82. Shekar and Gary's Predictions for 2023!

Speaker A: Hi, you're listening to the Retail Purge with Shekhar Rahman and Gary Hawkins.

Speaker B: We're going to discuss industry challenges and opportunities in grocery retail, AI current and upcoming trends, and so much more

Speaker A: foreign. Hey, guys, welcome back to another episode of the Retail Perch. And, uh, I know this episode might sound slightly different because I've been kind of trying to get over this sore throat of mine, and, uh, Gary and I have scheduled this episode many times and rescheduled it many more times that we've scheduled it. So, Gary, thanks for your patience. And, um, if I'm sounding different, it is still me. It's still here. Shaker Rahman. And we still have Gary Hawkins here. So, Gary, you want to say quick hi.

Speaker B: So you're sounding much more like yourself, Shaker, than you did a few days ago. So, uh, no, this is great. Welcome, everyone, and good to get back with you.

Speaker A: Yeah, well, today we have something exciting. Uh, we don't have a guest. I can promise you we have a lot of guests scheduled, but this is something that Gary and I have been planning to do for a while. It's about our top five predictions for 2023 for supermarket retail. And, uh, Gary and I have our own separate lists. Some of them agree, some of them don't, but we're going to go through it. And Gary, uh, do we want to do like a 5, 4, 3, 2, 1, or do we want to do like a 1, 2, 3, 4, 5?

Speaker B: Whichever way you want to approach it.

Speaker A: No coming. Given the fact that we're coming up to the new year, people like, counting down. So maybe we count down. Right, let's do that. All right, so, you know, I'm going to assume we did a virtual toss up here, and Gary won the toss, so I'm gonna let Gary go first. But I do want to thank everybody who's been listening to us. We're coming up into our third year of the Retail Purge, and it's been fantastic. We've just had so many amazing guests and topics discussed here and certainly educated me a whole bunch. And hopefully it's done the same for you when you've had some fun listening to it along the way. So here we go. Top 10 from the retail parts.

Speaker B: So top five from each of us.

Speaker A: That's right. Top five for each of us.

Speaker B: All right, so number five on my list, retail, uh, media networks are going to continue to grow. You know, certainly you don't have to look beyond the, uh, daily newsletters you get in your inbox from all the, uh, industry trade publications, retail media Networks are being talked about almost every day and you know, no surprise, right. There's a massive amount of money, uh, going in this direction. Um, I think the latest figures I saw were that uh, brand advertisers were going to spend $40 billion this year on retail media, 50 billion next year in 2023, and 60 billion projected to spend in 2024, year after next. So massive amount of money here.

Speaker A: Hang on, you said 40 billion.

Speaker B: Billion with a B. Yes.

Speaker A: Wow. Wow. And where is this money going, Gary? Going to the ad networks.

Speaker B: Yeah. So you know what really started this? I think the big retailers. And when I say big retailers, you know, Walmart, Amazon, Target, Albertsons, um, you know, noticed what Google and Facebook and Apple were doing with advertising and the amount of revenue they were driving. You know, certainly Amazon has driven a huge amount of advertising across its platform. Right. And I think the light went on a couple of years ago for the big retailers saying, hey, we've got these massive audiences, can uh, we monetize them? And uh, I think one of the triggers of this was the pandemic. And in the pandemic, the growth of E commerce and grocery retails, shoppers being much more digitally engaged. Right. So they're fronting it, sitting in front, front of their digital screen. Let's get an ad in front of them. And you know, we've seen Walmart expend, uh, vast resources building out their media network. Uh, I think I saw they were Projected to generate 2 and a half billion dollars a year or uh, revenue in 2022 this year. Kroger interestingly does not release their numbers, but of any of the big retailers, they were probably best positioned to do this because of the amount of data they had on their shoppers. And Kroger has Data on what, 60 million US households in its database. Right. So being able to leverage all that shopper data, purchase history along with digital advertising, you know, is a, uh, very, uh, persuasive to the brands.

Speaker A: Yeah. Wow. And I, and I also have seen trends where a lot of these retailers are taking retail, uh, media networks in house as opposed to going to third party providers of the service. Right.

Speaker B: Yes. And you know, I, I think this is going to be an interesting trend to watch. Right. Because obviously it takes some scale to do this, to truly access those budgets on the brand side and not just, you know, repurposed trade promotion or shopper marketing dollars, but it also takes resources in the sense of having the systems and, and the capabilities to do this. So I, I think there's certain at which, you know, retailer wise, it doesn't make sense to do this. So there's a place for third parties. But the challenge is, you know, the more parties you get involved, the more that revenue gets split up, the less there is at the end of the day.

Speaker A: Right? Yeah. Well, terrific. I mean given the fact that we've spent uh, six minutes on the first of the top five, I feel this is going to be a long episode.

Speaker B: Well, there's some good stuff here to talk about.

Speaker A: Oh absolutely, absolutely. I think it's, it's very interesting and time's gonna fly by here. So my number five is in store. Retail media networks are the next big thing. And I think uh, what we've noticed um, here is post pandemic, is that, you know, E Commerce volumes have kind of plateaued out a little bit. And I think um, also retailers are struggling to figure out how to make it profitable. So I think there's a lot of push to get people back into the stores. And of course I think given the economic climate, people feel they have a better shot at saving money if they walk through the store themselves and figure out savings. And I think so you're going to get more eyeballs in the store. And I know that when I walked into a Walmart last, they have screens all over the place where they're starting to uh, attract money from CPGs to connect with shoppers in the store. And I think this is a pretty open field right now. Uh, I think a lot of people are eyeing it. Obviously there's infrastructure involved. Yeah. As opposed to a website where you just display an ad here you actually got to put up hardware. But I think this is a place where retailers may uh, look at connecting brands to their shoppers within a controlled environment which drives purchases within their own stores.

Speaker B: Yes, yeah, no, absolutely. You know, and retailers, grocery retailers are well positioned to do this. Right. You know that they've got frequency of, of shopping. They ah, actually have a good number of digital touch points between websites and apps and email and text and social media. You know, some have screens in the store, uh, receipts, uh, etc.

Speaker A: Yeah, yeah. So, so I think in general, I think what we're agreeing on, Gary, is that see brands want newer, innovative ways of connecting with shoppers because nobody is watching TV anymore. Those ads on TV aren't getting as many eyeballs or impact as much and they're looking for other channels to do it.

Speaker B: Yeah. And just to uh, you know, maybe close this one out. The other appeal here for the brands is, you know, at least the big retailers, Walmart, Kroger, Amazon, etc are able to provide full attribution. Right. So they can tell the brand, hey, you, you know, we displayed this m many ads, this many shoppers clicked on it of them. These shoppers went into the store and these actually made a purchase of your brand. So for really the first time at scale, brand manufacturers or advertisers can truly understand and measure the effectiveness of their advertising.

Speaker A: Right, right. All the way down to Lyft, right?

Speaker B: Yes, absolutely.

Speaker A: Exactly.

Speaker B: Yeah.

Speaker A: Terrific. All right, Gary, what's on number four?

Speaker B: All right, so my number four is around, uh, fintech disruption. I, uh, think we are going to see blockchain. You know, the current sort of crypto mess aside, we're going to see blockchain as a technology begin to really transform, uh, a number of areas here. Uh, digital coupons, uh, loyalty rewards. We're going to see blockchain serving to help retailers develop new financial services and new marketing capabilities.

Speaker A: Yeah, I mean, I see that's inevitable. You know, at some point there was just so much inefficiency in the marketplace about how these things are processed. The number of touch points that exist before a coupon goes from a brand back to a consumer, back to the brand. Yeah, Uh, I think it's just ripe for disruption. Obviously, blockchains prime positioned to influence that. Right?

Speaker B: Yes. Yeah. And I think one of the things for our listeners here is, you know, I, as I talk to, uh, you know, people across the industry that they seems to be, you know, if not confusion, but, you know, when people hear blockchain, they sort of immediately think cryptocurrency. And I think it's important when thinking about the space to really separate those two things. Uh, yes, cryptocurrency certainly is tied to blockchain and that it's blockchain technology that enables it. But blockchain tech itself can be used for a lot of different things.

Speaker A: Right, right. Given all the current conversations around FTX and SPF and all these abbreviations that seem to create a lot of confusion and lost a lot of people money. So, uh, yeah, blockchain is different. So these are tied to more things like smart contracts and being able to, uh, impact traceability, auditability off data. Uh, you know, and honestly, I think, you know, this common ledger approach is a simpler way and a more efficient way of executing some of these programs. Right?

Speaker B: Yep, absolutely.

Speaker A: All right, so my number four is if Gary's is high tech, mine is completely low tech. So, um, I think that hot foods and meal kits Are, you know, exciting. I think they're, we've already seen there was some of the fastest growing categories for supermarkets. And I think more and more people, as they get busy and as they discovered during the pandemic that I like cooking at home, but I don't necessarily want to start from scratch with everything. I, uh, think there's a growing, I think you can see out there on the Internet, there's just a growing number of services, whether it's Freshly or Blue Apron or, you know, these meal kit services, which are a real threat to grocery companies in certain, um, you know, demographics. Right. And, uh, so I think grocery companies are going to have to come up with services which address some of that because they're actually taking away business from grocery stores. Yeah. And I see that, uh, a lot of retailers we talk to, their hot food section is gaining more and more popularity. People come in more to eat those foods and uh, it's ready to eat. It's, it's, it's a price you can't beat. Definitely better than restaurant. And you have, I think, a certain number of amount of trust with your local grocery store where you think the quality is dependable.

Speaker B: Yes. Yeah, so, so I agree with you. I think, you know, certainly hot prepared foods has been growing, you know, for some time, but, you know, going to continue that path. What I find interesting about the meal kit approach is the ability to think about customizing that meal kit, uh, right. To the household or that shopper based upon, you know, food allergies, based upon lifestyle preferences. You know, I'm vegan, uh, or I'm, um, on a keto diet or that type thing. I think that's where the meal kits ultimately really become a powerful, uh, value proposition.

Speaker A: So Gary, here's an idea. What about a customizable meal kit? You know, kind of like you have a Subway, you have a choice of 500 menus that you choose from and you say, I want, I want a meal kit for this menu, this recipe item. And the retailer's got a assembly line of ingredients. They can put together stuff in a box and give it to you and you take it all, as opposed to a cooked, cooked thing, you know. You know, and you can certainly think of having a thousand recipes there. You can obviously cook them, but you can have the ingredients necessary to sell to people. Right?

Speaker B: Yeah, yeah. Because I'd be willing to bet the old 80, 20 rule applies. You know, if you look across a thousand recipes, there's probably 80% common ingredients.

Speaker A: Exactly, exactly. Right.

Speaker B: So, yeah, no, I, uh, Think, you know, that absolutely ties in with a trend, you know, we both see around, you know, the growing importance of diet and everything related to nutrition and you know, people's food allergies, preferences, etc. Meal kits offer a way to customize that and make that personalized.

Speaker A: Exactly, exactly. All right, so what's number three?

Speaker B: All right, number three on my list is uh, computer vision gaining momentum. You know, I think Shaker. You know, this is sort of one of my favorite, uh, areas, uh, that I've been watching for some time. Um, you know the, and what I'm referring to here is the, the Amazon go or Amazon just walk out technology. You know, cameras, sensors across the store and so on. I think this will be the year that this really begins to gain some momentum here in the U.S. interestingly, this space has already gained momentum outside the U.S. market, particularly in Europe. You know, in the UK and Germany, uh, different markets in Europe. You know, there's a growing number of retailers that are in this space now and growing both in terms of numbers of stores, but the size of stores here. Uh, it's really been Amazon that's been driving this. You know, I think their largest deployment now is uh, 40,000 plus square foot whole food store, uh, with computer Vision. So Amazon's aggressively going after this. US Retailers have been much slower to adopt. But I think this will be the year.

Speaker A: Yeah. And I think, and I think there's a format, I'm sure there's somebody who's testing this out there which is maybe not convert the entire store but have a smaller section of the store which is like more immediate needs, high volume stuff that is in a smaller square, you know, footprint which, which is, which is equipped with the just walk out technology.

Speaker B: Yeah, right. So a store within a store type.

Speaker A: Right, Exactly. A store within a store type of approach. You know, so I have a, uh, convenience format within my larger store that you can just walk out. Yeah, yeah, I can see that, you know, banning traction. And I can see the smaller stores becoming popular in urban areas and it being a sub store in a suburban area. Right?

Speaker B: Yes. Yeah, yeah. I mean we're seeing a lot more of this. I've been struck by these growing, uh, number of shops in airports that either have Amazon's just walk out tech or they've got uh, computer assisted, uh, self checkout terminals now. Uh, and I just ran into this at a brick and mortar convenience store. I can't remember just where I was, but traveling somewhere. Maybe it was out skiing, stopped uh, to get gas, went in the store, and they had a countertop computer, uh, vision unit. So you pick up whatever products you want and go to the checkout, set them on in this area, and computer vision would recognize each one. And you just stick your credit card in and off you go.

Speaker A: Wow. Wow. Yeah. So I think, I think this is also maybe the year that Apple comes out with its, with its glasses. It's been talked for a long time, and I think, you know, I think there's one thing about outfitting the store with technology. What if you could outfit the individual and then connect and do a checkout that way? Because the glasses recognizes everything and scans everything into an app and you can.

Speaker B: Yes.

Speaker A: You're able to check out. Right. So I think there's interesting shifts that could happen here. I think people traditionally have been thinking about, I got out with my store with cameras, but, you know, you don't have to. The individual could be outfitted with all the technology that's needed to scan the stuff out.

Speaker B: Yeah, no, that's right.

Speaker A: All right, so. So number three for me is electronic shelf labels. And I think we've started seeing this. I've. I've been in Best Buys, and they pretty much have ESLs all over the place. I think we've seen and heard from many retailers that they're starting to deploy this in few of their stores. Obviously, cost is a factor, and there are, you know, there isn't return, uh, on investment here, which is a couple of years. But I think more than that, what it really enables is dynamic pricing. Right. Is being able to change prices midday or respond to events, as opposed to requiring labor to go in and change the labels out. It's just the operational overhead that's involved and handling this. And then, you know, competitive pricing. People are always trying to figure out, you know, how do I react to my competition? And I think ESLs give you the. That ability to be nimble on your pricing to the degree that it's helpful to you.

Speaker B: Yeah, so. So I agree with you. I, I think ESLs have hit that tipping point. Uh, you know, we're seeing retailers like Hy Vee that have committed to, you know, rolling these out across, uh, all their stores and absolutely agree also on the support for dynamic pricing. I think where this could get really interesting is our ESL is providing the foundation to support personalized pricing. Right. You know, we're already seeing some of the big retailers, one that begins with a K, uh, you know, provide personalized promotional pricing. Can ESL support communicating that to the shopper?

Speaker A: Yeah. Be Interesting, interesting. I know there's been some, uh, uh, aggregation in the ESL tech industry itself. You know, clearly that that's an indication that it's going mainstream because that means bigger companies are recognizing this is a huge potential and they're trying to buy up competition and become the single biggest player. So I think this is definitely something to watch for. We'd love to hear from you guys. If you are thinking about yourselves, I think every single retailer is seen enough ESLs and they're, it's somewhere percolating in the back of their head. They're just trying to figure out is, you know, is the juice worth the squeeze type of thing? Right. Yeah. Yeah. All right, so coming up, number two.

Speaker B: All right, number two on my list is we're going to see AI everywhere.

Speaker A: Right.

Speaker B: And we're already seeing this. You know, we're seeing AI being brought into, you know, a growing number of existing capabilities, like, you know, associate, uh, scheduling, that type thing and taking, you know, good capabilities, good solutions and making them that much better. Right. By, by weaving AI into it. But where I think this really gets interesting is how AI is enabling a real transformation of different capabilities and areas. You know, we're certainly seeing this in the marketing space. Uh, demand forecasting is another area that is just ripe for AI, uh, and how AI enables, uh, uh, process automation and you know, that is, I think we've talked about on previous episodes, is a really big, big game changer.

Speaker A: Yeah, I know. And I don't know if our listeners have played around with it and like we did on our call the other day with ChatGPT and OpenAI, I mean, the capabilities of what AI can do, um, even from a customer service perspective, or are providing intelligence suggestions to people while they're looking through stuff almost conversational style. It's amazing. I think it's going to impact customer service, customer experience, operational, uh, obviously optimization in the store, whether it is inventory or it's looking at associate scheduling. Uh, I think there's just so many areas that are going to get optimized. And I think, Gary, we talked about this, I think maybe last year in one of our episodes about how the whole labor shortage industry is going to fuel, um, the adoption of AI, um, in supermarkets, in retail in general, because you're forced to now think of ways of performing the same services with fewer people, so you're going to resort to more technology and capabilities to replace that.

Speaker B: That's right. Retailers don't have a choice.

Speaker A: Right.

Speaker B: I mean, it's really AI one of the Key, uh, elements in computer, uh, vision.

Speaker A: Right. And interestingly enough, people used to be afraid of AI, um, replacing people, but it's the other way around. What happened is people have left those positions and AI is filling in the gap in those positions as opposed to replacing people. So it's, it's an interesting. I don't think people saw that coming, so.

Speaker B: Yeah, no, I agree. I also think AI is developing far, far faster than most people realize. Yes. Right.

Speaker A: Yeah. And for those of you who want to know how good AI can be, I suggest you go to beta.OpenAI.com and go check out what this platform can do. It is amazing. It's going to blow your mind. I'm sure you've already heard about it on the Internet. People have been tweeting about it and articles about it, but you can try it out for yourself. It is simply amazing. And it's 2022, folks, so imagine where this is going to be in three years from now. Yeah. All right. And so my number two is, um, I've seen this at a couple of places. Smart carts enhance the in store experience. And I think, and I see that in more and more places. There's, and certainly at shows, I've seen a bunch where you can have carts. That is, you know, what we talked about is this whole, um, in store, just walk out technology. And we're talking about another way of enabling that just walk out technology by having a smarter card. And I think there's definitely cases where that's warranted and there's more controlled environments where a retailer would be willing to invest in a smart card. I'm not sure if you want to be wanted to be left out in the rain or in the snow. Um, but when you have controlled environments, I think there's certainly a case where this could incredibly impact the in store experience.

Speaker B: Yeah. So I agree. I think that, um, you know, smart carts are a viable path and will be a viable path for, you know, certain retailers. Right. You know, maybe smaller retailers don't want to make the significant investment required today to go after a complete computer vision platform. You know, Ann, as you call out, smart carts provide a number of those benefits from, you know, not only helping reduce resources required at the front end, but, you know, providing data on where shoppers are going in the store where they're dwelling. Uh, you know, all that real time data that opens up new ways to really begin to understand and measure brick and mortar store performance. Yeah.

Speaker A: And I think, you know, this technology is going to become commodity. I think it's going to become easier and easier to output existing carts with this technology. You know, it's like, you know, you know, back in the day, remember CCTV cameras used to be unfortunate to have it deployed.

Speaker B: Yeah.

Speaker A: For a couple hundred bucks, you can have six cameras access it anywhere from the Internet, control stuff, open your door, shut your doors. I mean, so I think it's about, ah, volume and it's about adoption. So, you know, I can see retailer, uh, you know, adding 50 bucks to a cart and making it smart. Right. At some point in time. Yes, the costs are going to be high initially, but then that ability is going to, is going to increase over time. And I think you're going to have a, uh, combination of, you know, smart stores in terms of, you know, outfitting them with, with all the vision and carts that kind of augment the entire experience, so. Yep.

Speaker B: No, I agree. Stores are getting smarter.

Speaker A: Yeah. Yep. And so, okay, so I don't have a drum roll, uh, sound effect, but we're gonna add, we're gonna ask our producers to add a drum roll. And this is number one for Gary. So what's number one, Gary?

Speaker B: All right, number one. Something near and dear to my heart for many, many years. I think this coming year is finally going to be the year of the weekly ad transformation. Right. We're going to see maybe not the death of, but absolutely a dramatic transformation in the traditional, uh, mass weekly ad. Um, ah, you know, it's, it's already become digital in a growing number of retailers. But when it's digital, it can become, uh, hyper personalized, it can become strategic, and it can become automated. And I think those are the three key words that retailers need to be focused on when they're thinking about transforming their, you know, traditional printed ad into this new digital world. Uh, it's, you know, how can it become hyper personalized? How can it become strategic? And how can that entire process become automated?

Speaker A: I couldn't agree more. And this is the one thing that Gary and I completely agree on. My number one thing is personalization goes mainstream in supermarket retail. And I think when we think about mainstream, where do you see content most? From a retailer? Right. It's typically the weekly ads, the website. And I think you're going to start seeing personalization appear in all aspects of your interaction with a supermarket retailer. And I think, uh, as we talk to retailers, there's increasing focus and urgency in leveraging their data to improve the experience. And I think people, um, who were traditionalists who thought, oh, you know, I need to not do this maybe are all jumping on the bandwagon. And this is I think the year of the personalization in supermarket retail. There's no question about it. I think there's just so many technologies that now come together to make it so much more woven and integrated experience. And I think people are now finally, uh, they've come to accept that the QR code is part of their life. Uh, it acts as a great bridge between physical and digital. And I think that's going to become a huge vehicle to drive a lot of this content personalization.

Speaker B: No, I agree. I think what's important here is retailers understanding that term personalization because it uh, certainly means something different to every person you talk to from you know, personalizing a mass email just by putting their name on it to you know, let's take the existing weekly ad with a few hundred items and, and personalize that. And here are the, you know, six most relevant things. What I guess really excites me and this goes back, you know, decades in my career, my experience, my life to, you know, really having a true customer focus in retail. It's as a retailer, you know, if I really have that customer focus and I've got 30 or 40,000 items in my store, I really want to be able to provide, hey, here are savings for you. Each individual customer on the 4, 5, 6, however many different things drawn from across the store that are most important to each customer. That in, that represents a sea change, as you well know, in how retail is done in this industry. But we're already beginning to see this happen. Growing number of retailers beginning to move down this path.

Speaker A: Yeah, yeah, yeah. So I mean, I think, I think there's no question about it. I think we're, you know, it's, it's loud and clear. You go to shows and you know, the word that gets used around the most and abused is personalization. And uh, yeah, but I think what it does tell you respective of whether it's used appropriately or abused is that it's on top of people's minds.

Speaker B: Right.

Speaker A: It's both, uh, in terms of solutions that are out there and retailers themselves are thinking about what more can I do. Right. And I spoke to retailers the other day who are like, you know, my, my acquisition and my growth is kind of flat and I'm trying to figure out how to get more of my shoppers to come back to the store more often. And you know, I think they're trying everything they can try traditionally and, but they're just not going a couple of levels below to understand true shopper motivations to drive them. So. Yeah, absolutely. Absolutely. So, guys, that's, that's, that's the top 10. I think maybe wind up being nine, because we, Gary and I agreed on a bunch of things. But, um, I hope this is interesting. I hope you found this fun. We have some terrific guests lined up here in the next couple next few weeks, uh, to close out this air. And again, if you were waiting and wondering why you didn't get the Monday episode of the Retail Purge, I'm sorry for your withdrawal symptoms. But we're back anyway. We're back, and, um, you know, we should be back every week here through the end of the year. But, uh, Gary, anything, any other closing thoughts?

Speaker B: Could be an exciting year ahead, uh, for the world of retail.

Speaker A: Yeah, I agree. Completely agree. And for those of you out there, be safe. I hope you had a terrific Thanksgiving, and we will see you soon in a week's time over now.

Speaker B: Thanks, everyone.

Speaker A: Make sure to join us every Monday and connect with us at the retail perch on Instagram and Facebook.

Speaker B: And if you have any questions, feel free to email us@theredseye.com until next time, this is Shaker, and this is Gary signing off.