Grocers’ Future Success Requires Strong Core

Grocers’ Future Success Requires Strong Core
Inmar Intelligence’s Spencer Baird spoke with Progressive Grocer about his thoughts on the state of food retailing.

“Transform,” “optimize” and “monetize” are words heard frequently throughout retail. Each takes on increased importance and new meaning in 2021 as innovation accelerates and uncertainty is amplified by pandemic-related factors. Success in such a climate filled with competing priorities requires that retailers have a strong core to move with increased speed, agility and discipline. It’s an appropriate metaphor to begin the new year, and a view held by Spencer Baird, at Winston-Salem, N.C.-based Inmar Intelligence. The veteran CPG executive and former head of merchandising at the Peapod division of Ahold Delhaize USA joined the firm in May 2020 as chief transformation officer and was recently elevated to the role of president to lead marketing technology efforts. He spoke with Progressive Grocer about the state of food retailing.

Progressive Grocer: People know Inmar from its origins 40 years ago as a coupon company, but since 2015, there have been 10 acquisitions, and capabilities have expanded greatly. How do you describe what Inmar Intelligence does today?

Spencer Baird: We are in the outcomes-as-a-service business. People say, “What the heck is that?” Well, you’ve heard of software as a service, right? You put it in place and have a vendor you work with and a call center you call any time that software doesn’t work. That’s insufficient in today’s world, where outcomes are important. So our approach is a combination of humans with expertise, which is the real value of the acquisitions we’ve done. They come in at the same time we’re implementing technology to help customers with stuff that’s either commercially important, or stuff that’s back-office important to help them save the money so it can be reinvested into the commercially important stuff.

PG: Can you break it down for us?

SB: We are focused on two really important categories so that we can be the best partners of our retailers. One is in stuff that you and I as consumers would interact with. The other big category is what we call clerically important stuff, and that is all about driving efficiencies. We do everything from supply-chain returns to supply-chain return insights that we provide to CPGs and retailers  that’s reverse logistics. We have a financial technology business where we’ve handled settlements and all sorts of reconciliation efforts for our clients for years. We’ve just recently announced Inmar Pay. At the point of sale, when someone pays with a credit card, we’re able to tokenize the shopper for the retailer to begin building an identity that we’re able to address programmatically with media, offer incentives and treat them like tribe members, whether they are in a loyalty program or not.

Then, on the other side of the house, what we call commercially important areas, we have everything from our coupon business, to our programmatic offsite media business, to our influencer business and our c-comm business. We do owned and operated e-comm platforms for retail clients. That’s the stuff that kind of has the sizzle.

PG: That’s a lot to digest. What are the common themes that come up across all of those areas when talking to retailers about innovation? 

SB: The biggest theme when I’m talking to c-level executives about digital transformation is to not think about technology first. It plays a role, of course, but the other 98% of the transformation equation is the mindset that’s necessary from the top of an organization down. Because the answer to whether you’re innovative highly correlates with the North Star that you have chosen. If my goal is to sell you more stuff, it’s going to be a pretty predictable path that I’m going to take to get there, and you're going to feel like you are meeting with a used-car salesman. When my North Star is I want to learn as much as possible with you, as a client, and you and I open up every single day, we develop a unique relationship, and innovation will be a byproduct of that.

PG: Speed is top of mind with many people when they think about innovation. How important is it to go fast?

SB: I had a conversation with a major retailer some years ago, and it asserted that it actually needed to go slower as opposed to faster. Doing so would let them get more in-depth behind fewer things in order to be world-class successful. It was a really interesting discussion, and I’ve always taken that same philosophy. It’s no different in my role here at Inmar Intelligence. We are moving fast, but it is a byproduct of the discipline we have in our core and the muscles we have built that leads to more speed and agility.

PG: Retailers are attempting to solve a lot of problems now that will determine their future success, and that success depends on asking the right questions. Are retailers asking themselves the right questions? What questions should they be asking?

SB: The question I typically hear, unfortunately, is “How do I get my monetization as a percentage of my sales to a higher level?” Which, unfortunately, very incorrectly assumes that there’s a very strong correlation between monetization as a percentage and their success as a retailer in terms of improving loyalty. A modern question that needs to be asked is “As an organization, when we’re successful, being the best place to do business and being the best place for our customers to shop, what four or five things has that been the result of?” Question No. 2 is “Where are we in relation to that?” A third question is “From where we are to where we need to be, how do we get there?” These are transformative questions, with answers that correlate highly with outcomes.

PG: If those are the questions, what do retailers do with the answers?

SB: We have a very simple framework that starts with the things that will matter 50 years from now, more than they even do today. No. 1 is how many customers came in the store, visited the site or did we deliver to? No. 2 is how frequently are they doing that? And No. 3 is how much did they spend when they were here. As much as everybody loves to talk about transformation, those same three metrics were important 150 years ago. A change in mindset is also needed. When an organization goes from a mindset of selling things, hoping needs are met, to meeting needs and trusting that they will sell stuff, that is a serious shift.

PG: Let’s shift gears to some real-world practical matters. Here we are, rolling into 2021 with a disrupted pricing and promotion landscape and reduced SKUs and lingering supply-chain challenges that make it hard to promote in certain categories. How should retailers and brands be thinking about pricing and promotions in the first quarter?

SB: It probably sounds counterintuitive, but for those that are on a mission to continuously improve and continuously learn, I don’t think anything changes. If retailers are on a mission to always sharpen, always improve, always learn from what’s working and not working, and do more of the stuff that’s working versus not, I don’t think the world is that different this year.

PG: What are you seeing in your data about how food retailers will be affected by a return to a more normal environment, the likely shift of market share back to foodservice now that vaccines are available?

SB: I’ll start with what I don’t know, and then I’ll go to what I know. We don’t have a forecast on how much goes back to the quick-service channel or the higher levels within foodservice. We do know from our surveys that 93% of shoppers say that the degree to which they’re using online today, whether that’s home delivery or curbside, will either stay the same or go up in the future. That is pretty remarkable and really interesting. It says a couple of things. One is that people still have some uncertainties, and they’re not sure if they want to be around these big crowds. The second is the efforts that retailers have made to make curbside really in lockstep with their in-store experience are really paying off. No. 3 is they are saying, “Now that I’ve tried it, I’m good; it’s my routine now.”

PG: There certainly has been a psychological shift among shoppers.

SB: There’s a trust element. People have grown more comfortable with trusting others to pick fresh products. That was the biggest barrier when I was at Peapod. But once it was overcome, it would lead to 55 to 60 trips a year from a core shopper. It was a matter of convincing shoppers we could pick fresh as well, if not better.

PG: Are you leery of research about stated intentions, because 93% is quite high? People may behave differently, given the opportunity to return to stores without wearing masks and a greater sense of safety.

SB: I had a similar suspicion, because it is really high. My belief is we will be somewhere south of 93% in reality.

PG: If the behavior change toward digital grocery is permanent, that raises a lot of financial challenges.

SB: Retailers have to figure out how to deal with the shift in their P&L. That is the source of a lot of the questions that we get today. For every point of e-commerce penetration, if a retailer is off by 10 seconds in terms of the amount of time it takes to pick one item across the organization, then what is the bottom-line impact? Our answer to that is it can be as high as 1.5 basis points, which is significant and expensive for just one point of e-commerce penetration.

PG: If you look at the volume of transactions and number of items picked, the numbers will get big fast?

SB: They do, and that threatens overall profitability. But it also drives this need to ask, “How do I improve asset turnover and productivity so I can offset the bottom-line issue that I could potentially be incurring?” The uniqueness of our portfolio means we can help retailers attack the top and bottom of the P&L at the same time.

PG: How does a guy who’s been focused on transformation and technology go about discovering innovation in the market?

SB: We have a framework that we use that categorizes products based off of the two most important questions in all of retail that are almost never asked: How much do people care about the stuff you sell, and do they care more or less than they used to?

PG: That sounds like a good place to start when it comes to looking at assortments. What’s the process after that?

SB: We take the overall categories and we break them down into subcategories, because our belief is that in a world that’s highly personalized, one of the biggest issues in the center store is the way things are categorized, because those groupings of UPCs are today loose coalitions of things that used to have a lot in common with one another, but they don’t have as much in common as they used to.

PG: Final thoughts on the state of food retailing and innovation.

SB: It’s a really cool time to be in grocery, and everybody loves to talk about what’s changed. But you have to build your house on a solid foundation that you can trust and be very certain will become more important over the next 50 years. Start your house there -- the other stuff is quicksand. If you think about frequency, basket size and number of shoppers, and you look at this new asset base that is available between in-store, on-site and off-site, there is innovation all over the place available to retailers.

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