Executive Perspective: In Conversation with Sam Wagar
A business-focused tech executive, Sam Wagar has more than 30 years of experience. His passion lies in the optimization of technology architecture and spending, thereby, enabling innovation and efficiency for both business units as well as customers.
Note: This executive perspective series interviews some of the biggest leaders in the Grocery industry to understand their current focus areas, the challenges they are facing, and how they are navigating this fast-changing world of retail. These interviews are conducted live and the transcript has been loosely edited for the sake of clarity and brevity.
Grocery Doppio: We had explosive growth in digital commerce, and then, of course, a bit of regression to the mean now. What are the big challenges that you see in front of grocers as they figure out what’s the new normal or living in this world of constant chaos?
Sam Wagar: Let me answer this in two parts. When we think about the new normal, it feels like it’s normal to always have some pressure on the business and we have to prepare for that.
When it comes to the big challenges, obviously, supply chain issues aren’t going away. With all the global, economic, environmental, and health pressures, it’s like we have to prepare for one crisis after another. There is no let-up. Improving the efficiency of our sourcing, expanding (supply chain) partnerships and deepening relationships with our CPG partners are all important. How do you get better leverage with CPG players and get better allocation without being forgotten? Because the small grocers, compared to the large ones, just aren’t going to be in a leverage position. Maybe some grocers - small ones - will have to aggregate or come together to increase their buying power and influence. You know, so that’s the supply chain side.
On the consumer side. We all seem to talk about tough times but consumers are spending money. We can talk about GDP and inflation, but through all this, consumers continue to spend money and they continue to buy higher-priced brands. They’re experience-driven, and there’s still no shortage of consumers who want a premium or a better experience. So, personally, even though there is pressure to focus on cost and cost or price-based incentives for our customers, I think we have to work on the engagement and the experience side of the equation.
I think that the best grocers in the industry do that very well. For some of them, it’s already there in their DNA, and for others, they’re figuring out technology and marketing programs that kind of exude that. Finally, there is service changing the way they handle and engage with the customer makes a big impact.
We are rebranding our stores, we have very beautiful market32 properties and we have some older, good price-chopper properties. We know that the customer likes the experience in the newer properties. So, that’s capital, we need to have the right capital to invest in the right things. We have to make big investments - remodeling stores, rebranding, etc but also operational investments that improve the customer experience - in-store technology, mobile apps for delivery, and our curbside pickup can help us engage with our customers better. We are constantly looking at ways to improve our customer experience.
Grocery Doppio: What are you seeing in delivery and curbside, is there a plateauing of usage? What levers you are focused on in improving your experience and profitability?
Sam Wagar: Certainly, the boom of eCommerce has kind of worn off. The numbers are steady; they’re growing but not like they were at the heart of COVID. Everyone does home delivery and everyone does curbside. Well, what do you have to do to add more appeal to that? How do you make that more attractive?
Curbside is healthy, it's growing, but delivery is still a bigger portion of the eCommerce mix. Curbside was growing fast during COVID, but then I think it kind of flattened out. I do think that the experience of curbside delivery has to be excellent, you shouldn’t have to park a long way away from the curb to get your delivery, and you shouldn’t have to wait at the curb for too long, and then have to circle around because someone honked their horn at you and you have to move. And, also, I think we have to make curbside pickup a good experience, and I think some retailers and grocers do a very good job at that, but there is potential to improve.
There is no doubt that we need to improve profitability and efficiency in fulfillment and we are trying to do that. There may be different promotions, marketing offers, and incentivizing the eCommerce customer through the digital coupon and digital to drive traffic to the store.
The next big thing for us is a mobile app that is fully digitally engaged and integrated with the store experience - it can allow the checkout-less, frictionless consumer to go in the store and then run out. I think that is still a huge opportunity.
Grocery Doppio: So, is getting the shopper back in the store the big unlock?
Sam Wagar: I don’t think it’s a zero-sum game there. It’s not shifting channels, it’s not always like you are robbing Peter to pay Paul here.
I think supplying a better digital experience in-store will add to our growth, add to our customer satisfaction. And, there are so many technologies that make that happen. You can do it in a kind of narrow way or you can do it in a kind of complete way. And, for us, a complete way would be to allow full scanning. Like we can all scan cans and boxes with our phones, but the problem is random weighted items. So, the product has to be weighed. So, if we put scales that generate labels that can be scanned, then we solve that problem. Because you know the product has a PLU sticker that is hard to scan. Most people have to type it in, etc.
And, then, certainly, if we had product recognition technology on the scales and in our checkout lanes, we help everybody. The product recognition helps our attendants, our associates who are brand new and they’ve been on job for 2 months. And, it helps the customers who are out in the self-checkout lanes, trying to checkout - they need help with identifying the product. And, then it helps those people with the mobile digital apps who are scanning their own product - it helps them and it also happens to help our Instacart shoppers, our eCommerce shoppers because they need help identifying products. So, I think the product recognition tech is one of those “kind of floats a lot of boats.”
Grocery Doppio: Grocers invested a lot in digital during the pandemic, because they had to. Now that we have a foundation there, what will the next wave of investment look like? Where should grocers focus?
Sam Wagar: Yeah, it’s not over. We’re due, I think, many, many grocers are due for a reset. And, you know, borrowing a grocery merchandiser’s term, they reset shelves and we need to reset our internet technology.
So, you know, I have been a little bit passionate about it and we are getting closer and closer to it. I think we are going to be investing in headless commerce, and you know, sometimes people are worried about that because it feels like a “build your own solution”, but it's really not. It is essentially an assembly of components.
There are partners in every part of that last-mile fulfillment, and so, we just have to find the right partners who can do… you know, we already have a mobile app that can take the order… so, we have to find a partner that can put up the website and the catalog and do the shopping cart. And, then, we find someone who can do the facilitation of the end of the lane to stage the products, and then somebody else to flag down the driver - a delivery service. So, it’s all really coming together. And, then, we haven’t even talked about micro-fulfillment.
Grocery Doppio: Yes, we’d talked about this earlier. Is that imminent for grocers?
Sam Wagar: Going back to micro-fulfillment, that’s really a fundamental & a pretty large investment that might compete with grocery banners also. Small and medium grocers will find it challenging because of the significant capital and resources required to set things up. I think it will happen. It's just a matter of the timing and the investment outlay.
Grocery Doppio: How are you thinking of the investment sequence; is it getting the fulfillment pieces of the supply chain fixed first before focusing on new areas?
Sam Wagar: So, I think that they’re not competing efforts if you will. The supply chain is on this side of the house and the retail/selling engagement is on the other side. So, we have organizations within our business that deal with both. They’re not the same, so I think we’re going to keep chasing the supply chain side while making progress on our merchandising and selling.
On the other side, I think that some of the competition for dollars might be eCommerce versus in-store technology, i.e., which one do you pursue? So, I think you’re right that there’s a tension in dollars - where are you spending your capital dollars? But, I don’t think you have to break the bank to take a direction, and I think, to me, I have tried to. Hopefully, others have understood that we don’t have to do a big bang on any of these. You can try smaller experiments but go into it knowing that it’s an experiment and it might be a waste of time and it might not pan out the way you want. So, make a small bet and make multiple small bets.
Grocery Doppio: We’ve not talked about it yet, but what’s your take on how grocers need to get better at using customer data? It is not that it doesn’t exist but the level of usage - it’s used as a report but what about driving more important decisions, more real-time decisions?
Sam Wagar: We do a lot of customer analytics in the traditional sense of what emails should you get, what products you get to see when you visit our website, that kind of stuff. But, real-time is still a challenge. I think the big opportunity here is personalization.
So, real-time personalization is not happening. It's kind of it, maybe, if you’ve identified someone in your loyalty database and you can execute a special coupon or program in the lane when they check out. Maybe, you can think of that as real-time, but it’s not really real-time, it’s kind of traditional marketing or traditional promotions.
Real-time would be, you know, take the mobile app and have location-awareness and when they get close to your location, then you can push something knowing what their potential buying habits are and having permission to do that. Not to bother them or something, but to try to deliver a service. That’s the real key.
But, the in-store tech we’ve just isn’t ready for that. I know there’s a future there, just, I don’t even know if the consumers are ready for real-time marketing. Because there’s a percentage of people who probably would love to be with their mobile apps, walking through the store, and being notified of what the special cheese is that just came in... that wasn’t in the store and they’d no idea that it was there, but it’s there. And, we know that they want. They like cheese/ European cheese. I think that’s a real-time opportunity.
Grocery Doppio: A lot of this tech transformation comes down to talent and people and Grocers are competing for technology talent across industries. What do you need to do to get the best talent?
Sam Wagar: Yeah, that’s tough. I was so surprised when I got into grocery and understood how much technology is at play to sell groceries. So, in my world, I’m excited by technology because there’s so much of it. And, you’ve to understand how to orchestrate so many business processes together to deliver that can of soup into a shopper’s bag. It may seem simple, but it’s very interesting to get there. I think it's one of the more exciting times to be in Grocery as we look to transform our business and increase our investment in technology.
Grocery Doppio: Across the things we have talked about, how can medium or small grocers compete? Do you play in slivers or do you play in certain consumer segments, have a higher-quality private label business, and be known for certain categories, because it’s difficult to go head to head with the large players?
Sam Wagar: So, I don’t think that just because we’re small doesn’t mean we can’t compete.
It’s everything. I mean, we are medium-sized but we still have resources. We still have dedicated teams working on what’s right for this market, what’s right for that market, what’s right for this customer segment, etc. We’re working on our private label and we’re doing a great job, we’re doing better than most in terms of our penetration. And, our rebranding is working very well in our new stores.
We compete very well in our marketing, in our zones. So, to me, it’s more about the buying power. So, yes, maybe, we’re hampered there. When competition comes in, maybe, if they’ve deep pockets, maybe they can make a difference. But, we’ve been very lucky to have loyalty in our areas. So, we do have competition, but certainly, no one really can come in and just wipe us out or push us aside.
So, our recent merger has really helped. So, I have to believe that for smaller companies than us, a merger is, maybe, the way to go. To start competing better you need more resources, Kroger’s, Albertsons’, and Walmart’s will spend more on experimentation than small grocers do on their whole IT budget.
So, you can’t outspend them, yet, the modern world suggests that there are small companies that innovate - quickly, effectively, and frankly, better than the big guys. It’s because tech is available and to me, the secret sauce here is not just sheer buying power, it’s not sheer size. You just have to have the right creative minds and a group of partners willing to invest with you on a small level. Because they’re trying to get their name known as well. And, I think that’s where we can still compete - by finding that secret combination or the correct combination to help us, partner, find innovative tech, and then, bring them to market.
Grocery Doppio: So, pushing the envelope further, what do you think of experimentations? Like, obviously, you can’t do big bang experiments with huge tech, but what are tech/things that you need to be experimenting with even on a small scale?
Sam Wagar: I think we need - to add to your point before - so we’re looking at customer analytics. So, we’re working on some way to track customer traffic in our stores in a better way… not just heat maps, you know I have seen a lot of heat maps that don’t do anything different, they just tell me what we know. So, these types of analytics are more about what is the customer’s journey through the store, what was their dwell time, and define their service area so we can understand the service levels, can potentially understand labor levels that were supporting that hour of need when the customers were queuing and then going away without conversion.
So, I see the store metaphor as a website, and in the past, you couldn’t instrument the store like a website. But, now, you can. It’s just a matter of what’s the right tech, how you consume the data, and what’s the right analytic to put on top of it.
To me, I think that’s a fascinating tech, much like web traffic analysis was in the past, and when you see what your trip to conversion ratio was and what things contributed to it versus what you sold that day, it’s a qualitatively different question. Potentially, a product placement, end caps, promotions, different types of arrangements of your floor plan, and then service levels - which departments were efficient and which weren’t? Which ones were understaffed at critical times, etc?
I think personalization has to be a big part of our journey here because that’s the next step - the in-store experience, the eCommerce experience - everything that we sell has to be more targeted, and I think it really addresses the - at the start of the conversation, we were talking about affluent customers, customers who are willing to pay for a better experience, a better product at a higher price point and they like the services of a concierge-like treatment and are looking for these things. And, if we are not able to offer that, we find a substitute of some kind. All the supply chain things we can do and change the efficiency of the store are important and we still have to work on that but we have to focus on the consumer who is willing to roll out a little more money for a better experience.
Grocery Doppio: We’ve covered a lot of ground today, is there anything else that’s a business priority that I haven’t asked yet?
Sam Wagar: I do think about the whole food safety and food source kind of issues around the sustainability of whether the products are organic, nutritious, etc., and the safety and the compliance around it. We’re moving towards a world where we have to track everything we sell so we need new technology to support it. It's a heavy investment for all of us unless the industry standardizes and it becomes, hopefully, some kind of commodity to help us get all of our food traced and put in a blockchain. And, then, the consumers will benefit because they will know exactly where their food came from and what they’re eating. And, we’ll benefit because we won’t be as susceptible to lawsuits for bad food handling or hurting people. And, so I think the food tracking and traceability will be one of those undercurrent issues that could really be expensive for the industry.