The following is a lightly edited transcription from the May 14, 2020 live interview with Flora Delaney and Third Haus founders, Chris Walton and Anne Mezzenga. The full video interview is available here.
FLORA:
I am focused on how Covid changes retail space management. I have seen changes coming but everything has accelerated now. There is a new focus on space management, store planning, planograms and floor layout. Whatever you want to call that function.
Retailers have been using the same stasis systems since 2001 –since Y2K! I mean there really hasn’t been a big technology revolution in that area or a lot of investment at all. And what I see that I am excited about is a wave of technology coming into space management that is I think going to shake up that function in retail. It’s going to combine virtual reality and gaming engines with AI and all kinds of really cool stuff. I’ve been saying to everyone there is a renaissance in space management coming. It is going to come. It is going to arrive soon.
I was already seeing this and it has just escalated with BOPIS. We already saw young millennial e-commerce people looking at space management data. When they do, they say “what do you mean its on a SQL server? This feels like my grandpa’s technology.”
So change is coming. But now we are seeing how covid changes retail space management and the demands on that function. Because now Space data is extremely important and urgent. Retailers are looking at their store design and layout data and their floorplans. They realize they don’t have the right planograms assigned to the right stores. They don’t have the connections to perpetual inventory. So how can they fill customer orders at the stores efficiently? How do they route shoppers so they know where to go in the store to build customer orders? That is suddenly starting to blow up and retailers are really trying to figure out what to do.
CHRIS:
So set the table for us, Flora. Because there’s a lot there. Let’s unpack it. These systems from 2001: what do those actually look like? What are retailers doing? How do they work? And then you mentioned there are some big innovations on the horizon. How are those different? I’m curious.
FLORA:
Today’s databases — whether they’re JDA/Blue Yonder or Symphony or whatever — they are the same relational databases that were considering cutting edge when they were implemented. They have things like a store table and a product table and a fixture table. And some retailers gained efficiencies in using those. A few were even able to automate some planogram generation.
But the floor planning portion of that, by the way, the store map portion of that has always been the backwaters. It has always been kind of sitting on top of AutoCAD files that are not particularly smart files. Those are at the very core graphic files they don’t carry data or information.
So, today’s space planning technology just layers relational tables with these AutoCAD graphic files. They come together and start to give a retailer some visibility into space productivity in different store zones. That’s where they were in 2003. And it really hasn’t changed dramatically up to today. Perhaps there are more connections and integrations with systems like supply chain or something. But at the end of the day, there really has not been anything radical in the space planning industry since then.
CHRIS:
Yeah and one of the key pieces too is knowing what’s where, right? Like in terms of truly knowing? It’s assumed it is all placed in all these different places across the store. But you know the actual compliance of what is actually happening is a whole other story. You know the ivory tower expects all of this stuff in all of these places. But when we look at the actual compliance – what is that?
FLORA:
Yes – it’s that whole feedback loop. Like you can know what you planned to be somewhere. Or where you wanted it to be placed. But because you’ve never had the execution feedback that says “yes. I put it there. That’s where it fit. Good job. I can guarantee it is on the third aisle in the fifth section on the seventh shelf.” Like that kind of specificity –which people kind of are expecting right now — Most have never had that full circle verification, you know? Communication back from stores. At least, a lot of retailers haven’t.
ANNE:
Flora, what are you seeing now? How are retailers tackling how covid changes retail space management? What are some of the changes that have really shifted your work over the course of the last few weeks? And where are you kind of lasering in on now?
FLORA:
Well, all of a sudden there are these incredible dead zones in stores. For example, grocery stores are asking
“What am I doing with the salad bar?”
“Can I have a self-serve area where customers are supposed to just help themselves which I cannot any longer operate safely?”
“What can I do with bins where people are expected to use communal scoops?”
CHRIS:
Are people looking to reallocate those spaces in the stores? Or are they just kind of saying let me shut that down? Where are people’s mind space in that area?
FLORA:
It’s shut down now, yeah. And the question is how long will it have to stay shut down? Because at the same time now that they have nothing going on in that part of the store, they suddenly have a whole new need at the front of the store. Which is where am I staging these orders for customers? And not only do I need to stage them, but I need to have them either refrigerated or frozen while they are staged. These are not room temperature orders– at least in grocery stores.
CHRIS:
Are people thinking about repositioning for that aspect specifically? What are they doing?
FLORA:
Yeah, they are trying to figure out how to reallocate. And I think if you had asked me a month ago… a month ago back in like April or early May… people were just being scrappy. People were just being clever. And they were just like “We will get by. I will put it here. We’ll take the space out of the customer service desk or whatever.”
And NOW they are starting to think it through more clearly and saying “Gosh, we can’t just have this jenky solution that will just last until the 4th of July.” Like that was what they were thinking. They were thinking “What do I need to do for the next 90 days?” But now they are thinking “What am I gonna do because this is probably how we’re going to be operating from now on.”
Because one of the long terms things we are going to see come out of this whole thing is the expectation that I can order online and pick up at store. Or order online and get home delivery.
It is going to escalate tremendously. This was going to grow before. But Covid has just been this huge accelerator that has every retailer thinking about how to get ahead of the customer demand and the growth in BOPIS trajectory.
CHRIS:
Yeah scrappy doesn’t work at scale, right? That’s the thing.