FE ATURE STORY - PAGE 8 - Sam's Club On Bringing The Digital Shift To Warehouse Stores - PYMNTS.com
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F E AT U R E S T O R Y — PA G E 8 N E WS & T R E N D S — PAGE 12
Sam’s Club On Bringing The Digital Whole Foods debuts
Shift To Warehouse Stores online-order focused “dark
stores” around the United States
J U N E 2020
W H AT ’S I N S I D E 4 An overview of how the COVID-19 pandemic is leading grocers and consumers to embrace digital technology like never before F E AT U R E S T O R Y 8 An interview with Eddie Garcia, senior vice president and chief product officer at Sam’s Club, on how the warehouse chain is employing product scanning apps and other digital services to make shopping more convenient and safe for its members NEWS & TRENDS 12 The latest news from around the food economy, including PepsiCo’s use of the direct-to- consumer model to deliver its products to customers ABOUT 17 Information on PYMNTS.com
W H AT ' S I N S I D E
WHAT'S
INSIDE
4
W H AT ' S I N S I D E
Restaurants have closed facilities designed solely for the preparation,
packaging and distribution of mobile gro-
en masse during the past cery orders. Such stores have been likened
three months, and super- to ghost kitchens, which serve the grow-
market trips have become ing number of mobile meal orders without
stressful as customers physical storefronts. Whole Foods has
opened six dark stores across the country,
observe social distanc- and Stop & Shop and Kroger are looking to
ing rules and pick through make similar moves.
bare shelves. Amazon, Target and Walmart were already
Many are therefore turning to digital tech- well-positioned to adapt to this new digi-
nologies to stay safe while purchasing tal reality, as they all had robust mobile and
groceries and related items, and these online ordering operations long before the
new shopping habits could cause lasting pandemic hit. Smaller independent grocers
changes that will have profound impacts have been forced to scramble to ramp up
across the food economy. their digital services as the grocery market
migrates online, however. Midwestern food
Recent analyses reveal just how signifi- wholesaler Winkler Wholesale Grocers is
cant these purchasing shifts are. PYMNTS supporting these smaller players by adding
research found that the share of U.S. con- online ordering to the services it offers more
sumers who went online to shop for than 400 independent grocers in Illinois,
groceries increased nearly 400 percent Indiana, Michigan, Missouri and Ohio. The
from early March to late May, when 13.2 company is also helping the stores set up
percent reported doing so. A large share of online ordering, curbside pickup and deliv-
these consumers cited exposure risks as ery programs.
the main reason to shop online (40.2 per-
cent), while 36.3 percent pointed to greater Stocking products and keeping them on
convenience or speed. These latter con- store shelves are persistent challenges fac-
siderations may prove to be even more ing all grocery stores. This could further
compelling as consumers begin to tire of fuel the direct-to-consumer (D2C) model,
large supermarket crowds, long lines and which enables merchants to sell directly
social distancing rules. to their customers via eCommerce chan-
nels and thus avoid potentially complicated
and strained retail distribution chains. The
AROUND THE FOOD ECONOMY D2C trend was gaining momentum before
One of the most dramatic manifesta- the pandemic, but it has even become
tions of food shopping’s digital shift is the appealing to larger merchants that have
rise of mobile grocery ordering through traditionally relied on supply chains to pro-
retail giants like Whole Foods as well as vide consumers with access to products.
third-party services such as Instacart. This Food and beverage conglomerate PepsiCo
trend is spurring the creation of dark stores, is getting into the D2C game with two new
© 2020 PYMNTS.com All Rights Reserved 5
W H AT ' S I N S I D E
websites, Snacks.com and PantryShop. shopping experiences. Change is also order
com, for example. Consumers can use of the day for these retail giants, as more
the sites to place direct orders for Pepsi and more consumers migrate online to do
products such as Cheetos, Gatorade and their shopping amid the pandemic — and
Sun Chips. demand safety when they do so in stores.
Sam’s Club has been working on staying
For more on these stories and other recent
ahead of the curve by offering products
headlines, read the Tracker’s News and
and services over digital channels, such
Trends section (p. 12).
as app-based product scanners. For this
month’s Feature Story (p. 8), PYMNTS inter-
WHY SAM’S CLUB CUSTOMERS ARE JOINING viewed Eddie Garcia, the company’s senior
THE DIGITAL SHOPPING CLUB vice president and chief product officer,
Large membership-based warehouse about how mobile is helping provide cus-
chains have long been known for offering tomers with seamless and safe shopping
their customers good deals on bulk prod- experiences.
ucts, as well as stripped-down, utilitarian
YUVAL MARCO
general manager of fraud and
authentication at NICE Actimize
6
W H AT ' S I N S I D E
$6.6B FIVE
Value of U.S. online
grocery sales in May FAST
FACTS
54% 28,000%
Share of consumers who Increase in grocery
reported cooking at delivery platforms'
home more often during social media
the pandemic engagement from
March to May
100 6
Approximate number Number of Whole
of Frito-Lay products Foods dark stores, as
available on PepsiCo’s of mid-May
new D2C website,
Snacks.com
© 2020 PYMNTS.com All Rights Reserved 7
FEATURE STORY
F E AT U R E S T O R Y
Sam’s Club On
Bringing The Digital
Shift To Warehouse
Stores
The supermarket has become a vital insti- is the company’s Scan & Go app, which was
tution in recent months, as it is one of the introduced in 2016. The tool allows custom-
few types of businesses deemed essential ers to scan UPC barcodes on products as
and allowed to stay open through the thick they shop and show their digital receipts to
of the pandemic. This has meant that store employees before exiting.
operators have had to rapidly implement
The app has surged in popularity since the
new health and safety rules to minimize
pandemic for a number of reasons. It allows
transmission risks among workers and cus-
customers to hasten shopping trips, main-
tomers — especially the most vulnerable.
tain proper distancing with other customers
These realities are casting a new light on and employees and avoid the potentially
some of grocery stores’ recent innovations, most crowded part of the shopping experi-
such as Stop and Shop’s handheld product ence: the checkout line. Use of the Scan &
scanners and Target’s mobile ordering and Go app has increased nearly fivefold since
curbside pickup services, which have deliv- March, Eddie Garcia, senior vice president
ered greater efficiency and convenience and chief product officer at Sam’s Club, told
for employees and customers alike. The PYMNTS in a recent interview.
COVID-19 era has given these technologies
“We’ve seen a strong uptick in member
the potential to not only reduce frictions in
adoption during the pandemic because it
the shopping experience but also make it
gives them the ability to pay for items right
much safer.
from their phones and skip the checkout
Sam’s Club has been a notable player line. It completely removes the friction and
in the digital innovation arena. The uncertainty of waiting in a checkout line
membership-based warehouse store chain right now,” he said.
has long prioritized digital innovation, both
The app is just one aspect of a multipronged
in its customer-facing and internal opera-
digital strategy that grocers such as Sam’s
tions. One of the centerpieces of this effort
Club are embracing to help customers
© 2020 PYMNTS.com All Rights Reserved 9
F E AT U R E S T O R Y
safely and efficiently shop during the pan- Sam’s Club has adapted its existing tech-
demic and its aftermath. nology platforms to accommodate seniors
and other at-risk groups. Its concierge ser-
TECHNOLOGIES TO AID AT-RISK SHOPPERS vice allows such customers to provide
grocery lists to store employees, who then
The pandemic has triggered a digital shift use a specially configured Scan & Go app to
across the economy over the past few fulfill and bring their orders to their vehicles.
months. Not everyone is prepared to go
digital overnight and alter entrenched shop- “We were able to build the associate-facing
ping and lifestyle habits, however. Senior app that powers our concierge experience
citizens may face a formidable learning in just six days because we built it on top
curve, for example, but they are also among of our already existing Scan & Go platform.
the most vulnerable to the virus and should That’s the cool thing about technology
take advantage of these new digital tools. — if you invest in building platforms the
right way, you can accelerate innovation,”
Garcia said.
He noted that nearly 132,700 concierge
transactions had been completed as of
early June.
The company is also enhancing the mobile
device workers use on the floor. An emer-
gency app allows them to quickly report
confirmed COVID-19 cases and another app
enables them to count how many custom-
ers are in-store at any given time to comply
with capacity restrictions.
A PROVING GROUND FOR INNOVATION
There is another important aspect of the
new reality in which consumers are living:
Millions have discovered online grocery
shopping and many may gladly put brav-
ing stores aisles and checkout lines behind
them for good.
Sam’s Club has seen orders through its web-
site and apps increase significantly, with
eCommerce revenues up 40 percent in Q1
10F E AT U R E S T O R Y
2020. These online orders may be poised to TOWARD THE FUTURE
grow even more substantially, however. The
The pandemic has exposed digital divides
company began rolling out curbside pickup
across the economy. Some businesses
to all of its nearly 600 stores in June after a
already had robust digital channels in place
pilot program at 16 locations.
and others have had to improvise to survive.
“During the pandemic, the way our mem- The crisis has, in this sense, underscored
bers want to shop, how they want to check the importance of having technological
out and their expectations around safety systems that are resilient, agile and able
and service is different than it’s ever been,” to respond to any unanticipated disrup-
Garcia said. “Members are putting a lot of tive events.
focus on having control over their shopping
“The current crisis has taught us that con-
experiences, so we had to quickly react and
stant innovation is key to being prepared for
provide them more choices to shop how
the … challenges that come our way. The
they want.”
work we were already doing with tech, and
A tremendous amount of work goes into the deployment of new tools at Sam’s Club
making mobile grocery apps and other dig- allowed us to move quickly,” Garcia said.
ital services function well and seamlessly.
This is important both to keep operations
Implementing such programs is nearly
running in the future and to meet chang-
impossible to do quickly without already
ing consumer demands and expectations.
having robust technology pipelines and
Ample studies, including PYMNTS research,
infrastructures in place — and this reality
indicate that many of the digital shopping
extends to unforeseen disruptive events.
habits adopted during the pandemic are
Garcia explained that Sam’s Club pilots likely to outlast it.
new digital services at a special facility in
“I anticipate technology will continue to be
Dallas called Sam’s Club Now that “allows
important to our members because they
[the company] to test and try new things in
are hyperfocused on speed and safety
a test club environment with real members.”
right now and I don’t think that will go away.
“Almost every new innovation we roll out — Retail was already going through an evolu-
including the concierge app — is first tested tion pre-COVID-19, but the pandemic has
at Sam’s Club Now so we can listen to our accelerated change and pushed retailers to
members, engage with their feedback and adapt, pivot and innovate.”
then iterate the technology to make it the
This means that innovations taking place
best product possible,” he said.
at Sam’s Club stores and among its cus-
tomers could just be the early stage of
sweeping digital transformations that will
continue for months and years to come.
© 2020 PYMNTS.com All Rights Reserved 11NEWS &
TRENDS
12NEWS & TRENDS
Changing digital and INSTACART LEADS THE THIRD-PARTY
ONLINE GROCERY SHOPPING PACK
culinary habits The growing market for online grocery
ordering has generated fierce competi-
ONLINE GROCERY ORDERING SURGES
tion among both established retail giants
DURING PANDEMIC
and newer technology platforms such
Most supermarkets have been deemed as third-party grocery delivery ser-
essential and were thus allowed to stay vice Instacart. A recent New York Times
open during pandemic-related shutdowns, analysis revealed that Instacart has expe-
but several studies have shown that con- rienced a more than 400 percent sales
sumers are flocking to online platforms volume increase from the same period in
for their grocery purchases even as other 2019. The company has surged past market
brick-and-mortar stores reopen. A recent incumbents Peapod and FreshDirect, which
report found that online grocery sales may be due to Instacart’s partnerships with
in the U.S. totaled $6.6 billion in May — a a wide range of grocery outlets, according
more than fivefold increase from August to the analysis.
2019. There has also been strong month-to-
month growth, as such sales increased 24 Retail behemoths Amazon, Target and
percent from April to May. Walmart already had robust online and
mobile ordering operations before the pan-
PYMNTS research confirmed extreme demic and have also experienced dramatic
growth in online grocery shopping: The sales growth since its onset. Walmart is
overall share of U.S. consumers using king when it comes overall market share,
digital platforms for grocery purchases however, representing 50 percent of all
hit 13.2 percent in late May — a sizable online grocery sales in late April.
increase from the 3.5 percent recorded
in early March. This shift to digital chan-
COOKING AT HOME UP MORE THAN 50
nels has been less pronounced than it has
PERCENT DURING PANDEMIC
been in other areas, such as the restaurant
and retail sectors. One possible reason for Consumers are putting their grocery pur-
this is that most grocery stores have been chases to good use by spending more time
permitted to stay open throughout the pan- in the kitchen during the pandemic, accord-
demic, while others have been subject to ing to a recent survey, and many say the
closures. experience is broadening their culinary
horizons. The survey found that 54 per-
cent of consumers are cooking and baking
more during the pandemic, 50 percent have
© 2020 PYMNTS.com All Rights Reserved 13NEWS & TRENDS
discovered new brands and products and
51 percent expect their new cooking hab-
its will last beyond the pandemic. The trend
does not necessarily translate into consum-
40%
ers only eating salads and nutritious items,
however: 39 percent are eating healthier
foods, but 40 percent reported eating more
“indulgent” fare.
OF CONSUMERS
New technology
solutions SAY THEY'VE BEEN
A GROWING NUMBER OF GROCERY STORES
EATING MORE
ARE GOING ‘DARK’ "INDULGENT"
The increasing popularity of mobile
order-ahead and delivery services has FOOD DURING THE
given rise to ghost kitchens, facilities that
service multiple food purveyors without
PANDEMIC.
physical storefronts. A similar trend is now
taking hold in the supermarket industry as
consumers turn to mobile and online order-
ing to procure their groceries. Amazon
appears to be leading the pack. The retail
heavyweight initially rolled out one Whole SMART & FINAL ROLLS OUT TECHNOLOGY-
Foods “dark store” location in the early days ENHANCED CHECKOUT LINES
of the pandemic and has since expanded Connected technology is doing more than
to six, with facilities in Baltimore, Chicago, allowing consumers to get their groceries
New York and San Francisco. Dark stores without leaving their homes — it is also help-
can help workers avoid some of the safety ing them stay safe when they shop in stores.
concerns that stem from crowding in stores Grocery chain Smart & Final is employing a
that are open to the public. Other gro- computerized system to limit crowding by
cery companies, such as Stop & Shop and using physical gates that control when cus-
Kroger, are planning their own dark facil- tomers can approach registers, for example.
ities, demonstrating that the trend could The gates also feature screens that remind
very well endure beyond the pandemic. consumers about pandemic-related safety
guidelines.
14NEWS & TRENDS
Smart & Final is one of several stores to parts of Illinois, Indiana, Michigan, Missouri
roll out technologies meant to ease compli- and Ohio in setting up online order-
ance with safety rules, which otherwise can ing operations. It is also partnering with
create distractions for employees and lead grocery-focused eCommerce platform
to tensions with customers. Grocery chain ShopHero to allow independent stores to
Kroger is employing sensor-based technol- offer online and mobile ordering, curbside
ogy it already uses to monitor and control pickup and delivery services.
checkout lines to keep store capacity under
Josh Winkler, CEO and president of Winkler
50 percent, for example.
Wholesale Grocers, explained that the col-
laboration aims to help its grocer partners
DIGITAL PLATFORMS BRING ONLINE satisfy growing customer demand for online
ORDERING TO INDEPENDENT GROCERS ordering. ShopHero’s offering also enables
Digital grocery shopping is not the sole turf grocers to manage their websites as they
of Amazon and other retail and technol- see fit and tailor their delivery or pickup ser-
ogy giants in large urban markets. Smaller vices to their individual operations.
independent stores have been ramping up
online services, too, often with the help of
third-party technology providers. Winkler
Wholesale Grocers is assisting the more
than 400 independent grocers it supplies in
© 2020 PYMNTS.com All Rights Reserved 15NEWS & TRENDS
Innovating the D2C left by their larger counterparts, which have
been strained by pandemic-induced labor
model shortages and supply chain challenges.
PEPSICO MOVES INTO D2C MARKET Several small growers selling directly to
consumers and businesses are also offer-
The direct-to-consumer (D2C) model has ing online ordering and pickup options to
been a boon for small merchants, allowing help customers comply with social distanc-
them to use online platforms to sell directly ing guidelines. There is evidence to suggest
to customers without competing for shelf that these approaches are paying off, too.
space at retail outlets. Even larger brands Idaho-based Kraay’s Market and Garden
are moving toward D2C channels to keep received its largest single order ever during
their products stocked and ready to ship the pandemic, for example, totaling $1,900.
amid the pandemic, including food and bev- The largest single order it reported prior to
erage corporation PepsiCo. The company the outbreak totaled about $600.
has launched two websites, Snacks.com
and PantryShop.com, that enable con-
sumers to order products like Cheetos, RESTAURANT WHOLESALERS SEEK TO SELL
DIRECTLY TO CONSUMERS
Gatorade, Ruffles and Sun Chips without
leveraging intermediary services. Pandemic-related restaurant closures
have hurt owners and workers as well as
Some observers believe PepsiCo’s move
consumers looking to dine out. The whole-
represents an important trend for the gro-
salers that supply eateries with ingredients
cery industry: disrupting traditional supply
and other necessary products have also felt
chains and providing brands with vital
these closures’ impacts. Some wholesalers
customer data sources. PepsiCo execu-
have thus turned to the D2C model to fill the
tives believe direct input from customers
gap and meet surging demand for grocery
purchasing various products or product
deliveries.
packages will allow the company to deter-
mine what consumers want and to tweak Delta Produce in Washington, D.C., has
its messaging and offerings to match begun selling products directly to con-
their demands. sumers via its website to make up for lost
restaurant business, for example. It is also
partnering with Choco Market, which usu-
D2C FARM SALES HELP CONSUMERS
SHOP LOCAL ally connects restaurants and suppliers, to
offer consumers next-day delivery options
The D2C trend is also helping small-scale for everything from food products to clean-
farmers offer their fruits, vegetables and ing supplies.
other products directly to customers.
Smaller farms are filling some of the voids
16`
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