The Theatro Ideas and Insights

Conference Webcast: Reopening? Retail Strategies and the Latest Technologies Helping Mitigate Covid-19 Risk

“Covid is likely the first of many future viral challenges that will force us to rethink the way we physically gather in stores,” commented Pano Anthos, CEO and Founder of XRC Labs during the RBC Capital Markets Global Consumer and Retail Virtual Conference held on May 27, 2020. XRC Labs invited Theatro’s own Verlin Youd to participate on their moderated panel discussion that also included Bill Thayer, Co-Founder & CEO of Fillogic and George Shaw, Co-Founder and CEO of Pathr.ai.

Listen to the audio webcast or read below for the transcript of this lively discussion.

 

Halley Morrissey:

Thank you all for joining us today.

With nearly two months of COVID impact under our belts, it seems all eyes now seem to be focused on the reopening of the economy, but there’s a lot of debate about what it will look like. In this session, we have the pleasure of speaking with experts in retail, operations, and technology to shed some light on the road ahead. If you have any questions along the way, please upload them to Veracast and we’ll do our best to address them.

First, I want to thank the RBC capital markets team for joining us for this timely discussion. I’m Halley Morrissey. I run business development at XRC labs and have the pleasure of managing our corporate partnerships.

For those of you who are newer to who we are, XRC labs is an innovation accelerator for the next generation of disruptors and the retail and consumer goods sectors. We run two programs each year that bring together entrepreneurs, investors, and corporate brands and retailers to foster rapid innovation in retail and CPG. We have nine corporate partners, retailers like CVS and Lowe’s as well as service providers like MasterCard and Accenture.

All of our corporate partners rely on us to be predictive, truthful, and connected. Predictive means access to early stage startups. Truthful means thought leadership and connected means access, not only to startups, corporate partners, trade, and Wall Street. I’ll take a moment here to thank Nick and his team. We’re proud to be innovation content partners for RBC Capital Markets. As investors we fund early stage companies across the retail and consumer goods landscape. Over the last four years, we’ve invested in 80 companies from consumer brands to solutions and next gen commerce supply chain on-demand manufacturing e-com and the consumerization of healthcare.

Within the consumer goods space, our breadth of investments is wide. These are just a taste of the consumer brands we invest in from prebiotic water to nutropics, to superfood dog kibble, and skincare for the gaming community. On the supply chain side, we’ve also invested across the board from autonomous drones to labor optimization, spatial intelligence and product information management.

Before I pass the mic to XRC Labs, founder and managing director, Pano Anthos, I’d like to encourage everyone to submit questions through Veracast for our panelists to answer later in the session. Without further delay, Pano, please set the table for us.

Pano Anthos:

Thank you, Halley. Let’s be candid, COVID was and is a major shock to the retail ecosystem. Non-essentials have seen sales drop by over 50%, while physical retail stores have been closed and are just now reopening. Numerous retailers have either declared bankruptcy or headed in that direction. Values like which were never part of our retail lexicon are now of paramount importance to shoppers.

Like the history of the fire code, which was born as a result of numerous building fires in the late 1800s, Covid is likely the first of many future viral challenges that will force us to rethink the way we physically gather in stores. Our physical stores are not designed to account for concepts like social distancing, so until we have a vaccine, what are we to do with our stores?

Many have opened to great fanfare as customers have started to come back, but is this the calm before another storm? Are we setting ourselves up for another setback or can we adapt to the new normal and rebuild our businesses with new processes and technologies? We know for sure that doing the same thing over and over again, expecting a different result is and remains the definition of insanity and not good business. So what can retailers do? This panel is meant to discuss those processes and technologies. With that, let’s dive in and bring back Halley.

Halley Morrissey:

Thanks Pano. It’s my pleasure to introduce you to our expert panelists for today’s session.

Starting with Bill Thayer. Bill is the Co-founder and COO of XRC portfolio company Fillogic, a leader in operations and supply chain. His main focus now is on tech enabled micro-fulfillment solutions.

Verlin Youd is SVP of Business Development at Theatro and a recognized industry solutions expert with deep experience across all aspects of retail and related enterprise technologies.

Finally, George Shaw is CEO and Founder of Pathr. They’re also an XRC portfolio company. George is an expert in spatial intelligence technology, as it relates to stores.

We’d like to give each speaker a few minutes to tell you about their companies. To give you a bit of context, going into the discussion. Bill let’s start with you, please.

Bill Thayer:

Great, good afternoon, everybody. Hopefully you’re all staying safe sound and washing your hands. I am a Bill Thayer, Co-Founder and CEO of Fillogic, a logistics-as-a-service platform for retail.

We convert unused locations at local shopping malls into tech-enabled micro-fulfillment hubs. So let’s talk a little bit about what’s going on in physical retail. Taking into account what’s happening in the current retail format, even before COVID hit, physical retail had been heavily impressed in heavily effected by the growth of online commerce and how it’s being handled in stores. So when you look at the three stakeholders, real estate owners, brick and mortar retailers, parcel carriers, they’re all being impacted before COVID and it’s just getting much more impressive.

As we go through the post-Covid era, real estate is trying to look to better to optimize their assets, brick and mortar retailers with the rise of e-commerce growth at 20% year over year CAGR that’s now increasing up to 30% with COVID and use of stores to be operating as physical fulfillment locations. So keeping with stores were never built to operate like distribution centers, staff is not, optimized to operate like that.

On the flip side of that, on the parcel carriers, that volume that’s coming out of those physical locations is increasing dramatically, but those locations and those people are not built to optimize. And when you look at the parcel carrier business, those locations are not optimized drop off and fulfillment locations. So if you jumping into slide eight, that’s kind of where we come in.

Fillogic is the mortar that connects the bricks to clicks. So our platform provides a technology and logistics infrastructure that helps this infrastructure operate more efficiently. In other words, we help this ecosystem operate more as an efficient network. So, what is the new normal bringing us? As I’d mentioned before that 20% year over year CAGR is now 30% with that volume exploding for ship-from-store retailers are struggling to look at and how they’re going to handle that logistics volume. That’s where we come in, because that legacy retail infrastructure is not built to handle it.

The future of physical retail has a much larger logistics component to it, more than ever before. We deploy a zero asset logistics platform that is frictionless requires zero integration to help our existing partners optimize their existing assets – their people, their inventory, and their infrastructure. So one of the things we do is not only we’re handling e-commerce volume, but it’s also optimizing other logistic processes, reverse logistics, stock, balancing transfers, forward-staging inventory. That’s kind of the operations we live in. Take it back to you, Halley.

Halley Morrissey:

Thanks Bill. Now, Verlin with Theatro.

Verlin Youd:

Let’s segue from inventory and logistics, which is a huge challenge in retail, to one of the largest populations of underserved and under-invested-in assets in all of retail: frontline employees, the store employees. There are literally 32 million frontline associates in the USA today. Of those 32 million, roughly 10-15% today have some kind of mobile computing device that allows them to stay connected to the network, to their information and enterprise systems. That means 85% or 27 million frontline employees are completely disconnected, many asked to leave their phones in a locker or in their car or not bring them onto the premises at all, enforcing that disconnection.

At Theatro, we’ve known for some time that represents a huge opportunity for improvement. But with Covid-19 we’ve seen it demonstrated very clearly that that disconnection is no longer acceptable for reasons ranging from safety that was mentioned before, to customer service in a rapidly changing environment, the ability to reach frontline teams and frankly, to be reachable by those frontline teams, is critically important.

So what is Theatro? Theatro is an end-to-end voice-driven platform that provides central communication capabilities designed specifically for the way that frontline employees work and operate.

How does it work? We gives literally every frontline employee their own intelligent, voice-activated virtual assistant. That virtual assistant can help them find information they need, or it can help them connect and communicate or leave messages for others. Because it’s voice-driven and plays directly in their ear. They never have to look at a screen. They don’t have to use their hands to navigate to the information they need, so it doesn’t interrupt their primary job. They stay heads up and hands free, ready to serve customers or ready to perform the task at hand on the shop floor.

We deliver all of this in a SaaS model to make it easy to distribute the software, easy to support the users, easy to add and modify the solution so it can support new and different processes that are required to stay competitive and differentiate from the others.

Lastly, what Theatro has done in a true a wave of innovation is to include the mobile IOT hardware device in the SaaS offering. In essence, providing all of the hardware necessary for every store employee to be connected at all times with Theatro owning, maintaining, and supporting that hardware as well as the software, taking that huge burden off of our customers. Thanks Halley. Back to you.

Halley Morrissey:

Thanks Verlin. Finally, we’ll spend a few minutes with George on Pathr.

George Shaw:

Thanks Halley. I’m George, Founder and CEO of Pathr. We’re a spatial intelligence company which means we use machine learning to connect location data – where are the people and things and physical spaces, to the business spaces to the operators of those spaces care about. We’re focused on retail, but also doing work for shopping centers, factories, thanks, and office buildings.

I’ll tell you a little bit more about what we do and how we do it. We start by tracking people, because we’re focused on the intelligence downstream and aren’t selling cameras or any other hardware, we’re free to use the infrastructure that’s readily available. As we’re seeing in source surveillance here in many cases, this means that we can use the existing cameras. We can also leverage wireless tracking various times, tracking from purpose-built camera, like the stereoscopic cameras my team and I built when I was CTO at RetailNext, or even a combination of technologies. Our software integrates all of these sources of data to produce X-Y coordinates over time.

That’s location data. Once we have the tracks of people, this is where the real fun begins. Machine learning can do things like identify staff and customer interactions to improve sales and customer experience, help marketers understand which signage is most effective by quantifying visitor behavior, and you can identify shoplifters real time using just their location. Our system has no personally identifiable information in it whatsoever, so the insights we produce are provably anonymous and provably unbiased. Imagine being able to identify those shop lifters within your store while they’re shoplifting with no risk of bias. We’re doing work in shopping centers and are currently in the process of installing the world’s first real-time, full-mall analytic system that leverages existing surveillance. We recently formed a partnership with a leading architectural firm to bring our analytics and especially our AI-driven simulation platform to offices and mixed use buildings.

You can see our social distance analytics. There’s a new module that we built. Until March, I wasn’t really thinking about social distance, but as the pandemic hit, we were able to quickly adapt our platform to include this module for understanding social distance and all sorts of physical spaces from offices to factories, to stores, to malls. We’ve been helping these operators set occupancy limits using science instead of guesswork, and then to monitor the locations in real-time, all the time.

Finally, a high level view of how we do what we do. There are two software components, our sensor layer and our behavior engine, that is purely software. Again, when you talk to existing hardware and existing infrastructure, wherever possible, the central layer integrates all that to do tracking. And then we take in that tracking with the world’s only behavior engine, this is where our machine learning lives and our special sauce. And then that communicates with existing systems Theatro is a great example of who’s here on the call. We can communicate with their system as well as many others.

So that’s Panthr. That’s what we do and how we do it. I’m George Shaw, Founder and CEO. Thanks.

Halley Morrissey:

Thanks George. Thanks everyone for giving us the context. Super helpful. Let’s jump right into the discussion portion of the session. Bill, I’ll start with you. You’re doubling down on malls. What do you see as the future of malls given a lot of people are predicting their demise?

Bill Thayer:

Well, I think there is a definite bright future for physical retail of which of malls are part, but they’re going to change. They were in transformation before COVID. The future after is different formats. There’ll be a huge logistics component to that, to range both the online and offline consumer. I think there’s a bright future for physical retail, specifically malls.

Halley Morrissey:

Thanks Bill, and would definitely encourage everyone to feel free, to jump in and answer questions. If you have something to add. Verlin, with fewer employees staffing stores, can’t retailers and brands just manage associates the old fashioned, analog way?

Verlin Youd:

Great idea, but the easy answer is no.

It’s certainly not business as usual anymore. Retail was transforming before COVID. COVID has a sped it up dramatically. The bottom line, analog is the path to failure, unless retailers truly do a digital transformation, including all the way down to frontline employees, they’ll fail. Our customer expectations have changed and when all of these retailers are competing with Amazon, they just can’t operate the way that they’ve always operated. They’ve got to think completely different.

If you want to be competitive, then brick and mortar retailers have to take advantage of an asset that online retail doesn’t have, and that is those frontline store employees. Take advantage of that asset to deliver products and services and value that can’t be delivered online, certainly to deliver experiences. They can’t be delivered online. One of our clients, a fairly large drug chain, is changing the way that their store employees interact with customers. Being able to provide better experiences, be more responsive to those customers and dramatically increase store productivity by using that frontline asset, and communications & connectivity to that asset.

So, no, I think someone who’s thinking they can do things the old way is going to fail. You have to be thinking new and innovating quickly. The agile are going to win.

Halley Morrissey:

Thanks Verlin, George you’ve interacted the store ops execs over the last few weeks. Are they really embracing tech solutions? Are they just happy to put up tape and plexiglass at the cash wrap and call it a day?

George Shaw:

Well, I think there’s some selection bias there, for sure. If they’re talking to me, then they’re certainly interested in technology to some extent, but overall store ops execs definitely need to use technology in order to solve some of these problems. They know they don’t have a choice. There’s huge demand from consumers. Consumers want a safe space. They want to come back to brick and mortar stores and they want it to be safe. Also, store employees. The store staff is demanding a safer working environment for themselves. The store ops execs really have no choice. I can’t speak to how enthusiastically they’re embracing this stuff, but they have no real choice. I think everybody knows that something has to change here, that we’re now entering the new normal and technology to Verlin’s point is exactly the way to get there. Analog isn’t going to fly anymore.

Verlin Youd:

George, I totally agree with you. During this pandemic, I’ve been surprised at how many store operations executives have actually reached out to us! If they didn’t trust technology previously, now they have no choice and they’ve actually reached out and asked us how we can help them deliver the new processes and procedures. They have to have to survive now and into the future. So I think they are, for lack of a better word, getting religion around technology, like they never had before.

Bill Thayer:

Well, definitely for store locations, definitely. For the longest time, it was all about digital commerce and now it’s like, ‘Oh my God, how do we focus on that store piece of it?’ because everyone looked at their store fleets and said, ‘I had X number of stores. How am I going to handle it?’ Now it’s like, now I have to take care of this asset because stores still do cost effective sales. E-commerce historically doesn’t.

George Shaw:

Yeah. I think we’re sticking with profitability.

Bill Thayer:

Correct.

Pano Anthos:

That’s right, but here’s the question. Can I ask you a question? So the fire code, basically what people have done is said, some, a fraction of the fire code is allowed into the store and if you reduce the number of people enough, A, you don’t need as many store associates and B, you don’t need a lot of technology. Cause it’s five people in the store of 5,000 square feet. There’s no chance of violations and so forth. What’s the flaw in that logic, obviously they’re flaws, but I’m curious.

Bill Thayer:

On just the store side of it, nobody’s hitting anybody with any fines right now. I mean, if there are stores that are open, if you’re in, let’s say New York and New Jersey, they’ll shut you down, but they’re not being very aggressive. I mean, part of the problem is we have 20th century laws to deal with a 21st century problem. Everybody’s trying to figure it out and sort of push the envelope a little bit and every state’s different. And you can just see that in the national news, everybody’s pushing back.

Verlin Youd:

Then drop to the drop to the practicality, right? We’re used to using body language as we shop, whether we’re interacting with another shopper and distance or interacting with a store employee. Well, now it’s six feet or more and it’s that lower occupancy rate, body language isn’t going to cut it. You have to find a different way to engage those customers and support them, and you have to have a better way of communicating between store employees to support those customers. It’s going to be forced.

George Shaw:

That’s fair. And I think that the point about 20th century laws is exactly right too. When we think about taking some fraction of the fire code, it’s even worse where we’re taking an old law about fire codes and taking some arbitrary percentage of it. As an engineer and as a scientist, I want real data. I don’t want to just take a guess. What’s the right percent of the fire code to use? Is it 20%? Is it 17% or is it 82%?

Nobody really knows currently, so that’s why we’re trying to bring some technology to bear on that and actually adding some science to that where we will model the dynamic behavior. We’ll observe that dynamic behavior as it unfolds because people don’t go into retail stores and spread their arms out and maintain six feet of distance and not move. They walk around talking. So in that environment, what’s the right number of people. Is it five per 5,000 square feet? Probably not. But what is the number?

That, I think is where you really need some science and some technology to be brought to bear, to bring these laws up into the 21st century so that we can have some new regulations around what’s the appropriate amount of occupancy for different spaces.

Verlin Youd:

You’re right on. I think COVID is what’s forcing it at the moment. At some point, we’re going to deal mostly with Covid, whether it’s treatments, vaccines, whatever that may be. I’m not a scientist, I don’t know. But at some point in the future, we’re going to reach that equilibrium where people aren’t worrying so much about COVID, but we’ve changed to a new normal.

In that new normal, they’re going to have to use data and analytics to figure out what’s the right ratio of store associates to customers. How do you best interact with them? The technology that Pathr has will certainly help there, and at the same time, they’re going to have to figure out how to use that technology to do other things. How do they operate that store as part of a larger enterprise, whether that be field management personnel or headquarters, they’ve got to reimagine the whole way that ecosystem of the retail enterprise works to support this new customer normal.

Bill Thayer:

The legacy infrastructure – retail stores and just retail operations is built on top of this legacy hierarchy and structure that is not modular. When you look at new retail, it’s built from the bottoms up, but a lot of retailers just have that difficulty. Do you go and fix it from the inside out, or do you bolt on and transform in process? I agree, that’s what the technology solutions are. From the Fillogic side of things, it’s utilizing infrastructure that worked one way to do something differently with it, but that’s low cost, it’s low impact, and at the same time it’s more cost effective. That’s the key.

One last thing I’ll just throw out there, our problem that we’re dealing with right now is everyone’s scared. Who would have thought that you would start scanning people’s foreheads with a thermal imaging thermometer, right? If you are doing that in your business, that is a major HIPAA violation. To do that, you have be a medically trained person, but that’s all out the door, most warehouses across this country, especially in New York-New Jersey area, they are scanning temperatures, no doubt. That’s the brand new normal.

Verlin Youd:

Your point about using existing infrastructure, that’s what innovation is all about – taking what you have turning it on its ear and using it a different way. I think all three of us and the solutions we provide are focused on doing that, whether it’s pathr with camera infrastructure, Fillogic with physical infrastructure or Theatro with wifi and IT infrastructure we’re using that old infrastructure in new and innovative ways.

Bill Thayer:

Well said.

Halley Morrissey:

Thanks guys, very lively debate. I love it.

Bill Thayer:

We’re not debating, Halley. We’re agreeing together!

Halley Morrissey:

We’re sort of dancing around this topic of digital transformation in retail. I’d love to just hear how quickly you guys think the pace of change is moving and what you’re seeing on the ground.

Verlin Youd:

From Theatro’s point of view, it’s accelerated dramatically. We’ve seen literally three or more years of innovation in the last two months. What retailers are doing right now is so dramatically different than what they were doing before and what I’m hoping, what many of us are hoping, is that it’s convinced them that they can get away with this, that they don’t have to spend, you know, a year planning for something two years of implementation and a year of measurement. It’s try it, win or fail, try something else. Win or fail, keep going on that innovation. What they’re also learning is they have to innovate for the audience at hand. Headquarters can no longer dream up innovation that’s going to help the store. They’ve got to go down to store level and understand the way things are working and the way things are changing every day, and then being agile enough to address it. If they do that, then they’ll win. If they don’t, then they’ll be challenged.

Bill Thayer:

I think a major piece of is organizations that would not cooperate before either by using same networks, you’re seeing a lot more collaboration, whether it’s across mall owners, retailers, parcel carriers. There’s a lot more of that because everyone’s trying to aggregate and creating network. Especially when you look at today’s physical retail. They have the best locations in closest to their target consumer, and they’ve used an infrastructure that worked for the last 15 years. It doesn’t work anymore. To Verlin’s point, three years in two months. Absolutely, and I think it’s just going to continue to speed up more now than ever.

George Shaw:

Another kind of collaboration that I would add to that is digital and physical. Even within an organization, you have digital, you had multiple groups that were siloed. They were starting to come together, but we’re seeing this acceleration of them really coming together where every physical location or every physical retail store has some kind of digital component, whatever that may be – buy online pickup in store or different marketing campaigns and so on. Those things are really coming together because retailers have no choice. They know that they’ve got to be a digital component to what they do. To us, that is a really exciting trend because we’re building digital tools for physical spaces. That’s, that’s another sort of internal collaboration that I think we’ve seen accelerate over the last couple of months.

Bill Thayer:

Well, retailers always felt that they could control up until two, three years ago. They felt that they could control the communication with their customer. Those days are over. Three-sixty degree visibility of a customer that’s gone. Customer wants it free. They want it fast. They were told to return for free, and if you screw up their order, they’re going to harass you on social media for the next 10 years. So you need to be working for the customer where the customer’s at. They don’t care that you’re trying to fulfill an order from the middle of the country. They ordered it. If they can get it from Amazon, they can get it from Walmart, they can get it from Target, they sure as hell better be able to get it from you too, just as fast and free.

Verlin Youd:

Yes. You talk about that democratization of information. Historically, we talked to big win-win game, but we played a zero sum game, at least between suppliers, logistics, companies, and retailers, and even between retailers and their own employees. Particularly at the front line, they were always looking for ways to gain an advantage. Well, given a crisis like this, it’s forcing people to actually act win-win rather than just talk win-win. As they act, win-win it’s forcing them to change processes and approaches that have been longstanding and hopefully they’ll crumble as a result of this situation and enable them to really step up for the future.

Halley Morrissey:

I have a question for you guys. Legislation has chased big tech company in the last 10 years, right? They haven’t stopped to say Washington, tell us what to do. Bill, you mentioned HIPAA violations are retailers now being forced to act like Big Tech sort of moving before they’re allowed to guide them. And I’m curious how that’s playing out in your businesses.

Bill Thayer:

Big Tech’s got better margins than retail. Let’s just put it that way. They’re a bigger target, right? When you look at annual reports that are saying so and so has got so much free cash flow, that is a bigger target. They say, who’s not paying their taxes, you know what I mean? That’s the evolution of LexisNexis as far as e-commerce taxing, that’s what slowly but surely come around. Tech is what moves the needle. It will continue to drive the innovation, and it pulls other legacy industries kicking and screaming into the future. I think it will always be a target.

Think about how the federal government went after Microsoft in the nineties. There’s always going to be that,’hey, this person makes money. Let’s go beat them up for a while.’ It’s always going to happen, I just don’t know if the legislation, especially what you’re seeing in Washington right now, everybody’s so split around both sides of it. I’m not going there, but the idea that those types of things are really going to go somewhere, I don’t think it’s going to happen. That’s my point of view.

Verlin Youd:

Yes. I think the populace has gotten used to Tech stepping way ahead of the regulation, and I think retail is going to have to do that to succeed as well. They can follow right in that mold. Not only do they have to, they’re expected to by their employees, least of all or most of all, and then number two, by the consumers, I can walk into a store and have the world’s greatest mall in my hand. If that store isn’t being progressive and isn’t using technology and acting forward, leaning forward into the wind is overused, then they’re going to fail. That includes enabling your employees to have access and to have all the information that a consumer could have and more, and to figure out a way to actually deliver a service that’s more than what’s in the hand of the consumer already.

Halley Morrissey:

Thank you.

George Shaw:

I think the example given before about fire code is actually a great example of this too. We’re right. Tech is moving a lot faster than regulations can keep up with and people are demanding that. Not only businesses, but consumers, employees are demanding tech to step in because there aren’t regulations that are suitable. And so, so technologists and technology companies have to come in and say, look, this is the right answer. Regulation will eventually catch up, but here’s the right answer because all of our safety depends on it.

Bill Thayer:

Yes, look, the one thing I’ll add to it, it’s not just technology. One thing I think that’s been really interesting to watch during sort of the pandemic, at least since really early March, you know, there are all of these people popping up to solve problems. Even government organizations are trying to figure it out and trying to work a little bit differently because drives innovation more than your rear being on fire. There’s a lot that’s kind of pushing tech has always been forward pushing, but I think in a lot of other industries, in some cases in government, they’re pushing quick as well. It’ll be interesting to see.

Verlin Youd:

There are great examples in retail. One of the great examples is buy online, pick up at store. There were some retailers that were doing it three months ago and prior, and a couple of them were doing it very well. One of our clients, The Container Store is best in class at buy online, pick up a store. But because of COVID now you’ve seen other retailers forced to deliver it. Frankly, they can’t operate unless they do, even if they’re an essential retailer. When they go to do that, you see them implementing a set of technologies, some just do it good enough to manually get the job done. Others do it a little bit better.

We have a customer who’s a large home improvement organization that never had buy online pickup in store and they’ve been able to quickly adapt and implement something. Then we’ve got a gas convenience client who’s made this the perfect time to figure out how to do drive-through or drive-up for gas and convenience for all the products they have. It’s driven the innovation, it’s driven the need to deliver what that customer is looking for outside of any rules and regulations, frankly, or any guidance that’s external to the retailers. They’re just diving in and going.

Bill Thayer:

Yes, sure. I think so much of it is being able to use the physical location logistically. It’s all of those solutions, and it’s the ability of democratizing that commercial engagement through doing much better job of consolidated networks because everything about store level inventory is all based on the technology integration and the transformation that people have been putting together to get better visibility to store inventory. They’re doing all of that so they can turn on all levels of those functions.

That’s what’s exciting to folks in my business, just because it’s the aggregation, it is the scale of that order level volume across all services and being able to aggregate that demand. One of the big things that’s happening is just the volume coming out of those buildings from a parcel volume perspective. Some of the parcel carriers can’t even cover and pick up all that freight so they’re putting caps on some of that freight. That’s what we do, we’re an aggregator. We’re an outsourced inbound and outbound shipping receiving dock to make that process more cost effective because in the world of logistics, it’s all about big boxes, right? Big trucks, big planes, big boats, big buildings, anything that you’re in small when you’re delivering one package, that’s no bueno. You want to do big, big stuff.

Verlin Youd:

Back to the point you made earlier, not only are people using their legacy infrastructure to do it, people are now making some interesting new infrastructure investments. What they’re learning through this, as you can get more out of those investments than you ever imagined, you’ve got to imagine new things to do. If you’re going to put in wifi to support your delivery at curbside, which is a must, what else can do with that wifi curbside. Can you do assisted selling? Can you provide other services? Can you anticipate other things that, that shopper is needing and delight them by providing it when they pull up to have something curbside delivered that they ordered earlier in the day. It’s a huge opportunity.

George Shaw:

I would add to what both of you guys are saying. Another trend that we’re seeing accelerating is re-imagining what that physical store is meant for. Why do I have building, is that store have a distribution center? Is it a warehouse? Is it a showroom? Is it a social space? You know, this is something that retailers and lots of other people have been thinking about for years, but now it’s become particularly pointed. I would also point to the fact that people are incredibly uncomfortable with this shelter in place order because they want to go out and get into these physical spaces. There’s still a huge drive to go into these physical spaces to go into retail stores, but it’s up to all of us collectively as an industry to kind of reimagine what the purpose of that store is. What’s the real goal and what are we optimizing for.

Bill Thayer:

Logistics is that network process. The stores were never used as fulfillment location. They’re being used that way now, and they’re being used for a myriad of different solutions. The issue is because of the cost of labor. Up until a couple of months ago, the scarcity of labor who knows what’s going to change going forward. But the ability to have service providers that can handle those sorts of solutions, I think is a big win. When you think about it, you want to get your product as close to that consumer, the online and the offline consumer. We stand strongly beyond the fact that building a facility in the middle of the country, where Amazon has set the price for real estate has set the price for labor and has set the standards because remember they don’t make money in retail, they do all that business and AWS? Retailers have to compete, but they have infrastructure. They have stores in the best locations, in the best malls and the best parts of the country, they just don’t operate logistically. That’s the key thing that we’re very, very bullish on.

Verlin Youd:

And they’ve got the people in those locations. They can take advantage of people that can actually serve other people better in many ways,

Bill Thayer:

Correct, and then they serve as the customer. We’re fine with that.

Halley Morrissey:

Gentlemen, who’s getting it right? Who is defining best in class right now? I’m curious.

Bill Thayer:

Walmart. Walmart and Target.

Verlin Youd:

Walmart and Target are doing a great job, but there are some smaller retailers that get it, that understand it. The Container Store is not a huge retailer, but they get how to operate and how to deliver customer value, and they’re not afraid to innovate.

Bill Thayer:

When you look at sort of the response to COVID and when you look at how they were turning things around. It’s unfortunate what happened with Amazon, because if you were an FBA customer, you got kind of pushed aside during COVID because it went toward key products. Whereas look at Target, 80% of their online orders are fulfilled from stores. Now their infrastructure is different. They have big back of the houses where they can do fulfillment, all that type of stuff. Same thing with Walmart. But they’ve been working on using the store as a fulfillment location for a long, long time. This is a perfect example, when you look at both of their most recent quarters, they’re killing it.

Verlin Youd:

Yes, but if you look at smaller retailers that have figured out how to use their people well, look at someone like Total Wine and More, a national retailer of beverages. They figured out how to use their people to help customers satisfy their needs. In this particular time, some of those needs for beverages seem to be a little higher. They figured out how to enable those employees to deliver a better experience, to give them product information, to give them training, to give them updates on new procedures and processes in a way that other retailers can’t match. I’d put them up against even the Walmart and Target in terms of responding to new procedures and new processes quickly and across the chain.

Another one of our clients, the president of this very large do it yourself retailer is literally leaving voice messages for everyone in the chain, including every store employee congratulating specific stores, thanking specific individuals, calling out great performance, talking about how they’re addressing employee risk. It’s changing the way that they’re communicating and collaborating from the very top to the very bottom because of this pandemic, and I expect that this will stay. It’s that important.

Bill Thayer:

If you could acknowledge and call out people, their good deeds. Positive reinforcement goes a long, long way, especially in these sort of times.

Halley Morrissey:

George, I have a question for you. I’m curious, obviously we’ve seen a lot of brands and retailers put manual solutions in place. Isn’t that enough, or do we need tech to help us?

George Shaw:

I would argue that in most of these scenarios we need tech to help us. What that means in our world is mainly as a way to measure and to test what’s actually working. So you might put manual measures in place, okay. If you might put some X’s on the floor and make the aisles one way or, or whatever it is, but you want to measure, did that actually work? Are people more socially distant because of that, but that applies to all sorts of different areas that applies to customer experience that applies to marketing. That applies to all kinds of other things where you want to do something analog, but you want to measure whether that analog thing that you did actually had the desired effect. Then you want to use digital tools to understand what’s the next analog thing that I should go ahead and do. So yes, we’re definitely seeing people putting manual solutions in place, but we’re also seeing people using technology to measure the efficacy of the solution.

Verlin Youd:

There are some interesting examples. Manual solutions can work in some cases, in others let’s think of a simple manual solution, that’s been in retail forever: the morning meeting. Every retailer has a morning meeting before the first shift starts well in the days of social distancing, you can’t have those morning meetings anymore. You’re not going to have 25 people standing six feet apart and be able to communicate with any of them, so they’ve got to use technology to help with that. Second piece is, if you’re changing store processes and procedures daily, you can’t use the old method of waterfall approach coming from headquarters to, with an email to a store manager who then has to then verbally communicate that to everyone else. They don’t have enough time in the day to do that and do the real job of serving customers. Technology becomes a mandatory requirement, when dealing with these challenges and will become an asset as they move forward.

Halley Morrissey:

Thanks gentlemen. Okay. Now we’ll do a quick rapid fire session. Try to answer these and you know, three, five word sentences. We’ll keep it short. I’ll start with you. Bill. Will robots be staffing our stores in three years, five years or never.

Bill Thayer:

There’ll be picking in the back in three years.

Halley Morrissey:

Okay. Verlin?

Verlin Youd:

I’m going to say they’re going to be ubiquitous in 25 years, based on a hundred years of experience. Barcodes took 25 years to be ubiquitous. PC point of sale took 25 years. Self-checkout took 25 years. Mobile computing took 25 years, and for heaven sakes, RFID has taken more than 25 years to become ubiquitous. Robots will be the same.

Bill Thayer:

Until a robot runs over a baby carriage, whole different thing. It’s like drones.

George Shaw:

I’m going to say never because I think there’s, there’s always going to be a demand for people to walk into a retail store and interact with another human. I think robots will play a big role. I think that’ll happen. That’s already happening and it’ll happen more and more, but people will never go away.

Verlin Youd:

I agree with George a hundred percent on that.

Bill Thayer:

That’s why I’m saying it’s from the back of the house. Just because you don’t have to be human to follow success, but nobody likes, you know, an experience less when a robot comes running down the aisle.

Halley Morrissey:

What’s the future of rent for retail, up or down. Verlin, I’ll start with you.

Verlin Youd:

I’m going to say down, it’s the perfect time to reduce some of that over-storing we’ve had in the U.S. for two decades. People are going to be getting rid of space. Rents are going to have to go down, it’s simple supply and demand.

Halley Morrissey:

Okay.

Bill Thayer:

Down short term, but a lot of these retail locations, especially anchor locations will get repurposed as fulfillment locations. It’ll be the best real estate out there.

Halley Morrissey:

Hmm. Noted.

George Shaw:

I agree with Bill, I think down, down short term. Long term, as space gets repurposed, and then demand goes back down.

Halley Morrissey:

Final rapid fire question. If the average store size is 10K feet today, what’s the new store size. I’ll start with you Bill.

Bill Thayer:

There’s no short answer on that. I mean, if you’re selling jewelry, it’s too big. If you’re selling furniture is too small. I mean, it’s tough. Inline mall slots are usually okay. Anchors big, big problem. They could be half the size they are now. I mean, when you look at Dick’s Sporting Goods or an L.L. Bean has taken over old anchors, I think that’s going to be the future. You know, you’ll still have your Nordstrom’s around Macy’s in some way, shape or form. I’m sorry that wasn’t a short answer to a short question.

Halley Morrissey:

No worries.

Verlin Youd:

I’ll go with a short answer here. I think it’s going to stay exactly the same. Retailers are looking to free up space by putting in tighter merchandising assortments. That’s been underway for a number of years, but now they’re also trying to deliver a better experience. I think those are going to balance out and you’re going to end up with the same average store footprint.

Bill Thayer:

It’s all about dollars per square foot at the end of the day.

George Shaw:

The average stays the same, the way that space is used changes, but the average size stays the same.

Halley Morrissey:

Okay. Thanks guys. Now I’d love to open it up for audience Q&A. We have some good questions here. Bill, this one’s for you. How many brands does a typical Fillogic fulfillment hub service?

Bill Thayer:

Well, when you’re looking at a specific shopping mall, it is all of them, logistically. There’s a logistics process. A SKU is a SKU is a SKU. It doesn’t really matter if it is jewelry or if it is tailored clothing, it’s a process.

Halley Morrissey:

Verlin for you. How have retailers and brands used Theatro differently since Covid began?

Verlin Youd:

Oh my gosh. Every single one of our clients has used it differently and we’ve had workshops with all of our existing clients and most of our near-prospect clients, to talk about how they change as a result of COVID, whether it’s helping employees feel safer and feel more comfortable working in this enclosed environment. Number two, how to change the way they deliver customer service. And number three, as I mentioned before, how headquarters actually integrates to all of the stores rather than being the ivory tower. Everyone’s changed what they’re doing.

Halley Morrissey:

Okay. Here’s one, a bit out of left field. Do any of you guys feel threatened by Amazon?

Bill Thayer:

No.

George Shaw:

Nope.

Halley Morrissey:

Good answers.

Bill Thayer:

They built their infrastructure to do something. They’re now in the same situation, their infrastructure has got to do something a little bit different, as my conversation earlier about fulfillment by Amazon. Unfortunately, if you’re an FBA during a time of natural pandemic, it’s not fulfilled by Amazon, it’s… f*’d by Amazon. Terrible.

Halley Morrissey:

George, this is a question for you. How does a retailer implement your tech?

George Shaw:

There are a few ways to start. You can start by just giving us a floor plan. What we can do is simulate the space. We use our AI to simulate how people would move through that space. Retailers that are currently closed and give us a floor plan, some view of their traffic, just the number of counts per day, something like that. We can simulate that space. Or the next step beyond that is to give us a small amount of existing data. That typically means a little bit of video from all the surveillance cameras in a space, and then we can go forward from there. Then the next step would be a larger quantity of video, and then a step after that would be actually installing software on the ground in place.

Halley Morrissey:

Perfect. Okay, gentlemen, thank you for the fantastic session. Thank you to RBC Capital Markets for your valued partnership and for hosting this event, thank you to our guest speakers and to all of our listeners who dialed in. If you’d like to learn more about XRC labs, please reach out. We look forward to connecting. Have a great afternoon. Thank you.

Verlin Youd:

Thanks all. Good retailing.

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