Data in Aisle 3

February 21, 2018 Pivotal Software

Watch Brandless CEO Tina Sharkey and Kroger’s VP of Digital Tech Ryan Kean talk to Crunchfund’s Susan Hobbs about how personalization and data are fueling the future of retail.

“Because we know everything you’ve bought over years and years and years and we know everything everybody else bought over years and years and years and we know the data profile of those items, then we can start to have better marketing, better understanding of our customer and build a target…”
—Ryan Kean

Transcript

Susan Hobbs: Just to make sure that everybody in the room knows and understands, Brandless is the newest company to grace the stage today. I’m certain of it because you’d launched in July, so could you tell us about Brandless?

Tina Sharkey: I can. Firstly, thank you so much for having us. At Brandless, if you haven’t heard from us, I know that Marlene was passing out these little cards but we are entering the market with better everything for everyone, starting with everyday essentials, so the things you reach for every day, olive oil, and coconut oil, and all non-GMO snacks and food. Most of our food is organic, so things like extra-virgin olive oil, then, the beauty and personal care, so clean shave gel, clean shampoo, not rid of the phthalates and sulfates and parabens, and things you don’t want in your beauty and personal care items, and then the snacks that some that you already have and love but ours are non-GMO, sometimes organic, and then new things like quinoa puffs and quinoa chips. All the food is non-GMO. Everything is clean and just what matters, philosophy, as well as the housewares, plates bowls, et cetera, and everything at Brandless is $3. Some are two for three and some are three for three and it’s all available at Brandless.com.

Susan Hobbs: You’re good at pitching this company. It’s funny that you would know so much about it as the co-founder, and I can attest to the snacks being tasty. I have tried them at a different event before. We all ended up gathering around and eating the Brandless food instead of the catered food, which was also lovely but we all wanted to try and see what the Brandless was like.

Ryan, Kroger was founded in 1883 in Cincinnati, Ohio, and as I shared in the beginning, you guys are this huge brand and it’s been a lasting brand. That’s pretty exciting. You’ve also focused and been on the forefront of technology when it comes to data and retail and you’ve got your 8451 data analytics division and it’s kind of your secret sauce to customer personalization is what you’ve told me. How do you use this data that you collected at Kroger? Can you tell us a little bit about it?

Ryan Kean: Sure. Yeah, so, you’re right. It is our secret sauce. What we collect from 84.51, it’s really about everything that our customer does within our stores through a transaction. We do have loyalty cards. We’re just tied to a loyalty card. We’re talking about that, previous, outside. If you shop at one of our stores, we have about 18 or 20 banners across the U.S. If you’re in Southern California, its Ralph’s, Northwest, it’s Fred Meyer, QFC. Head to east, now you have Kroger and a whole bunch of other ones.

Because we know everything you’ve bought over years and years and years and we know everything everybody else bought over years and years and years and we know the data profile of those items, then we can start to have better marketing, better understanding of our customer and build a target, so we know if you’re a Coke drinker, I’m not going to offer you Pepsi. But because I know in a certain region in Texas that they actually don’t like Frito-Lay chips, they like a natural brand chip or they like a certain kind of salsa and it may be very isolated to a certain demographic in a certain region, because we know that, then we can start targeting in one of those areas, working back with our suppliers, start to form a different relationship with them. You’d definitely form a different relationship with your customer and it really allows us to get at the forefront of providing our customer what they want when they want it.

“First and foremost, we don’t think of them as customers. We think of them as members of our community.”
— Tina Sharkey

Susan Hobbs: Excellent. Your customers are new to you, right? How do you use data and how do you collect it, and what are you doing with it?

Tina Sharkey: First and foremost, we don’t think of them as customers. We think of them as members of our community. We are building a direct relationship with everybody that comes to brandless.com and we’re asking them to join us. I mean, not necessarily as a paid membership but join the movement that we’re on. In doing that, it sort of creates a different relationship from the beginning but we use data in lots of different ways.

Every gesture that anybody does into the Brandless experience, whether that’s through a search term, whether that’s through a click, whether that’s through an order, or whether that’s through basket analytics, we are trying to use that to actually create the most extraordinary experience both on the site in that moment but more importantly, considering how new we are, to actually use many of the search terms that people are looking for to say, oh, every day, let’s look at what the most popular search terms are of things that we might not have yet and that’s a way that we’re actually co-creating with the community where we are seeing, “Wow, they really want shampoo. That was the one of the most popular search terms from day one,” so we knew that when we launched our shampoo and clean beauty line that that would be very, very popular and as it turns out, yes, it was.

We also look at the data and analytics in terms of basket composition. It’s interesting that some of the products, when you’re in the supermarket business, it’s never about one product. It’s about the mission and then the trip, so if you can get the mission, like why did you come to the store, nobody leaves the store with one item. You want to get the trip. We’re saying, okay, well what are the trips that actually build a routine basket and then, how can we understand that by saying, oh, when people buy extra-virgin coconut oil organic, they are also likely to buy these things. Not only does it help us on the display layer show the consumer that people who like this also like this but it actually helps us build bundles and build different kinds of experiences, understanding what are, what I would call the gateway items.

Then outside of our walls, when we are in social media, when we’re in our community conversations, when we are showing people different types of things, we know what those gateway items are and we sort of encourage people to try those because we know that might lead to a repeat or a different kind of basket experience.

Susan Hobbs: Okay. Ryan, you talked about data and it seemed like it was in bringing customers into the store but Kroger currently has over 3,000 physical stores with more than eight million customers who come through them every day, so how does this data that you have improve their experience once they’re inside?

Ryan Kean: Yep. We’re trying a lot of different things. This is really an exceptionally exciting time for us in retail. Obviously, there’s a lot of pressures on us as we all know. I don’t need to go there-

Susan Hobbs: Oh, but we will.

Ryan Kean: I figured. Really, it’s an exciting time for us because then we can try to drive greater technology and use the data to have a greater experience for the customer. A couple of things that we’re really focused in on, one is something called the digital edge. This is a video shelf edge. It’s about four inches high. We’ll put it on end caps, center of an aisle and it can run full motion video, so people can run ads on it. If we connect to your phone, we know that you are gluten-free, then flag gluten-free things as you’re coming down the aisle, so trying to have a greater connection to the customer on an individual basis when you’re in the store.

Another one that is a really exciting one, I think, is using our sensor network to have temp tags. We’ve created a in-house temp tag that is in all of our coolers. Food safety is, of course, the most critically important thing within a physical store, so as cooler start to come out of a band of variability there and we say, “You know what, something may be going bad,” then we’ll send alerts down to our store managers on a dashboard. Based on that, then we can take that food out of that cooler, move it to a safer place, so we reduce the shrink, reduce the spoilage and most importantly, we’re ensuring that our customers, if they’re pulling strawberries out for a cooler that’s been five degrees too warm, that they’re not having the bad experience when they get back to their house.

Susan Hobbs: When we chatted, gosh, it’s probably been a week or two now ago, you also had mentioned that the digital edge can flip. Can you tell us … because I thought this was really cool, so if you could share.

Ryan Kean: Right. We have 440,000 associates. The previous conversation about large amounts of retail, hourly workers rate, that’s one I want to follow up on, but having something that’s exceptionally easy for an associate that’s working in the store, we can flip the shelf to go from a customer mode to an operations mode, so bring up the pictures the planogram. I’m no longer looking at a sheet or trying to guess that this salsa goes here, that one goes there. Where they have the picture, I can quickly see where my out of stocks are and improve the efficiency across the whole store. The more efficient that we make the associate, the more time that associate gets to spend with our customer, so that’s really the mindset behind a lot of the automation and technology we’re driving in the store, is in the end, our strategies called customer first promise, and it is really how do I get cycled back to the customer.

“ …We’re continuously trying to refine that [shopping] experience for our customers.”
—Ryan Kean

Susan Hobbs: Cool. Do you ever see Brandless showing up in at Kroger’s or another physical retail store?

Tina Sharkey: In order to deliver everything in $3 with these extraordinary values, we did what we call … We eliminated the brand tax. The brand tax doesn’t refer just to marketing. It basically refers to the inefficiencies in the system that gets products onto traditional shelves, and so there’s just so much markup and so many touches from the time something leaves a manufacturer till the time it ends up in your home. We know that Brandless will only be on a Brandless shelf and whether that shelf is in a digital world or the physical world, I don’t imagine seeing it on Kroger shelves, although they have some pretty awesome products, so it would be a proud place to be if we were going to be but we’re more … The pricing model doesn’t work there.

Susan Hobbs: When it comes to online shopping and food, I think a lot of people worry about the quality of fresh items that they’re receiving because they don’t have the opportunity to pick it out themselves. I mean, even when it comes down to, when you think about those last mile things like Instacart or things like that, is that person really going to care about my banana in the way that I care about my banana? Looking at that, how do you educate your customers on what ripe avocado looks like and actually, what period of ripeness do they need to buy it based on what they’re going to use it for? Am I making guacamole in three days or am I using it for something that I’m making tonight? How do you educate those customers when you’re looking at that, Ryan?

Ryan Kean: Right. It’s hard because you’re not just educating the customer. You’re educating the associate that’s picking that order, so the customer always knows what the avocado that they want is. We’ll put in a note section up there. It says, hey, describe green bananas or slightly green bananas because I’m not going to eat them for a few days and they’ll put those notes in there and then we’ll pick them up appropriately. When you get to things like avocados, I honestly could go into a store here today and I’d have no idea what a ripe avocado looks like.

Tina Sharkey: It’s how it feels not how it looks.

Ryan Kean: See, I had no idea. I would be terrible at picking the avocados. But it’s how do you educate an associate in a highly variable workforce that this is what a ripe avocado is, and it’s trying to bring the technology and the tools, the education tools to those associates to make that really super-fast and easy but then also, kind of go old school and have great mentors within those departments that can educate people as they’re coming in to say, “You know what, this one’s great. This one’s a little past,” but it’s a huge challenge.

Susan Hobbs: What about the consumer? Do you want to educate them at all?

Ryan Kean: We do and so we do a lot of personalization and try to do engagement on our website, so if you go and you do a click list order, which is our order online pick up in store, there’ll be a lot of videos on there. There’s a lot of product data on there and it’ll start to educate the customer…and this actually gets in a little bit of the data as well, so if you know that I buy avocados, I’m going to bring up recipes with that within them. From those product pages, you can start to dive in and say how do I pick a ripe one. You got to do a little digging to get there the first time and so we’re continuously trying to refine that experience for our customers and make that better. It is definitely a work in progress. The fresh area is the most challenging area of the store especially when talking about online because you just can’t pick it up and feel it or smell it or touch it.

Susan Hobbs: It’s so much more subjective to people’s opinions, I feel like …

Ryan Kean: It is.

Susan Hobbs: … than a box of Cheerios or something like that. Tina, how do you educate your customers about the value and the quality while you are Brandless, you are a brand.

Photo by Wesley Verhoeve.
“Being Brandless really means live more, brand less, and get into the conversation.”
—Tina Sharkey

Tina Sharkey: We are definitely a brand. We’re just reimagining what it means to be one and that is about the community. Because we are building these direct relationships, our email newsletters, their open rates are off the charts. I used to be the CEO of a company called BabyCenter with the largest platform for new and expecting moms here in the U.S and around the world.

Susan Hobbs: I was obsessed with my daughter.

Tina Sharkey: Our open rates, I mean, so it was like — it wasn’t open rates from a marketer’s perspective. We were sending real content and we’re having real relationships. We think of the Brandless customer as the same way. The other thing that we do, because we are so actively engaged in our social platforms, so on Instagram, on Facebook, on Twitter, et cetera, we’re in constant dialogue and the best thing that’s starting to happen now since July is we’re finding our customers educating each other because now that the community is hundreds of thousands strong on Facebook alone, now we’re seeing the comments … It used to be that we would answer all the comments but the community is starting to answer and share their own tips.

I mean, part of what we mean by bringing Brandless is dropping the false narrative of like something that Mad Men wrote on Madison Avenue about what brands, how they want to talk, and actually leaving that white space open for a customer to tell their own stories. It’s not about our recipe. Here’s some ideas we have but more importantly, what are your ideas and how do we share those, and then how do we tag you so that you get the credit? We don’t want the credit. This is really about you.

Being Brandless really means live more, brand less, and get into the conversation. We’re starting to see these relationships form and even sub-communities within our community, the gluten-frees, the vegans, the people who are wanting to do these different kinds of hacks, and they’re sharing that with each other, and they’re building these communities inside. That’s the fun part, is curating those conversations and giving people the tools and the resources to be able to tell their own stories.

Susan Hobbs: That’s great. Are you on Instagram and Facebook?

Ryan Kean: I am, yes, both, and the company.

Susan Hobbs: As Kroger.

Ryan Kean: Yeah, absolutely. No. We do the same, not the same because certainly, your community outreach I think is definitely different than our approach on it from a Facebook perspective, Instagram, Twitter. We try to definitely get in touch with the social communities. It’s more from a Kroger broad perspective and then we’ll do certainly targeted based on an event, so Giving Tuesday is a great example. On Giving Tuesday, we launched a campaign, click on the link, come to our site, and in doing that, we’re going to donate meals to feed America. I checked yesterday on Twitter. I think we’re at like 2.3 million meals donated from that campaign, so it’s continuously learning from our communities of what is the most effective way to engage and how do we drive a powerful message that isn’t just go buy potato chips. I mean, we want to be differentiated and it’s really trying to best understand how to do that.

Susan Hobbs: Great. It’s, I don’t know, the elephant in the room or whatever. Amazon is our measuring stick for retail at this point, yet its numbers say that Walmart’s current revenue is $486 billion. It was reported earlier this month and Amazon’s is 136 billion, but Amazon is definitely the darling of Wall Street. Why do you think that is? This is for either of you, and does it affect your strategies?

Tina Sharkey: From my perspective, Amazon is the darling because they are all about Wall Street and invest in the future. Walmart is extraordinary and they’re both extraordinary — like come on, what Amazon has done is totally vertically integrated so many different things and they’re logistics ninjas. I mean, more people in this country have an Amazon Prime account than have … I don’t even know what they’re called anymore. Home phone number. What is it called? A landline, yes. A landline, yes. More people are Amazon Prime customers then have landlines in this country today. They’re just doing an extraordinary job at logistics and fulfillment and Walmart is getting to that place, I guess. I don’t know enough about either of their businesses but I would say that would be a place where they’re much more nimble in their ability to go after new businesses and they don’t have that installed physical space holding them back.

Susan Hobbs: Until now, which is like they’ve opened these bookstores that they closed.

Tina Sharkey: Bookstores. They just bought Whole Foods.

Susan Hobbs: Yeah, so it’s been interesting. Ryan?

Ryan Kean: Yeah. I mean, the both of them and a whole bunch of others are incredible competitors and for us, it really just drives back to how much we trust in our strategies. We want to talk about the customer first strategy. When you can start to really understand the customer and touch the customer, when you walk into a Kroger and the store manager recognizes you, may know your name, the bagger, we get great feedback every day to our call centers and through survey data of this person did this for me today. Maybe it’s just walking groceries out to the car or something but it’s that personal connection that is really hard to get online. You can do it but it’s exceptionally hard and so when you’re trying to do it in scale, it just becomes that much harder.

For me, it’s when you look at the great competitors out there, it’s what do you stand for? What at your values? What’s your mission? Does your mission change because of your competitors? For us, it doesn’t. Our mission is to drive the greatest customer experience, to trust the loyalty of our customers so we can deliver them the food experience that they want every day.

Susan Hobbs: I suppose that’s why you’re a 134-year-old company.

Ryan Kean: We’ve had to make some changes along the along the way too, so we’re going through another one of those right now.

“The more things like automation, dashboards, handheld, whatever it happens to be, we want to get our associates out on the floor talking to our customers, building those relationships, and just generally driving that greater experience.” —Ryan Kean

Susan Hobbs: We’re in the Silicon Valley and as an investor, I go to plenty of demo days and see brand new startups and they’re always telling me how they’re going to make everything less expensive by automating people out of jobs. Specifically, I want to ask you from a Cincinnati perspective, what happens when the cameras and the sensors work in a way that there isn’t actually even that horrid self-checkout — that I just don’t even check out at all — that I come in, I do my shopping, it knows I’m there, it knows what I’ve got, and I leave. What happens then?

Ryan Kean: We actually are test piloting that today. We have in 20 stores. We call it Scan, Bag, Go. We’re going to expand to about 400 stores next year and there’s other things in the store that we automate. The intent there is a couple fold. One is there’s some tasks that are just not that fulfilling to an associate, and there’s other tasks where automation can drive such a great greater level of accuracy, seven by 24 that it improves the customer experience. What happens when you start to pull these things together? The intent there is to allow our associates to spend more time on the floor with the customer.

If I have a management team that all that we, because corporate says, “Look at these reports all day,” or whatever. It happens to be and they spend the whole day in the office, not able to be on the floor, I really think that we’re failing our customer. The more things like automation, dashboards, handheld, whatever it happens to be, we want to get our associates out on the floor talking to our customers, building those relationships, and just generally driving that greater experience.

Susan Hobbs: It sounds like you it’s very similar perspectives in that way. I forgot to last time when I was up here, but does anybody in the audience have a question?

“…we don’t look at the data in the rearview mirror. We’re looking at it in almost real-time and saying: what can we learn? How can we course correct? What can we prioritize?” —Tina Sharkey

Audience #1: Experimentation: you’re a 134 year-old brand, you have a brand new brand. You’ve also read this edge where you do experiments with data with quality, with the customer experience. How do you think about what you experiment with and what the cycle time is and how much data does it take to drive a big change?

Tina Sharkey: It’s a great question. We run a meeting every single day. It’s called I to A and it means insights to action. We take the overnights, which are our snap reports of everything that happened on this site last night. What were the top selling products? Where did people come from? Where do they go to? What do they click on? What are the baskets built like? A lot of data. We literally get together for a half an hour every single day with key stakeholders in each department, which is basically the whole company because we’re a startup. We say, “Okay, what do we learn last night that’s going to prioritize something on the roadmap?”

It doesn’t mean that every day, we’re flipping around and doing different things but once you get used to having that meeting every single day, we don’t look at the data in the rearview mirror. We’re looking at it in almost real-time and saying: what can we learn? How can we course correct? What can we prioritize? What are the small wins we can make at like display layer or the larger wins that actually sets up the prioritization of the data science?

When we launched three free toilet paper as an example, it’s made with bamboo grasses and sugarcane, here’s what happened. We took a look at all the baskets that built that and then that comes in the next week, so it might not be the next day and say, “This is how we actually want to build new bundles based on that insight because people who bought that also bought this.” Then, there are things that we might change on a daily basis, so having the discipline where the data is your friend, it’s not outsourced to another department, yes, we have data scientists and we have technologists but in my company, everyone is a data scientist. Everyone has to get used to and comfortable with looking at dashboards, getting into the reports, and building their own dashboards so that they can be completely set up to succeed in their roles.

Though I’m talking about writers, art directors, graphic designers, people who write subject lines for emails, what emoticon they liked versus didn’t like, so the idea of giving everybody a seat that data table and knowing that insights can come from anywhere and sometimes, the most orthogonal places, that graphic designer who you wouldn’t think of as a data scientist but I’m saying, “But you are,” because understanding how those graphics drove engagement or drove basket building or whatever starts to build a culture of that, which then it helps prioritize the road map and prioritize the resources over time.

Ryan Kean: Very similar. Probably not as exciting or as quick, so within a physical store, we’ll do a pilot within five or 10, 20 stores that happens to be and it does take some time but on the online world, a very similar situation. We will have our marketing teams, our digital technology teams. We’ll get together very, very frequently, have discussions looking at the data comes through and then do A/B tests with some of our customer base to understand what’s working and what do we need improve on.

Susan Hobbs: Thank you so much, Ryan and Tina. I really appreciate you being here and your time.

Tina Sharkey: Pleasure.

This video was filmed at the Built to Adapt conference in Sausalito, California. The transcript was edited for clarity.


Data in Aisle 3 was originally published in Built to Adapt on Medium, where people are continuing the conversation by highlighting and responding to this story.

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