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Jake talks with Jason “Retail Geek” Goldberg, Chief Commerce Strategy Officer at Publicis about innovation in grocery retail.
The retail sector, for the most part, has undergone a huge amount of change over the last decade. The big department stores, the big clothiers, electronics stores have had to make huge shifts to digital, go omnichannel or fade away. That retail transformation story has been playing out across the board… except for a couple of key lagging categories. One of those last retail holdouts was the grocery store.
Why has grocery been an ecommerce laggard? What’s so different about the grocery category? What are those unique challenges and how are they being addressed? How does COVID factor into that transition?
There are lots of aisles Jake and Jason could explore, but Jake zeroes in on FIVE:
Jake’s FIVE List:
- Why grocery has lagged so far behind in ecommerce
- How the grocery shopping experience is changing for consumers
- The innovative ideas that are finally accelerating the shift to ecommerce
- The hurdles that stand in the way of their adoption
- What we’re learning as grocery shopping evolves
“People tend to like to pick their own bananas.”
Jason Goldberg gets into a cart-full of hurdles and advances in grocery commerce innovation. He talks about winning the consumers’ share of stomach, the items shoppers purchase, but don’t put on their list and the importance of product discovery in the grocery store.
As they discuss the latest in grocery commerce innovation, Jason takes Jake on a trip down memory lane, recounting the start of his retail career at Blockbuster – trying to digitally deliver videos to people’s homes over state-of-the-art 2400 baud modems in 1994. He reminisces about his days of professionally scooting around supermarkets on skateboards, sitting in board meetings with the CEO of a huge consumer electronics retailer – who said no one’s ever going to buy a TV without coming in the store to see it first, and having his perspective changed by a professional melon taster.
Some other stuff Jason said during the conversation:
“On average, most consumers use six different stores to fulfill all of their grocery and pantry needs. One of the dynamics that changes in digital grocery is an individual retailer can win a bigger total share of the consumers wallet over time.”
“While each individual transaction might not look as profitable, it actually is possible to win more profitable customers and have higher lifetime value by getting a greater share of that customers total spend.”
“When you think about digital, the ability to pick these products becomes much harder, the ability to find inspiration becomes much harder and the ability to drive serendipitous discovery and unplanned purchases becomes harder.”
“Dove soap comes in an eight-ounce bottle and a 16-ounce bottle but guess what happens when you put the pictures of both of those bottles right next to each other, at the same height, on a website. They look identical, right?”
“Suddenly all of those attributes of the product that were printed on the box are not legible when someone’s looking at that product as a tiny little thumbnail on their mobile phone.”
Additional resources mentioned in the episode:
Learn more about Emodo and the Emodo Institute: emodoinc.com
Jason Goldberg’s podcast: The Jason and Scott Show
Jason Goldberg’s website: RetailGeek.com
Transcript of S3 E2: Rethinking Grocery Commerce
Jason:
So once you bought a melon from this expert who has a degree and dedicated his life to picking melons, you realize yeah, the 15 minutes of training I got from my mom when I was 16 years old on how to pick a melon, like isn’t that sufficient? Right?
Jake:
Let’s talk innovation. Welcome to FIVE, the podcast that goes deep into marketing innovation, the big ideas and marketing and the marketing of big ideas. This is episode two, rethinking grocery, I’m Jake Moskowitz.
The retail sector for the most part has undergone a huge amount of change over the last decade or even longer. The big department stores, the big clothe ears, electronic stores have had to evolve or fade away. Huge shifts to digital or omni channel. That retail transformation story has been playing out across the board, except for a couple of key lagging categories.
One of those last retail holdouts was the grocery store, the events of the last two years have started to change that. Think about it. Of all the E-commerce packages delivered to your door pre COVID, how many contained a melon, bananas, cuts of meat or a carton of milk? Odds are that percentage was very very low. Even today, what type of brick and mortar retailer do you visit with any regularity? I’ll bet you dollars to doughnuts if you name one, it’s the grocery store. Now, you might get up on your laundry soapbox and go, nope. No dice, Jake. For me, it’s the pharmacy or the big box store, or the convenience store or bodega. And because I’m an affable guy, I’d say, Okay, you’re right. But really, if you’re coming home with groceries, those are all variations of the grocery store.
So why, why is grocery the E-commerce laggard? What’s so different about the grocery category? What are those unique challenges and how are they being solved? And what role is COVID-19 playing in that transition? My guest this time is Jason Goldberg, Chief commerce Strategy Officer at Publicis. Jason is one of those people who knows his business cold, even a casual exchange with Jason and you just walk away feeling like you learned something important. Even if he was just saying hello.
As the guy leading commerce strategy for the entire Publicis group, Jason retail geek Goldberg has a big job. So Jason, last time you were here, I meant to ask you, how does a person become the big cheese in retail at Publicis?
Jason:
Well, I was born into it. Some people have like merit and talent and worked really hard. I’m actually a fourth generation retailer. So sort of retail is the family business. And it just so happens, unlike my ancestors, I was born into the family business during a massive disruption of retail. And so for better or worse, the playbook I was handed didn’t work very well. And so I was sort of in on the ground floor of digital disrupting shopping and had to figure it out for the companies I worked for. And now I’m trying to help a lot of my clients figure it out as we’re, we’re sort of still going through it.
Jake:
Obviously, there’s a lot of digital that goes along with that. How much physical retail is there? And how do you bridge that divide between the two for your clients?
Jason:
Yeah, well, I use the word commerce very intentionally. I don’t like to talk about ecommerce. I don’t like to talk about retail, I don’t like to talk about brands versus wholesalers. Because those are all tactics that are part of this soup of consumers having needs that are fulfilled by shopping. And so I use commerce as sort of a blanket term to think about all the different shopper missions and all the different use cases for solving those shopper missions. And so sometimes that’s a visit to a wholesale store like Best Buy or Walmart sometimes it’s a visit to a digitally native brand like Dollar Shave Club or Warby Parker, sometimes it’s a brand selling direct like Gillette razor club, but the those are all different sort of use cases to me of this big, you know, 6000 year old problem called commerce.
Jake:
When you say visit these folks, what does the visit mean? And what are you helping them to do?
Jake:
Well Publicis is a big holding company. So there’s hundreds of agencies within the holding company, and they each have sort of a unique value proposition for their clients. My day job is kind of three things. I talk to the world about commerce and let the world know that the agencies within the Publicis group are very good at commerce. I talk to all the employees within the Publicis group about the best practices and evolving trends in commerce and try to upskill them and help them get the resources they need to be commerce experts and help their clients. And then I spend about a third of my time working directly with clients.
And so the biggest client I work with is Walmart. And we, you know, do a wide variety of things from thinking about the kinds of changes in the industry that might disrupt them to thinking about new ways that they could be more successful with some of their important initiatives to thinking how they can best reach the 240 million households in the US and you know, help them save money and live better. So stuff like that for different clients, the scope of the problems I tackle might be slightly different. But it’s fun, because it’s different every day.
Jake:
You mentioned that you were born into a period of massive change in retail. So clearly, we’ve been going through another one of those. Since the outbreak of COVID 19 in early 2020, what categories of commerce have seen the most change in that time, would you say?
Jason:
So specifically, because of COVID, the categories that I think have been most disrupted or most accelerated are the grocery industry, the automotive industry, and maybe the restaurant industry. The way I think about it, I think people tend to like to pick their own bananas, people like to test drive their own cars. And so those categories were less impacted by digital. And so then when this pandemic came, and it dramatically accelerated how we had to use digital for commerce, the categories that tended to disrupt the most were those categories that were the least digitally penetrated before the pandemic. So the book industry didn’t change dramatically because of the pandemic, but grocery sure did.
Jake:
That’s really interesting, you specifically use the word disrupted, that these three categories are the ones that are the most disrupted. But I expect that disruption isn’t always a bad thing, that there are some categories that are better off today than they were before. And other categories that have struggled much more so maybe. Could you touch on that for a moment, what categories of commerce have struggled the most since early 2020?
Jason:
There are categories that had a particularly rough time because of the pandemic. And in some cases, those were categories that were already having a rough time. And so that sort of accelerated the roughness, if you will. So if you think of apparel, for example, there was a time when apparel was one of the most robust components of consumer spending. And over the last 30 years, we’ve gotten a lot better at making high quality cheap clothes. And so one of the impacts of that is the amount of money that we all spend on our closet is vastly less, it’s about 50% of what we spent in 1990, for the same clothes, and so that apparel industry was already sort of waning because of those dynamics and clothes getting better and cheaper. And then the pandemic happens and you know, a lot of the reasons we buy clothes are for occasions, and all of those occasions were off the board. And so you take a category that’s already declining, and then you really take away a lot of the use cases for it. And it was a pretty challenging time to be in the apparel business.
Sort of unfortunately, apparel also, if you think about the dominant formats, tended to sell through brick and mortar stores that were located in malls. And aside from people’s lack of interest in apparel, people also had a distinct lack of interest in visiting moms, like traffic to them was declining before the pandemic and of course, they were closed for the pandemic. So sort of a perfect storm of badness for the apparel industry, if you are a gas station, it was not very much fun, because people were not driving to work. And so we sold a heck of a lot less gas. And then the restaurant industry really took a gut punch, they kind of competed 50/50 with grocery stores for share of stomach with American consumers.
Before the pandemic and during the pandemic, their share dropped from 50% to about 30%. They lost billions of dollars a month in sales. And even worse, the sales they did get, that 30% of the stomach share they saved, it was all off prem consumption. So it was meals that were delivered to people’s homes to be consumed in their home. And the unit economics for the restaurant were super unfavorable; they weren’t able to sell the high margin add ons like dessert and alcohol. And in most cases, the restaurants weren’t very good at taking digital orders. So they outsourced that digital experience to a marketplace like DoorDash or UberEats. And they took a pretty healthy chunk of the margin. So it was a very challenging time to be in the restaurant business.
Jake:
So you mentioned three categories that have really struggled, can you share some examples of how you and Publicis are helping some of these clients get through or get moving again?
Jason:
Oh, yeah, for sure. There’s a wide variety of examples. But certainly, I mentioned Walmart being my big client, the way people shop for groceries dramatically changed. They wanted to order groceries online. And increasingly, they wanted to pick them up curbside and so a lot of plans that we had already in helping Walmart to work on were things that Walmart vastly accelerated during the pandemic. And so you saw commercials promoting curbside pickup and you saw the merger at Walmart of what we call the blue and the gold apps. They used to have one mobile app for general merchandise and one mobile app for grocery shopping and we merged those two apps so you could get the whole assortment of Walmart’s products.
We substantially improved the customer experience for booking delivery windows and you know, rolled out a whole new suite of amenities to cater to that busy mom who is now ordering groceries online. Restaurants like McDonald’s and Starbucks, you know went from a focus to getting customers on premises to eat meals to really leveraging the drive thru. And we helped those clients dramatically enhance their digital experiences at the drive thru. So suggestive selling and personalized product recommendations and mobile order ahead, reconfiguring the drive thru from a drive up experience to an order and advanced experience and things like that.
Jake:
I want to know more about grocery commerce, the everyday stuff that sustains us and why it’s still the stuff of real world shopping. There are a million places we can take this conversation and Jason could easily go to any one of them. But for this discussion, I’m focused on five. I want to talk about the problem. Understand what’s changing about the consumer experience, get into solutions and innovative ideas, discuss the hurdles that stand in the way of their adoption, and find out what we’re learning as grocery shopping evolves. Let’s get into more detail about grocery specifically. Why is grocery lag so far behind and moving to digital, and has it been the companies or the consumers that have lagged behind?
Jason:
Well, it’s a little bit of a chicken and egg problem, I would say it’s a little bit of both, there was less obvious demand for digital grocery. And so the grocers invested less in digital. If you think about a category that’s wildly digital, like consumer electronics, and there was a big financial incentive for Best Buy to get very good at delivering televisions to your home and Amazon to deliver televisions to your home. In the grocery industry, things are a lot more complicated. The items we sell are perishable, right? Which adds huge complication to the E-commerce site. Like you can take a Samsung TV and you can put it on your website, and you can have 1000 of that TV in a fulfillment center and ship them out whenever you get an order.
But in many cases that produce for each door of a national grocery chain come from a different farm. And the assortment of produce that’s available is very localized to that store, retailers find it hard enough to keep an accurate inventory of those televisions, it’s really hard to keep an accurate inventory of those bananas in the store. And so most grocers have to deliver orders from the store to the consumer instead of from a fulfillment center to the consumer. So imagine that at the same time, you’re trying to build a website and show your warehouse’s inventory, there’s a bunch of customers running around your warehouse taking the inventory, right? That’s what a traditional grocery store is. And so it’s very hard. And since it takes time to pick that order, and we have to deliver it at a specific time. I can’t just show you my inventory and say alright, if you buy a TV, I’m going to decrement my available the promise TVs by one. I have to guess what my inventory of beef is going to be four hours from now when I go to pick your order, right?
And so it’s much more complicated, I’m likely gonna have to do a point to point delivery instead of a route, I’ve got this super dynamic perishable inventory. And then I have a lot of products that people have been habitualized for their whole life, they should share it for themselves. So people think, you know, they’re experts at picking melons, right? And so you don’t necessarily want someone else picking your melons, you know, you might be shopping for bananas, you’re gonna use three days from now. So you might want green bananas, someone else is shopping for bananas, they’re gonna eat today. And so they want yellow bananas. Because of all these inventory problems, the substitution becomes really tricky. If I don’t have the conventional green bananas you want. Do you want organic green bananas? Or do you want conventional yellow bananas, right? And on and on and on.
And so it is just harder to sell groceries online than it is apparel or books and music. And so that caused adoption to be a little slower, and that caused retailers to invest in it less. And then I would also just argue it’s one of the lower margin categories, right? And so there’s just less room for mistakes than there is a higher margin category.
Jake:
Really interesting. So it sounds like consumers are slow to adapt because they’re used to the way it’s been so many prefer to choose the groceries they buy, particularly things like produce. And many of the companies are slow to evolve because the products themselves are perishable and harder to manage in a digital environment. But if I’m extrapolating correctly, there might be an additional third player here that’s holding grocery back, the technology. Some key capabilities haven’t been there to support it because when you decide to do grocery digitally, you have to be able to better predict what’s gonna be available in inventory in the next several hours? That sounds like a technical solution that may not have been available at scale several years ago, but maybe available today. Does that sound right?
Jason:
I think that’s totally fair. Certainly like the technology enables you to give a better experience today. And even what might have been available four years ago was much more expensive to deliver than it is today. So again, you know, because of the margin constraints, like being able to spend an unlimited amount of money to solve a customer experience problem doesn’t fit.
Jake:
That’s awesome. So is grocery still lagging?
Jason:
Well, it actually still is lagging the whole market. So if you look at all retail sales, about 16% of all retail sales is digital. And most people are surprised by how low that number is. And you know, I have to remind people that there are big swaths of consumer spending that have very little ecommerce, right? So the biggest chunk of consumer spending is on new cars. Until the pandemic, very few cars were sold online, for example, they were mostly sold through dealerships. Gasoline is a big, you know, chunk of consumer spending. And still, except for a few outliers, you generally can’t order gasoline online. And grocery was a big chunk of consumer spending that you couldn’t order online. So if you take some of those inconvenient categories out, that 16% becomes like 30% ,25 to 30%, depending on how you want to define retail. But if you take that lowest number, 16%, grocery went from about 2% of all sales being online before the pandemic to about 10% of all grocery sales being online.
So accelerated dramatically. Digital grocery is five times as large as it was before the pandemic. But 10% penetration is still a lot lower than the industry average of 16%. And certainly categories like apparel, and consumer electronics are now 50% online. So from that frame, grocery still is very early innings.
Jake:
Let’s talk for a moment about the consumer experience of buying groceries online versus in the physical world. We know that consumers are used to the physical world and that was one of the things that held them back. But when they do go through the digital world, are there certain things that they miss out on that are just not the same in E-commerce or just not as good an experience as in physical grocery shopping? Not just because we’re used to it, but because of actual benefits.
Jason:
Yes, there are things that are better. And there are things that are worse, certainly. But there are a lot of categories where the consumer is judging quality in the store. And then you know, purchasing that product, right? And so you pick the particular bunch of bananas you want. And you probably have a bunch of complicated criteria for picking those bananas that you might not even be able to very easily articulate. But randomly having someone else pick those bananas doesn’t feel super appealing. Often you go to the store looking for inspiration, you don’t know what you’re going to make for dinner, but you’ll see something in the butcher counter that gets you excited.
There’s a lot of products in grocery stores that people generally don’t plan to purchase, right? So there are unplanned impulse buys, not very many people put chewing gum on their shopping list. A lot of people avoid unhealthy dessert foods on their shopping list. And yet, when they push that cart through the ice cream aisle, the ice cream catches their fancy and they put it in there. One of the most profitable parts of the physical grocery store is that cash wrap, you know, these days, there’s very often a cooler at that cash wrap. And you can buy a cold can of Coca Cola to drink on your way home from the grocery store. And that’s a high margin add on sales that you know was never on anyone’s shopping list.
And so when you think about digital, the ability to pick these products becomes much harder. The ability to find inspiration becomes much harder, the ability to drive, you know, serendipitous discovery and unplanned purchases becomes harder. There are little things but like most ecommerce sites show you a picture of the package, right? And that package was designed to sit on the shelf in a store. So you think about Dove soap, right? Dove soap comes in an eight ounce bottle and a 16 ounce bottle. But guess what happens when you put the pictures of both of those bottles right next to them at the same height on a website? They look identical, right? And so suddenly, all of these attributes of the product that were printed on the box are not legible when someone’s looking at that product is a tiny little thumbnail on their mobile phone. And so sometimes getting those attributes about products that will help you make a purchase decision are much harder on an ecommerce experience or at least a first generation ecommerce experience.
Jake:
That’s interesting. So does that mean that consumers are less likely to choose new products and try new things online?
Jason:
The number one lead source for a lot of brands is called saw in store. You saw it in the store next to the brand that you’re used to buying is generally how you would find out that oreo now has green tea oreos, right? They were right next to the classic oreos. And so when you type Starbucks Coffee into Target’s website, you don’t see any other copies like you go right to the Starbucks coffee and if you have a list with your favorite oreos on it, you never see the green tea oreos, right? Because you know you’re only being exposed to that spearfishing experience right into the skews you’re used to. So for those reasons, unplanned purchases and product switching tends to be less online.
Now, interestingly, as the E-commerce experiences get better, there are sometimes more attributes to help you make a purchase on a website than there are in a store. So there’s one thing that we tend to have on websites that we very rarely have in the store is social proof, ratings and reviews, right? And that turns out to be one of the most influential things to help people make a purchase decision. So it’s absolutely true. If you’re able to find a new product you’ve never bought before and you’re trying to purchase it, I would argue it’s sometimes easier to decide to purchase it online, because of the amount of information you can get.
In a store, some products might be labelled gluten free, but they’re not assorted by gluten free products. And there’s no official, you know, location on the box for that gluten free logo. So you have to kind of go on a treasure hunt to find a gluten free product. But on an E commerce site, you can generally do a filter to only see gluten free products, right? So you can kind of re merchandise the store to meet your specific dietary requirements. So there are advantages. And there are disadvantages, but it definitely is a different shopping experience than what most of us grew up with.
Jake:
We’ve talked about this difference where in online grocery shopping, you don’t discover new things as much. Shoppers make fewer impulse purchases, what have grocery retailers done to overcome that to make up for it?
Jason:
You know, across all ecommerce, I want to say the average number of items in an order is 1.6 items. The average number of items in a grocery order is somewhere between 60 and 120 items, depending on the grocer. All of the usability and what we would call user affordance of shopping is wildly different when you’re trying to help a consumer build a cart with 120 items than when you’re trying to have a consumer put one item in a cart and give you their money. There are learnings we can take from the apparel industry or other flavors of E-commerce. But there are a lot of things that we have to do very differently because of that distinction.
Jake:
So it sounds to me that maybe we could bring two ideas together. Number one, we talked earlier about the technology gap in grocery going online because the margins are small and the technology was expensive. But there have been these innovations whereby the technology is now affordable to the point where you can try these things and experiment and find ways to make it work even with the tight margins in grocery. And number two, we talked about how there’s been this development in the consumer experience of online grocery where retailers have figured out an experience that works for them that doesn’t necessarily work in other verticals. But both of those I think are kind of the same thing. Because we’re basically talking about AI based upsell capabilities inserted into the checkout flow.
Jason:
I would totally agree.
Jake:
Yeah, it sounds like the problem is that one of the most profitable areas of the grocery store is that impulse purchase, that exploration and realization of what you’re going to make for dinner tonight, the discovery of a new product or flavor of Starbucks Coffee. Up until now the industry hasn’t had the ability to do that for grocery online. But now the super efficient cloud based AI powered recommendation engines of today allow for sliding into that margin within the grocery experience. Would you add anything to that?
Jason:
No. I mean, I think that construct makes general sense, I might slightly expand the problem. It’s kind of twofold. There’s things that someone didn’t think to buy, and we want to help them discover and add to cart. But also because that inventory is so dynamic, we often run out of the item the customer wanted between the time she paid for it, and the time it gets delivered. So we both have kind of proactive and reactive substitution, right? Reactive. Shoot, we didn’t have the banana she ordered what should we do? And proactive Oh, she didn’t order bananas. But she has a high propensity to want bananas, let me find the best way to remind her to maybe add some bananas to that order.
So I would bring the problem slightly broader as needing that state of the art AI but also needing a lot better first party customer data. Because the other half of this equation is the answer probably is different for you than it is for me than it is for another shopper. And so the more I can learn about each of us and our unique preferences, the better I can train that AI to recommend products that are likely to be more successful.
Jake:
So then we’re back to the chicken or the egg where the more people do online grocery shopping, the better the online grocery shopping gets. And as a result, the more people want to do it.
Jason:
Yeah, and that is another paradox of this. I mentioned groceries like pretty low margin. And there’s actually extra expenses and digital grocery that make it even lower margin because we have to do all the labor to pick the item off the shelf and we have to provide the labor to deliver it to the home. So it’s a more expensive sale.
Often customers aren’t willing to pay more. But the flip side is that’s on an individual visit, but on average, most consumers use six different stores to fulfill all of their grocery and pantry needs. And one of the changes in digital grocery is an individual retailer can win a bigger total share of the consumer’s wallet over time. And so while each individual transaction might not look as profitable, it actually is possible to win more profitable customers and have higher lifetime value by getting a greater share of that customers total spent.
Jake:
So let’s talk a little bit more about this technology to either reactively or proactively recommend other things to people based on what they’ve said they’re interested in. Have you personally worked on implementing these kinds of technologies into their consumer experiences?
Jason:
Oh, yeah, quite a few. You know, we’ve got to work on digital grocery for Tesco, which is one of the top two grocers in the UK for quite a while back in the mid 2000s. We held one of the very first digital grocers in New York City called Fresh Direct now owned by a whole develop their kind of first and second generation digital grocery experiences. You know, today we work with Kroger on their clicking collect capability, we work with all the I mentioned, you know that I personally spent an awful lot of time with Walmart. I guess at this point, I’ve probably touched the vast majority of digital grocery experiences in the United States. So if you’ve ever had a really bad experience buying bananas, I’d like to apologize.
Jake:
I thought you’re gonna say if you had a bad experience buying bananas. Well, that’s the one I didn’t work on.
Jason:
Yeah, it was probably my fault. No, I mean like, I’ll be honest, even the experience, I would point you and say this is the best right now. This is the furthest ahead, you know, 20 years from now we’re gonna look back on it and laugh because again, big picture. We’re still in the first inning. We’re still like figuring out the roughest versions of this, like, we’re not even to the Model T of this is a car, right? So future generations will probably laugh at how rudimentary these experiences are today.
Jason:
When you’re bringing new ideas like these to market I imagine you run into people that say it won’t work. What’s the process of getting past that hurdle? That people hurdle?
Jason:
Oh, yeah. I mean, it’s human nature, right? Like, we all have innovator’s dilemma. We all are familiar with the old model. And every time something new comes up, there’s a bunch of good reasons why the new thing isn’t gonna work, right? And so I’ve been doing this digital commerce for about 30 years, I started my retail career at Blockbuster Entertainment. And one of my first assignment was to digitally deliver videos to people’s home, which at the time was a wildly stupid idea, because guess what you can do over the state of the art internet in 1994, deliver a movie over a 2400 baud modem. So that was a legitimate good reason why people aren’t going to download movies, right? And so you know, you could make the argument. Gosh, Blockbuster should invest in digging more holes to open more stores. Today, you may notice you haven’t been to a video rental store in quite a while, right? And you’re probably watching most of your movies on Disney plus and Netflix.
There’s always a good reason not to do it. And having had a front row seat to a lot of this digital commerce. I’ve sat in board meetings with the CEO of huge consumer electronics retailers that would said, no one’s ever gonna buy a TV without coming in the store and looking at it first, right? Today, more than half of all TVs are are purchased online. You know, I sat in a meeting with a now retired CEO of William Sonoma. Jason, no one’s ever gonna want to buy table top online. It’s a very personal experience. Of course, William Sonoma today is more than 50% online retailer.
Countless apparel companies. No one’s ever gonna buy clothes without feeling it. Luxury brands are invented in the dressing room, not on the website, every category I’ve ever come to makes all these arguments why digital works for those other categories. But my category is different, right? And so today, go talk to any big automotive brand. No one’s ever gonna buy a car without test driving it. You may be familiar with a brand called Tesla, right? And the majority of Tesla’s are sold without a test drive, you know, via a website. And at one point, you know, until Elon Musk discovered that he had a bunch of leases he couldn’t get out of he tried to close all these dealerships, because he didn’t find that they were adding particular value.
So I feel like there’s always this resistance. And sometimes part of that resistance is legitimate, like there is some challenge that needs to be overcome to make it work. And it does take time for customers to adopt new behaviors. And so you know, to the extent that doing something digital is different than doing it in the traditional way. It was pretty absurd. When Uber pitched like instead of taxis, we’re going to have you call a stranger and just get in their car to go for a ride, right? And like there are multiple good reasons why that would never work. And there are multiple good reasons why you would never rent a stranger’s house instead of a hotel, right? But today Ubers wiped out the taxi industry and Airbnb has wiped out the hotel industry. In the short term, consumers are very reticent. But in the long term, these things happen very fast.
Jake:
It’s like the bug can become a feature sometimes.
Jason:
Absolutely, for sure, there are things and grocery is a perfect example. I want to pick my own melons. And so online, I can’t pick my own melon. So that’s a good reason to go to the store and pick my own produce. I mentioned most of these groceries are first generation experiences. FreshDirect has been doing digital grocery for over a decade. And so you know what they do, they have a professional melon taster get up at 4am every day and taste that day’s melons, right? And you know what he is, he’s a chemist, and he has a glucose test. And he measures the sugar content of the melon, and he cuts melons open and tastes them and tests them. And he puts all this quantitative data on the website about the quality of the melons that day.
And so once you bought a melon from this expert, right? Who has a degree and dedicated his life to picking melons, you realize, yeah, the 15 minutes of training I got from my mom when I was 16 years old, on how to pick a melon like, isn’t that sufficient? Right? So I went from not wanting to shop for melons online because it was an inferior experience to oh my god, I get way better data. They don’t let me cut the melon open in the store and taste it. But FreshDirect tells me exactly what it’s going to taste like. And so I think that’s absolutely something that happens.
Jake:
I’m thinking about that online grocery shopping experience where there’s less cart abandonment, and you can upsell more. How do you think the industry came to the realization that online grocery shopping was totally different from other categories of online shopping? That for grocery alone this model works?
Jason:
I would say, as an industry, I think we’re still coming to that realization, right? Like I think there’s a lot of learnings in digital grocery, but they’re not very evenly distributed right now, right? So there are grocers that have invested a lot in digital and are learning a lot. And I would argue, you know, there are different learning cultures, right? And so there are cultures that use intuition and word of mouth a lot to make decisions. And that becomes hard to form an opinion about something new. And then there are data driven organizations, right? And so some of these grocers have launched a lot of digital experiences, and they measured them and they let customers tell them how they want to shop and what works and what doesn’t work.
And so I would argue that those data driven retailers are learning very quickly and evolving their shopping experiences very quickly. But there’s still a lot of legacy grocers, maybe they offer a website, they probably outsourced it to Instacart because they couldn’t be bothered to build one themselves. And they’re skeptical about this whole thing and just waiting for the pandemic to end so that customers will come back to their store, which is, of course, a false premise.
Jake:
Jason, this is great stuff. Before we wrap I’ve got a few questions that are a little more rapid fire. Want to do the Fast Five?
Jason:
Yeah. Hit me!
Jake:
Do you think advertising is an innovative industry?
Jason:
Historically, no, or not reasonably. I think there’s some forced innovation occurring right now. I think for the last several decades, we’ve had this kind of one mini model. And it’s, you know, just been the person with the most money could buy the biggest audience and get these outsized returns, it was a matter of coming up with one clever message to reach everyone. It didn’t require, frankly, a ton of innovation. Today, that doesn’t work, the audience is totally gone. It’s totally fragmented, you got to figure out how to reach all these, these micro audiences. And the message that’s going to be relevant to them is wildly different, right?
And so you can look at targeted digital advertising on Facebook and Google and say that was pretty innovative. And it only worked for five or six years before it broke and privacy changes are forcing it to evolve again. And so in the moment, we’re in the middle of like a pretty innovative period where it’s rapidly evolving.
Jake:
So how much of your personal grocery shopping do you think you do online versus locally? You mentioned, it’s about 10% online in the general population, what about for you?
Jason:
For us, it’s probably more like 60-40 digital, we’re lucky to have some significant means and live in an urban environment. So we have a lot of advantages to order things digital, and so the convenience sort of outweighs the value proposition of in store, but they’re absolutely shopping occasions for groceries where we still prefer to go to a physical store. So almost certainly the vast majority of all shopping decisions are irrational. And I know this very well. So I hesitate in any way say no, no, no, my shopping is rational. I still have a strong desire for unplanned purchases. Like sometimes I just want to go to the store and see what inspires me.
Jake:
Do you go to the local grocery store? Or do you drive further to go to your favorite?
Jason:
A significant component to my selection of stores has to do with work and wanting to see what’s new and what’s different. And so frankly, I tend to drive further and visit more independent retailers because there could be something going on there that I haven’t seen yet. And so I tend to try new things more. And you know, I’m likely to drive to more distant suburbs sometimes to just get a different experience.
Jake:
That’s cool. What do you think is the single most significant behavioral shift you’ve seen amongst shoppers in the last year or two?
Jason:
Yeah, I mean, it sounds trite. But digital first shopping that like, even if you want to go to the store, you’re now much more likely to use your phone as some portion of that shopping experience to find out, you know, if the store is open, or to decide which store to go to, or to read those ratings and reviews on your phone while you’re in the store. And so I fundamentally think that digitally enabled shopping experience is the most important highest level change that we’re facing right now when shopping.
Jake:
Okay, last question. Do you ever just visit a retail store and watch how people shop?
Jason:
All the time, one of the tricky things is we have all these cognitive biases that kick in that help us shop. We’ve learned how to shop for our entire life. And so you actually can’t do a very good job of observing shopping experiences while you’re experiencing shopping experiences, right? Because your brain is programmed to tune out all these irrelevant facts and acquire the important facts which are helping you select the products and complete your shopping mission. And so to really get insight about how people shop, you have to go to a store without the intention of buying anything or filling your shopping list. You need to go to a retail store as an anthropologist and not as a shopper. And so I in my professional life tried to separate my store visits, which are anthropological visits to a retail environment versus my shopping missions. I spent 10s of 1000s of hours in retail stores just observing how people shop.
Jake:
Wow, that’s probably more time than I spent shopping for everything combined.
Jason:
You know, one of the guys that invented this process of retail anthropology is this guy Paco Underhill, that wrote a book, Gosh, 30 years ago called Why We Buy. And one of the fun things he taught me is when you’re observing a store that’s designed for kids to shop, right? So uh, you know, grocery stores are designed for adults, but they’re also designed for kids, or a toy store or a kid’s apparel store, that the way to observe that store is sitting on a skateboard.
So we literally used to bring skateboards to the store. And we would scoot around the aisles on the skateboard because a store looks very different from a perspective of two and a half feet above the ground than it does five and a half feet above the ground. And so just little insights like that. And often, by watching the shoppers through a camera, instead of being in the store, it kind of takes you out of that shopping mode. And into that research mode.
Jake:
I’m sure there are a lot of brands that are only getting that shelf space two and a half feet above the ground that wish more people would sit on their skateboards and ride through the store.
Jason:
Well for some products for pre sweetened cereals. That’s the premium location. It depends on your product. But like again, if you think about it, you could walk into an average Target store and it looks beautiful, it’s beautifully merchandise and the lighting is all perfect and they have all these graphics on the fixtures to make them look beautiful. And you think like this is an amazing experience. But if I dropped you down to two and a half feet, what you would be seeing is the underside, unfinished underside of a lot of fixtures and dark gloomy corners that are you know where the light is being blocked.
And so like ironically, the stores are designed for the designers, right? In E-commerce, all ecommerce sites are designed by usability people that are working on 32 inch monitors, right? And so whenever I go to a client and say like, you know, show me your digital concepts, they pop open these like beautiful screens. Well, that’s not what people are shopping. They’re shopping on a little phone and they’re using that phone, like at the stop sign at a red light or like in the kitchen while they’re babies crawling towards the poison under the cabinet. Like the context matters so much for the shopping. It’s so funny how often we get the context wrong.
Jake:
I love that description of how physical stores are designed versus a digital store. Digital stores are much easier to do AB testing and figure out by trial and error what the consumer is telling us they want. Whereas physical retail is much trickier to do that. Jason Goldberg, Chief commerce Strategy Officer at Publicis. Thank you so much for your time today. That was great.
Jason:
Thanks so much for having me back. It was great chatting with you.
Jake:
Everything eventually evolves. If it seems like a laggard, it’s likely an opportunity because evolution is coming. And there’s lots to learn from the leaders in other categories along the way. And speaking of leaders, in the next episode of FIVE, we’ll take a look at some of the big innovative ideas springing up behind some of the most recognizable brands on those grocery store shelves. We’ll talk innovation with a wizard of commerce and media at one of the world’s leading packaged foods companies.
I’d like to thank my guest, Jason Goldberg of Publicis, really, it’s always great catching up with Jason. Hey, if you want more of Jason he has his own podcast, The Jason and Scott show. Wouldn’t you know it? You can find out more at retailgeek.com. Hey, and if you like this show, please write us a comment or give us a rating on your favorite podcast listening platform. We’d be super grateful. It helps more people discover the podcast. For now I’m going to grab my skateboard and head off to the grocery store. Thanks for joining us.
The FIVE podcast is presented by Ericsson Emodo and the Emodo Institute and features original music by Dyaphonic and the small town symphonette. Original episode art is by Chris Kosek. Social media and other promotional stuff was composed and conducted by David Roloson. This episode was edited by Justin Newton and produced by Robert Haskitt, Liz Wynemmer, and me. I’m Jake Moskowitz.
