Reimagining Multi-Channel Retail
Steve Matthesen joined Acosta, a full-service sales and marketing agency, last fall, succeeding long-time CEO Robert Hill. Prior to Acosta, Matthesen served as President of Global Retail at Nielsen and was a partner at The Boston Consulting Group. Matthesen has an MBA from Wharton, a master's degree in computer engineering and served in the U.S. Air Force at the Space and Missile Systems Center. He spoke with Retail Leader about retail innovation, evolving business models and digital profitability.
Retail Leader: Looking at your background it's easy to see what former Acosta CEO Robert Hill meant when he said you bring an analytical perspective to your new role.
Steve Matthesen: He's referencing my time at Nielsen in particular. Nielsen is very much in the data and analytics part of the CGP industry and one of the things we are focused on now at Acosta is better leveraging data and analytics for our clients. We want to make sure we are helping clients optimize which activities we perform for them in the store and do so in the most efficient manner so that they get the biggest bang for the buck. We are focused on how you measure the value and then how do you think about all the ways to improve it.
RL: We'll come back to some of the changes happening at Acosta in a bit, but first share your view of trends in the marketplace because you've got a broader and more global perspective than most.
SM: A lot of the trends are quite consistent globally. The shift really all around the world is back to smaller stores that are more shoppable and this is particularly evident in Europe and gaining momentum in the U.S. The other big trend, in place for some time now, is channel blurring and it is intensifying. Also, the number of stores people shop each month is steadily declining, which reflects changes in behavior because you can get everything everywhere.
RL: The trip challenge has been in place for a while, exacerbated now by online.
SM: The issue with e-commerce is it is still fairly small in the CPG categories with sales penetration in the single digits. Diapers is the one category that went big first, which makes sense in a way because they ship efficiently. Also, diaper manufacturers had made very aggressive deals because they were experimenting with a new and interesting channel so they leaned into it. At some point, though, people have to make money in the online channel.
RL: I feel like we've been saying that for a while.
SM: I know, but eventually. ... Right now you are seeing lots of experimentation, which is great, but most of those things don't really pencil out from an economic standpoint.
RL: Shoppers reportedly love the ability to buy online, pick up at store. Do you think retailers have figured out that model?
SM: The economics for that are also fairly challenging. European retailers have been doing it longer and they have learned a bunch of lessons. Picking from stores is not very efficient because stores are not distribution centers and so there are some issues with it. In Europe they are starting to evolve it because if you allow someone to buy everything in the store it makes it that much more complicated. The model has started to evolve to restrict the assortment of SKUs available for ordering online. The U.S. players are still in experimentation mode and most of the folks I talk to allow customers to buy everything in the store but they are going to find over time that offering a limited assortment make more sense economically. You are also seeing some retailers re-arrange category locations and aisles so it make it more efficient to pick. That approach can make it more confusing for in-store shoppers so there is a trade-off.
RL: Another trend we hear a lot about is "experiential,"as a means to offset shoppers migrating online. What's your view?
SM: It is easy to say and hard to do and retail is one of these areas where ideas tend to resurface. If you go back 20 years, experiential was a big trend and you had companies like Stew Leonard's and Wegmans who managed to make the store experience feel different. The challenge for everyone is that grocery shopping is not high on most folks' list of things they want to do, but we are starting to see a shift of certain demographics, specifically Hispanics, enjoying the grocery shopping experience. So how experimental can you make it so that shoppers are truly engaged, because there are still folks who just want to get in and out? My sense is there is no answer yet. The consumer doesn't know, the retailer doesn't know and the CPGs don't know. Click and collect isn't the answer, maybe it is an answer. Experiential is one option as e-commerce gets bigger and it is going to be very interesting to see how what stuff people want to buy in store and what they want to buy online and how all that shakes out. You are going to continue to see a lot of experimentation over the next few years and everyone tries to figure out what is actually going to work. It is an interesting time to be a consumer because of the experimentation.
RL: Speaking of experimentation, what's your take on the proliferation of meal kit providers?
SM: One of the things folks have started to figure out, which wasn't as big a topic five years ago, is that restaurants are real competition for grocers. I would say that meal replacement type services are kind of like restaurants even though consumers prepare the food at home. If you think about it, the biggest competitor to breakfast cereal is an Egg McMuffin so the dynamics have changed where it is less about Kellogg versus General Mills.
RL: Competition has changed and you mentioned food service, which is an area Acosta entered a few years ago with a flurry of acquisitions. As a result, your business looks very different than it did even five years ago in terms of services offered.
SM: Our offering has certainly expanded, but the way I think about it is we really do three main things. The first is the customer relationship and selling model where we are actually taking care of the process of selling for our clients. We got into food service partly because many of our existing clients are also in food service and in many cases the products are similar and a lot of the learnings are consistent.
That is a big chunk of what we do and the second big piece is in-store. This area has evolved over time and what we are focused on is the in-store experience. The store is an important point to sell people on products, particularly as retail has changed and store labor grows more expensive. The amount of out of stocks and shelves that don't look the way retailers and CPGs would like them to look is more and more of a challenge so that becomes a bigger value lever for our clients. We also do assisted selling in store, which is important because even in a world of e-commerce, the store environment is a real marketing platform for brands. In many cases that is where shoppers decide what brand to buy and which new things to try.
The third thing we do is operate a marketing platform to execute events and provide experiential services. In a world where everyone is getting more digital and looking at their phones, consumers still want to connect with brands and connect with other people.
RL: What does that look like in a retail environment?
SM: We are seeing demos in more places because the old model of launching a CPG product through the shared experience of television is no longer effective. The store is a great vehicle to explain products, especially those with more involved feature sets as they benefit from a conversation.
RL: Demos can be expensive though when people look at the activity in isolation as opposed to part of a larger go-to-market effort.
SM: It is very easy to look at the costs for all types of in-store activities as costs separate from an ad budget or trade promotion budget. Part of our challenge is to show folks how to think holistically about in-store activities and arm them with enough data to accurately measure the ROI.
RL: In an industry facing growth challenges that is relentlessy focused on controlling expenses, how does Acosta add value?
SM: We feel really good about our value proposition and our ability to leverage our scale to execute and deliver outcomes. We touch product, we are in stores, we are negotiating with retailers on behalf of suppliers. We are very embedded in our clients' business. Ultimately, we are in the more for less business and it all comes down to how do you help customers sell more stuff.