EPISODE 055 : 03/31/2022
Gary Hawkins is the Founder and CEO of CART (Center for Advancing Retail & Technology). He has consulted with such brands as Procter & Gamble and has written three books including the latest, Retail in the Age of ‘i’. Early in his career, Gary launched one of the first loyalty programs in the US supermarket sector.
Host: Ned Hayes and Ashley Coates
Guest: Gary Hawkins
Listen to every episode
Topics discussed in this episode
- How Gary launched one of the first loyalty programs in the US supermarket sector
- The importance of connecting retail to emerging technologies
- How CART helps to find the best technology solutions for their retail clients’ needs
- How giving away free holiday turkeys and Christmas trees led to record customer spending at Green Hills Market
- The crossroads of the individualistic shopping experience and the automated shopping experience in the consumer goods industry
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Ned Hayes [00:00:01] Welcome to Spark Plug, where we talk to smart people working at the intersection of business and technology. Brought to you by SnowShoe, your smarter loyalty leader. Today Spark Plug is happy to welcome Gary Hawkins. Gary is the founder and CEO of the Center for Advancing Retail and Technology, or CART. CART’s mission is to connect retail to new, innovative capabilities through programs, events and education. And Gary has a storied career in retail. He launched one of the first loyalty programs in the U.S. supermarket sector. He’s also worked with big companies like Procter & Gamble, and he has helped companies leverage customer insights and analytics. He’s also the author of three books, including his latest Retail in the Age of I: Exploring the Future of Retail propelled by the exponential growth of technology. So welcome, Gary.
Gary Hawkins [00:00:51] Thanks for having me.
Ashley Coates [00:00:52] We’re so glad to have you here today, Gary. I know that Ned just gave us a brief background on you, but wondering if you could share about your career history in your own words?
Gary Hawkins [00:01:02] Sure. It could be a long, convoluted story, so we’ll try to keep this short. But I literally grew up in supermarket retail, my family owning some stores. We had a wholesale business years back in the certain New York area. So, you know, no big surprise that after school that I would at some point get back involved in that business. But what really led me to where I am today began almost 30 years ago, launching one of the first loyalty programs in the US supermarket sector. At that time, I think we were literally probably one of three retailers in the country, Vons. I had a program and you under Virginia. But most retailers that were looking at loyalty then it wasn’t called loyalty. It was called the frequent shopper program. And it was really all about simply replacing the paper coupons that retailers would have in their ads with electronic coupons, right? Sign up for this card or key tag scanner, and it will give you these coupons digitally in your transaction. I knew enough about technology to understand that if we’re doing that we can really effectively barcode that shopper to that loyalty card or key tag, append their ID to the transaction, and begin to build the database right? And from there, begin to hopefully understand a new way to look at retail. So that was how I first got into it and first approached it over those first couple of years, a lot of nights, literally two or three or four o’clock in the morning in the office, staring at computer screens and all those data trying to understand what I was looking at, what was going on and slowly began to figure that out. And as we did that, we’d begin to change how we went to market as a retailer. But I also had become a member of a couple of different share groups, so the retailers around the world and began talking about some of these different ideas. So that sort of launched me off in the direction of beginning to speak different conferences, conventions on the U.S., other markets around the world that quickly segway over into working with other retailers, helping them understand what this whole thing was about and how they could put pieces together. So I did work with Kroger early on as they put their program together. Others here in the U.S. a lot of work across Europe, South America, a lot of work over in Asia, particularly Japan. From the retail side, that work spread over into the big brand manufacturers, helping them understand what retailers were doing with all this data and then moving to helping the brand understand how they could collaborate with retailers, leveraging all those data insights, et cetera. Along the way, technology was becoming more and more important to my work. I saw the inefficiency and waste in mass marketing and mass promotion across the industry, so I became very focused on personalization and actually built the first two personalized marketing system for mass retail, gosh, over 15 years ago wound up selling that to a big tech company out of Silicon Valley and then having some sense of what was coming and sense of all this new technology and innovation and so on set up what we call CART, Center for Advancing Retail and Technology. CART really works at that intersection of retail and new innovation, helping retailers understand and discover all this new stuff.
Ned Hayes [00:04:21] Got it! Well, it sounds like this all began, though, with your experience at Green Hills Market that was once called the best little grocery store in America. So can you walk us through the initial steps of how that Green Hills store launched and what the initial reception was?
Gary Hawkins [00:04:39] Sure. Well, you really going to take me back here. So very early on before we formally launched through our shoppers obviously had a lot of discussion internally with our management team and people. And quite honestly, most of our folks thought I was nuts and certainly a lot of other people outside our business but vendors and that type things, they begin to learn what we’re talking about doing. Comments generally ran along the path of there’s no way people are going to sign up, give you their name or address or phone number and carry around a card or tag they use every time they shop. It’s not going to happen. I was convinced enough of the power of this approach that we just kept pushing ahead. So we put together a strong value proposition, and early on it was real simple. If you want our weekly ad specials or really any of the discounts available around the store, you have to sign up and be a member. And it was really interesting. You know, we found early on we didn’t get a lot of pushback for the shoppers. Those few shoppers that did argue with us or push back. We came to find out we’re really not our regular good shoppers. They were more of the occasional and the cherrypickers and so on, right? But as we began to gather a lot of data, we began to really understand their shopper behavior and quickly begin to understand that, gee, all our shoppers are not equal to us in value. And I’ll be honest with you, I can still remember again a lot of those long nights, but coming to the realization that as you begin to really understand all this data, it was like turning the lights on. I hadn’t realized I’d spent years in retail in the dark, and now all of a sudden somebody flipped the light switch on and I could really see the whole business here by looking at it through the lens of the customer. But as we saw there, as we saw, for example, the top 30 percent of our shoppers generating 80 or 85 percent of our annual sales. Those types of things can begin sharing that across our team and our people. The light went on for them as well. They begin to see the value of this. So that really was sort of the beginnings of what we did.
Ashley Coates [00:06:54] Yeah, that’s fascinating. It’s incredible what you find when you start segmenting your customers like that.
Gary Hawkins [00:06:59] Yes it is.
Ashley Coates [00:06:59] Yeah. Well, I know you said people thought you were nuts, but I think any great idea ended with that response. So good on you. I’m curious if there are any other marketing initiatives that you launched at Greenhills or elsewhere that weren’t a loyalty program, but were based around rewarding and incentivizing customers.
Gary Hawkins [00:07:17] Really good question. So before we had launched the loyalty program, my father had actually created and run for a number of years a church rebate program. It was pretty simple people could come shop store, turn their paper receipt in, but their church and periodically they’d bring them back to the store. We have somebody sit there and up all these receipts, and then rebate one percent of those sales back to the church. And oh gosh, one of the other things that we had done before the loyalty program was we created a senior citizen shopping day. So we could go hire a bus that would go around to the different senior housing areas and bring people down to the store. We put special items on sale just for them, small quantities of things, that type thing. But so we sort of had a history of doing some progressive things, but everything really transformed after we launched loyalty. Now we had a platform for not only understanding in discovering all this new information and view of this behavior, but it also gave us a platform for rewarding and incentivizing recognizing shoppers. So, for example, their church rebate program move to become a digital program, and we opened up schools and some other things. I think be worth calling out, there are two or three things that really became eye openers for us in those early years. One of those and this is really early on, we like nearly every other supermarket in the country come Thanksgiving time, would sell turkeys at a loss simply to get people in the door, hope to heck they buy something else, right? So you make money. And it was not uncommon for us as one store to lose $20,000, just selling turkeys at a loss. I began looking at that and I’m looking at all this data saying this just doesn’t make sense. If we’re going to lose that kind of money, let’s at least give it to our regular most valuable shopper as a reward. So we actually created and I think executed, I believe it was the first true loyalty based free turkey program, done and tracked all electronically. But where I’m going with that was the first year was fascinating. It was real simple. In the 10 weeks leading up to Thanksgiving spend 500 bucks we’ll give you a free turkey. The learning, though, came and yes, it was very successful and we had a handful of people after their 10 weeks that said, Hey, we spent a thousand dollars. Do we get two turkeys? That triggered us thinking around, Hmm, I wonder where the top end of this thing is right? So the next year we came back and said, OK, five hundred bucks get a turkey, spend a thousand dollars with we’ll give you a turkey and a free Christmas tree. We grew the number of people spending a thousand dollars in their 10 week period from, I think, maybe 30 or 40 that first year to over 400, three or four years later. And we had a parking lot full of Christmas trees that we were giving away. A really neat experience and certainly great word of mouth from there. The last one I had mentioned, because it’s a really different learning here, is somewhere several years after we launched, we actually closed the store down early one night after Thanksgiving, before Christmas, and we invited our top 200 customers in for basically a thank you party. We put our whole team in black tie, set up tables of food, horderves and somebody playing piano or something there didn’t sell anything. Purely a thank you to our best customers. And it was fascinating not only for myself, but for my management team to realize, Gee, I never knew these people were among our best customers. They always thought they knew who the best customers were because they saw them every day, but they saw them every day because they were coming in for a cup of coffee. And that was it. So there just this big discovery around that. And the related thing to that was we learned pretty quickly how important recognition is when you’re thinking about customer relationships and customer loyalty.
Ned Hayes [00:11:25] Right? I know that you’ve looked at retail for multiple dimensions over the years. I’m curious if there are any ideas that went by the wayside that you think should be revived, things that you thought up maybe 10, 20 years ago that you’re like, you know, no one’s doing this, and I think it would work now.
Gary Hawkins [00:11:42] Now again, really interesting question. I can’t tell you the times that I’ll be talking with retailers and everybody from small independent retailers to some of the Big Top Ten regional guys in the country. And it regularly strikes me how much of the learning that we figured out 20 to 30 years ago has been lost along the way. There are so many retailers don’t understand the top 10 percent, up 30 percent of their shoppers are driving by a huge portion of their business. They don’t understand what percentage of their shopper base they’re losing each year to defection or turnover. So that is really something that I think shouldn’t come back into retail because it was all a powerful learning and information. The other thing I would say is that to the example I just spoke to around recognition, we see a lot of retailers with loyalty doing continuity type programs or other rewards and benefits and so on. Very, very few retailers thinking a little bit outside the box around recognition or how they can recognize customers with different services. And that type thing, I think is just so, so powerful.
Ashley Coates [00:12:59] So, Gary, I’d love to chat about the Center for Advancing Retail and Technology, but I actually want to take a step even further back because I believe you studied psychology in school and you’re not one of the first retailers and people who work with customer behavior who we’ve spoken with, who studied psychology in school and I’m just curious if you attribute your successful career to your interest in psychology.
Gary Hawkins [00:13:22] Yes, I did. I actually minored in psychology, in school and college. I think it certainly was an important element that I brought into my experience, how I approach things and so on. But again, I think you bring up a really interesting area in the sense of those executives that I’ve seen that really understand shopper behavior, shopper data, loyalty and then not only understand it, but begin to take action on it. This interesting blend of both analytical and creative, which you typically don’t find in a single person. Most people tend to be either more or left brain or more right brain, but it really was interesting over my experience working with many other retailers around the world, those people that really got this space or even continued to really get it today are really sort of a unique blend, and I think the psychology just gets added into that that much more.
Ned Hayes [00:14:23] Got it. Well, the organization that you’re currently heading up, CART, the Center for Advancing Retail and Technology, you founded that about a decade ago. Can you tell us more about CART and how you serve retailers and wholesalers and even major brands?
Gary Hawkins [00:14:39] Sure. So going back around 10 years or so ago when we set CART up, I had for some years by 10 plus years before there been spending all my time advising consulting with global retailers, some of the big brand manufacturers and increasingly technology companies all around the space. And we stepped back and began to get a sense of what was happening with technology and more broadly that there was this tsunami that was going to be coming in the not only retail, but the world was just more and more innovation, more and more technology and so on. At the same time, we realize and believed that we had some strengths and some experience in not only understanding new tech and implications of new technology and how things could be put together to develop new capabilities. And so that’s what really led us to setting up what we called CART, the Center for Advancing Retail and Technology. Early on, CART really was leveraging our store that, in a sense, became sort of this lab or the sandbox for testing and trialing not only marketing programs and merchandizing programs and ideas, but increasingly technology. And we thought, Gee, there’s something here because we were getting a lot of interest in it. And how can we grow this in all of those early years? CART did a number of things as we felt our way around that area from could we get other stores to act as labs and so on. Where we wound up the last several years, though, is if you think of CART as really working at that intersection of retail and tech and all this new innovation. Our sweet spot has become helping retailers discover and learn about new capabilities, new technologies coming into the market, understanding the implications of many of these new systems and helping educate retail. So the banner spot, or our secret sauce, are events that we do for typically a regional up to national retailers and think of them as a mash up of a private trade show and a innovation discovery event. So typically we’ll engage with the retailers executive team, understand areas of interest, opportunity, where they’re having challenges. We’ll go out then and bring together what we think are the latest and greatest capabilities that address those areas, we’ll vet them, do some due diligence on them, go back and forth with the retailer. And typically we settle on between a dozen and a dozen and a half companies. We’ll then spend time working with them, coaching them, getting them attuned to the retailers needs and then bring them together for a day or two on site with the retailers executive team to learn about these new technologies, to have time for Q&A, networking and so on. But the real secret of these is bringing together for their day in one room, the retailer’s entire executive team. So everybody’s on the same page. At the same time, they’re learning about a new technology or a new capability. The CMO can ask a question. The COO can come in with a question the CFO, instead of this long, protracted discussion that can sometimes take months or years, typically by getting everybody in one room at the same time focused on this. It really brings focus and speed the whole process a lot.
Ashley Coates [00:18:05] I’ll bet, that’s wonderful. Well, and I understand that part CARTs mission is to increase access to new innovation and technology for companies of all sizes. And I’m wondering if you can share why that is important to you personally to increase access again.
Gary Hawkins [00:18:21] Great question. And as I look at what has happened, how this industry has grown, developed and what’s happening out there today, technology becoming more and more important to retail and in one sense, a lot of their technology just far beyond the resources, the reach of smaller retailers, right? If you’re Walmart or Amazon or Kroger and can throw millions, tens, hundreds of millions of dollars at new tech every year, great. But for smaller, even bigger regional companies, it’s a challenge. So in my mind, I would hate to wake up in a world someday where there’s only two or three or four big retail players, one on every corner. And that’s it, and lose diversity in the retail industry from many of the one store small operators, mom and pop shops to the local regional companies that are so attuned to their community and up. So that’s why it’s important to me to try to help even the smaller players understand what’s happening. But the other side of that is on many occasions we’re asked by a solution providers and certainly younger technology companies coming into the industry. Hey, this is our great ideas. What we can do. What do you think? And on different occasions, we’ve been able to point them towards Gee, you know, if you take your capability in, yeah, you could go take it to Walmart, or you could take it to Kroger and you’re going to be in conversation for two years and who knows what’s going to happen? Or, gee, if you pivot there just a little bit and think about this, you could take that into the independent retail market or focus on regional retailers and that type thing. So we try to do what we can sort of foster technology into all parts of the industry.
Ned Hayes [00:20:11] Right. Well, speaking of pivoting, you wrote something really interesting on CARTs website, the paper, titled Retail 4.0: The Age of Metamorphosis. So could you briefly walk us through the first three stages of retail and how we got that 4.0?
Gary Hawkins [00:20:27] Sure. Retail 4.0, that paper came from a paper I wrote 10 or 12 years ago. Retail 3.0 If you step back and look at the way retailers develop, Retail 1.0 was what I think of as the age of national brands. It began sometime, you could say, back in the 1940s, when really two things happened in parallel. One was the growth of the first really self-service supermarkets where you could go and get a shopping cart, go up and down the aisle yourself, make your own decisions around that same time where the birth of the first national media networks, right? Both radio and television meaning for the first time, brand manufacturers could reach a huge portion of the population very efficiently, marketing wise. That became really important because now I’ve got more and more people making their own decisions going down the aisle of the store. So life was good for those big national brands for around 50 or so years until, let’s say, the mid 1990s. And again, there were two things that happened. The first was Wal-Mart got into the grocery business, which triggered a massive wave of consolidation. A lot of smaller retailers, regional companies either went out of business or rolled up into the Albertsons and Safeway and Kroger’s of the world, today in parallel around that same time. Were some of the first loyalty programs coming into the industry, giving certain retailers access to all this new data that the brand manufacturers did not have. So that launched what I think of as Retail 2.0 or the age of Big Retail. Now that was good until around, let’s call it 2010 or so. And what happened then was the beginning of what I’ll call Retail 3.0 or the age of the shopper. It was around then that even though a lot of those data had been available, like at a Kroger, many other retailers from their loyalty programs, a lot of retailers didn’t really know what to do with it or how to use it. Kroger was certainly the first big guy that really saw the use of all this data as a strategy for going to market and built a huge analytics team early on in partnership with Dunnhumby Analytics Consulting Group that worked at Tesco in the UK. Kroger eventually brought that in-house, but they begin to weaponize all this data and really began to focus on the shopper and their shopper focused and carried through to the brand manufacturers that increasingly were collaborating with retailers, leveraging all this data for insights. So they took us up to around the past year or two, which brings us to Retail 4.0.
Ashley Coates [00:23:15] Moving on to something else, you wrote you released a book in 2019 called Retail and the Age of I. And so in the book, you discuss how the consumer goods retail industry is rapidly approaching a crossroads. Can you talk about that crossroads?
Gary Hawkins [00:23:29] Yes. The real premise of that whole book was that the world retail, but even more so the world, everything is becoming more and more focused on the individual. If you think of different examples of that health care, for example, medicine, prescription drugs, et cetera, treatment plans becoming more and more based on the individual based on their DNA, their genetics, et cetera, et cetera, we began to see marketing become more and more personalized across different retail sectors. We began to see things go back to health care for a minute, 3D printing applied to prosthetics, 3D printing, a new leg or arm or something for a person, but it’s tailored to them individually. So the whole premise was retail and retail industry needed to really make the shift from a history of mass marketing, mass promotion to truly focusing on the individual shopper, individual consumer. And for retailers failing to do that, not going to be a pretty future.
Ned Hayes [00:24:35] So you mentioned shoppers actually having an individualistic experience instead of having the impersonal shopping experience that’s all automated. So what’s your advice to retailers who are navigating this new world of technology? How do retailers navigate between becoming overly dependent on technology and just going back to the old school cash and ultimate curation? How do you balance that?
Gary Hawkins [00:24:59] And there’s no perfect answer to that, right? I think certainly smaller retailers, regional retailers that are very networked and tied into their communities need to continue to foster that. I many times used the example I was a kid growing up in our store. My grandfather knew pretty much every customer coming through and what they liked, what they didn’t like and so on. I think larger retailers today can leverage all this data that we have access to to increasingly know their shoppers, for example, provide them different services recognition that are important to them individually. I’m seeing a growing number of retailers that are instead of putting out a traditional mass weekly ad and saying, Hey, here are 300 items on sale. Go dig through it and find out the six that are the things you really want to buy, instead giving each of their shoppers a truly personalized ad that is giving the customer savings on the products they want to buy. So Ned, it would be six or however many items for you. Ashley, it’d be a different selection of items for you based on everything we know about you. It’s big data powering this up, and it’s really AI powered personalization systems tied into all this to this business process automation that automates all this. And that’s where to come back Ashley, one of your earlier questions, much less technology is targeted at bigger regional big retailers, but we’re exploring ways this kind of capability can be brought to smaller retailers and on almost a fully automated basis because smaller retailers don’t care about one store or 10 stores, 50 stores. They simply don’t have the staff the resources to do this. But technology can provide a way.
Ashley Coates [00:26:52] That sounds like it can be a superpower for smaller retailers because they have that personal touch as you mentioned your grandfather knew the name of every customer that came in the store. And then if they also have technology behind them powering what they do, that seems like it could be a real sweet spot for independent retailers.
Gary Hawkins [00:27:10] And that’s what we’re seeing. And it’s interesting that while the technology might seem at first glance, a best fit for Big Retail, it’s smaller retailers that are first movers in this space. And I think part of that, there’s really I think two things driving that one is smaller retailers just innately are more customer focused than big guys. The second is Big Retail hit traditionally or historically has really been driven by the big brand manufacturers. What deals what slotting fees as Procter and Gamble are going to pay to get their new product on the shelf? It’s really been backwards driven, and their brand or manufacturer of focus has also fed into what gets promoted every week. One of the brands going to help pay for if you get an ad from Kroger or Safeway or CVS, those items on the front page. It’s not because the retailer said, Oh, this is what my shoppers want. It’s because that brand manufacturer is paying to get it on the front page of that ad in a special display in the store. Smaller retailers typically don’t have access to a lot of those marketing funds. They’re not as beholden to them. They’re more innately customer focused. This is a great way for them to move.
Ned Hayes [00:28:28] So if we looked five to 10 years out, which seems like you’ve been doing your whole career, what will the age of retail five point look like? Any prognostications for us?
Gary Hawkins [00:28:40] So if you go back to my 1.0, 2.0 and so on, we’re in the early stages of what I call Retail 4.0 the age of Metamorphosis. And what I mean by that and how I arrived, is that that was what I see happening is the industry is becoming more and more digital. It struck me that what’s happening is we’ve mixed the DNA of traditional retail, getting mixed with all these new digital capabilities and technologies, and there’s something new that’s going to come out at the end. And that’s why the metamorphosis and the next three or four or five years are going to be this period of massive change in what retail looks like, how retail goes to market, how people shop and so on. You ask, what does the future going to look like? What’s interesting is I talk a lot in my writing and speaking around this exponential growth curve of technology. If you go back and look, the retail 1.0 lasted around 40 or so years. 2.0 was around 20 years 3.0 was around 10 years. We’re moving up that growth curve. So I’m suggesting that retail for 4.0 all this age of metamorphosis is going to be about a five year period. What comes next? Really good question. As technology moves increasingly fast, it becomes harder and harder to try to answer that question, because we have so many capabilities today that we would not have dreamed of 10 years ago. But I’m sure the future brings more and more automation both physical automation, robots, self-driving vehicles, as well as software robots, business process automation systems, replacing more and more people because systems can make decisions, in some cases far faster, far more efficiently and far better than a human being. As I go back to my example of marketing personalization or personalized weekly ad as a human being. I can’t go through and look at everything Ashley has purchased over the past year to understand, Oh my gosh, what should I put in front of her next week and at what price? Right? But a properly built A.I. machine learning system is tailor made for that type of thing. So we’re going to see more and more of that across not just retail, but across the world, everywhere and everything we encounter. So it’s going to be fascinating times.
Ashley Coates [00:31:08] Yeah. Well, we’ll have to have you back in five years and see if it does!
Gary Hawkins [00:31:13] I’d love to.
Ashley Coates [00:31:15] Well, Gary, it’s been such a pleasure chatting with you. We do have one last question, which is what do you hope will be your legacy? What do you want to be remembered for?
Gary Hawkins [00:31:24] I’m going to say probably two things. One is my role as a father and husband. I’ve been incredibly fortunate to have been married to a wonderful woman for what will be 42 years this summer.
Ashley Coates [00:31:38] Congratulations.
Gary Hawkins [00:31:40] We have four great kids that are all grown and three grandchildren right now. And I guess it’s one of the things that wisdom accompanies age. I guess, if you will, and the older I get, the more I’ve come to appreciate all that. So I certainly hope to be remembered or leave a mark on my family for hopefully being a good father grandfather. On the business side, I take a lot of personal satisfaction from trying to help fellow retailers across the industry understand what are increasingly complex things, all these new technologies and capabilities and so on, and try to help people understand these new things, understand the implications to past practices and processes, and get them excited about what can be done. So instead of being sit back in, Oh my god, I can’t keep up with the this, and bury their head in the sand to try to get retailers excited about the future and say, no, look at all the new things you can do and where this is going. So hopefully somebody will think of that some years out.
Ned Hayes [00:32:45] Well, thank you so much for the great discussion today, Gary. This has been fantastic to hear about your history and also to look a little bit into the future.
Gary Hawkins [00:32:53] Well, enjoyed being with you.
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