unpackingDS_podcast
Peter_Episode1
PODCAST - Unpacking the digital shelf

Roundtable: Hooray for Creative Disruption!

It's definitely time to find the silver lining in the economic dark clouds. Rob and Peter put the week's news in perspective for the hopeful signs of the new digital age.

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TRANSCRIPT

Peter:

Welcome to unpacking the digital shelf, where we explore brand manufacturing in the digital age.

Peter:

Just me coming to you from the digital shelf institute's Cape Cod office as always these days. And Rob is in the Berkshires, Rob, Hey. So, Rob, I wanted to start out with a little inspiration for all the brand marketers out there. You brought this to my attention and it's really carried me along this week. The inevitable Seth Goden has a brilliant blog and his June 23rd message really was genius. You know, as usual, his entries are short, so I'm just gonna read it all. The title was "voices versus noise". So he says, "if it's not relevant, it's noise. If it's untrusted, unwelcome, or selfish, it's noise, but your contribution isn't noise. Not for the right people at the right time. The internet isn't a mass medium. The voices online are not for everyone. It's not the Superbowl or mash, or even the nightly news. Nobody reaches much more than 1% of the audience on any given day, but that tiny slice that does want to hear from you that needs to hear from you. That would miss you. If you didn't speak up for that audience, you are not noise. You're essential." I just, I love that for us doing this. And I thought for our audience that we are no longer in a world of mass-market, but in the masses of markets where we're increasingly niche, remembering how you are essential to your audience during this time is, and every time, is just super important.

Rob:

Yeah, this I mean, I just absolutely love this quote. I love Seth Golden's writings in general. He's got his most recent book. This is marketing is a manifesto on how marketing should be done now in the digital age. It's a short book, highly recommended. He has in his soul that he believes the value of a marketer is to be empathetic and to add value and to make people's lives better. And I love that view of marketing as opposed to, to drive sales, you know, sales for him are the result almost a side effect of having done great marketing. They're not, yeah, they're not the purpose.

Peter:

Yeah. They follow trust sales, follow trust exactly in any sale made without trust will be reversed until you earn it.

Rob:

Exactly. And so, the modern marketer, and especially in the digital age, the goal is to build trust, building a connection with your audience, and becoming one of these essential things that they go to on a regular basis and being a signal in the noise. And so he, I mean, there's this quote, we'll link to it. It's just absolutely wonderful. It covers the heart of this transition. And I think we're really only at the beginning of it. I mean, we, it's really easy to walk around and see marketing that is pushy, that is interrupted. That is about the brand and not about the shopper and the companies though, that is being more about the shopper and being more empathetic and, and solving their real problems are the ones that are going to succeed in the future in this digital medium when you know, your marketing is ignorable and people have to opt-in increasingly.

Peter:

It's marketing by human beings for human beings. We can't forget that. So anyway, that was, that was my moment of inspiration for this, for this episode. I'm not quite sure how to make a transition to the next article from this, but it turns out we're running out of coins. What is going on?

Rob:

So, first of all, a lot of people, this is a personal story. A lot of people are at home cleaning out their houses. And one of our good friends out here in the Berkshire's, they are helping, they're our age, you know, right around 40, they've got a kid coming and they're helping to clean out the grandparents' house to make room for the kid. And one of the things they found was a jar that the soon to be grandparents have been putting their pocket change in for 30 years. And so the jar is so big that, you know, it's a deadlift just to pick this thing up. And so they're like, okay, we need, we need to deposit this. So they go to a grocery store like a grocery. You couldn't do this during COVID for a few months, which is the root of the problem. Right now you can go to the grocery store and you can go to Coinstar and you can deposit this stuff. And in small change, they had $750.

Peter:

Holy mother,

Rob:

it's just, it's just incredible, you could imagine sitting there in the Coinstar with this monstrous jar slowly pouring it in for many, many minutes and just, you know, how loud those things are.

Rob:

They're set.

Peter:

I despise coins. Well, I mean, some of this came up because, so I read this in the New York Times, the Tennessee Congressman John Rose was at a hearing where the fed chair Jerome Powell was at, and he said a bank in his district told him it would run out of coins by the end of the week because the fed was only sending a portion of its usual order. And Jerome Powell said he was well aware of the issue and believed it would be temporary. He said and really raises confidence. We feel like we are making progress, which is, you know, anyway, but the critical part here, and the part that's painful is that for people with incomes under 25,000, about 43% of payments are made in cash. And so for the, for the unbanked, for lower-income people, like not being able to transact in cash and groceries, not being able to, you know, payback in, in coins is it actually a pretty critical issue in the banking industry.

Rob:

In so many ways has been kind of strangely exploitative of lower earners in the United States. Um, and ironically, we have really great NGOs that are helping people in Africa and other regions that the, you know, the great unbanked with dramatically less wealth than the people that we're talking about in the U.S actually enter the digital banking system, um, and enabling micropayments and things like that in a way that's cost-effective for everyone involved. And with COVID coins have a bunch of different problems. One of the problems is you don't want to touch them. You don't want to transact with them. And another problem is people haven't been able to deposit the coins in the Coinstar. Um, and so the good, that was a major source of coinage for, for, for a lot of folks in circulation there, you know, there's a lot of things going on like that. The long term solution here has got to be better integration of the unbanked into the digital banking system. Absolutely. And I don't know exactly what the solution there is. I know that there are startups here and there, but I mean, you're talking about a population of people that's early difficult to reach and in a lot of the normal marketing and content customer acquisition ways. So, it's a hard problem in the meantime. I mean, there's not much to do other than for the government to try to make more coinage and get it, get it to more places. And it's weird, it just feels like a weird problem in 2020 that we just don't have enough nickels and dimes.

Peter:

Well, one of them, I mean, to your point, one of the issues, I think that the DSI is going to take on for, I don't know, I think for the foreseeable future, one of the things particularly coming out of them, you know, the black lives matter movement has made me and us, I think, think a lot about, you know, about in this case. I think for us, the digital divide is just a topic that we're going to take on an ongoing basis and an upcoming podcast we're going to talk to. And John adopts Google's head of product design with quality in mind with diversity in mind. And, and that's just one of the things I think when you talk about the digital divide just for banking, I think that's, you have to approach it from that standpoint. Like how do we make sure that everyone has equal access to technology so that they can participate In the economy? I think it's, it's critical. So I'm looking forward to those conversations.

Rob:

So this week we've got a few stories that are, I would describe as second-order impacts of COVID. And I get that phrase from Benedict Evans and in our article that he wrote several years ago, about seven-second order impacts of self-driving cars. And, um, and also just simply second-order impacts of switching from gas, fueled cars to electric vehicles. And there's a lot of there, there's a lot of knock-on effects that you don't think about immediately. So for example, if you've got self-driving cars, the convenient sector disappears, you know, you've got seven or 8% of all retail is the gas station. Um, and, and, and similar, um, stores where you go purchase a couple of things when you're pumping, pumping gas or, and things like that go, right. If, if everybody's got self-driving cars. And so the fact that convenience will die with self-driving cars, isn't something that people normally think about. There are other things that change like LA. I remember the stat being something like 20% of all the square footage in LA is parking spaces. And with self-driving cars don't need that. They can live somewhere else, right? They can live in large towers. And so all of a sudden you get an absolutely incredible amount of real estate that can be used for other purposes. And that's not something that you generally think about. And so with COVID, we're getting to a point where people have, I think, beaten to death, the big themes, you know, Oh, people are doing digital now, Oh, people doing click and collect. Now how much of it is going to stick? I mean, we've certainly beaten it to death.

Rob:

Now we're thinking more about what are the, what are the unusual second-order effects that can themselves be big deals and can themselves be profound and a switch from physical currency to digital currency for a large percentage of shoppers who are unbanked is one of those that's actually kind of interesting to think about. And then another one, the second article that we've got here is the shoppers pulling back from specialty retail and in grocery, one of the specialty retail sectors that sort of ironically, you wouldn't have expected to suffer during this time, but has been suffering is the grocery store.

Peter:

Yeah, I think, you know, we've seen co-ops across the U.S, a 5.7% decrease in sales in April, and a 1.4% decrease in May. And you know, on the face of it, I would think co-ops should be doing great right now. They have the trust of their consumers and, and their neighborhood people. And they stock what they know their customers want. But I think, um, price is an issue

Rob:

And not just price, but even though a lot of them I think have done a good job with clicking collect, or calling collect or, or various variations of those things, they, you don't really think about digital when you think grocery co-op, you don't think cutting edge technology when you think grocery co-op. And so there's an element of this where I think a lot of people would assume that a Walmart or an Amazon or target has got this digital thing down. And if you're at home and you've got to do click and collect, you just, you might assume that they've got that right, but you're a co-op, you might not assume that they've got that or they haven't updated their website to make it clear that they've got that, or, you know, any, any number of issues will come up like that. And I, there's a psychological part of this that adds to the consolidation in grocery and the top three, I mean, people have been saying the top three groceries are gonna have, you know, 60 to 70 points of market share coming out of COVID, which is a dramatic increase from before. And it's at the cost of these, the smaller groceries I had. So I think the price is one part of it, but I don't think it's the whole story.

Peter:

Yeah. And we were, um, we were talking yesterday with Jason Goldberg, from Publicis and the Jason and Scott show, one of our favorite podcasts, we'll be having a podcast interview with him that we'll be putting up later. But one of the things he was talking about was that you know, what's going on right now is likely going to continue in one form or another through the end of 2021, just what it is like, there's an acceptance that needs to happen there. And so it does, when we see trends like this, it's concerning because it's for these businesses that operate in the normal, you know, the normal times and our press, I think the larger grocers are going to continue to take market share. And it's going to be a struggle for especially real Realty retailers across all categories.

Rob:

Yeah. This actually brings to mind if I want to, if I want to go from sad to happy, I think through the forest fire analogy always right, where you've got an old forest, there's a lot of crap on the ground fire comes through and then there's rebirth and new growth, and you got a stronger forest out of it. And forests rely on forest fires as part of their natural evolution and as part of their long term health. And the idea of capitalism generally is that you've got this creative destruction where old business models are replaced by new business models. And so there, there's a, there's a feeling that a lot of these old grocers that are old school have been following a supermarket playbook without much variation since the '50s. There was an article called the man who's going to save the grocery store. That's one of my favorite long reads of the last couple of years. I mean, it's like a 45-minute hour-long article read and, and really excellent. And it talks about transforming the grocery store from just like a place that you go shop to a place of community. And, you know, maybe COVID is going to cause market consolidation of the top grocers, but those grocers are really transactional. And that opens the space for more innovative approaches to the grocery store in the long run. And they'll be able to do it inexpensively. Another article that I read this week was saying that over the last 10 years with the booming economy, landlords have had the ability to continually raise rents anytime they want, and restaurants and specialty retailers have been able to just follow the Brent Trent. I mean, we're talking about dozens of the major cities across America, seeing way more than a low digit, double-digit growth of red prices, making it almost unaffordable to open a restaurant right now, a landlord is pretty happy to get anybody who will pay anything, right. And so the power has moved back to the tenants. I listened to a podcast interview on the Tim Ferriss show with one of the co-founders of the Alinea group in Chicago. And what he was saying is that now the 25-year-old innovative chef who couldn't afford to open her own restaurant or couldn't get along, she's the one that's going to kick a Linnaeus button, the future, because now she's going to be able to get a nice spot of real estate for a low price and try something new. So, so he was, he was very, um, he thinks that the fact that a lot of restaurants are going to go under is a good thing because he thinks a lot of restaurants were poorly run. And in this space, maybe a lot of groceries going under is a good thing, because it may open the door for the next generation of grocery stores, Allah, the man who's going to save the grocery store.

Peter:

Yeah. And I think we're going to see that across a bunch of categories. You know, when I think of some of the old line B2B distributors that just have not gone digital at allI think, I think there's going to be challenges in that, in that category as well. If you're, if you haven't sort of moved from your old sales model, if you haven't gotten your inventory and, and content online, like that's going to be, a big struggle, I think.

Rob:

Yeah. I mean, COVID feels more like a forest fire. It's more revolutionary than evolutionary in this space. And, it's gonna accelerate the decline of a lot of business models that were already declining. And it's also gonna in, in doing that all at once. I think it opens up a lot of opportunities for people to be innovative and bring new models to market and bring new models to market that are more relevant to the modern age.

Peter:

Yeah. To our listeners who wonder how Rob can possibly absorb all of this reading. I found out this week, he doesn't pay any attention to the news at least through traditional channels. So

Rob:

Yeah, like if you want to be really angry all day, then, you know, watch CNN and Fox or New York times or wall street journals, you know, just things that'll make you very anxious and angry and take a lot of your time. And, and if you, if you don't want to be anxious and angry, and instead you want to learn a lot of things, then, you know, read the better analysis.

Peter:

You know, we've been talking about digital innovation and, and I know sort of, from second-order back to first order, I think to close out the episode, there was an awesome interview with Lubomira Rochet from L'Oreal with Lila Abood at the financial times. And just the big standout quote that caught my eye was in e-commerce. We achieved in eight weeks what it would have otherwise taken us three years to do. Now that's a first-order story. Right. The digital transformation of the beauty sector has just been phenomenal during this time. And L'Oreal is a prime example of that. And the interesting thing that really stood out to me, Rob, and I'd love your opinion on this, you know, they bought a Canadian startup in 2018, ModiFace, which allows people to sort of essentially test out hair color or foundation tones digitally right online. It turns out 15 retailers, including Amazon boots and ASMR Watson, have added that code to their websites and apps. And I just thought for essentially, for them to sort of lower their firewalls and let L'Oreal's code go onto their sites. I think that's just, that's changing the PDP, the product detail page in a, in its sort of one of clearing out the forest fire and allowing for more collaboration between retailers and brands to create an experience. Yeah, there's, there's

Rob:

The big picture here is that there's still an experience gap, mean physical retail and digital retail, and a lot of ways. And in food, for example, there's sampling and in beauty, there's also sampling where you go to a Macy's and you try it, try to makeup and stuff like that. And in automotive purchasing, you test drive and so on and so forth, and those are not replicable online. Exactly. But you can get close in a lot of ways and technology is getting better and better and allowing you to get closer and closer to motor face acquisition looks pretty good at the time. And now it looks awesome. And it's, it's just an example of where if a brand has a truly innovative experience, the retailer will work with them. The retailer will generally, I mean, even Amazon will allow the brand to express the experience on the site because they know that it serves the end shopper better. So most brands are not really investing in a digital experience that much. I mean, it's still the eCommerce teams that we talked to. You still get the image leftover remanence from the brand and creative teams. You know, there's still begging, borrowing, and stealing for good digital imagery. A lot of times. I mean, honestly, I've seen companies in CPG and their 50 billion-plus range where you go to the Amazon product detail page, you know, look at the image gallery. And it's literally screenshots of their website that, you know, an intern eCommerce team, just so that no offense, Matt

Peter:

Running our production.

Rob:

Yeah. Well, I mean, you know, interns, interns do the real work and, and so like, how is it that a $50 billion CPG company doesn't have a graphic designer to do good digital imagery for the product detail page, which is the most important branding asset on earth right now. So, you know, you look at a L'Oreal and you look at their investment in the experiences. It gives them, gives them a competitive advantage, over everybody else. And it gives them something to offer their retail partners. That's unique in partnership. And I mean, it's just, it's just a heck of it.

Peter:

It also gives them new demographics. I mean, there are older demographics that are resisting going online, and they're seeing a large percentage of the people using this technology are the older demographics. And I think that's sort of one of the second-order stories that we're seeing coming out of this, which is that the older generation is, you know, experiencing online grocery for the first time. They are getting more digital in order to be able to connect with their families, et cetera, and also developing markets, Latin America, online sales jumped 300% in April and in Africa and the Middle East, they Rose 400% like this. This is a sea change for sure, but I'd just like to go back to these retailers allowing code that isn't there as onto their sites. And I've to say, you know, in our Salsify lives that we lead. One of the big things that we work on is connecting up with retailers and trying to partner with them to create better-enhanced content experiences on their sites and really bringing those PDP pages to life. And, and a lot of retailers are not good. Maybe you'll put this in a better way, Robin, but are not agile at allowing new experiences, new, new experiences, maybe even outside code to come into their sites. And I understand the wariness about it, but it does feel like in order to innovate, somehow those walls need to, they need to get better at that. I don't know, tell me if I'm wrong or

Rob:

They were great at that in the two thousand. I mean, part of the issue is that there's a, a PTSD on, on this stuff. So in the two-thousands, there was a lot of third party code running on these sites to, you know, to do things like delivering below the fold content and deliver imagery and allow you to get access to material safety, datasheets, and, and so on and so forth and power advertising and do analytics and blah, blah, blah. And the sites kind of got bogged down. They became slow. And yeah, there, there's a bunch of incidents where the third party code took down the site. Yeah. So that's bad, you know if you're Walmart and especially if you're talking about a prime shopping day or prime shopping hour, and the site goes down, you're talking millions and millions and millions of dollars. So the advantage of running the code has got to outweigh the risk of something bad like that happening now, w w that said technology on the front end in JavaScript libraries and things like that have gotten way more resilient in the last 10 years. And so it's a lot safer to run external code and you could do a lot of things asynchronously, such that it doesn't slow down the CU the site that there's, it's gotten a lot better than it was, but a lot of, you know, a lot of people that are in these seats, remember the days when these third party applications really just hurt them. I want to go back there. So I like it, I personally understand the reticence some of it's a little dated, but you know, I totally get it in L'Oreal's case. They've got their chin over the bar. Obviously, this is going to drive impact for a category where people like to try it out.

Peter:

Yeah, yeah. It's exciting stuff. And just watching what they're doing, but Lubomira is, is leading. It is so impressive. Back in 2013, they had set goals for e-commerce to reach a fifth of group sales by 2020, and for half of its marketing dollars to be spent online, those goals have now been achieved. So L'Oreal's even thinking bigger. And so she, you know, sort of the closing quote here, and maybe a challenge for many of the brands that are listening, that L'Oreal says, we are setting ourselves up for a world where half of the business is eCommerce and 80% of consumer interactions will happen online. And that will be true for every category, but it's a, it's a pretty interesting future that they're setting themselves up for. It's pretty awesome. So with the positivity thinking of creative disruption and what is to come, I think we'll close out the podcast for today. We have come to speaking of, of, of creative disruption direct to consumers; it's on everyone's mind. And in the third quarter, starting in July, we will be launching our DTC strategy playbook for a whole quarter-long series to help executives that are working on their DTC strategy. Just get all sorts of insights from the experts. So make sure you keep an eye out for that as always, you can check in on digitalshelfsummit.salsify.com and Rob, great to talk to you as always

Rob:

My pleasure

Peter:

And thanks to everyone listening, thanks as always for being part of our community.