RL - Jan/Feb 2018

Imagining

Retail’s Future One on one with Daniel Alegre, President of Retail and Shopping at

Google.

THE FUTURE OF MEAT DUNNHUMBY’S NEW BUSINESS MODEL BLOCKCHAIN FOR THE SUPPLY CHAIN PEOPLE TO WATCH: 18 LEADERS IN 2018

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Retail Leader JANUARY/FEBRUARY 2018 VOL. 8, NO. 1

6 EDITORIAL

RISE OF THE ANKLE-BITERS. Move faster or be eaten alive by a new breed of competitor swarming at your feet.

8 MERCHANDISING AND MARKETING

RADICAL THINKING REQUIRED. Quotient CEO Mir Aamir wants retailers and CPGs to think bigger.

10 SOCIAL RESPONSIBILITY

THE FUTURE OF MEAT. Plantbased meat alternatives are on the rise, and investors, CPGs and retailers are paying close attention.

12 GROWTH AND BUSINESS DEVELOPMENT

36 TECHNOLOGY AND INNOVATION

ADVERTISING SALES & BUSINESS

WHOLE FOODS SECRET WEAPON. The retailer armed itself with new analytical capabilities by migrating to the cloud five months prior to being acquired by Amazon.

38 SUPPLY CHAIN

BLOCKCHAIN FOR THE SUPPLY CHAIN. Blockchain technology is quickly finding a home in the supply chain world.

AN APPETITE FOR CHANGE. Retailers use of Jujitsu techniques can help them win in five areas influencing the future of food.

Senior Sales Manager Judy Hayes jhayes@ensembleiq.com 925-785-9665 Senior Sales Manager Theresa Kossack tkossack@ensembleiq.com 214.226.6468 Account Executive Matt Kavney mkavney@ensembleiq.com Office 443-203-6379 Cell 202-607-5368

MARKETING

AUDIENCE DEVELOPMENT Director of Audience Development Gail Reboletti greboletti@ensembleiq.com Audience Development Manager Shelly Patton spatton@ensembleiq.com

ART/PRODUCTION Director of Production Kathryn Homenick khomenick@ensembleiq.com Advertising/Production Manager Roz Gilman rgilman@ensembleiq.com Art Director Bill Antkowiak bantkowiak@ensembleiq.com Art Director Regina Loncala rloncala@gmail.com

18 LEADERS TO WATCH IN 2018. A look at 18 individuals influencing the retail industry in unconventional and potentially profound ways.

Subscriber Service/Single-Copy Purchases EnsembleIQ@e-circ.net Reprints, Permissions and Licensing Contact Wright’s Media at ensembleiq@wrightsmedia.com or 877-652-5295

24 COVER STORY

IMAGINING RETAIL’S FUTURE. One on one with Daniel Alegre, President of Retail and Shopping at Google.

Executive Chairman Alan Glass Chief Operating Officer & Chief Brand Officer Rich Rivera Chief Business Development Officer Korry Stagnito President of Enterprise Solutions/ Chief Revenue Officer Ned Bardic President & Executive Director, Path to Purchase Institute Mike McMahon Chief Digital Officer Joel Hughes Chief Human Resources Officer Jennifer Turner

30 HUMAN CAPITAL

WOMEN IN TECH. These are exciting times in the retail and technology world as new opportunities arise for women.

24

RL_0218_2-5_TOC-ga.indd 4

Associate Brand Director Mike Shaw mshaw@ensembleiq.com Office 201-855-7631 Cell 201-281-9100

Senior Marketing Manager Courtney Hofbauer chofbauer@ensembleiq.com

42 WHAT’S NEXT

16 SPECIAL REPORT

Retail Leader.com JANUARY/FEBRUARY 2018

EDITORIAL Editor-In-Chief Mike Troy mtroy@ensembleiq.com 813-857-6512 Managing Editor Gina Acosta gacosta@ensembleiq.com 813-417-4149

RETAIL’S DATA DRIVEN FUTURE. Dunnhumby CEO Guillaume Bacuvier explains the data science company’s evolving business model.

4

SVP, Group Brand Director Katie Brennan kbrennan@ensembleiq.com 917-859-3619

Retail Leader is published eight times yearly by EnsembleIQ: 8550 W. Bryn Mawyr, Chicago, IL 60631; Phone 224-632-8200 Fax: 224-632-8266. www.retailleader.com For address changes, send to Chicago, IL address or e-mail spatton@ensembleiq.com. © Copyright 2018

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letter from the

EDITOR

Rise of the Ankle-Biters Move faster or be eaten alive by a new breed of competitor swarming at your feet.

The phrase “ankle-biters” entered the retail lexicon in a big way last year and was used often with derision to describe small, niche brands contributing to the growth challenges of large consumer goods companies. These pesky ankle-biters also made their presence felt among retailers where their cumulative impact created a growth headwind for established retailers.

While the ankle-biter phenomenon has been gathering momentum for close to a decade, it is high on my list of key ways the retail world will change. The reasons why relate to factors such as technology, social media, e-commerce and shifting consumer preferences that have caused a fragmentation of demand that ankle-biters are well-equipped to satisfy.

For starters, it has never been easier to build a personal brand via social media and YouTube. Oftentimes an individual simply pursuing a passion gains a following and a level of celebrity that can be parlayed into the sale of products. Others who intend to be merchants at the outset can simply leverage digital communication methods to directly connect with shoppers seeking niche items not available in local stores. These merchants then have the ability to reach millions and millions of potential shoppers by exploiting Google’s capabilities or participating in one or more of the third party marketplaces.

The most obvious example here is Amazon with its FBA (Fulfilled by Amazon) program that gives small merchants access to a highly advanced supply chain network and a rapidly expanding base of fulfillment centers located ever closer to more shoppers. Anyone with access to inventory and an Internet connection can be a retailer or a brand, supported by marketing, merchandising and supply chain capabilities as or more sophisticated than those available at some legacy companies.

Ankle-biters come in many sizes, from multi-million dollar companies with distribution in conventional retail outlets whose impact can be quantified to millions of much smaller entrepreneurs relying on e-commerce marketplaces or shipping goods from their garage. They don’t even rise to the level of the ankle and their sales certainly don’t show up on any Nielsen or IRI reports. This makes anklebiters like an odorless and colorless gas, the existence of which can only be proven by sales and traffic weakness at established retailers.

That’s why the ankle biter effect is so frustrating and different from competitive challenges of the past. For example, in the 90s, if Walmart opened a 200,000-sq.-ft. supercenter near an aging Kmart store Kmart would know who took its market share. The same is true today to a lesser extent when it comes to rapidly expanding chains such as Dollar General or Aldi. It is easy for competitors to identify either as a source of sales weakness when they open nearby.

The ankle-biter phenomenon isn’t going away. It will persist and intensify in the coming years and be an even bigger competitive issue. However, there is a solution and it doesn’t involve going head to head with Amazon or Walmart to offer an endless aisle marketplace approach. It does mean innovation has to accelerate throughout organizations at an accelerating pace — something often heard, but seldom delivered — to provide the uniqueness and personalization that makes shoppers’ receptive to the ankle-biters.

There’s the obvious stuff like adding greater precision to assortment planning by category and store, leveraging new sources of insights for personalized offers, evolving collaboration processes with suppliers to move faster and relentlessly focusing on the supply chain to more efficiently flow goods, eliminating waste and executing new fulfillment models such as click and collect or home delivery. And when it comes to food retailers in particular, being more aggressive about employing a digital first mentality, leveraging stores to drive traffic to their Web sites and exposing shoppers to the universe of items that physical stores can’t accommodate.

The ankle-biters will continue to mass and gnaw at the market share of established retailers, moving higher up the leg of the vulnerable who have deluded themselves about the relevancy of their stores or the extent of digital advancements. If that makes for a disturbing visual — good — because no retailer wants to look in the mirror several years from now and regret not having moved faster. RL MIKE TROY Editor-In-Chief mtroy@ensembleiq.com

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> MERCHANDISING AND MARKETING

Radical Thinking Required QUOTIENT CEO MIR AAMIR WANTS RETAILERS AND CPGS TO THINK BIGGER AND MOVE FASTER TO DRIVE SALES IN A MULTI-DIMENSIONAL COMPETITIVE ENVIRONMENT. > By Mike Troy

T

The thing about executives with solution provider companies is their view of what it takes to be successful in the future invariably involves using services like those offered by their company.

The same could be said of Quotient CEO Mir Aamir, with one important distinction. When he describes the increasingly important role of data driven personalization in the world of shopper marketing, a space where Quotient leads, his views are substantiated by a career that began in the consulting, CPG and retail world.

From Aamir’s vantage point in Silicon Valley he sees retailers and brands operating in an intensely competitive, multi-dimensional environment where the winners will be those able to move fastest to capitalize on emerging digital capabilities.

“The opportunity is significant for retailers and CPGs to truly transform themselves. They have been thinking about it and talking about it for some time, but the sense of urgency went up several notches in 2017,” Aamir said.

To capitalize on that opportunity, Aamir is challenging those at Quotient, retailers and CPGs to think more radically and bigger picture about the future. He know that for many companies that means exercising new muscles.

“We think hard about what this industry is going to look like five years from now and work backwards. We have to think really outside of the box which the CPG industry has historically not done,” Aamir said.

His view is shaped by a non-traditional career trajectory that gave Aamir a broad and global perspective on the retail and CPG world and eventually landed him in Silicon Valley. The native of Pakistan earned an MBA in Karachi, took a position with Procter & Gamble leading product launches in Asia, came to the U.S. to earn an MBA at the University of Chicago and then began a career in consulting with A.T. Kearney.

He became a retailer at the urging of Target Chairman and CEO Brian Cornell who held a leadership position Mir Aamir, President and CEO, Quotient

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Retail Leader.com JANUARY/FEBRUARY 2018

with Safeway when Aamir came calling in 2005.

“I thought I was going to sell him a consulting project and he sold me on coming to work for Safeway,” Aamir said.

During his time at Safeway, Aamir led creation of the retailer’s innovative Just For You digital promotion initiative and that gave him exposure to Coupons.com, as Quotient was known at the time. He joined the digital promotions solutions provider as President, COO and CFO in 2013, led the rebranding of the company in 2015 and last year’s acquisition of Crisp Mobile, a provider of interactive mobile advertising solutions. Aamir was named CEO of Quotient in September 2017 to lead the company’s growth in what is expected to be a nearly $20 billion shopper marketing market.

The core of shopper marketing today, according to Aamir, is data and one-to-one communication, a field with enormous possibilities still in the early stages. Consider the weekly print circular long relied on to push offers in front of consumers. The vehicle plays a role in communicating a value proposition, but it is incredibly inefficient.

“It is a push vehicle that is in your face, in your home, but it is just getting harder and harder for it to pay out and it has always been hard to measure,” Aamir said. “The reason they haven’t gone away is because the digital innovation needed to make them go away is not in market yet.”

Quotient offers an intermediary approach that that allows retailers a degree of personalization with the first two pages worth of offers tailored to the individual. While an improvement over the one-size-fits all print circular, the bigger breakthrough in personalization will come this year with a personalization initiative that pushes the two or three things most relevant on a particular day or week to an individual to appear in interactive ad on Facebook or Pinterest, completely customized, relevant and done at scale, according to Aamir.

Another dimension of innovation Aamir sees coming relates to the psychology of planning a grocery purchase. He contends digital shopping apps have not caught on in a big way because most require typing information.

“In the future, you will say things or take pictures of stuff.

That is the future of shopping planning,” Aamir said. “A platform will take in all the information to develop a list and link to all available coupons and offers.”

To make it happen, CPGs will leverage their strengths in branding and marketing and work with retailers who leverage their strengths with shoppers and data to reach consumers one-to-one.

“The ones that do it right will survive and succeed in a market that is being redefined by the likes of Amazon,” Aamir said. RL

> SOCIAL RESPONSIBLITY

The Future of MEAT PLANT-BASED MEAT ALTERNATIVES ARE ON THE RISE. IMPROVED PRODUCTS HAVE ATTRACTED NEW CONSUMERS AND THE RESULTING GROWTH HAS MAJOR INVESTORS, CPGS AND RETAILERS PAYING CLOSE ATTENTION. > By Angela Flatland

I

It’s 2050 and the earth’s population has grown nearly 40% to almost 10 billion inhabitants. In order to feed the mass of humanity, grain, bean and seed production previously utilized for animal farming is allocated to the production of meat alternatives. Traditional protein producers have become dominant players in the plant-based world, a system of grading and certification exists and restaurant menus are filled with plant-based options.

The above scenarios are not far-fetched given recent business trends, improved flavor profiles and broader consumer acceptance of plant based foods. The meat alternative space has become quite crowded with entrepreneurs, billion dollar corporations, investors and entrepreneurs vying for a piece of the action as there is solid evidence that plant-based meat alternatives are at the beginning of a generational shift in consumer acceptance. And there is also the issue of the planet’s burgeoning population. The United Nations projects the global population to reach 9.8 billion by 2050 making advances in plant-based proteins essential as a solution to feeding a hungry planet.

When it comes to lab-grown meats, there’s already companies forging the path. Silicon Valley-based Hampton Creek, announced in June of 2017 that it will be the first company to release a line of “clean meat,” a term referring to meat grown in cell culture instead of harvested from livestock. While Hampton Creek may be the first to market with a packaged product, it’s not the only food technology company based in Silicon Valley that’s taking on the mission of clean meat. San Francisco-based Memphis Meats produces chicken, beef, duck and pork using clean meat science and technology and recently completed a $17 million series A funding round. Investors included big names like Richard Branson, Bill Gates and the largest supplier of ground beef in the world, Cargill.

“Memphis Meats has the potential to provide our customers and consumers with expanded protein choices and is aligned with our mission to nourish the world in a safe, responsible and sustainUma Valeti, M.D., co-founder and CEO of Memphis Meats

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able way,” Sonya Roberts, President of Cargill Protein, said when the investment was revealed.

Summing up the point of view of many of those active in the world of alternative meat is Uma Valeti, M.D., cofounder and CEO of Memphis Meats.

“The world loves to eat meat, and it is core to many of our cultures and traditions. Meat demand is growing rapidly around the world,” Valeti said. “We want the world to keep eating what it loves. However, the way conventional meat is produced today creates challenges for the environment, animal welfare and human health.”

Clean meat is not the only futurist meat option on the rise. Meat alternatives and other plant-based proteins sales have been outperforming traditional categories and large companies have taken notice. Plant-based food and beverages grew 14.7% during the 52 week period ended July 8, 2017, according to Nielsen. More specifically, sales for online plant-based proteins in powder, bar and liquid have grown tenfold since January 2015 according 1010 data, a cloudbased platform for big data discovery and data sharing.

Growth always attracts a crowd, but especially now when growth in the food industry has been hard to come by in most categories. For example, Cargill isn’t the only meat producing CPG company making big bets. In October 2016, Tyson announced its investment in Beyond Meat, a company known for making pea protein chicken and beef alternatives that taste remarkably close to the real thing.

More recently, Tyson was among the companies supporting Beyond Meat with a fundraising round totaling $55 million.

The additional capital will be used to triple the size of the company’s production footprint, further fund research and development and expand sales and distribution. Beyond Meat’s signature product, the Beyond Burger, is already enjoys a foothold in some of the nation’s leading supermarket retailers and is finding its way on to restaurant menus.

“Global demand for all protein remains high and we’re passionate about meeting that demand sustainably,” said Justin Whitmore, Executive Vice President Corporate Strategy and Chief Sustainability Officer with Tyson. “Our investment in Beyond Meat provides another fantastic alternative for consumers as we strive to sustainably feed the world.”

Another company attracting investor interest is Impossible Foods. In August 2017, the maker of the Impossible Burger, secured $75 million in funding from the Singapore-

based investment company Temasek in addition to the Open Philanthropy Project, Bill Gates, Khosla Ventures and Horizon Ventures. The following month, the company announced a major production expansion with a 68,000-sq.-ft. production facility to meet anticipated demand.

“Our mission to transform the global food system is urgent, and the opportunity is huge so we are embarking on one of the most ambitious scale-ups of any startup in the food industry,” said Impossible Foods CEO and Founder Patrick O. Brown.

“Our goal is to make delicious, sustainable, nutritious and affordable meat for everyone, as soon as possible.”

Canada’s largest meat processor, Maple Leaf farms, invested $260 million in 2017 to acquire s of two popular plant-based meat brands, LightLife and Field Roast. When acquiring Field Roast, Maple Leaf President and CEO Michael McCain said the deal aligns with the company’s mission to be a leader in sustainable protein. Other large CPGs investing in plant-based companies in recent years include Nestlé’s acquisition of Sweet Earth, Danone’s acquisition of WhiteWave, Hormel launching Evolve, a plant-based protein line, Otsuka’s acquisition of Daiya and Campbell’s launching Bolthouse Farms line of nut milks.

The surge of deal activity follows growth in consumer demand with indications the trend is well established to support further expansion. For example, a 2017 consumer study by Nielsen found that 39% of Americans and 43% of Canadians are actively trying to incorporate more plant-based products into their diets.

“It’s not a short-term trend to eat less meat. People are more conscious of the health, sustainability and animal welfare factors. It’s not likely they will go back to eating more meat once they’ve changed their diet,” said Emily Steingart, Brand Manager of Quorn, a meat substitute brand from the United Kingdom.

The plant protein category is projected to reach about $6 billion in global sales by 2022, a compound annual growth rate of 6.6%, according to the “Meat Substitutes Report” by Market and

Markets data, a global market research and consulting firm.

Perhaps the surest indicator that a category has arrived is when a trade group is established to represent the interests of companies operating in the space. That was the case in March 2016 when 23 companies formed the Plant Based Food Asso“The increasing ciation (PBFA) and Michele demands for more Simon was named Executive Director. products has been a “The increasing demands for more products has been challenge to keep up a challenge to keep up with with but it’s a good but it’s a good problem to have,” Simon said. “We are problem to have.” receiving requests to create a plant-based food certification —Michele Simon, as well as to help with retailer executive director of The Plant Based Foods Association collaborations,” said Simon, noting that she expects the PBFA to establish a plant-based certification in 2018.

“Overall, we know it’s a category to be prepared for growth no matter what business you’re in,” Simon advises.

“Be prepared to grow with consumers. For retailers, it’s dedicating more shelf space to plant-based foods, collaborating to create in-store experiences to help shoppers find products, and building more prepared food options. For CPGs, it’s focusing on R&D to create more options, creating recipes with your products for food service, and keeping up with supply and demand.” RL

POWERED BY PLANTS

Top reasons consumers are eating more plant-based foods 80%

83%

70% 60%

62%

50%

51%

40% 30%

24%

20%

17%

10% 0%

Improve overall health and nutrition

Weight managment

Want to eat clean*

Due to health concerns/diagnosis

To save money

14% Concerns about environmental protection

*Incorporate more foods that are unprocessed or minimally processed.

SOURCE: 2017 The Nielsen Co. Company (US). LLC.

JANUARY/FEBRUARY 2018 Retail Leader.com

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> GROWTH AND BUSINESS DEVELOPMENT

Retail’s Data DRIVEN FUTURE Before the phrase “big data” became commonplace, dunnhumby was helping retailers and brands understand shoppers and grow sales by extracting value from massive data volumes. Founded in 1989, dunnhumby is on a new mission to democratize data and make sophisticated analytics available to all. In April 2017, the London-based company lured Guillaume Bacuvier away from an 11-year career at Google to lead a new phase of growth as CEO. He spoke with Retail Leader about personalization, sku rationalization and the data science company’s evolving business model. > By Mike Troy Retail Leader: Most everyone has heard of dunnhumby, but in simple terms how do you describe what dunnhumby does?

Guillaume Bacuvier: We help companies and primarily retailers extract value from their customer data by applying science to it. Companies produce a lot of data in their dayto-day business, especially in retail, and we help them use that data to better understand their customers, make better decisions and better serve their customers. We don’t necessarily touch all of the data sets a retailer would have, we are really focusing on data that has some type of customer connection.

RL: A retailer would use dunnhumby in addition to providers of other types of shopper insights?

GB: Potentially yes. A typical interaction we have with a retailer very often begins with helping them understand and audit all their data sets. There is usually an assessment of the IT and data infrastructure and some recommendations about how to best organize and set up the data so that it can be fully exploited. From there we help retailers use data to answer fundamental questions about what their customers are doing and why they are doing it and creating reporting and business intelligence that is customer centric.

For example, answering with great insight simple questions about why foot traffic or sales are dropping in a store or region. Or helping them build customer segmentation that is smart and always live and relevant and can be updated almost every day. We also help them optimize pricing and 12

Retail Leader.com JANUARY/FEBRUARY 2018

assortments and personalize communications and promotions using a lot of advanced science. What dunnhumby is all about is activating retailers’ data to extract value from it in different ways.

RL: Thanks for clarifying. There is a lot more data available today than when dunnhumby was founded and it was common for retailers to complain about not knowing how to put data from point of sale systems to good use. Now we have this proliferation of data from structured and unstructured sources making for an even bigger challenge.

GB: The volume of data produced in a retail business has increased by multiple orders of magnitude. The other challenge that many retailers face is they were early in using IT and building systems that have aged so there is a big disparity in their technical infrastructure and the quality of their data that puts them at a disadvantage relative to new upstarts natively built as IT companies with cleaner data sets.

The other thing that has changed is twenty five years ago you could find companies who had a lot of data and could accept that they didn’t quite know what to do with it all. Today there is a recognition that data usage is a key competitive advantage. One of the key points I made at our North American Partner Summit is that the best retailers and businesses need to stop looking at the data in their systems as a byproduct of their core business and more as a critical asset in its own right that they monetize and treat strategically.

RL: You also talked in your presentation about redefining customer-first retail in a data driven age and mentioned “the new retail.” What does that mean?

GB: That is a term we stole from Alibaba founder Jack Ma. He talks about the new retail as the integration of online and offline channels, supply chain and data as one system.

He puts data as one of four things that are key to a new retailer and views the data he is collecting and processing as important as stores and web sites. We agree with that.

Increasingly what will make a retailer successful is not just having stores in the right places, or the right products or employees providing the right service, it is having the best data set from which they can optimize their operations across the board. Data is one of the key pillars of any retailer’s strategy and will determine who is successful in the long run.

RL: I don’t think many people would dispute that or dispute that data is what drives being customer centric by executing personalization.

GB: The case we are making based on the work we have done with hundreds of retailers is that everyone in the organization from the board room down to the store front uses data to understand the customer and manages the business and make decisions on the back of data that tells them more about customers. Starting with the board room, usually the metrics and reporting and therefore the tools by which any company makes a decision are typically the result of the data they can get their hands on and the systems and organizational design they have. Therefore, it is very rare for the key metrics an executive team tracks to be centered on customers. Keeping an eye on performance by customer segments, how your most loyal customers are doing and slicing the data by customers doesn’t come naturally to businesses because that isn’t the typically business are typically organized.

It is important to make sure that you use data to get that customer centric mindset and the data that backs it is available at every level of the organization from the boardroom to the store front. A lot of what dunnhumby does is enabling that, providing the entire organization with the insights, the reports and the tools to make that a reality.

business. We are focused on how to make customer centric data available to all and therefore every decision that is taken, whether by a store clerk or the CEO, is driven by customer data. Through data, you try to create the notion that you personalize each interaction to each customer at scale.

RL: That sounds very challenging, especially for a large retailer operating in multiple geographies.

GB: It is easier said than done especially in a multichannel environment with physical stores. We try to replicate as much as possible what is capable online in an offline environment.

RL: Personalization can mean different things depending on the category or type of store. If a shopper is in a larger store they expect a broader assortment.

GB: True, though there is a counter argument that is reflected in the work we have done for quite a few retailers. In very large store formats there is a trend toward assortment rationalization because having too many Skus is counterproductive especially if some of those Skus are perfect substitutes for one another because you are creating more confusion for customers. The challenge is finding the optimal tradeoff between offering something for every client that walks into the store without offering too much because it becomes counterproductive.

RL: Isn’t finding the perfect assortment a perpetual challenge for the industry?

GB: With the data sets that retailers have today, whether it is rich loyalty card data or tokenized basket data, you can draw insights about what are the products you cannot afford to remove versus those that are such perfect substitutes for one another they are arguably duplicates and therefore how do you create the optimal assortment.

RL: Oftentimes it’s the merchants or marketers who are the biggest users of data so it is interesting to hear you talk about board level usage of customer data.

Guillaume Bacuvier, CEO of dunnhumby

GB: With dunnhumby’s largest, most successful clients we typically have board level engagements. Some of our clients have redefined the metrics and KPIs by which the executive team manages the business to put more customer data into their hands it because it rarely comes naturally to any JANUARY/FEBRUARY 2018 Retail Leader.com

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> GROWTH AND BUSINESS DEVELOPMENT

RL: Some stores offer very limited assortment in one category but you can go down another aisle and there is a more extensive offering.

GB: Some of that reflects the tension in the business around whether retailers are putting the products in the store that customers want or is the product assortment the output of trade negotiations with suppliers. We have told the story of Tesco’s turnaround, they are our oldest customer and shareholder, over the past three years. A lot of what has gone on involved them moving away from a merchandising approach to squeeze the maximum juice out of suppliers at the expense of the products and prices customers really wanted and it has allowed them to regain market share and grow.

RL: I’m glad you mentioned Tesco. They own a percentage of dunnhumby but that doesn’t preclude you from working with other retailers.

GB: We have two separate relationships. One is a shareholder relationship and the other is fairly standard commercial relationship like we have with other clients. There is no exclusivity so we could in theory work with Tesco’s most direct competitors in the U.K. They have been very supportive of us because in order for dunnhumby to be successful we need to operate as a normal business.

RL: Is it a case where the larger the universe of companies you work with the better it is for Tesco because the deeper the overall market insights?

GB: That’s right. Obviously Tesco cannot get its hands on any data specific to our other clients, but the aggregate expertise of our team is much stronger from working with many retailers. Likewise, as anyone who is working on software algorithms processing data knows, the more data these algorithms are trained against the better they become so it is in the interest of everyone that dunnhumby has as many clients as possible because that makes our science better over time.

RL: What does the next phase of growth look like for dunnhummby?

GB: Historically, if someone wanted to work with us and take advantage of our data and expertise it was expensive and it was complex. Realistically it was only something a larger retailer could afford. Our strategic direction at a high level is to enable companies of more varied shapes and sizes to access our science so we have created a data science on demand model that can be accessed by a much more varied set of businesses. Our go to market model has already started to shift from a model that was 14

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high touch, with a lot of consultants and multi-year engagements, which we will still employ with some retailers, to one that allows companies to access our data science and expertise through a lighter touch model.

The long term vision and thesis is that even if you are small independent store, using data to better understand data your customers and optimize pricing and assortments is important too. We want to enable any retailer to access the same level of sophisticated data science as what we are able to provide to Tesco, Whole Foods or others we work with today.

RL: You spent 11 years at Google, a very well regarded company, why make the switch to dunnhumby?

GB: There are similarities in philosophy and culture because Google also believes you can extract a lot of value from data. What attracted me to dunnhumby was I saw the potential to make this a really fascinating company if we are able to achieve the science as a service vision. The potential with recent technology evolutions is to create a platform of data science that we could address a much larger market and. It seemed like a transformation story for the business that was very appealing. We can really make the company an amazing story in the coming years if we play it right.

RL: Can you extend into other retail channels beyond food and consumables?

GB: It even goes beyond retail. Part of the strategic planning we have done revolves around the question of can we broaden our addressable market and where can we go beyond our sweet spot, which is grocery centric retail. What we do also applies to other retail segments. Sometimes the offering and the science has to be adapted.

RL: Any segments you can single out?

GB: E-commerce is an area where we have done work, but haven’t had a structured offering. People assume because they are data and tech natives they are good at it and have nailed every problem but our experience is that is not true. We have a number of pure play retailers in our portfolio today but we think there can be more. Ecommerce is definitely an area where we want to invest.

RL: Data is data. A lot of the same techniques are used to extract value from it regardless of channel.

GB: Any business that collects a lot of data about its customers is interesting to us. That is our filter when we look at sectors we think we can play in. RL

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> SPECIAL REPORT

18 Leaders to Watch in

BUZZWORDS SELDOM LIVE UP TO THEIR HYPE, BUT THAT’S NOT THE CASE WHEN IT COMES TO DISRUPTION AND TRANSFORMATION, TWO WORDS THAT HAVE DOMINATED RETAIL CONVERSATIONS FOR MANY YEARS NOW. > By Mike Troy and Gina Acosta

Don’t look for a change in 2018 as far as the forces of disruption and innovation are concerned. Both words will continue to underpin every aspect of the rapidly evolving retail, consumer goods and service provider ecosystem. Accordingly, Retail Leader offers an unabashedly subjective look at 18 individuals influencing their organizations and the retail industry in unconventional, diverse, less than obvious and potentially profound ways in the coming year.

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THE MASTER OF M&A

DISRUPTING WITH STYLE

Bruce Hoffman, Acting Director, Bureau of Competition, Federal Trade Commission.

Katrina Lake, Founder and CEO, Stitch Fix

Hoffman’s views on competition will impact a retail and CPG world where deal activity is forecast to increase. Less than two weeks after Hoffman assumed his role at the FTC in August 2017 he made a name for himself by announcing the agency had halted its review of the competitive implications of Amazon’s acquisition of Whole Foods Market.

Hoffman’s name will become more familiar to retailers and CPG companies in 2018 as the FTC weighs in on even more mergers and acquisitions, including CVS Health’s $69 billion acquisition of Aetna. Early indications are 2018 will see an increase in deal activity compared to 2017, according to Deloitte’s annual M&A trends survey of 1,000 executives at corporations and private equity firms. Roughly three fourths of those surveyed said deal flow will increase in 2018 and there was nearly unanimous agreement that deal size will increase.

That means Hoffman and others lawyers at the agency will be assessing all manner of competitive issues with more of a free market bias expected under a Republican administration. However, before than can happen the Senate needs to confirm Hoffman’s new boss, Joe Simons, who president Trump appointed in October. It will be up to Simons to make Hoffman’s appointment permanent. The pair worked together at the FTC previously when Hoffman spent three years with the agency from Sept. 2001 until Nov. 2004 while Simons led the Bureau of Competition from June 2001 until August 2003.

The personalized styling service is redefining the concept of retail experience. Many companies will ship a box of products to customers’ homes and claim to be disruptive, but few have done it the way Stitch Fix has. Founder and CEO Katrina Lake founded the service in 2011 while earning an MBA at Harvard and today Stitch Fix sits at the intersection of two of the driving forces in retail — personalization and artificial intelligence. Shoppers discover and buy what they love through personalized shipments of apparel, shoes and accessories, handselected by Stitch Fix stylists and delivered to their homes.

Lake contends Stitch Fix has created a better way to shop and its approach is redefining retail, however 2018 will be the company’s most challenging year yet following a well-received public stock offering in November. Stitch Fix has to prove that its approach to apparel retailing can grow by attracting new customers while engaging more deeply with existing shoppers and serving men as well as women. Lake also faces the personal challenge of serving as CEO of a newly public company whose shareholders have high expectations about her ability to continue disrupting retail. The skills required to run a public company can be different than those relied on to found and scale a company and not all entrepreneurs make the transition smoothly.

Prior to founding Stitch Fix, Lake managed the blogger platform at venture-backed social commerce company Polyvore and consulted with a variety of e-commerce and traditional retailers during her time at The Parthenon Group.

THE CPG CRUSADER Nelson Peltz, CEO, Trian Fund Management

The activist investor is poised to bring disruption to Procter and Gamble. That Procter & Gamble has become fodder for activist investors is a sign of where the iconic CPG company finds itself today.

P&G has been falling behind major competitors when it comes to market share as consumers opt for cheaper store brands. Organic growth at P&G was just 2% last fiscal year, and the company forecasts 2% to 3% this year. To fix this, Peltz, 75, whose Trian Fund Management has invested about $3.5 billion in P&G, says the company needs to streamline its businesses, nurture more new and small brands, and reorganize management with outside talent. Peltz wants to split P&G into beauty, home care and family care units — each with regional leaders, which he says will spur new products. Peltz says P&G is not innovating fast enough, noting that the company’s last breakthrough brand was the Swiffer introduced 20 years ago. Peltz has also criticized P&G’s board for overpaying executives and considering internal candidates only for CEO. Meanwhile current P&G CEO David Taylor says the company is already in turnaround mode after shedding significant brands and entire businesses (like beauty) and cutting hundreds of millions of dollars in costs.

While Taylor and Peltz’s strategies may differ, Peltz has a long history of fixing broken CPG companies. His activism may be the hard push P&G needs to truly get back on track.

JANUARY/FEBRUARY 2018 Retail Leader.com

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> SPECIAL REPORT THE MEAL KIT MAGICIAN

Tobias Hartmann, President North America, HelloFresh

Experienced supply chain executive will determine viability of meal kit model in the U.S. The meal kit industry is poised for a shakeout in 2018 and Tobias Hartmann will be one of those doing the shaking. The veteran e-commerce executive was named President of North America at HelloFresh last September ahead of the company’s initial public stock offering in Germany.

The move likely assured investors about the company’s ability to execute its strategy in the U.S. HelloFresh doubled the size of its U.S. customer base in 2017 and under Hartmann’s leadership will look to surpass revenues of $1 billion in a fragmented market where rivals Blue Apron have stumbled and Plated was acquired by Albertsons. HelloFresh believes it is at the forefront of disrupting the large food industry at the beginning of an online transition and meal kits are just part of its plan to build a global lifestyle brand.

To meet that challenge, Hartmann brings to HelloFresh nearly two decades of management experience in developing, launching and operating direct-to-consumer products and business services solutions for private and public companies. Prior to HelloFresh he served as President of Radial Inc., which included the former companies eBay Enterprise and Innotrac who helped other retailers manage their supply chains. He also served as Managing Director and Chief Operating Officer of D+S GmbH, a German based full-service e-commerce and business process solutions provider.

A RETAILER’S WORST NIGHTMARE

Andy Jassy, CEO, Amazon Web Services

Jassy’s leadership of Amazon Web Services is the source of many retailers’ woes. Amazon Web Services (AWS) is why Amazon the retailer is a giant competitive issue for so many retailers.

Jassy has led AWS since it was launched in 2006 after Amazon realized the cloud computing service it built to move faster could be offered to other companies. He joined Amazon in 1997, three years after the company was founded, and he held a variety of roles prior to founding AWS. He was named CEO of AWS in April 2006.

AWS now generates nearly all of Amazon’s profits even though it accounts for only about 10% of net sales. AWS generates nearly three times the operating profit of Amazon’s North American division while Amazon’s international division produces operating losses. Without the financial contributions of AWS, Amazon’s share price would not be above $1,000 and it wouldn’t have been able to spend $13.7 billion to acquire Whole Foods Market or announce the addition of 25 U.S. fulfillment center projects in 2017.

While AWS’s growth rate has “slowed” to the 40% range, the business has tremendous momentum ensuring cloud computing can continue to subsidize Amazon’s retail efforts and market share gains. The AWS user conference known as re:Invent drew more than 40,000 attendees to Las Vegas Nov. 27 through Dec. 1, where new launches were announced such as Alexa for Business and a service called Amazon Sumerian designed to make it easier for developers to build VR/ AR applications.

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DOLLAR GENERAL DIGITAL ACCELERATOR

Rob Scruggs, Chief Digital and Customer Engagement Officer, Dollar General.

Scruggs filled a newly created role to elevate Dollar General’s digital efforts in 2018. Dollar General loves physical retail, as evidenced by plans to open 900 new store this year, pushing it past 15,000 units by the end of 2018.

However, the company also knows digital integration and leveraging its physical footprint will be key to increasing shopper engagement and growing sales with core shoppers whose lower income levels doesn’t mean they don’t have high digital expectations. That’s why Rob Scruggs was tapped to serve as the company’s first ever Chief Digital and Customer Engagement Officer. He’s tasked with accelerating the company’s digital strategy and developing resources to save customers time and money.

He brought a non-traditional background to retail role when he joined Dollar General last fall, having previously served as global director of client experience for Bank of America Merrill Lynch and prior to that held experience roles at Asurion, E*Trade and J.P. Morgan Chase.

Scruggs is part of a recent talent infusion at Dollar General that includes his boss and Chief Merchandising Officer Jason Reiser, who joined the company in June after holding key merchandising roles at Vitamin Shoppe, Family Dollar and Sam’s Club. Also new to Dollar General and integral to Scrugg’s digital efforts is Chief Information Officer Carman Wenkoff who joined the company in June 2017.

STORE EXPERIENCE INNOVATOR Ellie Bertani, Senior Director of Associate Innovation, US People Team, Walmart.

Bertani is helping Walmart workers cope with the complexity of executing the retailer’s omnichannel strategy. With more than 1.5 million employees in the U.S., Ellie Bertani occupies an influential and high profile role at Walmart, a company whose actions with regard to employee compensation, benefits and satisfaction are watched closely. She also faces a challenge on a scale unlike any other in retail - improve employee productivity and satisfaction while elevating customer service in a complex operating environment where the increased use of technology could be viewed as displacing workers. It is a fine line to walk, especially at Walmart, where the company has long enticed entry level workers with the prospect of advancement potential.

Bertani is a relative newcomer to Walmart. After receiving a Master of Public Administration degree from Harvard and an MBA from the MIT Sloan School of Management, she joined Walmart in 2013 as senior manager of Women’s Economic Empowerment. In August 2014 she was named Director of HR Strategy and Innovation and led projects such as diversity and inclusion, and entry level employee training that have paid off in improve customer service levels and sales growth. Last October, she was given a new challenge as Senior Director of Associate Innovation. In that role, Bertani works with Walmart’s leadership team to develop a long-term workforce strategy, directs the retailer’s U.S. change management practice and Lifelong Learning program and leads the company’s Opportunity Agenda in partnership with the Walmart Foundation.

OMNICHANNEL ARCHITECT Richard Maltsbarger, Chief Operating Officer, Lowe’s

Lowe’s is elevating its omnichannel experience in the rapidly changing home improvement sector.Winning in the world of home improvement, as in all of retail, requires an omnichannel approach and the ability to leverage technology at a pace at least as fast as consumers. At Lowe’s that challenge falls to Richard Maltsbarger who was elevated to the role of COO last fall with clear direction from CEO Robert Niblock that the “O” in chief operating officer also stands for omnichannel.

Maltsbarger joined Lowe’s in 2004 as director of customer analytics, the year before Niblock assumed the role of CEO. He currently serves as chief development officer and president of international, positions in which he is responsible for corporate strategy, business development and international operations in Canada and Mexico. Maltsbarger officially becomes COO on Feb. 3 when 36 year Lowe’s veteran Rick Damron steps down.

If Lowe’s is to be successful in the future and narrow the performance gap with Home Depot it will be because of Maltsbarger’s efforts to deliver a seamless omnichannel experiences and execute Lowe’s brand promise to build lasting customer loyalty. As is common for a COO, he oversees operations of Lowe’s base of 2,144 North American stores, supply chain, the professional business and services. He also works closely with Lowe’s Chief Customer Officer Michael McDermott to further enhance the omnichannel customer experience. McDermott joined Lowe’s in 2013 and up until assuming his current role in Oct. 2016 he served as Chief Merchandising Officer.

MMM MMM DIGITAL Shakeel Farooque, Vice President of Digital and E-Commerce, Campbell Soup Company

Campbell has a goal of generating $300 million in e-commerce sales over the next five years. Everyone wants to up its e-commerce game, and Campbell Soup Company is no exception. Yes, the 148-year-old soup company is looking to update its business model and reverse declining sales by selling soup (and other things) online. So in July Campbell brought in Farooque, a former Amazon executive, to lead a new e-commerce division.

Farooque, who held a range of roles at Amazon before taking jobs at eBay and Kohl’s, will have to figure out how to keep up with the rapidly evolving CPG landscape online.

Farooque brings both a consumer and technology focus to Campbell. He most recently spearheaded the design and execution of Kohl’s digital business strategy, transforming the organization into a strong omnichannel player. While at eBay, he overhauled the eBay Deals Program to increase subscriptions and nearly tripled revenues in Year 1.

At Campbell, Farooque’s strategies will almost certainly include taking advantage of the company’s big investments in meal kit companies Chef ’d and Habit. Another strategy may involve an online service the company is currently testing that will deliver soups to homes.

If Farooque can reinvent the selling of soup and help Campbell stay ahead of the e-commerce curve, he may have a hand in reinventing something much bigger: the center of the store.

JANUARY/FEBRUARY 2018 Retail Leader.com

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> SPECIAL REPORT ON-DEMAND MAN

Bastian Lehmann, CEO, Postmates

Postmates is trying to be the new Instacart, Grubhub and Amazon all rolled into one. Earlier this year, Bastian Lehmann testified before Congress in a hearing titled “The Disrupter Series: Delivering to Consumers.” In his testimony, Lehmann made the case for retail delivery via robots and drones, with the hopes that Congress would consider advancing a budget that “prioritizes STEM education.” And that makes sense, since Postmates is all about food delivery automation, whether the tacos are from Walmart, Taco Bell or Kroger.

The idea for Postmates was conceived in 2005 when German-born Lehmann was relocating from Munich to London and he struggled with finding a simple solution for moving goods around the city. He later pursued this notion of “ride-sharing for stuff” through AngelPad in San Francisco, where he met his co-founders Sean Plaice and Sam Street. Postmates now operates in 44 U.S. markets and is doing 2 million deliveries a month. The company’s current sales make it a major player in the race to capture the food delivery dollars of consumers around the country. Lehmann, 39, says he expects the company to become profitable in 2018 and for it to go public next year.

In 2017, Postmates launched food delivery via self-driving robots in California and launched a fresh grocery delivery service in select other cities. To keep driving growth in 2018, Lehmann is laser-focused on grocery delivery. He says Postmates’ grocery advantage will come from “doing more and doing it faster, when it comes to urban logistics.”

THE RISE OF THE INFLUENCER

Negin Mirsalehi, CEO, NeginMirsalehi.com

In five years, Mirsalehi has transformed her social media reach into a budding beauty empire. When Mirsalehi decided to create her first Instagram post in 2012, she didn’t even have an Instagram account. Now, at age 29, and thousands of posts later, Mirsalehi is one of social media’s top influencers and the CEO of a multi-million dollar brand. With more than 4 million Instagram followers, Mirsalehi, who is based in Amsterdam, has a bigger social audience than brands such as Yves Saint Laurent, Saks Fifth Avenue, and Pantene.

Because Mirsalehi has grown such a loyal following, big beauty brands have hired her to promote their new lines. Some of the companies she collaborates with pay up to $20,000 per social media post, according to Money magazine. In 2015 Mirsalehi launched her own hair care line, called Gisou, which is on track to reach $3 million in sales in 2017.

Mirsalehi is part of a wave of social media-driven beauty influencers reshaping the estimated $62 billion U.S. beauty industry. The immediacy of social media is putting pressure on brands to become more innovative in their product offerings.

To wit, everything in Mirsalehi’s hair line is formulated with either honey or propolis, a bee by-product. The range has just the kind of artisanal, natural ingredients that more and more beauty shoppers are looking for.

But Mirsalehi’s hair care brand is only part of her empire.

She recently launched a video series called “Negin Mirsalehi: Real Life Daily,” on her YouTube channel, where she has 190,000 subscribers. And Mirsalehi is still looking for a megadeal with a CPG company. It may be only matter of time before Procter & Gamble comes calling.

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THE PHARMACY DISRUPTOR Larry Merlo, CEO, CVS Health

Merlo will be bringing together two very different companies in the country’s largest ever health-care merger. Merlo has been CEO at CVS since 2011, and he has been credited with transforming the drug chain into a pharmacy innovation company. But Merlo’s tenure has not been easy.

Since announcing that CVS would stop selling cigarettes and change its name to CVS Health in February 2014, the retailer has been struggling with sales and profit declines.

With the $69 billion Aetna deal, Merlo, who trained as a pharmacist at the University of Pittsburgh, is determined to create a health-care behemoth by joining companies from very different corners of the health-care ecosystem.

CVS Health today reaches more than 100 million people each year through nearly 9,700 retail pharmacies, 1,100 walk-in medical clinics, and other clinical services.

Together, the companies have roughly $240 billion in annual sales. The merger, expected to be finalized next year, must still be approved by shareholders and federal regulators, but at issue is how a retail pharmacy chain merging with a company insuring over 22 million will affect how Americans receive health care.

Though CVS faces immediate turbulence as it figures out what to do, Merlo’s company is in a better position to benefit from the tail winds of the health care economy than other retailers.

NATURALLY WINNING

Amin Maredia, Sprouts Farmers Market, CEO

Maredia has worked hard to control his company’s destiny, and the future looks bright. A CPA and Harvard Business School alum, Maredia joined Sprouts in 2011 after working at major companies such as PriceWaterhouseCoopers and Burger King. Maredia has great timing. He became CEO at Sprouts in 2015, just as natural and organic products really started to take off among food shoppers. The Sprouts formula, which aims to offer natural and organic products at affordable prices, has been resonating with consumers ever since. The grocer says it is able to offer lower prices because it has relationships with farmers and is able to buy their excess produce at below-market costs and move it quickly into its stores. With revenue growth in the high teens, higher than average profit margins and ample cash flow, the business model is helping the company ride a wave of sustained growth fueled by surging organic food sales, which are poised to top $70 billion this year.

Maredia is now planning to lead Sprouts through several growth initiatives, including a digital makeover, as prospective buyers wait in the wings. Albertsons approached Sprouts months ago, but the two sides couldn’t come to a deal. For now, Maredia says his company is focused on maximizing the reach of a smaller footprint of stores by investing in its grocery delivery game.

Amazon Prime Now has been providing e-commerce services for 10 of Sprouts’ stores, with plans to expand the partnership further in 2018.

A LIDL BIT OF FAITH Brendan Proctor, Lidl U.S. President and CEO

Can Proctor get the Lidl formula right for the U.S. market.? German grocery chain Lidl made a big splash in America this year when it announced plans to open as many as 100 stores as part of its push into the U.S. market. The discount grocer is investing $200 million on the rollout and has opened 47 stores so far along the East Coast. Spearheading the massive effort is Proctor, who moved to America in 2016 to take the U.S. president and CEO role for the company after leading Lidl operations in several countries, most recently in Ireland.

While Lidl encourages shoppers to “rethink grocery” and goes to market with a unique set of merchandising, marketing and store operations attributes, Proctor has a tough job ahead of him.

European grocery operators have floundered trying to launch in the U.S. Carrefour, Aschan, Marks & Spencer and others have all failed here. Already there are reports that Lidl is struggling. The company is reportedly adjusting its expansion plans after failing to sustain traffic in its newly opened U.S. stores. Lidl has also slowed down construction on many sites planned or backed out entirely of other deals.

All of these issues are fixable, but will require a big change in strategy. For Proctor, the question isn’t whether the Lidl model works in the U.S. market, but what can his company do to adapt to that market?

THE NEXT-GEN GROCER Chai Mishra, CEO, Movebutter

Mishra’s online grocery store takes farm-to-table right to consumers’ doorsteps. In June, Chai Mishra launched Movebutter, a small online grocery store with 300 products. A month and a half later, the company had a waiting list of 120,000 people who wanted to place orders on its website.

The e-grocery startup based in Silicon Valley is a pure-play e-commerce operator, touting value pricing on limited assortments of own brand, quality, socially conscious products whose minimalist labels are reminiscent of the early days of private label. Movebutter’s value proposition is rooted in thinking that the current grocery distribution system is broken, so it touts the elimination of middlemen, overhead and waste as drivers of its approach. Movebutter works directly with farmers, butchers and producers across the country to source food, and items are sealed in transparent packaging so consumers can see what the food looks like. Orders are delivered via FedEx or same-day shipping with ice packs to keep it cold.

Mishra describes his vision as making “the best food in the world accessible and affordable to everyone. Regardless of who they are and where they live.” He also says traditional food retailers and CPG brands are struggling to keep up with the changing tastes of consumers, many of whom are interested in learning where their food comes from and enjoy the convenience of shopping online. With retailers like Target acquiring grocery delivery startups, companies such as Mishra’s might be next in line for a mega-merger.

JANUARY/FEBRUARY 2018 Retail Leader.com

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> SPECIAL REPORT SERVANT OF THOSE WHO SERVE(D).

Tom Shull, Director and CEO, Army and Air Force Exchange Service.

PATH TO PURCHASE INNOVATOR Amit Sharma, Founder and CEO, Narvar

Sharma is a former Apple and Walmart executive focused on shoppers’ post purchase experience. Amit Sharma is on a mission to simplify the everyday lives of consumers and when his company does its job well it means consumers don’t know that Narvar was even involved in their e-commerce experience. Sharma, a former Apple, Walmart and WilliamsSonoma executive, founded Narvar five years ago as a post-purchase experience platform to handle the type of e-commerce details that cause difficulties for most retailers. Stuff like order tracking, notifications, returns and customer care across numerous touch points. The creation of Narvar was born out of a recognition that the path to repurchase happens after a purchase is made, yet most retailers were not effectively engaging with shoppers after they hit the buy button to manage their fulfillment expectations and influence future behaviors. Narvar’s philosophy is that taking care of people after they’ve made a purchase is the best way to build trust and turn customers into brand ambassadors. The company does that via capabilities such as offering a great returns experience and perfectly timed email communications all delivered in a seamless and operationally efficient way. The approach is working for the fast growing company that works with many major retailers. Narvar has already served more than 200 million consumers who completed 2 billion transactions in 24 languages.

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Shull leads an $8.5 billion retailer with a growing digital presence. The Army & Air Force Exchange Service (AAFES) is often overlooked in conversations about retail competitors, but that is a mistake with Tom Shull serving as CEO. The 1973 West Point graduate and Harvard MBA led a major digital effort that opened a new competitive front for AAFES in late 2017 that is estimated to have an annual sales impact of $200 million.

Long restricted to only serving shoppers on military bases and overseas locations, AAFES increased its addressable market by about 18 million people in November when honorably discharged veterans became eligible to make online purchases from AAFES. Prior to a Department of Defense ruling in early 2017 only active duty, reserve and Guard members, 100% disabled veterans and their dependent family members were able to shop with AAFES. Shull set out to change that situation in 2012 when he became the first civilian director and CEO of the AAFES retail operation, leading the effort to make the exchange benefit available online at AAFES as well as the Marine Corps Exchange, Navy Exchange and Coast Guard Exchange. In addition to its digital presence, AAFES operates 3,500 facilities consisting of department stores, convenience stores, gas stations, restaurants, theaters and specialty stores on military installations in all 50 states, five U.S. territories and 33 countries.

THE ANTI-UBER

John Zimmer, Lyft Co-Founder and President

This transportation industry innovator is shaping the future of fulfillment for retailers and brands.Zimmer got a job out of college as an analyst at Lehman Brothers, but what he really wanted to do was disrupt transportation and reinvent ride sharing. He moved to Silicon Valley and launched Lyft in 2012, three years after Uber started up.

After a half-decade of playing second fiddle to Uber, Lyft is now finally coming into its own. The company recently announced a round of funding of $1.5 billion. That puts Lyft’s valuation around $11.5 billion, which is still smaller than Uber’s estimated $68 billion, but Zimmer’s company has more than doubled the 162.6 million rides it provided during 2016. Lyft is now available in all 50 U.S. states and has statewide coverage in 41. It has also made the jump into Canada — its first international move — and started offering the service in Toronto.

While Lyft continues to do all the right things and looks at a possible IPO in 2018, retailers still wrestling with last-mile challenges could look to Zimmer’s innovative vision for new solutions. WalmartLyft has a nice ring to it. One-hour shipping could happen through a (perhaps driverless) Lyft force that is happy to deliver full-time during the day. Grocery delivery would also be consistent with Zimmer’s bigger vision: to improve people’s lives with the world’s best transportation. RL

>> REIMAGINING THE FUTURE Where leaders learn what lies ahead on the path to purchase.

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> COVER STORY

IMAGINING Retail’s Future

C

ONE ON ONE WITH DANIEL ALEGRE, PRESIDENT OF RETAIL AND SHOPPING AT GOOGLE. > By Mike Troy

Daniel Alegre serves as President of Retail and Shopping at Google, a role that entails crafting the company’s overall strategy and leveraging Google assets to aid retailers’ digital transformation.

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Conversational commerce is the next big thing in retail and those who require proof need look no further than Amazon. It has gone all in on a strategy to penetrate households with devices such as Echo that enable users to communicate with its Alexa voice assistant and perform all manner of tasks — including shopping. Alexa’s life-simplifying pleasures go well beyond shopping and can be habit-forming. That’s what Amazon is counting on, ingraining itself deeper and deeper into the lives of Americans whose children will grow up as the first Alexa-native generation. That’s a scary scenario for retailers looking five to 10 years into the future at the prospect of ubiquitous conversational commerce, or as some call it, voice shopping.

While no retailer individually, not even Walmart, is equipped to offer a competitive response to the potent combination of millions of Amazon Alexa devices supported by a steadily expanding network of world class fulfillment centers, all is not lost. Far from it. Google has entered the conversational space in a big way with its Google Home device, an expanding collection of smart displays and partnership with other manufactures to integrate Google Assistant voice capabilities into their products.

Google is moving fast and creating a unique value proposition a growing number of retailers find compelling.

“We have a host of things that are very valuable to the retail and shopping sector and I’m pulling it together so that our partners have a one Google approach and view of what we can bring to the sector,” said Daniel Alegre, President of Retail and

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> COVER STORY Shopping with Google. “I’m responsible for crafting the overall retail and shopping approach for the company. We are enabling for the retailer a control over their experience and bringing them much closer to the consumer,” That’s a tall order, but as Alegre notes, Google has its own universe of very relevant assets when it comes to things like search, images, YouTube, product listing ads and the Google Express delivery service. And like Amazon, Google is a company that builds for the future and scale.

Walmart and Target were among the first to buy into the Google retail vision and the potential of voice in a big way last fall. In September, Walmart integrated with Google to make several hundred thousand items available for voice shopping via the Google assistant. In 2018, the company plans to turn on the ability to order groceries via the Google assistant for pick up at store, further eliminating friction from the process of list-making. Target also announced it expanded its relationship with Google so customers could access its assortment through voice command and also receive the 5% price reduction if they pay with one of Target’s REDcard products. In 2018,

SAY WHAT? Why consumers prefer voice assistants to Websites/apps.

It is more convenient

52%

It allows me to multi-task and do things hands free

48%

It helps me automate my routine shopping tasks

41%

It feels more personalized to my needs

41%

It provides better deals/offers

38%

My data is more secure

38%

It feels like a more natural way to interact

37%

It feels more like speaking to a real person

35%

SOURCE: Capgemini Digital Transformation Institute, Conversational Commerce Survey of 5,041 consumers in the U.S., U.K., France and Germany.

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Target has vowed to work with Google to offer store pick up within a two hour window and to bring other innovations to market.

At the end of last year, there were a total of about 50 merchants directly integrated with Google and accessible via the Google Assistant. While that may not seem like a large number, there were none as recently as 2013 and Google introduced its Home device in 2016 and voice shopping in 2016. However, it wasn’t until last year, and during the holidays in particular, that Google made an Amazon-like push to sell devices. It had plenty of help in that effort from merchants active on the platform who make a margin on each sale but also have a vested interest in seeing Google Home reach a penetration rate equal to or greater than Amazon’s Alexa.

“We purposely kept the number of merchants very small as we expanded nationally, but we expect to have more come on board. I can’t predict what that number will be in a year,” Alegre said. “We do know that we are going to continue to provide a deeper, richer experience with the retailers we have and then expand it as we gain comfort with the customer experience.”

Retailers also need to have a comfort level with Google when it comes to the sharing of their information and how customer data is used. The prospect of Google joining Amazon as a second enemy rather than a valued ally is disconcerting to retailers.

“We make it crystal clear that retailer X will not benefit from retailer Y’s information that resides with Google. We realize that retailer purchase information is one of their core assets to be guarded as a competitive advantage and for them to share it with us is something we don’t take lightly.”

THE GOOGLE WAY Experience is key with voice shopping and interacting with voice assistants, but Alegre defines the term differently than operators of physical spaces who tend to think of experience in sensory terms related to lighting, flooring, signing, merchandise presentation and dozens of other touchpoints. For Alegre, experience is the emotional reaction a Google user has to a search query, how well their voice is recognized or the simplicity of interacting with the Google Assistant. It can be magical or frustrating.

“If you really want to make voice search inquires powerful you can’t really make mistakes,” Alegre said.

A decade ago when most search was conducted on a desktop, Google could be forgiven for returning off target responses because there was ample real estate on large screens to have the right answer be the fourth of fifth answer. Accuracy had to improve with the shift to mobile and much smaller screen sizes. With voice, the accuracy bar has been raised so high there is little margin for error and it declines daily as consumers expectations increase.

“If the wrong answer, product or ad is returned to the user the experience becomes so poor the device ends up being used to just play music or present recipes,” Alegre said.

Accuracy begins with the ability to process natural language, which is one area where Google arguably has an advantage over Amazon if for no other reason than search is Google’s core business and it has been at the search and voice game a long time.

The billions of dollars the company invests annually in artificial intelligence and machine learning means the Google Assistant can distinguish between English speakers with regional accents, different tones of Mandarin or multiple Indian dialects, according to Alegre. It can even understand the very poor Mandarin Alegre said he speaks in addition to Spanish, French, German and some Russian.

That understanding is at the heart of the future growth of conversational commerce and some of the most viable early uses cases are viewed as food and consumable product categories. That’s because many purchases at a supermarket, drug store, dollar store or mass market retailer are transactional in nature and therefore prone to be disrupted by alternative and more convenient methods.

“When a loyal Walmart customer links their account with Google, at that point we are porting their past purchases with Walmart onto the Google experience. When they say, ‘okay Google, buy me a tube of toothpaste,’ the ideal is it already knows what you are asking for and it will ask if you want to re-order a prior purchase,” Alegre said.”

If a Google user wants to see other options from different retailers, that desire can be communicated and conceivably a customer could view options from Target or other retailers who have integrated with Google.

“Voice and voice capabilities are extraordinarily powerful for transactional experiences where a consumer knows exactly what they are looking for and tells Google to get it for me,” Alegre said.

The more challenging voice shopping experience, for the time being anyway, involves higher consideration purchase categories or those that have a fashion element. For example, in situations where a consumer needs guidance and information, wants to envision how a product would look in their home or help with assembly, leveraging voice capabilities is a more

Google Home was heavily promoted during the 2017 holiday season, with major retailers such as Best Buy (above left), Walmart (left) and Costco (above) among those prominently featuring the device.

elaborate process. In some of those cases, Google can tap into retailer, supplier or user-generated content on YouTube to provide answers, but it’s not as easy as a reorder transaction, which is why companies such as Walmart and Target moved aggressively to partner with Google.

A DIFFERENT BEAT While Daniel Alegre is helping invent the future of shopping at Google, the 14 year Google veteran’s career began in an unlikely fashion. The native of Mexico migrated to Canada, attended Princeton and later earned a law degree and an MBA at Harvard. Before putting those credentials to work, he returned to Mexico when an opportunity arose to start an FM radio station. As an aspiring musician who once wanted to be a drummer, he soon learned the new radio gig came with some surprises.

“I arrived at a building that had no equipment and no antenna, only a license. I had been a drummer, but that was all I knew about the music business,” Alegre said. “I had two weeks figure things out, hire an engineer, get the antenna up and running, launch the radio station and understand how you sell. I later learned JANUARY/FEBRUARY 2018 Retail Leader.com

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> COVER STORY

Amazon’s Alexa-enabled devices were already the company’s top selling items and with the acquisition of Whole Foods it has hundreds of new physical distribution points, such as this location in New Jersey.

what it means to be there for the community during a hurricane when I was on the air for 48 hours straight.”

The innovation skills he applied to that role are proving useful now as Google and its retail partners are working on an issue of immense proportions and Alegre is again, “figuring it out.” One of the first things he figured out is that Google’s growth beyond core search had created organizational silos that made working with the company challenging. It had reached the point where whether a partner was large or small they could be interacting with as many as 10 different touchpoints. That wasn’t going to work if Google wanted to bring more retailers into the fold and increase the value of the Google Assistant.

“The one consistent ask that we were getting from CEOs at companies was, ‘can we have a relationship partner that can help us makes sense of how Google can really fit for us,’” Alegre said, referring to his role and the retail and shopping team he leads. “Retail and Shopping is an area that obviously is at an inflection point and one where we have had partners coming to us and saying, ‘we need your help transforming in the digital space.’”

That’s what Google is working hard and investing billions to accomplish. And Alegre would be the first to admit it is a work in progress because that is the Google way.

“The reality is there is no master plan at Google. At heart, we are a start-up that has a lot of strengths and assets, but we are trying to solve really big problems for the greater good. That means you have to take certain situations and approach them like a start-up and say, ‘let’s figure it out.’”

Figuring out voice shopping is the type of really big problem that Google founders Larry Page and Sergey 28

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Brin like to tackle, according to Alegre. They want to bring 10X change to solving a problem rather than an incremental tweak. They start with what is a really difficult problem to solve and how can technology be brought to bear to develop a solution, is how Alregre explains the thought process and the approach Google is taking with the Google Assistant, Google Home and integrations with a growing roster of partners.

“We feel we need to be part of the solution for retailers. We want them to be successful because they have been long term partners of ours,” Alregra said.

There is something in it for Google too, of course.

The company generates revenues by selling devices and it earns a commission on retail sales it helps facilitate.

Alegre doesn’t share specifics, but the amount isn’t large or he wouldn’t be getting asked, “why did you launch this if there isn’t really any money involved?’”

His response is like that of so many technology entrepreneurs in Silicon Valley who apply a philosophy of building something useful and figuring out later where the money is.

“If you focus on innovation and you can bring value the rest will figure itself out,” Alegre said.

As far as retailers are concerned, figuring out e-commerce and the conversational aspect of it is something they need to happen soon rather than later. Amazon isn’t slowing down and just like with other things it has done, such as creating an expectation that shipping online orders should be free and not take more than two days, shoppers will want to communicate with other retailers the same way they do with Alexa or they won’t bother.

Somewhat ironically, one of Google’s biggest partners is Amazon and it also has a deep relationship with Apple, which is expected to launch its own conversation device called Homepod this spring. Amazon distributes apps through the Google Play store and Google syndicates ads to Amazon.

“In the space we are in, those that you would consider competitors with Google are also likely to be partners,” Alegre said. “We’ve had a more than a decade partnership with Amazon and it is a very positive relationship but at the same time there areas where we are going to compete and both companies are aware of that situation.”

However, unlike Amazon, which has an “us against them” worldview, Google is an open platform when it comes to surfacing information in queries or working with retailers to develop and grow conversational commerce. If it is successful with the latter, it is possible to envision a scenario in which a federation of retailers have a direct connection with Google, access to the Assistant is pervasive via the Home device or other means, more shoppers discover the magic of voice shopping and use it with greater regularity. There is a lot of work to be done to execute such a vision with 2018 setting up as a pivotal year for Google and its partners to make further inroads with shoppers and possibly turn the tide against Amazon, or at a minimum slow its market share gains. RL

A

Okay Google, WHO IS CINDE?

WHILE AMAZON’S ALEXA AND GOOGLE’S ASSISTANT VIE FOR DOMINANCE IN THE HOME, THE RETAIL WORLD HAS ITS OWN VERSION OF A VIRTUAL ASSISTANT AND HER NAME IS CINDE. > Mike Troy

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An acronym for Conversational INsights and Decision Engine, CINDE is a first-of-its-kind digital analytics assistant that brings new capabilities to business users accustomed to running queries or consulting spread sheets.

The ground-breaking natural language processing virtual assistant was developed by Symphony Retail Solutions and unveiled in Paris last fall at the company’s Xcelerate Retail Forum.

“CINDE is not like other, more general digital assistants such as Siri, Alexa, Cortana, that are able to do a few simple tasks for the user based on speech input” said Pallab Chatterjee, Symphony’s Retail Solutions Chairman.

“She has pervasive insight based on artificial intelligence and machine learning to understand retail business trends specific to grocery and hard goods, continually learn, and proactively alert users to critical issues that need attention.”

As with other assistants, CINDE is designed to receive natural language input from users and provide conversational answers. However, she applies those capabilities to the retail enterprise and responds to highly detailed questions through use of deep analytics, data mining and immersive visualization into a store’s department, planogram, and product level. Because of what Symphony describes as contextual intelligence, CINDE then serves that information using the most appropriate visualizations to give holistic insights for actions that can or should be taken.

For example, rather than a user needing to look up a report for a specific category in a specific store, they could simply ask CINDE how the category is performing, and dig into what trends are affecting the category’s performance, what products shoppers are buying instead of a specific product or how promotions for a category or product have performed.

“CINDE is a game-changer and adds significant advantage and capabilities to retailers in their day-to-day challenges of serving the ever-changing needs of customers,” said Joan Lewis, a Principal with Joan Lewis Consulting and former Senior Vice President of Consumer and Market Knowledge at Procter & Gamble. “She provides conversational insights and actions for execution that would take teams of analysts weeks to produce, meaning

users would be taking action on stale data.”

Like many a good idea, CINDE came about because, as Symphony’s Senior Vice President of Product Strategy, Sy Fahimi, explained, the company asked itself, “why can’t we bring the simplicity of what we are all used to in the consumer world to the business world. Why can’t we do a Siri for business?”

In November 2016, Fahimi said the company took the view, “let’s go see if we can figure this out.”

Eleven months later after beginning with a clean sheet of paper, CINDE was born and put in the field with a major food and consumables retailer as a test case.

CINDE is already capable of answering about 30,000 questions about topics such as sales, customers, competitive pricing, promotional effectiveness, inventory and “CINDE offers a assortment by accessing information that resides in completely different retailer’s systems.

“CINDE offers a comparadigm for category pletely different paradigm managers and executives for category managers and executives who don’t enjoy who don’t enjoy having having to click through things to get information,” to click through things Chatterjee said. to get information,” While CINDE’s current capabilities and the sub-one —Pallab Chatterjee, second response rate to proSymphony’s Retail Solutions Chairman viding answers is impressive, things really get interesting in 2018 as new skills are added. Her new capabilities are expected to be more prescriptive in nature with users able to query CINDE about recommended strategies.

“We are building a recommendation engine and I’m very excited about the speed at which we are doing it,” Chatterjee said. RL JANUARY/FEBRUARY 2018 Retail Leader.com

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> HUMAN CAPITAL

WOMEN in TECH BECOMING A FEMALE EXECUTIVE IN THE RETAIL TECHNOLOGY WORLD REQUIRES PERSEVERANCE AND SERIOUS SKILLS. HAVING FOUR BROTHERS AND SPENDING TIME IN THE MILITARY DOESN’T HURT EITHER. > By Cheryl Sullivan

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Building a career at the intersection of retail and technology poses unique challenges and opportunities, especially for women looking to advance into executive ranks. Retail is at a historically challenging crossroads with the rise of Amazon, the proliferation of multi-national discounters, savvy shoppers comparing 24/7 across all channels and relentless pressure on margins even as costs continue to rise. Retailers who succeed in this volatile environment are doing so because they are aggressively innovating, on the technology front as well as in other parts of the business such as promoting diversity throughout their organizations.

These are exciting times in the retail and technology world as new opportunities arise for women. As someone who’s developed a healthy career in retail technology, what follows are lessons learned from my journey along with some ideas about how the industry can advance further, especially when it comes to women in senior leadership roles.

THE FREEDOM OF FEARLESSNESS Growing up with four very active and competitive brothers and two sisters, I was a rough-and-tumble kid active in all kinds of sports. So perhaps it’s not surprising that my first career was in the military. I enlisted in the U.S. Navy at a time when many men did not accept women in the service and there were rules against women serving on ships. Unlike my male counterparts, to be accepted as a peer I needed to prove that I was qualified to be there.

I needed to work twice as hard to demonstrate my value to them and to the military. The challenge became even greater as I was promoted in rank and was placed in a position where I outranked men, requiring me to direct and lead those who challenged my right to exist in their world. This was an instrumental time in my career development as I learned the fundamental skills of being a leader, such as leading by example and earning respect.

My military journey was in the special intelligence arena, which was a great fit for my interest in combining big-picture perspectives with close attention to detail, data, and facts. As I moved up the ranks in the cryptology field, I was exposed to advanced technologies not widely used in the civilian world. I was attracted to the techie aspects of the role from the start — which turned out to be a key building block for my post-military career.

Although it is somewhat less so today, at the time I first entered the tech arena, it was very much a man’s world with something of an “old boys club” mentality. I’ve never had the 30

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Cheryl Sullivan, Chief Marketing and Strategy Officer, Revionics.

mindset, then or now, that my gender should stop me from succeeding at anything I set out to do. But I knew — and accepted — I would have to work twice as hard to prove my value and worth to earn my place at the table much as I had done in the military. “Fear” isn’t really in my vocabulary, so I never shied away from going for what I wanted with everything I had.

Whether in the tech world or the military, fearlessness is your friend and grit is a prerequisite for success. If you’re willing to take on new challenges or go where others have hesitated before, you can meet with very rewarding successes.

THE TECHNOLOGY TRAJECTORY After the Navy, I joined FHP, a prominent HMO, where my love for technology continued to grow. So much so, that despite the fact I did not own a computer, I spent many long evenings after putting my kids to bed on a self-study course to teach myself to program. I would then arrive early and stay late at work to have access to a computer to test out what I had learned.

FHP, like many non-tech organizations, preferred to outsource many technical initiatives rather than trying to build expertise in-house. So, when we needed a new application that would enable us to manage and report on hospital utilization, the company sought proposals from technology vendors. I set out to write the application myself and spent evenings coding a solution. Before outside firms submitted their proposals, I surprised my colleagues with a solution.

At first, no one would consider it. How could a non-technical, relatively new team member design anything that was usable — let alone useful? But I convinced first my boss then other colleagues to try it, and they, in turn, became champions for the cause. As we overcame the initial skepticism, my solution was cautiously deployed in a trial usage. It ultimately proved so successful

that it was rolled out to multiple states. Soon I was promoted to a position within our IT team and helped to build additional solutions that improved efficiency and were delivered far more cost-effectively than if we’d outsourced the function.

The takeaway here is to be constantly learning and fearless when it comes to doing the unexpected. Don’t take “no” for an answer when met with resistance. When you run across that professional challenge that you are passionate about, invest in yourself to successfully take on that opportunity, even if it means thinking outside the box and doing the impossible. Professionally you are your own brand, and no single employer will ever be able to develop your brand as fully as you can. It requires investing your own time and resources to develop new skills, but the investment ultimately pays off — and often in unexpected ways.

READY FOR RETAIL When developments in my personal life took me to Chicago, I landed at Nielsen as a senior technical consultant implementing price, promotion, and space management solutions for both retailers and consumer packaged goods companies. I found the business side of retail fascinating, particularly category management.

Here I took the opportunity to work very closely with The Partnering Group, who were the founders of the category management 7-step process, and became an expert myself. By this point, retail and CPG had set their hooks deep in my professional psyche and I began to gravitate towards the business vs. technical side.

Miller Brewing Company attracted me with a role in their new category management department. This in turn gave me the opportunity to lead their assortment and space management department, delivering category business and space management plans for both retailers and CPG. Here I began to refine my leadership skills and deepen my knowledge of the value of analytics in CPG and retail.

Being presented with an offer to combine my retail and CPG business knowledge with technical skills, I accepted a position of VP of Category Management with Intactix. I was asked to take on the responsibility of expanding their space management business into EIA (Efficient Item Assortment) and category business planning. It was my first experience reporting directly to a CEO. It wasn’t until after I arrived that I realized the CEO assumed this would be possible with one part-time developer. Adding salt to the wound was learning there was no category management or assortment domain expertise in-house.

There I was, with a major initiative, no development resources, and no internal domain expertise available to help me. It was at this moment that I learned how important it was to think outside the box. Not willing to accept defeat, and after convincing the CEO of the magnitude of the opportunity, I secured the funding that allowed me to hire a third-party development firm. I then set out to establish a retail industry focus group which consisted of some of the most prominent retail and CPG companies such as Supervalu, P&G, Quaker, Nestle, GE,

The retail technology world still lacks women in senior executive roles, although the situation has improved from when Cheryl Sullivan entered the industry nearly 30 years ago.

JANUARY/FEBRUARY 2018 Retail Leader.com

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> HUMAN CAPITAL

Revionics CEO Marc Hafner and Chief Marketing and Strategy Officer Cheryl Sullivan (on stage) co-host the annual Revionics Insight summit attended by retailers, CPGs and industry analysts.

Anheuser-Busch and Kellogg’s. I leveraged the focus group to determine the product requirements and validate designs.

After the initial debut and positive customer response, we brought the products in-house and a hired a full development team dedicated to the initiative. The success of the solution brought with it industry-wide attention and Intactix was acquired shortly afterward. These solutions still exist in the market although they have evolved.

The lesson from this experience, whether someone is a woman or a man, is that a dead end isn’t always a dead end, but rather a unique opportunity to creatively think outside the box. Believe in yourself and view setbacks and obstacles as an opportunity to achieve unprecedented success. Ensure you have a solid business plan and are able to communicate it clearly at the executive level. Strategic visions mean nothing if you can’t operationalize and execute against them.

PATH TO THE C-SUITE Having seen firsthand how a strategic approach to product development can create significant business value, I left Intactix and co-founded my own company as CEO with two other partners. We had a clear idea of what we wanted to accomplish, and we set aggressive milestones, secured funding and had a strong following. Within a year we were acquired by i2 Technologies, where I became VP of Category Management. As my expertise and experience in retail deepened, I took on a variety of executive-level product management, marketing and strategy positions in companies addressing a wide range of retail and CPG challenges, including Spectra Marketing, Oracle, and ems. Today at Revionics I am Chief Marketing and Strategy Officer, part of an executive team leading exciting growth and innovation at a company known for applying leading-edge machine learning science in a SaaS delivery model to deliver game-changing price, promotion and markdown optimization for retailers. I was lucky to be brought in 6-1/2 years ago by a CEO who recognizes both the value women bring to a technology company and the value of placing people in leadership positions, not because of gender but based upon their ability to do the job and a track record of proven results.

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THE OUTLOOK FOR PROGRESS Relative to when I began my career in retail technology, we see far more women in positions of respect and authority. Thankfully the number of times I look around and realize I’m the only woman in the room is growing less and less frequent. That said, it’s disheartening to see how lopsided the figures still are when it comes to women in industry leadership positions, and it defies rational thinking.

There are many reasons why retail — and any other competitive businesses — would want to have more diversity in leadership positions, and most compelling is the very clear business case. Research has shown unequivocally that diversity in the executive suite and on the Board helps bring innovative thinking to the table that is almost certainly more reflective of your full customer base. Fresh minds contribute fresh perspectives on issues, and fresh perspectives keep your organization sharp and competitive. Research again proves that companies with diverse perspectives and leadership better compete in the market and deliver more successful business results.

Women also often have strong problem-solving skills — they generally take a more collaborative, inclusive approach that can lead to better outcomes. From a recruitment standpoint, which is critical in today’s tight labor market, having C-level women sends a positive message about an organization’s culture: that it is open to diversity and supports women and other historically under-represented groups in the workplace, and that in turn helps to attract and retain top talent.

We are gradually seeing more women moving into C-level positions, but organizations need to continue to consciously make sure they foster a culture that rewards innovation and accomplishment, and that does not grow stagnant “because we’ve always done it this way.” On the whole, I’m excited to say that the outlook for women is more positive today in the retail IT industry than at any other time in my career. I’ve had tremendously rewarding and challenging experiences, and I look forward to many more ahead. Like anyone else, I’ve taken my share of hard knocks, but maybe one of the most important lessons I can impart is to remember that failures are just stepping-stones to success. Don’t let them discourage or define you, but rather give you key insights that can propel you forward. RL

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> TECHNOLOGY AND INNOVATION

Turning Disruption Into

OPPORTUNITY

Andrew Appel is a former McKinsey consultant with an economics MBA who helped drive growth at several Chicago area companies before becoming CEO at IRI. He joined the provider of big data, analytics and insights five years ago to accelerate growth and position the company as a market leader just as turbulence in the retail and consumer goods industry was intensifying. Appel enjoys a unique vantage point on the industry and spoke with Retail Leader about today’s most pressing issues, food retailing innovations and his formula for leading in uncertain times. > By Mike Troy Retail Leader: What is your outlook for retail and consumer goods in 2018? What are you hearing from customers?

Andrew Appel: The market for retailers and CPGs will continue to be difficult because the level of change is unprecedented. Consumers are shifting their buying behaviors and brand preference more than ever before. You have a battle going on between Amazon and the rest of the industry as they take their disruptive business model to the CPG and grocery retail sector and that creates a challenging environment. You also have certain investor groups focused on short term profits, although that is starting to diminish somewhat.

RL: Are the growth challenges we are seeing more demand driven or related to new types of competition and new market dynamics. You hear a lot about people buying less stuff?

AA: The growth rate in CPG and consumer health has been pretty stable and moderately low for the past three years. If there is a generational shift in buying in terms of dollars spent per year as a percentage of personal incomes, that’s something I don’t hear a lot. I also haven’t seen a lot of facts that would suggest Millennials or Generation Z consumers are spending materially less money on consumer goods products that they were 20 years ago.

RL: What trends are you seeing then as it relates to growth.

AA: There is a shift in the size of companies succeeding and it has been a trend for three or four years. The top 50 CPGs, those with revenues of $5 billion or more, have seen flat to 1% growth, midsize companies in the $1 billion to $5 billion range have seen 2% to 3% growth and those with sales less than $1 billion are growing at 5%. There has been a different phenomenon with retailers’ growth because Amazon and e-commerce have been absorbing most of the growth.

RL: What’s your outlook for 2018?

AA: It is going to continue to be a very disrupted market and those who can move quickly and add value will win. I sometimes remind my team that Apple cannibalizes its entire product line every two years.

RL: IRI helps companies realize the full value of their data. Speak to the proliferation of data that results

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from all the new inputs and how you account for that in your model.

AA: It starts with a foundation of 50 to 60 partners in our ecosystem whose data we integrate into our data cloud. We have partners that allow our customers to see thousands of characteristics of consumers. We want to be able to understand every exposure or demand creating event that happens in someone’s life whether it was a minute, an hour, a week, a month or a year ago. We try to do it as granularly as possible and where we don’t have every single piece of information we have all sorts of projection algorithms. Our platform is highly open so we also have the ability to ingest other data sources and we connect to 100 other platforms.

RL: The scenario you just described regarding the abundance of information, do retailers have the executional capabilities to match up with what the data tells them they need to do. Is there more data than can be put to practical use?

AA: The explosion of data has vastly outpaced the ability to interpret, analyze and take action, so yes, that is one of the challenges. Retailers are trying to catch up at a rapid pace and put the information in the hands of the right decision makers sooner.

One of the areas that is easier is personalization, even though people have a long way to go, because there are mechanisms to directly communicate to the consumer.

RL: The conventional wisdom these days is that there will be this big shift of center store categories online.

What is your take on the shift and the pace at which it will or could happen?

AA: It depends on the definition of online and in general when you see those type of statistics it is really hard to predict. I do believe the click and collect model is going to play a very important role in the next five to seven years of grocery retail and it has a very good shot at becoming the predominant model. If you look at the top 100 metro areas and whether the delivery model or the click and collect model will prevail, Amazon obviously saw the need to do something differently when it bought Whole Foods.

People have shown a willingness to go pick up their groceries at a store. The battle for the consumer is whether the delivery models can reduce their costs enough and overcome challenges with fresh because it has traditionally been difficult to deliver a high quality fresh experience remotely.

RL: Come back to partner ecosystem. How do you work with CPG companies in the product development phase, to leverage insights to develop items people want to buy before they know they want to buy it. How early in the process do you get involved?

AA: We are involved in it pretty early. We have our Hendry group inside IRI that looks at market structure and product portfolio gaps. More recently, we invested in the AI and machine

learning company Machine Vantage which helps us figure out the next trends in human behavior. We do a lot of work on new product launches as we’ve now built of data pool of more than 350 million loyalty cards that gives us a much greater granularity than we used to get with panels. There is nothing like having granular buying data on tens of millions of people and billions of trips to provide rapid insight on the effectiveness of anything you are doing with a new product launch, an ad campaign, a promotion or shift in price. That kind of access gives us a huge amount of information about what shoppers our doing and is very useful in our new product identification and launch service.

RL: You touch on it earlier, the amount of change going on in the market, and helping your customers prosper in a disrupted landscape. What is your approach to imagining the future so you can position IRI for success in an unknowable future.

AA: A lot of things come to mind, but five stand out. We focus on a couple simple things in everything we do. Are we helping companies better serve consumers? That requires us to understand better than anyone in the world, I hope, consumer behavior and is what we are doing helping our clients grow their business. We come back to those two base principles time and again and that brings us to the third point. You have to find a balance between the future and the present. We are always trying to figure out where the world could be 10 years from now and then bring it forward. The fourth thing would be to never settle in terms of your intellectual curiosity. You always have to be challenging your own assumptions, disrupting your own business models and whenever you think you got it right take the alternative view with a healthy degree of skepticism. There is also a cultural dimension of risk-taking, which is why I’m a believer in building a culture that accepts a lot of different character types. It takes a village of very diverse, heterogeneous people to accomplish great things. RL JANUARY/FEBRUARY 2018 Retail Leader.com

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> TECHNOLOGY AND INNOVATION

Whole Foods Secret Weapon WHOLE FOODS MARKET ARMED ITSELF WITH NEW ANALYTICAL CAPABILITIES BY MIGRATING TO THE CLOUD AT THE MOST OPPORTUNE TIME — FIVE MONTHS PRIOR TO BEING ACQUIRED BY AMAZON. > By Mike Troy

T

The price cuts Whole Foods made on key items when it was acquired by Amazon last August and then again at Thanksgiving had the food retailing world buzzing. The high profile moves earned the companies tremendous publicity and prompted speculation about future actions.

Meanwhile, less obvious changes had been set in motion long before the Amazon deal that promise to have a bigger impact on Whole Foods in 2018 than any press release about a reduction in organic turkey prices.

In March 2017, Whole Foods completed its migration to Teradata’s IntelliCloud, making it one of the first users of the technology firm’s newly launched securely managed cloud offering. The process had begun the prior year when Richard Beaver joined Whole Foods in May 2016 as global senior director of enterprise information management with the intent to upgrade an existing data warehouse. However, rather than bolting new capacity onto a 13 year old Teradata system as the company had been doing every few years to stay just ahead of growth, Beaver and others in the technology group grew interested in the cloud. Many of the reasons why were the same as those of other companies, namely faster decision-making, lower cost and scalability — but Whole Foods was also eager to address a major deficiency it had when it came to understand shopper behavior. Business users were clamoring for increased analytics capabilities that Whole Food’s on premise system was laboring to provide.

“We were pushing as a company to find new areas of analytics opportunity and one of those areas was around customer marketing. Believe it or not, Whole Foods did not have a CRM program for the first 30 years of its history,” Beaver said. “We were just starting to get into that space and we knew that it was going to create a tremendous amount of information and just upgrading the (on premise) system wasn’t going to allow us to be successful.

We needed to make a step increase in performance and the cloud offers that.”

Transitioning to the cloud Whole Foods is well-equipped to apply analytics to its shopper data and that of Prime member households thanks to a prescient decision that saw the company move to the cloud five months before the Amazon acquisition.

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Retail Leader.com JANUARY/FEBRUARY 2018

was an easy choice, but Beaver and his team soon realized the switch entailed many challenges. One of the biggest related to the capabilities of the carrier network over which Whole Foods data would pass. The retailer needed a 1 gigabyte line to connect its Austin, Texas headquarters to the Teradata data warehouse in Las Vegas. Whole Foods and Teradata worked with local and national carriers to get a dedicated line, a fivemonth process Beaver described as laborious.

The distance between the business users and the data they would be accessing also created the issue of latency, essentially the time lag that occurs when a user makes a request of the system and data is retrieved. With an on premise system latency is minimal, but Whole Foods data was shuttling back and forth roughly 1,300 miles so Beaver and the team had to change the manner in which information was transmitted by re-architecting systems.

“There are a lot of things you have to think about from a cloud migration perspective,” Beaver said.

One of the more straightforward aspects of the entire process involved the actual physical migration of data. In March 2017, Beaver’s team, including Ken Casey, senior manager of Whole Foods data warehouse and Caden Schaefer, senior data warehouse architect, began a four-day process to load the retailer’s data on a Teradata supplied network-attached storage (NAS) device, essentially a file cabinet size thumb driver. The device was transported to Las Vegas by FedEx where the data was extracted to the Teradata IntelliCloud to be access by the business users back in Austin.

With the hard work, planning and roadmapping leading up to the transition out of the way, Beaver said, “the go live was a snoozefest,” and undertaken with minimal fanfare inside the company. Even so, business quickly noticed the speed at which applications ran and query results returned, prompting Beaver to receive several emails asking what he had done.

The cloud migration and the increased abilities Whole Foods now possesses to extract value from its data comes at an opportune time for the company. That’s because a key advantage of being part of Amazon relates to finding new ways to serve customers by integrating Whole Foods data with Amazon’s behavioral data gleaned from the more than 60 million households estimated to be Prime members.

“We don’t quite know what the future holds, but I know it’s going to be a lot funner,” Beaver said. “Now we can truly innovate on a platform and with a company that has the scale to allow us to do it. All of that is pretty exciting for us.” RL

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Sub󰇷󰇷󰇷󰇷󰇷󰇷󰇷󰇷󰇷󰇷󰇷 󰇷󰇷󰇷 󰇷󰇷󰇷󰇷󰇷 󰇷󰇷󰇷󰇷󰇷󰇷󰇷󰇷 ne󰇿󰇿󰇿󰇿󰇿󰇿󰇿󰇿󰇿󰇷󰇷󰇷󰇷󰇷 󰇿󰇿󰇷 󰇿󰇿󰇿󰇿󰇿󰇿󰇿 󰇷󰇷󰇵󰇵󰇵󰇿󰇷󰇵 d󰇷󰇿󰇿󰇿󰇿 󰇹󰇹󰇹󰇹󰇿󰇹󰇹 󰇹󰇹u󰇹󰇷󰇷󰇹󰇹󰇷󰇷󰇿󰇿󰇹 󰇿󰇿󰇹󰇹en󰇷󰇷󰇿󰇿󰈧 󰇿e󰇿󰇿󰇷󰇷󰇷󰇷󰇹󰇹󰇹󰇹󰇹󰇧󰇵󰇵 󰇿󰇿n󰇷󰇷 󰇹󰇹󰇷󰇷󰇹󰇿󰇿 󰇵󰇵󰇷󰇷󰇧󰇧󰇷󰇷󰇷󰇷󰇧󰇷󰇷󰇷󰇷 f󰇷󰇶󰇶 󰇷󰇷󰇶󰇿󰇿 󰇶󰇶󰇷󰇷󰇷󰇷󰇷󰇷󰇷󰇿 󰇹󰇹󰇹󰇹󰇶󰇶u󰇹󰇿󰇿󰇹󰇹󰇷󰈦

> SUPPLY CHAIN

Blockchain for the Supply Chain WHILE DIGITAL CURRENCIES CONTINUE TO GENERATE BUZZ, THEIR UNDERLYING BLOCKCHAIN TECHNOLOGY IS QUICKLY FINDING A HOME IN THE SUPPLY CHAIN WORLD. > By Laurence Haziot

T

The holiday season may be over, but retailers can’t let down their guards yet.

From returns and exchanges, to everyday measures like ensuring the quality of the products they sell, competitive pricing and managing supply and demand, retailers are shining a spotlight this coming year on their supply chains.

Retail stores know merchandise returns and exchanges significantly impact their bottom line. Not only do onethird of gift recipients report exchanging at least one item during the holiday season, but returns equate to approximately $260.5 billion in lost sales for U.S. retailers, according to the National Retail Federation.

With the high volume of holiday gift returns on top of the existing complexities around supply chain management, it is becoming increasingly difficult for retailers to decipher between legitimate and fraudulent activity. Companies are searching for new methods to quickly identify fraudulent transactions and returns, which can cost retailers between $9.1 billion and $15.9 billion annually.

An easier, more secure solution for retailers to authenticate and effectively manage these transactions is by using blockchain technology. Simply put, blockchain is a shared ledger that is decentralized and resistant to tampering. It allows verified contributors to store, view and share digital information in a security-rich enviLaurence Haziot, Global Managing Director and General Manager Consumer Industries, IBM

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Retail Leader.com JANUARY/FEBRUARY 2018

ronment, which helps to foster trust, accountability and transparency in business relationships, making it an ideal solution for supply chains.

BLOCKCHAIN TO THE RESCUE Blockchain’s trusted and shared system of record creates a permanent digitized chain of transactions, and provides retailers the ability to accurately and quickly trace products throughout the world.

The implementation of blockchain technology is growing at a rapid pace. In fact, a recent study by IBM’s Institute of Business Value (IBV) found one third of almost 3,000 C-Suite executives surveyed are using or considering blockchain in their business.

In our globalized economy that is dependent upon both exports and imports, properly tracking the shipments of retail products from manufacturers to stores to customers is complex. According to Maersk, a simple shipment from East Africa to Europe can go through nearly 30 people and organizations, including more than 200 different interactions and communications among them tracked largely in paper documents. This complicated process demonstrates the value of and need for blockchain’s digital chain that tracks products accurately and in real-time.

Not only does blockchain pinpoint a product’s location, but it also traces the authenticity of products.

Fraudulent activity can occur as products move from manufacturer to the supplier, to retailer and finally to consumer — and back, if a customer is returning or exchanging the item.

Tracing authenticity is imperative especially with luxury items. Retailers can smart tag designer products — handbags, sunglasses, watches, etc. — and put them on a blockchain to ensure that the purchased or returned items are authentic. This puts a hard stop to brand impersonation. For

example, Everledger uses blockchain to authenticate and trace the origin of high-value and luxury goods, such as diamonds and wine that are authenticated by trusted players like certificate houses. This better protects suppliers, buyers, and shippers against theft, counterfeiting and other forms of corruption.

THE IMPLICATIONS FOR FOOD Blockchain doesn’t just help track holiday gifts. Its technology is also valuable in ensuring food safety among grocery retailers. Recently, a group of leading companies including Dole, Driscoll’s, Golden State Foods, Kroger, McCormick and Company, McLane Company, Nestle, Tyson Foods, Unilever, Walmart and IBM banded together to work across the global food supply chain to further strengthen consumer confidence in the global food system. As an extension of this work, Walmart, JD.com, IBM and Tsinghua University launched a Blockchain Food Safety Alliance in China to apply blockchain technology for food traceability to support offline and online consumers. This partnership demonstrates that blockchain is applicable in any retail sub-sector.

A new IBV study released this January surveyed 203 organizations in the consumer industry finding 18 percent of the total of consumer industry organizations are currently using blockchain. The top six specific consumer areas which those surveyed see blockchain transforming are product safety and authenticity, supply

chain optimization, finance/operational processes, regulatory compliance, promotional strategy management, customer engagement and co-creation.

There are also significant opportunities to introduce new business models that transform customer engagement. Nearly three quarters of surveyed consumer executives using blockchain expect provenance enabled product safety and authenticity solutions with blockchain to positively impact their industry and 59% think it will help create new business models in product safety and authenticity.

This is important as customers can feel let down when their choice items are sold out, face shipping delays due to inclement weather, or have difficulty in the return or exchange process. These experiential challenges shape a customer’s overall opinion of a retailer and the customer service they offer. Blockchain can help to better manage these variables that impact customer experience and expectations.

As the global supply chain continues to become more vast and complex, reducing complications and potential risk while improving customer service is possible with blockchain. We will continue to see how this new emerging technology streamlines the retail industry in 2018—and believe it’s a key opportunity to maintaining market share in the years ahead. RL Laurence Haziot is Global Managing Director and General Manager Consumer Industries, IBM

JANUARY/FEBRUARY 2018 Retail Leader.com

39

Powered By

The RL ReseaRch RepoRT Do you plan to use your smartphone or tablet to check prices at other retailers while shopping in-store?

Voice commerce comes calling

51.71% Yes

Voice commerce will develop and mature in the coming years, but for now mobile remains an undeveloped opportunity for most retailers. The vast majority of consumers are unfamiliar with the voice shopping process, and more importantly, do not own an Amazon echo or a Google Home device. That same can’t be said of smartphones.

The mobile commerce revolution is still growing and gaining momentum.

48.29% No

Hunt for a Deal: Mobile enables on-the-go comparison shopping and more than half of the 1,000 shoppers surveyed in Market Track’s Shopper Insights Series used a smartphone or tablet to check prices while shopping in-store during the holidays. The desire to get the lowest price mixed with the convenience of searching on a smartphone is a powerful combination for consumers. That only half of shoppers are doing this today indicates there is still huge growth on the horizon for in-store mobile browsing.

Do you use your smartphone while grocery shopping?

44.20% Yes

55.80%

The Importance of a Digital Strategy: Although our study found that 30% of consumers use their mobile device to compare prices while they shop in-store, mobile research extends to other areas. rice. About 21% of consumers said they check their emails for offers and coupons while 19% said they check a retailer’s mobile apps for deals and 18% look up product information/reviews. data shows retailers need a mobile strategy that extends beyond a pricing conversation.

No

What do you use your mobile device for while you shop in-store?

Comparing prices 30%

30.08%

Checking email for offers/coupons Checking a retailer’s mobile app for deals

25

21.21% 20

18.71%

Looking up product information/reviews Using mobile wallet

17.66%

Ordering items from another retailer

15

Other 10

5

0

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Retail Leader.com January/February 2018

7.66% 3.47%

1.21%

Mobile Behaviors in Traditional Grocery: every sector in the brick and mortar world has been affected by a shift towards mobile – even grocery. Around 44% of consumers use their smartphone while grocery shopping, according to Market Track research, and although most groceries are still purchased in-store, consumers are increasingly using smartphones to inform and enrich their grocery shopping experience. It may have once seemed to be an impossible world for mobile to break into, but the acquisition of whole Foods by Amazon and a focus on online ordering by grocers proves that even the traditional brickand-mortar experience has been impacted by a mobile-heavy society. Still, only 44% of shoppers claim to use their smartphone while grocery shopping, leaving plenty of room for further adoption. RL

> WHAT’S NEXT...

An Appetite for Change RETAILERS USE OF JUJITSU TECHNIQUES CAN HELP THEM WIN IN FIVE AREAS INFLUENCING THE FUTURE OF FOOD.

M

My childhood memories of holiday meal time are flooded with both favorite foods and frequent phrases. For instance, at holiday gatherings, amid the familiar smells of traditional dishes being prepared, I would often hear a relative utter the phrase, “I need to work up my appetite.” Knowing adults generally did not speak favorably of work, the younger me found the saying a bit confusing. Why would anyone purposely engage in an activity he didn’t want to do, just to become hungry? But as my years and palette have grown, I have come to appreciate the sentiment of wanting to do something that puts mind, body and spirit in a better disposition to enjoy the banquet placed before me. Food just tastes better when we are hungry, verified by the fact that our word appetite comes from the Latin root appetere, meaning desire or to long for something. The human experience of everything, including food, is heightened when accompanied by a yearning for it.

These days, I seem unable to have a single work-related conversation that doesn’t include the word “change.” We talk about the amount of it, the speed of it, the cost of it, and the never ending magnitude of it. We discuss its causes and how to avoid being its victim. While these are all worthy conversations, given the inevitability of change, perhaps our time would be better spent talking about developing an appetite for it. Rather than resist it, perhaps we should try another tactic. For example, the Jujitsu school of martial arts takes a unique approach to selfdefense. Jujitsu teaches that when an attacker approaches, rather than resisting the force, one should instead use the attacker’s energy to advantage by redirecting it slightly and in so doing, throw the attacker off balance. When it comes to change, perhaps food retailers are better served by taking a Jujitsu approach of not resisting it, but anticipating its approach and using its momentum to our advantage.

The emerging issues work that FMI has undertaken has identified five areas we anticipate will have a tremendous impact on the food retail industry in the next few years: the new consumerism, the new marketplace, the new workforce, artificial Intelligence/technology, and

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Retail Leader.com JANUARY/FEBRUARY 2018

> By Leslie Sarasin food production. The areas might be listed individually and sequentially, but all of them must be understood as intimately interrelated – think of a rope with interwoven strands rather than a food chain with individual links. Any one of the five areas influences and affects the remaining four. For instance, technology is changing the way consumers shop, the way the marketplace operates, the needs of the new workforce and the way food is being produced. The grocery shopping preferences of the new information-craving, personalization-demanding consumer are forcing us to rethink the marketplace, improve the way food is produced, reconsider the methods used to gather and use data, and reshape the way store teams interface with the public.

At FMI’s Midwinter Executive Conference, to be held January 26-29 in Miami, we will address these challenging areas from a variety of perspectives, but all with an attitude of developing an appetite for change. Top thought leaders and industry analysts will draw upon recent research, consumer trends and the latest technological developments to cover such critical areas as developing talent, applying artificial intelligence to business strategies, identifying consumers’ desires for fresh departments, and meeting the demand for local products and global tastes. These wide-ranging topics will be examined by some of the best minds in the industry, but the glory of the Midwinter setting is that the concepts presented can then be more deeply explored in casual social settings by some of the best practitioners in the industry. Or as one member put it, “I get to hear the latest, but then get out of the clouds and into the weeds with colleagues.”

I hope to hear your voice as part of the industry conversation about the ways emerging issues are challenging food retail. Together, we can develop an appetite for change and learn to divert and convert the energy of these challenges into workable assets and opportunities for the new food retail marketplace. RL Leslie Sarasin is President and CEO of the Food Marketing Institute.

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