DeCoded Podcast: The Impact of COVID-19 on Retail

With Pano Anthos, XRC Labs • July 2020

COVID-19 has changed the way we shop. In this episode, we talk to XRC Labs founder Panos Anthos about the pandemic’s impact on the retail industry.

Read Transcript

Reid Jackson:

Hello, and welcome to The DeCoded podcast, presented by GS1 US, where today's thought leaders help us crack the code on emerging technologies. Today we have Pano Anthos, who is the founder of XRC Labs, joining us. XRC Labs is an accelerator that brings together entrepreneurs, investors, brands, and retailers to foster rapid innovation and unlock new opportunities within retail. Pano, welcome to the show.

Pano Anthos:

Hi Reid, thanks for having me.

Reid Jackson:

Yeah, no, I appreciate you making the time here. Here we are, it's early July of 2020, and COVID-19 has changed all of our lives so dramatically. For today's conversation, I mean, you guys, you are a retail expert in my mind. I know a lot of people come to you looking for insights and trends and analyses and where things are going, so for today's show we really want to talk about COVID-19 and the impact it's having on retail. I'd love to start off with grocery, if that's okay with you.

Pano Anthos:

Sure. Absolutely.

Reid Jackson:

All right, so before COVID-19, grocery online sales were roughly at around 5 to 12% depending upon who you go to of most grocery stores. Now, overnight, we're upwards of 40% online sales, but that's a heavy burden for these grocers to automatically add this. How come it wasn't added before? Online sales in other areas have been growing for a long time, why did it take a pandemic like this? I mean some of it, it's obvious, but what was holding them back beforehand?

Pano Anthos:

Well, honestly, I don't think the consumer was demanding it. Changing consumer behavior is not a trivial exercise. It takes upwards of 45 days to change a consumer behavior. And so if you've been buying groceries in a store for 100 years, so to speak, that behavior dies hard. It took something like a virus, a fatal virus no less, a deadly virus to actually change all that.

Reid Jackson:

Yeah. To me it's been mind-blogging how overnight my parents are looking for how can they buy groceries online. But at GS1 US, we're all about identify, capture, and share, and I've been involved with some of these grocers on different projects they're running. I remember one specifically out of Florida, a grocer that has a vendor that supplies them with 37 different flavors of ice cream, but all the flavors are labeled as vanilla or chocolate. To migrate them to an online system overnight is no simple task, because if I want mint chocolate chip and my daughter wants rocky road, and everything is only vanilla and chocolate... I mean, are you seeing this as well in this industry where they're technically behind? Is this a big hurdle for them, a small one? I'm just trying to give our audience an insight into what's behind the curtain for them.

Pano Anthos:

Well, first of all, I think it makes sense to understand how the grocery industry operates at a very, very thin margin. Most of their profit margin is promotions that are coming from the brands directly, essentially buying shelf space or mind space so that the grocer really is a pass-through. Frankly, a lot of people think grocers of nothing more than a real estate way, which is not fair. But when your margins are as thin as they are, they're not even a traditional retailer from that vantage point. So that's a first thing, is that they're operating on very thin margins and, therefore, with very thin margins comes very little capital for investing. That capital is what fuels technology investment.

Pano Anthos:

So they are way behind, and it didn't matter because, frankly, everyone operated the same way. Again, it's only the fear of going into a store that I think has really curtailed grocery shopping. Yes, center of store are the products that are shelf stable, could be sold online. But they're either a lot of volumetric weight in some cases, like a cereal box is really expensive to ship locally. Or if it's a dense product like jam or glass, it's very fragile, and it's very expensive to ship by consumer basis. I think that the nature of the products have never really lent themselves easily to direct. And frankly, I would argue that if you really look at what's going on, it's pickup curbside-

Reid Jackson:

Right.

Pano Anthos:

... more than ship to my house. That makes sense because that's really what whether it was Instacart or anyone else trying to say, "The actual experience is pretty awful and pathetic, but the procurement process of getting the product into the house, I don't mind driving up and having my groceries bagged for me and waiting for me. That's fine." So I think that we're overdrawing what online means for a grocer. It does not necessarily mean literally shipping direct to the consumer. It much more means effectively providing a curbside pickup capability. Target has spoken to it, and Walmart speaks to it, that that's by far the biggest growth area, has been curbside pickup. If you look at shopping, clearly Instacart has taken over the shopping experience because, again, people don't want to be in stores.

Reid Jackson:

Right.

Pano Anthos:

Right, so they can shop for them. And that makes sense too. Yeah, it's very logical what's going on. This should not come as a surprise to anyone, given that there was a big surprise as COVID.

Reid Jackson:

Right. Yeah, no, it's excellent points, and I love the way you simply laid it out there for everyone. It's kind of all the players were playing in the same playing field and now they all have to adapt to the new playing field. Are there anything that's top of mind for you that if grocers don't continue to improve on that will cause some of them to go out of business or not keep up with the times and be relevant? Is there any type of technology adoption or process adoption outside of curbside pickup that you're seeing that's top of mind for you?

Pano Anthos:

I don't. I don't think it's a technology issue, I think it's a customer service issue which, obviously, impacts operating cost as well as customer sat levels. But the movement of product is so expensive that it's going to have to moved in case quantities, like it is today, and then unbundled and then packaged up for local delivery. But again, I would argue that last mile delivery is so ridiculously expensive that no one can afford to do it, at least of all Instacart. That's not where their value prop is, their value prop is shopping in store.

Pano Anthos:

So I think what's going to happen is you're going to end up with stores becoming warehouses, more like a Costco, not quite with the membership model and so forth, but local, right? The Vange is your local, you're more like a warehouse. You will have some sort of fresh area for people to walk into if they really need to, although I think that's going to get more sophisticated over time. That would be the one area I would say technology can make a difference is identifying freshness of product, either with computer vision or sensor technology that actually knows how long the lettuce has been there and whether it's wilted or not. That gets really interesting because, obviously... or whether the avocado is ripe, which no one can tell today without touching and feeling it.

Pano Anthos:

So those kind of produce principles could be automated. In which case then the produce itself could be treated the way center stores treat it, durables, stuff that basically can be bought and shipped. But right now people are saying, "I want to touch the produce." Right? And of course, the produce is usually the first thing people walk into.

Reid Jackson:

Right.

Pano Anthos:

I think that's the one area where I think tech can make a huge difference. I don't think tech refrigeration is going to change much in the next 15, 20 years, except maybe smart sensors that will tell you if the refrigeration unit is going down, which is really more of an insurance factor. I think prepared food continues to accelerate. I don't think it's going to be a Blue Apron. I don't think they survive or they really have much of a business. It's going to be much more of the Blue Apron at the grocery store model, where you get scale by having chicken salad made for you, right? Instead of you making your own chicken salad, you buy a fresh made chicken salad. That's been going on for a while. I think that expands into more and more meals.

Pano Anthos:

So I do think where grocery can evolve to is more meal planning and meal development. And using data finally for once. I mean, good Lord, the grocers have been sitting on frequent shopper data for 25 years and have done almost nothing with it. I've shopped whether it was a Whole Foods or a Kroger or wherever, a Wegmans, and if I buy meat, no one has ever emailed me six months later or three months later saying, "Hey, you know that meat you bought? It's on sale again." No one ever has done that, which is really basic marketing. But again, the grocers have never been incentivized to do it, because they're not paid to sell me more meat. They're paid to sell more meat of the variety that a brand is promoting.

Reid Jackson:

Right.

Pano Anthos:

That's what they tend to sell.

Reid Jackson:

You've brought up so many things with that last part. I drive out my neighborhood and make a left onto the major road and within a two-mile span there's three major grocery stores that are all vying for my money to be spent at their store. So I see the opportunity for some of them to get more creative, especially with the user data. But you talked about stores becoming warehouses, and I'm going to get to that in little bit further along. You talked about logistics and produce and being able to see some things there, and I want to talk about that as well. But I want to come back the customer service issue, because I think that that's going to be key all the way around. What a lot of people forget about is a grocery store, you're kind of the employee. I'm the customer, but I'm the employee because I'm walking around, I'm picking my own stuff. And so now we're moving online, curbside pickup, customer service is really important.

Reid Jackson:

So we see with less in-store shopping, where consumers are relying more on the data of the product listing, right? My wife is a big cook and she's a great one. I always say she won me through my stomach. She's very particular about what she buys, and I know she gets frustrated when she wanted to buy something and she ordered it online, but it wasn't what it came to. My question to you is, do you think that there's going to be a bigger focus on data accuracy and descriptions because of this transition?

Pano Anthos:

Well, I mean, data accuracy matter everywhere, and it increasingly matters when the customer connection is fragile. An online customer connection is far more fragile than a physical store customer connection, right, because in the later, the customer has driven into the store, and if they don't see X, they see Y on the shelf very quickly, right? It's all grouped that way so it's very easy to see. It's very hard to do that online. There are companies like Farmstead who are trying to use data analytics to curate what I should be seeing. That's great and that's on the curation side. But I would say that when you're online in general, the accuracy of inventory counts, the accuracy of product descriptions, the accuracy of ingredients and transparency on labeling all are critical, right? Because honestly, there's some huge number of percentage of people who look at a label before they buy the grocery item. It's over 50%. 60% I think it is.

Pano Anthos:

You can pretty much guarantee that data quality as it's relating to inaccuracy, as it's to your supply chain and transparency is going to become increasingly important. Ingredients matter, so you can't label everything vanilla and chocolate ice cream. If you're online, you lose the ability to control that. Whereas the store, you can get away with it without being quite so active.

Reid Jackson:

Yeah, I mean when you're shopping in the store and you ask the manager, an employee, "Hey, can you help me find X." And they're like, "Oh, we're out of X, but Y is pretty close." And you're having that conversation, you don't get that interaction when you're online. I've seen the grocers struggling with this, "Well, do I leave the basket empty of that one item or do I put another item in?" It's a gamble for them with that customer service experience.

Pano Anthos:

I agree.

Reid Jackson:

All right, let's transition back to the stores and stores changing, and let's open this up a little bit more beyond grocery. Because we're all told that... Well, I should say the state I live in, it's now mandatory that we have to wear masks in public. Things are changing all the time. How do you see stores changing? And let's just move forward a little bit, just 2021, 2023, do you see that this is a substantial change that's going to persist well into the future?

Pano Anthos:

Well, I've alluded to it, right, that the center of store is really going to be more like a warehousing operation. You don't need to walk the aisle to choose Cheerios. You already know you want Cheerios. There's not a lot of product innovation in center store. Insofar as it is to your point, the accuracy and the description of a product online is going to give you a better search and discovery tool than walking through a store and being completely confused by its format. You're going to get better search and discovery online. You're not going to need the center of store to be shoppable in the sense of physically. You can trust in Instacart to do it for you, or you can buy it online, just have it shipped to you in bulk. I think you'll find grocers will look at some things from a bulk perspective, and I wouldn't say play the Costco game, but certainly offer products that way.

Pano Anthos:

But by and large, you still have curbside pickup which is a huge advantage because it's local. It's close, and it's immediate. I think, what is it? Something like 30 or 40% of all people who shop for dinner literally have or don't know what they're going to have for dinner in the hour before they need to eat. So some crazy number of unpreparedness, which pushes the whole process into a very last minute, got to go to the store, pick up this, pick up that kind of mentality. I don't think that's going to change much. I don't think people are going to get that prepared.

Pano Anthos:

So you look at consumer behavior, which is last minute. They're learning how to cook so that's a difference. Granted. But search and discovery online plus curbside pickup says short of the fresh produce being a thing that people want to touch, feel, I don't think you need to go into a store.

Reid Jackson:

Yeah. Yeah. I tend to agree. Let's transition over to traditional retail, your Macy's, your Targets, your Nordstroms, and those. I often think of what's been going on with retail and malls and things are changing. I was having a debate with a friend the other day. He's like, "The Macy's store in New York City, the Macy's Day Parade, is that store going to close down? Is that store going to change size?" Let's just move it back. That's just a thought on my end but move it back to general retail. How do you see stores there changing? Are we going to have one-way aisles? Are the store sizes going to move smaller, and are they going to be more warehouses like grocery stores?

Pano Anthos:

First of all, for traditional retail, apparel, accessories, if you know what you want, you just buy it online. Your likelihood of going into a store has dropped dramatically. Why would you need to go into a store? Well, you don't know what you want and so you want to do discovery. In clothing, especially, touching and feeling a product is important. The fabric makes a difference, the drape of the dress or the pants that fit, and then fit, super important. You'll tend to go in for those aspects. But with the ability to order four sets of something, of different sizes and have it shipped to you and then return what you don't want, that's got to be even more problem and to the retailers demise.

Pano Anthos:

The retailers need to solve the fit problem and that's take back to manufactures however, because ultimately, unless you're vertically integrated as a store, if you're a department store you're really hosed because the manufacturers do not provide consistent fit. Same model, same style, same skew, may fit differently depending on what manufacturing plant it came from. That's especially true with blue jeans, it's a huge issue in the jeans market, no standardization. They never cared. It didn't matter because everyone would go onto their store and they tried everything on. And now it matter and so-

Reid Jackson:

It's interesting.

Pano Anthos:

... what I call the normalization of fit is now a big issue but not easy to solve because they don't have the level of granularity and accuracy in manufacturing that they should. They don't have a completely digital process for cut and sew operations. They're getting there, they're more and more so. But fabric, texture, and elasticity of fabric makes a huge difference and look makes a difference. People have been spending a lot of money trying to figure out the fit issue. Fit is going to continue to be a problem. It will be an isolated set of products for which you need to feel and touch it. Staples will go completely online.

Pano Anthos:

I mean, look, I, today, this morning, anecdotally, I wanted to buy more casual shorts. And so I went on to... This is exactly what I did. I typed in best hiking shorts, and I got this incredible piece of content from, I don't know, Hiking Magazine or something, on the 20 best hiking shorts made. Really detailed, and I was like consumer reports for hiking shorts. And then I went to two or three brands that I know, REI and Arc'teryx, and I went to the Patagonia site. I saw that REI was having a sale, and so I saw the four or five brands that the content was saying were the best and for what I was looking for. And so I bought five or six pairs. I'm not going to keep all five or six pairs, because I don't know which one fits best, right?

Reid Jackson:

Right.

Pano Anthos:

I'm going to bring them home. They're going to ship to my house. I'm going to take what I want and push the rest back, which has been going on for a while. This is not new to a lot of people, but it's now at scale. It was the few of us who digital only and didn't want to go into store and time was super valuable. Now it's turned into, "I'm not walking into a store. Why do I need to go into the store? I'll just return it if I don't like it."

Pano Anthos:

So you're just going to see this more and more where fit is the only reason to go into a store, and once you solve the fit problem, you don't need to go to a store. I mean, honestly. You want to maybe be part for the experience and meet the brand or talk to the owners or be part of a community, which is another angle for stores, which is we believe in vertical brands. We believe vertical brands is really about positioning the brand. I mean, Joey from Albert was on a recent call I was on. He said, "We look at stores as marketing vehicles. Right? Not from a sell through, it's a marketing vehicle. We're getting our brand out there. We're getting our name out there, creating community around our brand." And they're doing it with physical locations, which makes tons of sense. But you don't need 4000, you can just have 100, and probably cover the major geo areas and you're fine. Maybe you've got 200 or 300, but you don't need 1000.

Pano Anthos:

So you're going to see stores being marketing vehicles. They'll be, in some cases, I call it urgent care, meaning immediacy, I need this now kind of situation or scenarios. But we're getting more and more specific on the warehousing side and inventory planning side, and we're going to see more and more product really close or manufactured in front of the customer over time. Our longterm vision is you're going to see a delay in the manufacturing process, meaning you keep your products as close to parts or non-finished goods, raw materials as possible and you produce, relatively speaking, on demand. It could be literally on demand, or it could be on cycles of demand, so every month you replenish based on existing demands. And so you don't produce as many extra smalls or extra larges because you can see the demand curve.

Pano Anthos:

I mean you've seen that with Zara and others that are trying that. They're doing a lot in that area. But it's going to even get more sophisticated. Apparently accessories is going to really go... Once fit's solved, there'll be no reason to go into a store except for community building.

Reid Jackson:

The fit piece, the normalization of fit, I have to be honest, it's new to me. I thought it was just me when I tried on jeans and like, "Why don't these fit. They don't fit right. The last pair I had did." What's holding them back there? What is the challenge? What's the hurdle?

Pano Anthos:

Low cost manufacturing does not mean sophisticated manufacturing. If you're sourcing in Vietnam, you don't necessarily have state-of-the-art cut and sew operations there. You could. You've got to invest in it. Who's investing in it? Well, look, most of the brands are hurt, in a world of hurt. So have they gotten super sophisticated? No, because what they do is they push the product to retail and it's a retailer's problem. Well, now, the retailers are stuck in so the problem comes back to the manufacturer. This is a chicken and egg problem, right? All the while, the customer is saying, "I'm tired of this. I'm going to go to a brand where I know what my fit is, consistently." They have fewer skews, like in Avalon, but I know what I'm getting. And so you get more micro brands. You get specialized brands that have fewer product that they're dealing with but are better at it for what they're dealing with.

Reid Jackson:

Do you see an opportunity for couture... I mean saying it right, but customized manufacturing of clothing for a higher end but bringing that higher end down more to the middle end, the latest, greatest. I'm going to get a clear thought on this, but I'm seeing more regionalized manufacturing of garments, right, trying to move back to localized so the product doesn't have to travel so far. It's ordered online, sewn, made, manufactured in that area and then distributed to them. Do you see an opportunity for that more customized as opposed to the less skews, but everybody is wearing the same thing? Is there a balance to happen there, or is it already happening, I'm just not aware of it?

Pano Anthos:

Well, it's happening in the shoe industry. Almost every shoe manufacturer can produce custom shoes in 12 days or less. These are on demand, but they're not immediate. You don't wait in the store and it's produced, nothing moves that quickly. The idea is if you're willing to wait a couple of weeks, you can get custom shoes. Shoes, especially athletic shoes, running shoes, track shoes, are highly valued for their custom fit. It used to be custom orthotics, well, now you can get shoes with custom fit. That's going on. That happening, and all the major players are doing that today. It's still a small portion of the business because by and large the band for customizing is great. I'm not referring to custom so much, I'm referring more to stock product-

Reid Jackson:

Right

Pano Anthos:

... for which your management of planning has been, "Well, they bought X amount last year, so they'll buy X amount this year." Why not, "Well, they bought X amount last month, let's place a re-order and produce X number of quantities."? Because the raw materials are already in this country, we don't have nine weeks of transit time to deal with. If you move the raw material, the raw goods as close to the customer as possible, you reduce your transportation cost and time, which means you can be much more agile and responsive to the demand fluctuations.

Pano Anthos:

I mean, look, March and April were really cold here in New York-

Reid Jackson:

You're right.

Pano Anthos:

.... and north east. Really, really cold. Did anyone predict that? Probably not. Were retailers caught napping, so to speak? Unfortunately, probably true. What could they do about it? Well, had they been more of an agile model instead of this nine-month advance planning model, they could have spun out more sweaters and products that would have been more cold weather orientated rather than warm weather oriented. But they're so seasonal, and it's now time for resort, it's now time for summer. It's now time for spring. It's like they're so programmatic that they've lost the fact that the customer and weather, for example, fluctuates a lot. So it's going to take a while. I think you're going to end up with many dead retailers and massively hampered and hurt manufacturers before we really do see the emergence of more on demand.

Reid Jackson:

Yeah, there's a lot more to it than we take for granted. Let's transition. We talked a little bit about customer service and stores changing and the importance of data and utilizing customer's data. Let's talk about the back of the store, the logistics piece here. We're hearing in the news, we're dumping out milk, we're plowing over crops, we need to get more agile with our logistics. That was just on the food side of things. What's your thoughts here? I mean is there any big trends that you're seeing or spots where we're succeeding or areas that we're just drastically failing at that we need to focus on more? I'm just interested at a high level what your thoughts are with logistics. What's top of mind for Pano?

Pano Anthos:

Well, I'd say one is what you can't do as well as what you can do. And so what we can't do today is defy the laws of physics. We can't fly planes faster or make ships go faster in the short term. We have to deal with what I call almost immovable objects or constraints and figure out how to optimize around those constraints. I think the invention of the container is a great example where that was an optimization of an existing process. The ships are maybe somewhat faster but they're not 10 times faster. And so until we get breakthrough in light transportation and so forth, it's not going to change that.

Pano Anthos:

I'm not a brokerage of transportation, not terribly interesting, it's very optimized today. There's no big advantage of one broker versus another. So whether it's freight brokerage or cargo brokerage, you're getting asset utilization and that's an improvement and that's all good, it's behind the scenes. But that's not really a great deal of innovation going on. Centers and the trucks have been around for years now, so knowing where the truck is is valuable. But we had built, my first startup, a truck and trace solution that Intel and some other major corporations used. But the real value of it, despite the fact that it was all of Intel using it, it was still under a million dollars a year. It was because it was exception-based monitoring, it wasn't like everything was chaos and everything was at will. We are seeing some of that today with COVID, but by and large, things settle down and so the supply chains are pretty predictable.

Pano Anthos:

Where I think the reinvention happens for us is, one, is the area of autonomy. Any form of autonomy that we can build into the supply chain is going to be of immerse impact because it reduces your labor costs. Robotics has been doing this for a while. They're very expensive, not easy to automate. Firstly, you can't automate everything. And then obviously a number of studies are coming back that automation still requires lots of people, so it's no zero-sum. Autonomy in terms of computer vision, whether it's drones, trucks, cars... The truck and cars thing is years away because of public safety issues and the fact that if we're not 100% accurate people die. That's a cost that no one is willing to entertain.

Pano Anthos:

But inside spaces like warehouses, we have a company called Gather that's doing autonomous drones. It makes perfect sense, huge impact on savings and labor, and inventory accuracy, and you can reorganize your warehouse based on what a drone can do. It used to be you'd organize it based on cranes or forklifts. You don't have to do that anymore. You can organize it completely differently now based on what a drone can do. So you can make them really high and flat, where isles were never that high and flat. Now you can do more of that.

Pano Anthos:

So we're very interested in always any sort of replacement of a labor component to this. We care a lot about labor automation from a vantage point of safety, so we got a couple of companies doing work in the social distancing story and making sure that labor is automated and compliant with best practices around labor standards. We love what we call interim logistics, where you're taking existing spaces that were stores and turning them into mini logistics centers. And so Logik is doing that now with the mall. The mall is probably the best position to be logistics centers. Not that they want to deal with that, but they're the best located of any real estate in the country. They're always in highly suburban, highly dense areas.

Pano Anthos:

We've got a company who's essentially spun up, effectively, super, almost micro fulfillment warehouses, very low touch, low cost, highly valued solutions to drive down the sorting process and drive out the sorting process in the UPS and FedEx world so that we can reduce your 3-5 day carrier window and delivery to 1-2 days. The pitch is you can get one or two days delivery for 3-5 day career prices. Because really looking at the entire supply chain, just taking out the chunks that just are inefficient or are old school and re-imagining the assets that are available, like stores, and turning them into mini warehouses. The landlords don't like it that much, but the customer love it, because it means that they get product much quicker, faster, cheaper.

Reid Jackson:

Yeah, I agree with you. I was reading an article about the food delivery and how there was kitchens popping up left and right into older malls that had been, for a lack of a better term, abandoned or dying off, and they've seen this rejuvenation. I could see that translating over to distribution and what you just explained. It's really cool to go from 3-5 day cost and get into 1-2 day, which is significant. Transparency in supply chain, do you think moving forward that's going to have a new definition or new requirements because of COVID-19?

Pano Anthos:

There's no proof that I've seen that COVID affects food. Even packaging has been discussed where concerns were that the COVID virus can live on a cardboard box for two days or something like that. I think transparency around food has much more to do with illness and sickness around food poisoning or more importantly, ingredients and what's in a product. I would say there's more attention to what I'm eating, so to speak. Me, meaning the collective me, because I'm cooking, and I'm spending more time making food and dealing with food than I ever did before. For example, if you were getting a meal from a grocery store, you look at the ingredients, and it'll say whatever is in there, but it's not going to show you the ingredients of the ingredients, right? So if it's chicken salad, you'll see, oh, it's made of whole chicken and mayonnaise, but it doesn't tell you that mayonnaise is whole fat mayonnaise or skin mayonnaise. There's just a lot of sub-ingredients that are just not being described on the box or in that meal.

Pano Anthos:

But when it comes down to raw product, meaning like a box of whatever, cereal or otherwise, you're looking at the ingredient list, and you're saying, "I'm not too sure I want to put that in my body. If I have an alternative, I'll go with that." You look at what's happened to the dairy industry because of lactose intolerance and just this idea that dairy is not good for you, which we grew up in a very different world.

Reid Jackson:

Yes, we did.

Pano Anthos:

Where dairy was absolutely essentially for live.

Reid Jackson:

Yeah, one of the cornerstones of the food pyramid.

Pano Anthos:

We were so programmed, my wife and I, I have to confess, that we made our son drink milk even though he was allergic to it and we didn't realize it.

Reid Jackson:

Wow.

Pano Anthos:

And so finally he was like five or six, he was coughing. He didn't throw up, thank God, but he was really not... He was just not comfortable and things weren't good. We realized, this child is allergic to milk. Whoever heard of that before? It didn't exist growing up. No one was ever... I mean if they were, we just didn't know about it. We were programmed that milk was essential. Now, dairy farms are going out of business left and right. I have a... Upstate New York, I'm on a road that used to have 13 dairy farms on our four-mile road, and now there's zero.

Reid Jackson:

Oh, wow.

Pano Anthos:

Yeah, and Dean Foods has filed for bankruptcy, the largest preparer of milk. It's just catastrophic. But that's where I'd say... Because there are alternatives to milk now. There's soy, there's oat, there's almond, everything is out there, right? And some are better for you than others. No one drinks soy milk anymore, because that's not good for you, so you now drink oat milk. The choices we have to get the ingredients we want makes the cost of switching low. I can even get fresh milk now, that's not pasteurized. Not in a store but from farmers.

Reid Jackson:

Right. Right.

Pano Anthos:

So the question is now switching cost is so much lower because the choice is there. That's where the ingredients and food transparency really matters. I don't think we're at the point where we care... We do, certainly at the high end, care about what farm it came from, right? You're like, "Oh, that came from ABC farm, not DEF farm."

Reid Jackson:

Or EKA organic-

Pano Anthos:

That's it.

Reid Jackson:

... non-organic.

Pano Anthos:

Well, even more than organic. You can have two organic farms, but this has more fat content and this was more marble. I mean you can get really crazy on the meat side. But if you're talking about vegetables, and you're dealing with organic, organic is organic, for the most part. Someone will probably argue, "No there is rarefied organic and there's... " Who knows? But if you're all General Mills, and I had this conversation with them, they're hosed. They have no idea, right, where that wheat came from at the skew level. So if you open up a box of cereal that's produced by General Mills, they can not tell you the percentage of that-

Reid Jackson:

Which farm.

Pano Anthos:

... which farm and whether it was organic or not. They've got so much work to do if they want to create that level of transparency in the supply chain. Now, I would argue that for the most part, people don't care quite at that level. There is a subsection that does, but the vast majority, price is still important. When we look at brands today, and we put out a study where we think there's really three angles that consumer comes from. One is convenience, one is cost, and the other is what we call values or aspiration.

Pano Anthos:

And so cost and convenience in food are very, very critical, but the aspirational component is, "I want to be healthier, and therefore, if I eat organic versus inorganic I'm going to be healthier." Whether that's true or not, the science is out there but will we be around to see it for ourselves in our own lives? Maybe, maybe not, right? Diet certainly matters, but I'm just saying that if you're General Mills, your ability to transparently map that entire grain into that cereal box, that's going to be a tall order. I don't know that most people will care that much. It might seem most, some people definitely do, but not most.

Reid Jackson:

Yeah, you dropped a lot of good knowledge on us today here, Pano, around customer service, what stores are going to look like, logistics. I love the fact that the can't-do and the can-do, there's sometimes just removable objects and the normalization of fit. But unfortunately, that's all that we have time for today. Pano, I can't thank you enough. I always love listening to you talk and getting the opportunities to talk with you. You have a vast amounts of knowledge, and I wish you continued success with XRC Labs. You mentioned Gather, and Gather actually just recently won our startup pitch competition that we run, so congratulations to you and your team on that.

Pano Anthos:

Excellent. Thank you.

Reid Jackson:

Without any further ado, we appreciate it while listening to the episode here, please give us a review. A five-star rating would be appreciated, but it's not required. We're always looking to improve. Please go to our website, look for our new postings of episodes that will be coming out and don't forget to subscribe. Thanks so much, everybody.

Episode Summary

The COVID-19 pandemic has forced consumers to adjust to a new normal in shopping. Demand for retail options like curbside pickup and online ordering has skyrocketed. How are retailers adapting to these new consumer shopping behaviors? In this episode, Pano Anthos, founder of XRC Labs, a retail-focused accelerator, discusses COVID-19’s impact on the retail industry.

The views, information, or opinions expressed during DeCoded by GS1 US podcast series are solely those of the individuals involved and do not necessarily represent those of GS1 US, its employees or member companies. The podcast series is provided by GS1 US as a convenience and does not constitute or imply an endorsement, recommendation, or favoring by GS1 US of any of the identified companies, products, or services. GS1 US does not warrant or guarantee any of the products or services identified here, nor does it assume any legal liability or responsibility with respect to them.

About Pano Anthos

Pano Anthos leads XRC Labs as its Founder and Managing Director. Having founded four startups around key platform shifts, he saw the seismic shift coming to retail, and with the right vision and timing, recruited Parsons School of Design and Kurt Salmon as part of Accenture Strategy to be founding sponsors. Now with 80 accelerated startups, 10 active world-class retail sponsors, 250+ business mentors, Pano has built a world-class ecosystem for retail and consumer goods innovation at XRC Labs. He speaks regularly at NRF national and regional meetings, Shoptalk, and RILA executive conferences. He leverages a deep startup network in Silicon Valley, New York, and Boston to fuse leading technology, e-commerce and user experience innovations to existing customer-oriented businesses.

About Pano Anthos

Pano leads XRC Labs as its Founder and Managing Director. Having founded 4 startups around key platform shifts, he saw the seismic shift coming to retail and with the right vision and timing recruited Parsons School of Design and Kurt Salmon a part of Accenture Strategy to be founding sponsors. Now with 80 accelerated startups, 10 active world-class retail sponsors, 250+ business mentors, Pano has built a world-class ecosystem for retail and consumer goods innovation at XRC Labs.

About Reid Jackson

As Vice President, Corporate Development, Reid Jackson helps leads the investigation of new technologies, partnerships and business opportunities to increase the relevance and reach of GS1 Standards. Drawing on his extensive IT background and experience implementing solutions for both large and small corporations in retail, grocery, healthcare and manufacturing, Mr. Jackson helps lead the exploration of collaboration opportunities to help businesses leverage emerging technologies including the Internet of Things (IoT), blockchain, artificial intelligence, machine learning and computer vision. 

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DeCoded Podcast: The Impact of COVID-19 on Retail

With Pano Anthos, XRC Labs • July 2020

Episode Summary

About Pano Anthos

About Pano Anthos

About Reid Jackson

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