf Spotlight

In this edition of Top Shelf Spotlight. We delve into how technology is shaping the future of the grocery industry. Join Mark Brandau, Chloe Riely, and special guest Sylvain Perrer, President of North America and CEO of Mercatus. As they unveil the insights from the 2023 Supermarket Technology Review. Discover the transformative power of strategic investments in grocery technology and how it's revolutionizing the way we shop for groceries. Stay tuned into this webinar to learn how operational ef

ficiency and customer experience are at the forefront of this technological revolution and how targeted investments in technology are key to unlocking success in the grocery sector. Let's explore how grocery technology is delivering streamlined operations and enhancing the customer experience. Hi, everybody. Good afternoon. Welcome to today's webinar with Supermarket News, Intelligence and Mercatus. And today's presentation is how technology is transforming the grocery industry. The person who's

talking right now, that's me, Mark Brandau. I'm the guy in the middle there. I am a moderator with Supermarket News Intelligence. I helped design the survey from which all these insights are drawn and was the principal author of the report that we're discussing today. But really, the more important folks that are going to be talking today are our industry experts. So there's Chloe Riley, executive editor of Supermarket News, and Sylvain Perrier, who who's the president and COO of Mercatus. The

way that today is going to go is that we're going to start with a big picture look at the supermarket industry and the investments that they're making in different kinds of technologies, which will lead into a discussion about operational efficiencies. And then the next few seconds will be the inside game and kind of the outside game. So growing sales from within the four walls and trying to grow online sales and things like off premises channels like curbside and delivery. Finally, we'll do a d

iscussion of ways that retailers are collecting data and more importantly, using it. And then we'll get into the real important part of the show, which is the Ask the Experts section where we will be interviewing Sylvain Perrier. Now, to begin, we're going to start with again a big picture look at the industry and the tech investments that they're making right now. And ahead of 2024. And luckily, pretty much every every retailer who took our survey and there are more than 100 respondents did ide

ntify technology as an important part of their future plans going forward. Nobody said it was unimportant, and nearly half said it was going to be critical to what their plans were for the coming year. Now they're also going to be starting from a pretty, I would say, satisfied place with their current tech stack. So all of their technologies taken together and integrating closely with all that their tech stack and most folks are fairly satisfied with it. They're more likely than not, they're mor

e likely to be satisfied than dissatisfied. And I would say the majority of folks are at least satisfied with their current technology. It works, but they are still looking for improvements and looking for investment, which is why more than nine in ten folks are in the market for some kind of new technology or upgrade. Very few people are saying that it's probably not going to happen in the next 12 months. And the way that that's going to happen, interestingly, is that most folks are looking to

probably grow the number of providers that they work with there. There are a few approaches to technology in an industry like ours. You can kind of consolidate work with fewer technology partners, look for more of an end to end solution. About a quarter of folks are targeting that. Another quarter are looking to probably stay put, keep the same number of providers and still look for some new solutions. But a bare majority of retailers are looking to work with new and more partners. Now, there's

a lot of interest, there's a lot of willingness to invest, which is great. But of course, with any sort of major outlay like technology, there are going to be some barriers to investment. And I think that a lot of the reasons would look familiar to us, especially right now, kind of in the last, I would say 6 to 12 months, there's been a higher interest rate environment. And so the cost of borrowing is much higher. And so costs the budgets are going to be, you know, kind of a hurdle for many to o

vercome. Three and five respondents to the survey. But there's also the the questions of integration. Again, these tech stacks that people work with, they're very, very complicated. And the more that you bring in new solutions and kind of both amount of what you already have, whether or not those systems play well together and share data can be, you know, a difficult part of implementing. And so that's also a big a big issue for many of our retailers. But here's what we're going to try to really

tease out some of the differences between chains and independent retailers, which was kind of the big cleavage here. Now, independents, it it probably shouldn't surprise us are going to be more budget conscious than some of the chains are. Chain supermarkets are part of larger organizations that might have more resources available to them. And independents are trying to operate in a very low margin business kind of on their own. So it makes sense that they are going to be a little more concerne

d with cost. And I think that does logically go into the issue of staffing as well. Not enough folks to manage new systems, but if you look at the reality for chain supermarkets as well, they're more a little bit more concerned than Independents are about the lack of integration. So the difficulty of implementing new technology, what that might do to operations and, you know, just sort of how unwieldy that could potentially make their tech stack of the rest of these options. Chains and Independe

nts are pretty well aligned on. Very few of them are saying, well, there's no willingness to invest. They're not necessarily overwhelmed with the options, but they have different priorities and Chloe, if you don't mind, I'd like to bring you in here because you're far closer to the industry than I am. And I'm just sort of wondering what you make of these these splits right now between chains and independents when it comes to what might hold them back? Yeah. Yeah. Well, I think Mark, just kind of

as you just identified, you know, I don't think it's surprising at all necessarily. You know, you look at chains like Walmart, Kroger or Target, and, you know, we're just talking, you know, mostly just leaps and bounds ahead in terms of, you know, capital to invest in emerging tech. You know, not only that, but, you know, these larger brands also have these resources. You know, they have a tech division, potentially multiple roles. When we're talking about decision makers, you know, when it com

es to prioritizing tech and integration, you know, whereas an independent might might not have any one individual responsible for paying attention to those emerging trends, opportunities for optimization. So, yeah, absolutely. I can see why these numbers follow the way they do. Yeah, and it leads into our next section pretty well. I think a big priority across the industry. And this held for both chains and independents, I think is when we presented these different priorities for technology, ask

them to rank, you know, of these five or you are number one all the way to what's number five. Operational, operational efficiency really rose to the top across all kinds of retailers. And it makes a lot of sense, right, In order for us to get the most use out of this technology, it has to make us better. It can't slow us down. It can't complicate, you know, a very high volume, low margin business like ours. And so I think that that that flows from a lot of what we just saw on the previous slid

e about concerns of investment. But then also, I think it's worth noting that customer experience was was very, very important as well. This is different ways that customers can use us, whether it's online ordering, whether it's, you know, some technology like self ordering, self-checkout to make things a little bit easier on the customer. And then number three, I would just point out employee experience, that's kind of usability and functionality. How how hard is this going to be for our our st

aff to use? So it goes back to what we were talking about before as well. Now, you know, the reason why we asked this and why we wanted to point that out is we were asking all retailers, okay, well, then of all the things that you can get accomplished in the next 12 months, what are your biggest objectives? And frankly, this one surprised me a little bit. And until I thought about it a little bit more. So kind of this top tier of responses, you know, there's increasing average sales per order. T

here's growing our online business and improving relationship with customers, using data to maybe personalize some offers. But even above those at the top is one in three respondents said, well, we really need to reduce shrink. And just a little bit further down, a quarter of them say what we need to reduce our are out of stocks. And they said that more than you know just generally lowering operating costs, generally lowering lowering labor costs. And so I thought, okay, that that's kind of inte

resting. But then the more that I think about it, those those options that I just sort of talked about, they really get to profitability. Sure, there are ways to grow top line revenue, but when it comes to the things that are going to drive efficiency and really drive the bottom line, then it makes sense to me that, you know, they would rise to the top or near the top and this slide is one where also I think it's just as interesting to note what is at the bottom of responses and what really didn

't rate as well as what is at the top. And so if you look down there at those three little red lines at the bottom, there's very little appetite for operators to streamline, to streamline operations. And any of the major departments, whether it's a center store or the perimeter. You know, and Chloe, I wanted to ask you about this, too, because, first of all, there are, you know, a couple of things. Can you just give me your thoughts on why these profitability focused, operationally efficient foc

uses, focii however you want to say that why those are ranking as high as driving top line revenue? Well, yeah. So I would say I mean, looking at what's at the top there, I mean, the reduced shrink, you know, we're just seeing out of stocks, I mean, that definitely drives, you know, what we're seeing. We've been seeing nationwide increase in theft and shrink over the past year. You know, retailers like Walgreens are rolling out new store concepts in urban areas, you know, specifically designed f

or reduced theft, reduce theft. You know, a company like Target announcing it was going to close nine stores across four states, you know, again, due to theft issues, not to mention, you know, all the intense issues of crime and theft coming out of San Francisco. So, I mean, that definitely tracks in terms of out of stocks, you know, to me, that feels like a labor pain. You know, without tech out of stocks are managed by people. And, you know, the people part has just feels like it's been a neve

r ending challenge since COVID and probably even a little bit before COVID as well. So, yes, both of those make sense for me. Yeah. And I think that this says something to about kind of the labor problem as well. You know, whether it's in supermarkets or in restaurants, whenever whenever the issue of technology comes up, you know, I think a lot of people's ears perked up and they say, well, okay, how much is this? How much of this is a straight labor play? Right? How much are you trying to reduc

e headcount and still, you know, maintain sales with your people. But at least according to these responses, there doesn't seem to be the case. I mean, the streamlining options were kind of framed to the respondents as doing doing more with fewer people. And that just doesn't seem to have much appeal here. Yeah, I was just going to say absolutely, because I think the opposite is happening for many retailers. We talked to. You know, it takes so much right now to find good, reliable workers. And s

o I'm surmising that for most grocers, you know, it isn't an issue of streamlining, but rather curiosity about how they can be using tech, you know, both to make their employees lives easier and therefore keep retention up while then also simultaneously, you know, improving their own bottom line. Yeah. And as we so as we move on from this slide, we are going to get into the discussion of the top line. Here's where we really want to, you know, talk about sales driving strategies. And so in this t

able here, you'll it'll look kind of familiar because this is just a different way that we are framing of the top objectives for all retailers here. It's just in this table here. So the totals are the same. The next two columns to the right are the crosstabs for how chain retailers responded and how independent retailers responded. And I think it's really important to point out those differences here throughout the rest of the presentation because we really did. I think, find a lot of interestin

g differences. But I do want to begin with here in large part at chain retailers and independents were pretty much aligned on things like lowering operating costs and reducing labor costs generally and on the need to improve customer relationships, you know, getting data, using it to really convert more direct offers and things like that that go to the top line. But what I wanted to point out now is a few places where independents and chains are going to be a little bit different in the way that

they respond. And generally, one theme that kind of popped up in these responses is that independents are, for the most part, generally more focused on improving sales within the four walls of their stores. They are, you know, some of them have already adopted online sales and first party or third party delivery and curbside. But compared with chains, they are a little bit more focused on increasing average sales per order, growing their prepared food sales and sales in other parts of the perim

eter, and then also on optimizing their assortment, which which makes sense to me. And that's a way for them to really boost that top line as best they can. And the reason why is that they all operators, not just independents, do seem to agree that the the in-store departments are at least right now more profitable than some of the off premises channels. Certainly the perimeter departments like the Meat counter bakery, deli, in-store food service brands, if you have them, are more profitable, it

appears, than online ordering or curbside pick up. You know, in-store pharmacy does does fairly well, but it's virtually nonexistent for independents in the survey. And then retail media networks we'll talk about later. But we're pretty early on, I think I think most folks are having trouble driving a lot of profit from those departments compared with, you know, the perimeter and center store. So that's why I think that the things we saw on the previous slide a little bit more relevant. And of

course, what we want to get out with this entire presentation is how those goals and those hurdles drive the current investment landscape and interest in future investments in some technology. So we'll start with some of the in-store technology and one other kind of big theme that popped up to us and that I think that we can hopefully have something to talk about more during the Q&A is that in this industry it's really software led right now more than hardware led. So if you look at this, at thi

s table, the left column of data is where these solutions are already implemented across the industry. So these are the the number of respondents who have already implemented this kind of technology. And you can see our software for inventory management and scheduling and labor management are already very, very high. And then the big kind of piece of hardware that is more common, especially at chains, independents are self-checkout kiosks, but right now this is very, very software led, much lowe

r levels of adoption for things that we're reading about in supermarket news, you know, things like smart carts and, you know, digital tags and digital signage for end caps or sections, the really cool freezer case displays. We'll see that they've got, you know, a good amount of interest by just low levels of adoption so far. And the way that we look at it next on this slide. So this bar chart is basically a measurement of net interest. We are taking the folks who say that they are not intereste

d in adopting these certain technologies, subtracting them from the folks who are interested. So for all these solutions, among those who have not yet implemented, the ones with the highest interest are still it's still software related, which is interesting. And I think a lot of that has to do with the fact that independents are looking to catch up on a lot of these on a lot of these solutions. Chains have already kind of led the adoption. Independents recognize that they want to catch up. And

so that's kind of what's driving the net interest for a lot of these. And here we're seeing things like digital price tags and digital digital signage kind of come up a little bit more. And, you know, you look way down at the bottom. Kitchen Robots right now just don't seem very relevant to a lot of people, chain and especially independent. And there's a little bit less runway for things like, you know, self-checkout kiosks because the adoption is so high. And Chloe, when you when you look at al

l this stuff, one thing that kind of jumps out to me is, okay, independents right now are they're very focused on increasing sales within the four walls. And yet some of the things that are out there to maybe drive sales, things like digital signage to merchandise the center store or perimeter apartments a little bit better. Their interest is a little bit lower than I would have thought, especially relative to chains. And so I'm just sort of wondering what you think about, you know, that imperat

ive to to grow sales and how it's translating or not into investments are looking to make. Yeah, Mark, I would say my my overall impression, just looking at, you know, the data we've got here is just that this level of tech is, I would say maybe just too granular for most independents. You know, I see the data here. This is just, you know, I'm a driving response from independents. I mean, there's just kind of higher level issues, point of focus. And yeah, I would say, you know, options like smar

t carts and freezer, you know, freezer signage, freezer displays kind of feel like add ons or bonuses maybe at the stage sort of like a a nice to have. But I need to have just in terms of, you know, managing the bottom line. Sure. All right. We've got lots of great questions coming in. We'll try to get to them as much as we can in the Q&A with Sylvain. We're going to move on right now to the next part here. So there's the in-store experience, which I think is a bit of a focus for independents. A

nd now we're going to look at some of the ways that folks are trying to invest in driving online sales. Now, again, here's our here's our chart of top objectives. Again, what I'll point out here is that where chains are more focused than independents on some things would be on, for one thing, increasing the online business two in five chain retailers said that that's a top objective for the next 12 months. And it also leads into there a little bit further ahead than chains on wanting to moderniz

e their technology. We do think that those things kind of go together. But overall, we took a look at retailers projections for their online sales group. We asked them chains and independent like, you know, over the next five years or so from now till 2028, what kind of a compound annual growth rate do you think you'll achieve for online sales? The good thing here is that it is largely optimistic. I mean, fewer than one in ten people are not expecting growth in online sales. And for the most par

t, I think that people are cautiously optimistic and they're looking for some steady growth in the mid-single digit range over over the next five years. Now, there is there is a difference here, I think, where chains are more focused on the upside case and independents might be the ones driving the kind of pessimistic case a little bit more. Makes sense given that the lead the chains already have in this. But overall, I think it's a pretty it's a pretty good distribution that points to some pret

ty cautious optimism for online sales growth. And with all of these sections, we're going to look at kind of how that's driving current adoption and interest in some solutions. So here I think that it makes sense that of all the eCommerce options, we already have some pretty good adoption of things like direct digital offers. You know, four in five retailers have already adopted these things. Virtually nobody is disinterested in getting that. I'm getting that done. I'd like to meet the 2% of peo

ple who aren’t interested in that. There's much more adoption of first party online ordering than there is a third party, and we'll see that the interest is different for those who still have to implement that. And then discussion of loyalty programs and gasoline rewards, that is more driven by chains. Right now than independents. But we'll see that they're trying to catch up. And then we'll also talk about retail media networks and video video, e-commerce, live streams. It's a pretty interestin

g thing that we'll get to here on the next slide. So it as as was the case before with some of the in-store technology, independents are much more interested in in adopting some of these things largely because they're trying to catch up relative to chains. I think that they see that these are worthy investments to make. They're trying to figure out how to bring them with new partners and so and and even still off of the highest base of adoption, direct digital marketing has the highest interest.

But really, I think what is two things are interesting here. First, third party online ordering. I think that folks are kind of coming around to the idea that a direct owned channel is probably better, you know, not only for hanging on to more of your profit by not paying out a commission, you have to keep more of your data. We'll hear later from Sylvain. And I think about places where third party partners do kind of help with a first party plus model for that last mile. But really here also re

tail media networks, there's kind of parity in terms of interest among independents and chains. They're both interested in and doing more of it off of kind of a I would say a fair to middling base of adoption. Already about one in three retailers have already done it. But Chloe I've got to be honest, you know, this was kind of a new one for me, not covering supermarkets as closely as I might restaurants and, you know, it's a very, very cool thing. I think that there's a lot of potential there, b

ut I'm wondering how you see it as the industry expert where we are with all that. Yeah, I think especially with, you know, the retail media network pull out was interesting to me. And I think, you know, when it comes to retail media, I mean, it's a fast growing space. The bigger chains are ahead, obviously, but we're also seeing more mid-tier grocers starting to play in the space, too. You know, Fresh Market has been doing some really cool things with shoppable livestreams. They just launched a

retail media network in February. Hy-Vee just launched its retail and media network, Read Media a few months ago. Over the summer, Kroger announced it was going to be bringing its retail media ad tech fully in-house. So we're just seeing a lot of movement, you know, just generally in the space right now. It just feels like things are moving and shaking in the space. There are big opportunities there. And, you know, I would say the data seems to suggest not obviously chains are, you know, very a

ware of that, but it seems to suggest, you know, independents are also interested in growing the space further. Yeah. I mean, it is really interesting, but it's just such a heavy lift to produce that kind of content, you know, with the production value and in the amount that you need to produce to have to have a have a network that people can kind of come back to and then that you sell against. So the fact that both chains and independents want to do it I think is great, you know, but the just t

he production needs of that content are going to be really interesting to look at, I think, you know, absolutely. And so the last thing, too, will be a discussion of, you know, data more generally. You know, these are places where we we wanted to kind of get at this this question of, okay, so what does artificial intelligence look like in the supermarket industry and what are some of the practical uses for it? Because, you know, AI is is in the news a lot things like, you know, generative AI for

search and chat. Very, very cool, very interesting and going to be pretty disruptive to a lot of industries. And I think that in our industries, in supermarkets, they'll also be pretty cool. So we're going to get to that. First, we wanted to ask this question that we ask in a lot of our tech surveys. We asked this of restaurant operators before. We're doing it here in the supermarket industry, and that's kind of setting a baseline of to what extent do you feel like you're already kind of optimi

zing the customer data that you can already collect and put to use? You know, interestingly enough, at the beginning of this year, we asked this of restaurant operators and, you know, a majority of them expressed that they they weren't very confident that they were. You know, there are a lot of you know, probably not and definitely not. You know, we're just we don't know if we're doing as much as we can with it yet. And in the supermarket industry, it is a little bit of of the reverse. It's abou

t three quarters of respondents said that, you know, they're somewhat at least somewhat confident and very confident that they're optimizing their customer data. I think that makes sense. You know, they have a lot of sources to draw from of things like direct offers in the US, but it shouldn't surprise anybody that, again, this split is going to be indicative of the chain and independent split. You know, I think that chains probably have, you know, more technology in place to collect more data a

nd also more technology in place to put it to use as well. So this makes sense to me, but I think that even among independents, there's a fair amount of confidence that they know what to do with what they know about their customers. And so we took a look at where a lot of the retailers are getting this data from. It should be it should be no surprise that transaction data from from the US is a big one. Also ones that have loyalty programs. I think a big reason why you run our lunch program is so

not just to drive frequency, but to know who these customers are. And then about half of the respondents also do pretty well on voice of the customer. Things like surveys, listening to social media and online reviews. But there are you know, I want to just point out that there are, you know, some splits here. Again, like I said before, you know, our suspicions were confirmed that the chain retailers are a little bit farther ahead right now in putting putting their loyalty programs to use having

sort of more robust ways to get data out of their systems. And that also trickles down to, you know, tracking the redemption of direct coupons and offers as well. So a lot of a lot of these should should make sense prior slides. And so what's interesting here is that the investments and the current adoption already of a lot of analytics programs and I are are pretty interesting. I think that this is an industry that I would say is among the better, you know, retail industry's ad sales and labor

forecasting, you know sort of sort of knowing when you're busy periods are how to manage your inventory and labor around that. And also there's there's more than half of respondents that have already adopted some sort of automated marketing for personalized offers. So there's still plenty of use of direct mail. I'm sure, in the in the industry. But we have done a pretty good job, I think, of digitizing that and delivering it in ways that are more relevant. So through email, through phone of sor

ts of technologies that everybody uses and uses quite a bit. Now the other parts of AI are a little bit further down on this table. So there's suggests a suggest a upselling capability, whether the platform is, you know, at a self-checkout kiosk or in a retail, in a retail video network or on your online ordering engine. And then there are also chatbots for customer service or for upselling as well. But right now, the adoption is much lower in those cases than just sort of the, you know, kind of

straightforward brute force that you would get from, you know, your sales or labor forecasting. I think a lot of folks realize that even if you're using something as common as, you know, Microsoft Excel or another kind of database, you know, Ai is all through that helping you slice and dice your data. Now, net interest is still I think people are seeing that there is a lot of a lot more progress to be made in quick wins to have through software. So that's why we see a lot of interest in sales f

orecasting and Labor forecasting still automating things like inventory management and automating marketing are still very, very popular. You know, and one thing that I was not too surprised to see once I really thought about it was just the the, the interaction of of chat bots probably not as relevant to a grocery shopper as maybe somebody doing a restaurant occasion. And I think that's suggestive. Selling is probably going to be dependent on adopting these other things like retail, retail, vid

eo networks and, you know, a more robust online ordering engine. So I would just stay tuned there. The interest is probably there makes sense that chains are probably a little bit more ready than independents are for that. So yeah, Chloe And anything else before we kind of move on to the next section. No, no. Mark, it’s great. Super comprehensive. Okay, great. Because I've been waiting to be waiting to bring on our esteemed panelist, Sylvain Perrier. So Sylvain and Mercatus were very, very great

partners who were both here on the survey. They helped us really get our heads around a lot of industry issues, and so we're really happy to bring him on. Chloe is going to drive a lot of the interview here. Chloe, While you and Sylvain are talking, I'm going to look through all of our great questions here from the audience. Q&A hopefully identify a couple that we can get to before our time is up. But Sylvain, it's great to see you again. Thanks so much for joining us. And Chloe, why don't you

take it away? Great. Sounds great. I mean, yes, I mean, there's so much obviously just great questions coming in, but I feel like, yeah, a great place to start is just, you know, where do you think the grocery industry sort of is in terms of curve of adopting technology? You know, it looks like from the survey, like we're seeing most operators starting with the software before they get into the fancy hardware. We're also seeing that kind of investment in the, you know, back office functionality

before rolling out the customer facing solutions. But yeah, I'd love to hear your thoughts on this. Yeah. And first of all, it's great being here with with all of you. And it's a good question. Investments in technology is very much cyclical. A lot of it, I argue, is is tied to the macroeconomic drivers. And we are seeing today if you were to compare, ‘08 to ’23, there's there are certain elements that are similar customers trading down going from the preferred high-low merchant down to the disc

ount, the discount to potentially food banks. And unfortunate thing to say, I think what contrast those two time periods fundamentally is, is two things. One is labor rates are higher. And the second thing is the widespread adoption of SAAS platforms and mobile technology. And so I'm not surprised when we see this pivot to investing deeply in software for for a couple of reasons. One is software is malleable easy to change and you can get more out of it, especially in a climate where data is key

in trying to break down data silos, get a complete 360 degree view of the customer hardware is more problematic and is typically single function. So if you look inside of a store, very rare do you see widespread deployments of kiosks at low usage, high cost, high support maintenance fees, and also sometimes troublesome inside of a store? If you have low labor penetration, you need someone to kind of manage those, those kiosks and so on. So the numbers that are being presented are not a surprise

. Yeah, and I think that's such a great observation. Just the nimbleness of software. We're kind of in the era we're in now. It makes total sense. It's kind of pivoting over. I feel like, you know, the operators that look, you know, in our data here, you know, when it came to online sales growth over the next five years was, you know, moderately optimistic, not too bullish. I'd love to hear your outlook as well as, you know, what you think the industry could do to really accelerate its e-commerc

e success. You know, I'd also like to hear if you have any thoughts on how independents can be doing that. I think that would be very interesting, too, since there's obviously the interest here. But it seems like the independent side is where we were seeing more of a barrier to entry, at least according to this data. Yeah, we're still really bullish on the numbers when it comes to e-commerce growth. So we we announced seven, I believe 7.8, 7.5 for last month, actually September numbers 7.5 billi

on in terms of overall online sales. We're actually going to be announcing the October numbers soon with Brick Meets Click. And we've seen again a considerable growth in online sales for specifically for eCommerce. I would encourage, you know, there's this dichotomy and the numbers are presented by MarK, where you seeing this fight between the the chains and the independents, between customer acquisition and customer retention and there's various degrees of sophistication to be able to do that.

So what we try to counsel are retailers that are using eCommerce is A) Own your customer and make sure you retain have your 1P and 3P strategy very well defined. And what I mean by that, having a very well defined 1P 3 P strategy is you want to own your customer end to end. And I think there's generally nothing wrong in using a 3P, but make sure that they are integrated in the fulfillment process, that they're not owning the entire customer relationship and pricing needs to be considered. So how

do you price in store versus how you price in your 1P and your price in your 3P needs to be considered because if you're not capturing the customer who's looking for convenience, that at very least as opposed to driving them to a competitor you want to drive, you drive them into your brick and mortar I also feel like that's great, just really simple actionable items in terms of, you know, how grocers can be thinking about better optimizing this. The same, you know, investing in technology, you

know, would have been more affordable like so many things years ago in a lower interest rate environment. How should operators prioritize their investments now? You know, especially with independent grocers, you know, indicating they're they're very budget conscious. Yeah. I go back to the data that Mark presented. Shrink is top of mind for everyone right now in downtown Toronto. A majority of our retailers actually have the implemented security or locked up items and there's a cost associated a

ssociated to that. So examining ways of using technology to buy net shrink, also SKU composition, SKU rationalization quite more fundamentally, I think in some cases I visited, you know, I spend my time visiting a lot of stores. I always feel that they're over merchandised. We as consumers always buy the same 1000 to 1200 products on an annual basis. So I think their needs there needs to be some some thought process put into that to that realm. I also think that managing labor is extremely criti

cal. Cost of labor is high. Either we give better tools and applications to the existing workforce to be able to do things much more efficiently or faster, or we put technology into the hands of consumers so they can self-serve. That comes as an added challenge, putting technology into the hands of consumers, because then you're dealing with high capital costs typically. And also, I'd argue this potentially an increase in shrink, which is theft. So it's it's very much a balancing act. And not ev

ery retailer is going to have fundamentally the same opportunity as a challenge independent of access to capital. It's going to come down to who you are as a brand, where are you in in the United States from a geographical perspective? And who are your customers? Yeah, we have retailers out there that really cater to a younger, more urban crowd versus a more, you know, rural, comfortable middle age group of individuals. It's still still a great and savvy at using technology, but maybe want to ha

ve a more high touch experience versus someone that lives in Metro New York. Is 22 years old. So I think it's also understanding that market baseline first and foremost. Sure, sure. So it sounds like this is, you know, largely we should be thinking this is sort of a B2B tech fix, not necessarily a B2C in the sense of, you know, this isn't it makes more sense to get this tech into the hands of the, you know, the store employees versus, you know, versus the consumers of the shopper. I was going to

say, what do you make of the, you know, chain versus independent sort of split, wanting to drive this need to drive online sales versus mine to boost average spend per in-store visit? And how should any operator approach striking the right balance there? Yeah, so it's really funny, Mark, you're your research was spot on in a question that I asked a crowd of retailers back in the summertime in Cincinnati. And it was it was wild where the chains were more about acquisition and the smaller indepen

dents were, were about retention. So that's great. So that's a solid indication. I think fundamentally this could be driven by this shift in consumer spending. So going from your preferred local smallish retailer where you're buying your preferred brand, the things that you really enjoy are more expensive and maybe you're not buying them as much and you're trading down to a larger chain who has maybe a less expensive private label item and so on, or national brand. It's heavily, heavily discount

ed. So that could be the case in my conversations with retailers at the independent levels, they understand if they can retain a consumer and convince them to put one more product in the basket, that profit that that amount goes straight to the bottom line. And I think it's more it's easier to conceptualize that if you're a small, independent operator, you know, your customers versus if you're a large chain and you have a machine that's running that consistently is about customer acquisition tur

ning on a dime. Is there is very, very difficult. In any case, it's not to say that the chains aren't thinking about this, but I think as a whole they are geared today to operate in one way. That's great. Great observations. Sylvain, is there anything else that you want to mention or get to or anything else in the data is jumping out to you before we maybe try to jump and answer some of these questions here in the Q&A? No, I think, Mark, you did a fantastic job. And in just this stuff, this this

data will serve a community in the industry well to make some strategic decisions. Well, thanks. And that's in large part to your help to and the market itself. So thank you for that. Sylvain, are you ready for some audience Q&A? Let's do it. Okay, great. So so a lot of these there's a lot of sort of really great ones that I would not have thought to ask myself. And the first one comes from Colin. So Colin says with the move to go for more tech and more digital, inevitably that means more elect

rical consumption. And in some markets that really won't be tenable. And so the question from Colin is do you see corporate ESG initiatives coming into direct conflict with the move to go toward more digital and more online sales? Yeah, it's it's quite possible and it is a very much I'll give you guys a great example. I mean our our state authority here is really pushing for EVs and no gasoline operated vehicles by certain a certain date and time and and my state and Canada in general were reall

y not set up for infrastructure to be able to do that. And there's a bit of a of a mad scramble. So you're seeing legislation not catching up with decisions or at the consumer level and so on. So I would expect the exact same conflict to occur within corporate America on on some of these initiatives. I would even push that further. We're even now today with some privacy laws that we see in California, CCPA. Now we have copycat laws emerging in 11 other states. And AI really, really taking off. I

think people are not understanding how conflicts around trademarks, copyrights and TII And I think we're going to see even more conflicts at that level that will emerge faster than at the hardware level. So that's great. Question by Colin. Yeah, definitely was next one that comes from Jeff and Jeff's is online growth just cannibalization of in-store sales. It seems like a margin killing process in a lot of cases. Yeah, this is like I used to get asked that question like ten years ago and I woul

d say ten years ago. Absolutely. But what we saw phenomenon through the pandemic is the stabilization in the reality of the convenience factor of e-commerce and people don't really really get hooked to e-commerce after three and a half, four tries. It depends on the market. What we see is, yes, it's to a certain extent it's cannibalization, but the online basket in some cases 1.5 to 2x larger than in-store. So the retailer benefits not only from the transition, it's a transition to online, but a

much larger product set in any case. So they are capturing item sales that normally that consumer would go buy somewhere else and that's and that's more items in the basket, not necessarily taking price increases for online. That's right because that's that's a really interesting thing from the restaurant world too, is that the menu prices will go way up for an online order. And I don't know, do they do that as much in the supermarket industry? Yeah, it's it's it depends on what they've negotia

ted with their there if they're 3P it depends. So if they're selling at parity with it in-store then the services will typically will use to offset the parity or the retailer will take it out of margin. In some other cases they're passing the entire cost on to the consumers. So then the online pricing will be significantly higher than in-store. Gotcha. Really good question here from Garret. What other types of shrinkage are retailers looking to solve with software other than theft? Another theft

is top of mind, of course, in the public comments, but what else can we do with technology around shrinkage? Yeah, and I think it's important to define theft. So theft is not just in store by a unknown third party. I mean, so there is employee theft and that's the harsh reality of the industry. And it's theft across the supply chain from the moment it leaves manufacturing to distribution center or in the case, if it's DSD, directly directly to the stores. So theft does occur in those spaces. Sh

rink is also food wastage. So it could be vegetables. It could also be, you know, when you walk by the deli counter or the bakery section, the bakery section being my favorite section, those things have a stale date. And so the more that you produce and if you can't sell it, then there is there's become this shrink. There's this risk that is thrown away after a certain date. So software really, at the end of the day can really help a understand your production volumes, what you should be, what y

ou should be manufacturing in store, baking or preparing. And that's by looking at historical historical trends. So great example. The this the second one is also understanding food safety. When is it time and so on and then so when you and so that's a great way of defining shrink that's that is and that's being part of shrinking. So I've got a really great kind of philosophical question here from Sanjay. So he frames it thusly. So based on the costs related to technology adoption for independen

ts, what strategies do you see them employing to compete with chains aside from just catching up with tech? Yeah, well, the old school fundamentals prevail of safe, clean stores that are easy to shop in-stock customized assortments based on local demographics and local preferences, customer service, etc. So how how much does the operations elements matter when we're also trying to catch up technology-wise to chains? Yeah, that's a great question. So so there are fundamentals, right? So so think

of grocery as an operating system, right? So if you think of as an operating system, there are some non-negotiables. From an operating system perspective, I need a word processor and a spreadsheet. I need to see files need to print, I need to browse the Internet. Well, groceries, the exact same thing. I need a box I P.O.S.. I need product on the shelves, I need labor and so on. And guess what? I need clean stores. I need to service my customers. Right. You can't escape the non-negotiables. So le

t's just say in the non-negotiables are covered at that point, everything else is about differentiation. And so you can take two approach approaches, a me too approach and hope you can you can succeed and win, or take it, take a complete sideways approach. A great example and Chloe mentioned it at the top of the webinar and she's going to keep me honest here. The Fresh Market in their streams, their live stream where they have influencers unpack, a pack a bag of groceries and make a recipe that

is going like gangbusters for them. Yeah, and none of the large chains do this and I even think the closest is a few in China that I've seen. So I don't know why is Target not doing this with fashion. Why is Walmart not doing this? That's a great example of differentiation. We have a great retailer here that's local, very small, that does e-commerce. It's 1P it's but it's fulfilled by a 3P. They personalized handwritten notes in a bag. I'm like, I'm a big fan. I think that's a great way to do it

. It's low tech, low tech. Yeah. I mean, that sounds like, you know, that's why people love the Four Seasons so much. Right personalized. Yeah, handwritten service and the hospitality sector. Absolutely. At once. Okay. We have a few minutes for a few more and they keep coming here, so I'll try to keep up as best I can. Everybody Next one comes from Kevin. What role do you see Optical analytics with smart cameras playing in the highest priority of reducing shrink? So this is one that we probably

when we were designing the survey, we didn't know too much about yet. But what do you see in the in the world of smart cameras and incorporating video. Yeah it's I, I historically was a big firm believer of consumers just using their camera on their phone to self scan their products. And I think that's still a viable option. Look low adoption rate but there's there's a third party solution in market right now and I and they’re called Focal and I and what I know of that technology it's a camera t

hat is fixed on a shelf and then what it does it snaps pictures and it can using I point out, dead zones within there's products missing on the shelf. I think that could be further tweaked for to t log to its products stolen. I think there's some great applications application in that sense. And this is one that I'm very, very curious on. There's a really great question here regarding loyalty. So this is from from Jean. And Jean says, Regarding loyalty, people are accustomed to go to their local

store because they, you know, they might know the butcher, they might know the owner and trust the quality there. But with e-commerce, how do you maintain this loyalty if all the stores have the ability, the available, the ability to sell online? And so does this create sort of a race to the bottom where there's no differentiation, we all can sort of offer this online selling. How do you maintain that personal loyalty that you engender in the store? Yeah, Well, so first of all, if if you're onl

y doing marketplace, you're no better than anyone else on the marketplace. Number two is if you're counting on a third party to deliver for you and you're at least not giving them standards of operating, and you're not telling them that experience or whatever you're handing off to that third party to deliver. If you're not tweaking that, you're no better than everyone else. That's why we're seeing a massive amount of retailers that are doing better on curbside pickup where you in It's their own.

In some cases it's their own labor in store and doing the picking and packing. So you're fostering that relationship with the individual that's doing the picking and packing for you. They get to know you personally. They may recognize that you've forgotten to order something or they're recommending a different a different product or something new they have in the store to the person carrying those items out to you in the store, you get to foster that relationship. At the end of the day, that gi

ves you the choice as a consumer. If you love the in-store experience, you can go in. If you're under a time crunch, but you still want that high touch, personalized experience, you can go and do curbside and so on. I will say again, do not as a retailer, take the need to approach. You have to think operationally, put on your customer satisfaction hat What are the little things that you can do that are going to make a big, big difference. So I mean, can I just say it's the best answer to that qu

estion I've ever heard? thank you. Appreciate. Thank you. I've had to ask constantly in this industry since I started in it, which is, yeah, I love this idea of that. It's on you. The onus is on you as the operator to not get lazy with your with your e-commerce, with your delivery that you need to make that just as special as is. If someone was walking through your doors. It's a great answer. Absolutely. The amount of retailers that don't even measure their KPIs on their on their e-commerce oper

ation and and suddenly they're like, this isn't working for us. I wonder why. You're not measuring it. It's just mind boggling. All right. So I think we have time for one more question. I'm going to try to combine two that just came in because I find them to be pretty similar. So so then what technologies do you see taking off in the near future? And somebody also asked how important things like these digital price tags are going to be. Do you see them becoming more of a requirement for everybod

y? So I love what Microsoft is doing with Open AI. I've been specifically playing around what they've done in power BI and copilot tied to Office 365 I think a AI Insight HQ First people learning how to adapt and I think you've got to be purposeful and training your employees so they know what the boundaries are and so on and so on and so on and so on. I think that's first, I think moving this back into the front in the hands of consumers at a presentation there, I love what BirdsEye is doing. I

think that generally makes sense. And your second part of, your question, I forget if you could just quickly repeat it for me. Somebody asked specifically about some of the in-store digital merchandizing. So yeah, I do stuff like that. Yeah. So ESL tech for it, it makes sense for large format and where you have mature loyalty, where you understand where you could affect price at a moment's notice to help you increase sales if you're simply implementing it to save on labor. Yet they're great, gr

eat studies that could prove that. But the ROI has to apply. I think it's ESL plus the other stuff that I just mentioned that generally starts to make sense. We see that quite well here in Toronto with Loblaws that has done it in a superstore at size 150,000 square feet. Very difficult to quickly change prices and it's tied to their optimum program. So I think they've done a really great job, great. So everybody, I think that is all the time we have here. We thank you guys so much for staying wi

th us for this full hour for asking all these great questions. And Sylvain, thank you so much to you and your team for all the help from the design process of this survey all the way through presenting these insights. This is great. Thank you. Thanks. Thanks, everybody. Have a great day.