Transcript:
Peter Crosby:
Welcome to Unpacking the Digital Shelf where we explore brand manufacturing in the digital age.
Peter Crosby:
Hi everyone, Peter Crosby here from the Digital Shelf Institute. Thomas Parkinson, co-founder of PeaPod, ItemMaster, and dean of grocery ecommerce and digital experiences, is now putting his 30 years of experience into creating Sifter.shop, what he calls a Nutrition as a Service platform that helps consumers find, explore and buy products that fit their personalized dietary needs. In an age where sustainability and nutrition also happen to drive better margins, Rob and I thought it was a great time chatting with Thomas about his career putting the e- in front of things in grocery, and what Sifter is all about.
Peter Crosby:
Thomas, thank you so much for joining us on the podcast. You have such a history and you've driven so much of the grocery industry into its new age. And so we've been looking forward to this conversation.
Thomas Parkinson:
Well, thank you, Peter and also Rob for inviting me. It has been a long journey. I was in eCommerce for 31 years, starting in 1989. So yes, I went through a lot.
Peter Crosby:
I think you were the one that put the E in front of commerce if I [inaudible 00:01:24]
Thomas Parkinson:
Well, probably yeah, you were dialing into our modem rack not on the internet.
Peter Crosby:
Oh man, that's another podcast altogether.
Thomas Parkinson:
Yeah, for sure.
Rob Gonzalez:
I wanted to kick this off with that timeline in mind, just thinking about the big sweeping story arc of the last few decades and you co-founded Peapod way back when and Webvan famously in the same era, I crashed and burned and did not make it out of the .com bust, but Peapod did it as part of Ahold and it's still going even today. And so I'm curious with Peapod and Instacart coming up, and now all of these instant commerce folks and everything. What are the biggest changes in online grocery that have just surprised you in the last few decades since you've been doing this?
Thomas Parkinson:
Sure. Well, that's a great question, Rob. So we started in 1989 and we built all our own software. You had to get the disc and put it in your computer and dial into our modem rack. And our first place that we shopped was with Jewel foods in Chicago. Evanston, Illinois, actually. So we were actually shopping in the store, picking the groceries, loading them up in cars of our drivers at just people's cars and they would be driving them around the neighborhood. And as the company matured, we got a better handle on the economics and realized this is not really a profitable model. And so we realized that we probably needed to move to warehouses, centralized fulfillment and using trucks with drivers. And what we had to do there though, was we had to go to next day delivery versus we were offering same day and next day, but by only offering next day delivery, it meant you could batch all the orders up into single routes. And that instantly made us profitable.
Thomas Parkinson:
So that was going really, really well. We were building warehouses. We were working with Stop & Shop in Boston. We were actually using the top floors of their stores to create many warehouses, we called them warerooms. Then as that was moving along, new companies came in that were actually shopping back in store and they were doing same day delivery while we were now doing next day delivery. So suddenly there was a competitive edge on Peapod with the new company. So Instacart was doing same day delivery. And so that gave a better service model, but we knew that for us it wasn't profitable. And so we had to pivot to doing same day, but then that made it unprofitable for Peapod at the time. But because we had the advantage of picking in the warerooms and stores, we actually were closer to the customer.
Thomas Parkinson:
So we were able to do kind of a hybrid of sort of batch and also same day delivery, et cetera. But I say the biggest shift has been moving to the same day and now it's like 30 minutes that people can get their groceries. And I can tell you that I just know that's not a profitable model. What the smarter companies are doing now though, is they're moving more into becoming media companies where they can sell. They've got all these customers. Now they can sell ads to the CPG companies, et cetera. Who are trying to reach those customers. With that media, I think some of them are going to do quite well, but that kind of gives you a sort of landscape change. And it all came down to logistics and profitability. That was always the challenge for Peapod.
Rob Gonzalez:
Yeah, it's interesting. There are newer companies. You've got folks like Gopuff who have pretty decent unit economics, but it's due to the fact that they're doing a warehousing model. So they don't have to worry about the picking costs and whatnot. The picking costs are just brutal in this game. And then you've got Instacart, which might have been built at the best possible moment in corporate finance history given their cost basis, because money's been so cheap the last decade. And just the moment that interest rates are rising, they're able to make money on retail media. Yeah, it's just so interesting that the Peapod model you were able to make profitable long before any of these other players actually came on the horizon and were able to do it for such a long time. I just think that's awesome.
Thomas Parkinson:
Yeah. And it's actually the Instacart story, similar to the Amazon story where you were able to use that cheek money in order to grow your company and then suddenly you're a media. So I think that's the brilliant part there. And then companies like Gopuff. I mean, you got to find your margin somewhere, right? So with Gopuff they have a lot of private labels and so they're making higher margins on the actual products that they're selling. So different models and I respect them all and it's all hard work. I could tell you that. So the next company that I'll start, won't be delivering any physical goods has said-
Peter Crosby:
You've learned your lesson, Thomas, is that what it sounds like?
Thomas Parkinson:
Yeah.
Peter Crosby:
We'll definitely get to that one in a minute. Before I left the industry talk, I did want to just check in with you one. Rob was just talking about sort of the new economic era that we're entering right now and eCommerce sort of starting to come back to some state of whatever normal is, but in a different environment of inflation and supply chain problems and all of that and changing valuations as a result of that. And I was just wondering, when you look out at the landscape of what's happening right now, what do you think are the things that will last, that we'll see through this maybe next bumpy period, because they're good ideas that maybe can be done that can be sustainable. Does that make sense?
Thomas Parkinson:
Sure. Well, first of all, I think eCommerce is not going away from growth. And so the COVID pandemic was almost the best marketing thing that could ever happen to just companies, they doubled in sales. Before that it was like 15% growth, 20% growth year over year, but suddenly it was this massive growth. So I don't think consumers, I think they're happy to go back to the store, but I also think they're going to continue using eCommerce so that's not going away. So what does that really mean? It means that retailers have to offer it and it may be a lost leader for them, but they're going to have to make up for somewhere else, but it is basically table stakes now for retail. And some retailers have chosen to outsource it 100% to third parties and others have brought it 100% internally.
Thomas Parkinson:
So if you take a company that my old company Peapod's owned by Ahold Delhaize, they're pretty much doing it all themselves with the warehouses, they bought fresh direct. So they're 100% committed to doing it themselves. Others think it's hard. So it might be easier to outsource, but in either case you have to offer it. Another thing that's really happening in the deliveries and also the pickup space is automation. So a lot of the retailers are investing into automated warehouses using technologies like AutoStore or Ocado. What I think is amazing is Kroger's actually entering markets that they don't even have retail stores in. So they've entered Florida with no retail stores and they're competing against Publix, Walmart, others. So that's a huge move. So they're building these automated warehouses and they're just going 100% eCommerce.
Thomas Parkinson:
So I think, and that the challenge with automation is that if you invest too much money and make it too big, then in order to fill the box, basically with sales, you have to go further and further away from the warehouse to get more and more zip codes and more customers to fill that box. But then what happens is it makes it harder to do same day delivery because now you're driving a really long distance. So there's this really sort of interesting formula that you have to crack: size of a warehouse, distance to the customer, amount that you've invested in that facility in order to pay it back. So I think that's just a really, really interesting kind of way to look at the business. If you just look at it from a logistics point of view and the service model to the customer. So...
Rob Gonzalez:
Yeah, and even if you look at the old way of doing Peapod on top of the Stop & Shops, there's the version of it today that uses automation would be the micro fulfillment center technologies that they're using that extra grocery space in the actual stores, whether it's above, like you were doing or they'll tack it onto the side or whatnot. And there's another question that some of that automation technology brings, which is the assortment design. Do you use that assortment space and the automation and the robotics of the micro fulfillment centers to better service instant commerce so rather than... So you just have the same kind of products but you avoid the picking costs or do you use it to have a larger assortment for people who do the online pick up in store. So you've got greater skews, but maybe that sells on the lower volume. I think you're right. I think there's a lot of questions that this type of stuff raises. One thing though... Sorry, go ahead.
Thomas Parkinson:
Yeah. So the challenge also, the great thing about what you just brought up was assortment. Actually automation limits your assortment. So you can only get a certain number of products, say like 10,000. So if the customer wants sort of a long tail, you're still running around the store, picking up the spices and things like that. So I think there is a model and you just touched on it, which is super fast automation for the highest moving skews that are most popular and you just don't even offer the long tail. And then don't forget Frozen's hard to put into automation. I'm so glad I'm not doing it anymore.
Rob Gonzalez:
I'll put that in the intro, Thomas. One of the things that Peapod got right really early on that I think is incredible is the customer experience on the website was, I would venture to say that in 2010, the average product detail page on Peapod is better than the average product detail page on most grocers today. Had better imagery, had better item details, had better nutritional information, and the same information provided a great search experience. And then also you were running a media program on Peapod.com as well, all driven by really great content. So Peapod seems to me like it was early in prioritizing the digital experience and the digital brand and continued to lead in that space over a very long period of time, even in the face of competition that was differentiating on other axes. What about that digital experience? What about it caused you to prioritize it so highly and focus on it so much? And how much of an advantage really was that? And is that even today?
Thomas Parkinson:
Yeah, that's a great question. I mean, so sort of the company motto tagline from the very beginning was smart shopping for busy people. And so smart shopping was a driving force that we wanted to make it so that the customer could find the products in the smartest way possible. And so what does that mean? That means content. That means features that leverage the content. And then also you're right, the media was also very right from the start of Peapod, like selling ads to CPG companies, coupons. We invented electronic coupons. So yeah, those were all really, really critical. And then actually I just wanted to show you one thing. So this is 1995, so when the first nutrition labels came out, we said, "We got to offer these online." And we were just moving to a windows interface from MS-DOS. These labels came out on the products, so we started typing them in. And then I found a company that had shelf images for planogram systems. And I licensed those images and this was what we offered in 1995. So we were definitely always focused on offering the best products to the best product data content and around that. And then as we got-
Peter Crosby:
Well, Thomas you'll have to send us that image so we can share with our listeners. Because it's a beautiful relic from MS-DOS.
Rob Gonzalez:
I will say any millennials and millennials will not recognize the windowing style, the old Microsoft grain.
Thomas Parkinson:
And what about the Warhol reference? Come on.
Peter Crosby:
Of course. Of the game.
Thomas Parkinson:
That's why I did. That was our first image. First product got to be stempost, that's all we could.
Rob Gonzalez:
That's awesome.
Thomas Parkinson:
But we were manually typing that in for every product that we were offering. And also from day one, we had things like unit price and then sorting by unit price. So you could find the cheapest per balance. I mean, these were things that we were the first to invent and it was just driven by smart shopping. We just wanted to make it as easy as possible for the customer to find the best value. And then what's good for them health wise, which has always been for my brother and me. My brother Andrew, and I have always been big on food and health.
Peter Crosby:
And Thomas, so we've sort of covered the past, present. And then I want to talk about the present and future, which is what you were hinting at earlier, which is your next adventure. Throughout your career you've really been at the forefront of the fight for transparency of nutritional and sustainability information and grocery. You want to make healthy eating accessible for everyone. And so you start a new company Sifter SP and that's looking to make a leap forward and be able to achieve that future really. So can you tell us a bit about that. And what caused you to do it.
Thomas Parkinson:
Yeah, sure. So there was actually-
Peter Crosby:
... your energy into it.
Thomas Parkinson:
There's actually a company that we started inside of Peapod and then spun it out. So it was called ItemMaster. And the reason we started that is because up to that point, we had been paying for all that data and all the images. And I just kept wondering, it's like, why are we paying for that? And why aren't the CPG companies, the owners of the content paying for that. So we came up with this idea to create a platform where the CPGs could upload their own content, their images and their data. And so we built this platform, but we couldn't get any of the CPG companies to do it because they didn't have the departments and the people to do it. So that's when at ItemMaster, we actually started capturing all the images and data ourselves with machines and all that.
Thomas Parkinson:
Frankly, I wanted to start the company that Salsify is today. We were just a little early. But yeah, so ItemMaster though was we were really focused on embracing the GS1 standards. And so GS1 their standards had all six views of the image straight on, and then three sorts of advertising views at a different plunge angle and a different side angle. And so we made that our standard capture. And I think that caught a lot of people off guard because it was like, whoa, they're offering everything. And so we were charging the manufacturer, the CPGs to capture it, and then we were actually giving it away free to the retailer. And of course we were part of Ahold at the time, now Ahold Delhaize. And so they were kind of pretty good leverage to get everyone to play ball with us.
Thomas Parkinson:
So we started ItemMaster, we became experts at data capture. So now I'm an eCommerce expert at data capture of products, which includes all the nutrition data. And so what that is we went well, now that we've left Peapod, we sold ItemMaster, what do we want to do next? And it was like, man, we've been wanting to do something to make healthy eating easy for everybody. And so we started Sifter and it's whole focus is we've built a nutrition as a service platform in order to enable retailers, health companies, consumers all access nutrition as a service and shop by diet. And so the process now is that we bring in the raw data. So Sify is one of our key providers of bringing in the raw data that the consumer product goods have contributed. So their images, packaged data, all the nutrition and ingredients, we then make sure it's all complete, beautifully clean, and go through our QA process to make sure it's a complete record.
Thomas Parkinson:
And then we run it through all our algorithms that assign all the different diet filters or attributes to the product. So we have more than 100. Now we're at about 135 different ones. So those are not claims on the package. Those are ones that we are able to imply based on the ingredients, the nutrition panel. So if you have gout, we can tell you this product's not good for gout. If you have diabetes, we can tell you can't eat this product, or we can tell you that you can't eat this product, all based on analyzing through our algorithms, all the ingredients of the product. So then we publish that into the cloud and make that available to retailers as a platform. So a nutrition as a service platform. So that's sort of what Sifter does, and you can go to Sifter.shop as a consumer for free and Shopify diet and there's no single diet. So like I'm personally a diabetic and so my diet is diabetes, I'm also gluten free, and I'm also dairy free. So my diet is really unique to me combining three of Sifter's diets. So there's no single diet for everyone. You create your own diet and then you shop on Sifter and it sifts out the products that you can't eat. And that's really the mission of ours. The food is medicine.
Peter Crosby:
And Thomas, are you imagining that there will be other ways for consumers to reach that data in the context of a retailer specifically or something like that? I think you have an announced Walmart partnership. Can you describe sort of how that's coming to life?
Thomas Parkinson:
Sure. Well, Walmart has something called wellness days. It's a single day where they make their customers aware they have a booth, et cetera. So what we did, we built a mobile app for them that is scanned by diet. So that diet that I set up, which was diabetes, gluten free, dairy free, I set that up and then I can scan any product in the store and it'll give me a green check mark or a red X. It was a really, really simple app. So that was just the one project that we did for them. It was great. And now also you can access that functionality on the Sifter app right now, or you can access it through our APIs. And in the end, we're as a nutrition, as a service platform, our APIs are sort of critical as a way to connect to our functionality.
Peter Crosby:
Yeah. So when I look at Sifter.shop at the top, it's got to shop all retailers, then it's got Thrive, Walmart, Amazon, Instacart, Target, Walgreens, and then local retailers. And I was wondering for the consumer coming there, what does that experience become? That then turns that diet into commerce.
Thomas Parkinson:
Sure.
Peter Crosby:
Does that make sense?
Thomas Parkinson:
Yeah. So at Sifter, what we want to do is first help you discover the products that meet your diet. Then we want you to know where you can buy it. And once you can enter your zip code, choose the retailers of your choice that you shop at. And then when you want to buy the product, if we're able to connect through eCommerce like with Walmart, we're connected through their eCommerce APIs. So we put the product right into their cart. So depending on the sophistication of the retailer, we can just direct them to the item detail of the retailer, or we can actually put it into their cart. But the whole idea here is find the products that are good for you, and then tell you where you can buy them and enable you to buy them at the retailer of your choice. So we're ingesting the assortment of all the different retailers. So that's a huge, big data task that we do, because if you enter a zip code, you can choose what local Walmart is near you, and we have the assortment for you. So, yeah.
Rob Gonzalez:
That's so cool. It makes me think about this big goal that the whole industry has in general, which is a more personalized shopping experience. Personalization sales, higher conversion rate, higher margins, all that type of stuff, but there's always a tension between personalization and data privacy. And when a company tries too hard to say, hey, this is a great product for you. People get creeped out and regulators get creeped out and they push back. It's so interesting about this model that by using nutritional diets as a way in you allow people to personalize to a really crazy degree. So zip code plus the intersection of all your dietary preferences gives you boom, the products that might be interesting to you. That's a really, really cool insight. I can imagine shopping for myself, no problem.
Rob Gonzalez:
And then within that, I would imagine that advertisers like the retail media could sell higher priced advertising. So if somebody goes in there and they click diabetic, gluten free, no dairy, all of a sudden a tremendous amount about that person. Even if you have no other point of data, you should be able to promote certain types of products to somebody who's got that type of lifestyle. And given that there's all these different diets that you could intersect within each other, you're creating all of a sudden segmented populations that people opt into based on what they're looking for. I don't know. I'm ripping on this a little bit, but I love the way that you've gone about building this.
Thomas Parkinson:
Well, and you've also touched upon something that I think is really interesting and we all see sponsored products. If you're on Amazon, you see paid for positions. And in the grocery store, if you go to a lot of grocers, you'll do a search for peanut butter and then you'll see one that says sponsored product and you'll oh, okay, so they must have paid for that position. But those sponsored products don't know about your diet. Okay. So what we're giving a gross receivability retailers to do is do sponsored products and only show the ones that match the diet that the person is on. And so now that's just a whole new area of personalization. I think just like what you said. And I think it also guesses what happens when you are only showing the sponsored products that match your diet. Usually those are higher margin items. Okay. They're healthier. They're the newer products, retailers make more money. So yeah, I think the personalization, it is hyper personalization beyond anything that's happened before.
Rob Gonzalez:
In a way without creepy data collection or privacy issues or anything like that. I mean, you're giving an experience that people opt into. Yeah.
Thomas Parkinson:
This is just real time. And I can change it right now. You know what? I'm going to do my daughter's diet right now, because she's completely different from my diet. And so the sponsored products will just be different or whatever personalization it's the real time. It's not based on past history.
Peter Crosby:
Yeah. And our most recent consumer research, it turned out that now in the 55% range of consumers are willing to pay more for brands they trust. And the issues of nutrition and sustainability and ingredients are core to that when you're shopping for food. And a future where somebody was able to stop offering me products that wouldn't work for my diet would be in some ways the ultimate experience where I'm seeing things that could drive great discovery. My husband is a dairy allergic as well. And so often we get this close to loving a product and then we realize, oh, there's something in there. And so I feel like if that were removed from our view and instead we were being offered the things that would work for our family, I think that adds tremendous value in loyalty. And in these days where there is margin pressure and competition coming from all over the digital universe that's a really cool edge to work on. Are there ways that our brand listener executives are getting kind of their engine going on this? Are there ways in which you work with brands through Sifter?
Thomas Parkinson:
Well, the first thing is that you'll notice on Sifter.shop there's no prices. Okay. So we're all about finding products regardless of the price. We don't want to be a shopping engine that compares retailers. We're all about the CPG product and what's inside it and what does it offer the consumer? So I think that's kind of and people said, well, why don't you have pricing as well, because that's not what Sifter is about. Sifter is about finding products and for you to discover products that match your diet, your unique diet, and then you can choose your retailer. I don't think we really ever want to show pricing. We'll leave that up to the retailer. If they're connecting into our APIs, they get the data, they can render it however they want on the screen. And if they want to do it with price, which if they're in their eCommerce, they're going to show price, but we do not want to get into that at all. We just want to stay focused on shop by diet is the key for us.
Peter Crosby:
Well, Thomas one, thank you for being here just to take us on that journey through. You've seen this industry, you've helped start this industry putting the E in front of things for your entire career and to see you now doing it with Sifter it's so exciting. And we really appreciate you sharing that journey and what's to come with us. It's been a great time.
Thomas Parkinson:
Oh no, thank you. And I've been working with Rob for... How long has it been? Probably 10 years now, right?
Rob Gonzalez:
Pretty close. Yeah.
Thomas Parkinson:
Yeah. And I keep popping in and out of Rob's life whatever new company, but I will take credit for enlightening Rob on consumer product goods, food products, because we were-
Rob Gonzalez:
Yes.
Thomas Parkinson:
I was the one that like, I came to you with ItemMaster and I wanted to use your platform because I was tired of building all the software myself. And then I said, sure, you can load all our product data, it's free for everybody. So you then loaded into Sify and it was a great demo.
Rob Gonzalez:
Yeah. It was a great demo.
Peter Crosby:
Yeah. God bless you, Thomas.
Rob Gonzalez:
I mean, it took us, I don't know, almost eight years after that fact too, before we were really actually managing the nutritional data in the same way. I mean, you were at the very cutting edge of anything that we were able to do. So I always appreciate that.
Thomas Parkinson:
Well, you're always, it's always like waiting for dev to get things done, right? That's what I do now on the [inaudible 00:30:50], right?
Peter Crosby:
Sit and wait. But when it comes out, it's great and Sifter is a great site and congratulations on it. And as it evolves and new things get added, come back and chat with us anytime.
Peter Crosby:
Thanks again to Thomas for joining us. If you want to see his very first digital shopping image, check out the DSI linked in page or the show notes. To keep on top of all things DSI, go to digitalshelfinstitute.org and sign up as a member. Thanks for being part of our community.
