A challenge faced by all retailers that offer last mile delivery is how to reduce the cost of the delivery. For example, a delivery made to a customer within a two-mile radius of a store or a fulfillment center will cost a retailer between $10 to $15.
Grocery retailers that fulfill online orders incur labor costs plus the costs to deliver the groceries. On average, grocery retailers lose in excess of $20.00 on every online order they fulfill. It’s a staggering amount of money when one takes into account that online grocery constitutes 30% or more of a grocery retailers sales.
An interesting fact is that over 45% of deliveries are made to customers that live within 3 miles of the grocery store that fulfilled their order. The number is slightly higher for customers that receive a delivery from a convenience store. Does it really make sense to use a car, van or truck to make deliveries to customers living within 3 miles of a store? No. However, what’s the alternative?
Founded in 2019 and headquartered in Mountain View, CA, Tortoise powers low-speed remote repositioning for light electric vehicles like delivery bots, shared scooters, and cleaning robots. Tortoise
works with partners worldwide to provide the most cost-effective, zero emissions way to move anything from A to B at a low-speed. Unlike autonomous vehicles which are heavily restricted and years away from wide-scale deployment, Tortoise Cart can immediately be utilized by retailers.
Tortoise Cart is also an ideal solution for restaurants or dark kitchens to deliver food. Tortoise Cart is much larger than other robot delivery vehicles, allowing for multiple orders to be pooled on the same cart for delivery. The cart is easily navigated to travel the fastest and most cost-effective route to deliver each order. McDonald’s, Domino’s Pizza, and other restaurants continue to research solutions for delivery. Tortoise Cart is an ideal option. (Tortoise prefers to focus on online grocery delivery for its cart but the carts can be used to deliver food).
Each robot is about the size of a shopping cart and is remotely piloted, ensuring a human is always at the wheel. (Remotely piloted means that an operations tech sitting in Mexico drives and navigates the cart using a camera with a 360 degree view. This makes it faster, safer and easier to drive the carts while following all traffic laws). The carts operate on sidewalks and drive at an average speed of around 3 to 7 mph, allowing them to safely navigate around people, cars, pets, and other obstacles. The cart can carry over 100 pounds of goods (groceries, food, other products) in sealed containers, which are remotely opened by the cart operator when it arrives at its destination.
Tortoise provides retailers a contactless, zero-emission, and affordable home delivery option, mitigating sustainability and congestion challenges. The cart is 100% electric, removing
the need for a gas-guzzling delivery vehicle and minimizing the traffic impact of e-commerce.
Tortoise Cart has produced its first generation cart. Future models of the cart will have increased features and increased speeds giving retailers greater flexibility to customize options for the carts they leverage.
The real value of the Tortoise Cart is that it significantly reduces the cost of each delivery. On average, utilizing the carts for deliveries within a 3-mile radius of a store will reduce the cost of the delivery between $6.00 to $11.00; a remarkable savings. In addition, since retailers aren’t limited by the number of carts that they utilize, Tortoise Carts can theoretically become the primary vehicle for the majority of customer deliveries.
Retailers can also leverage the carts to make deliveries within a 3-mile radius of the dark stores they utilize to fulfill online orders.
Companies like Instacart and Shipt that fulfill and deliver online grocery orders for their retail customers can leverage Tortoise Cart to increase delivery options and speed to customers while reducing costs for the grocery retailers they serve.
Based on my research and experience working globally with Amazon, Kroger and other retailers, I believe the Tortoise Cart is a must-have for grocery and convenience store retailers. I compared the Tortoise Cart to the delivery robots offered by Starship and other companies, and I rank the Tortoise Cart at the top of the list for the following reasons:
Remote controlled cart that can travel on sidewalks or on the sides of roads
Large carrying capacity (100 pounds+); the average delivery robot can barely hold 20 pounds
Teleoperation reduces risk & removes the need for upfront mapping work; mapping work can take weeks and is very expensive
Lowest total operating cost in the industry
Extremely fast and easy to install and use
Average delivery cost of $4.00 per order; a savings of 50% to 75% over current last mile delivery methods that use cars and human drivers
I especially like the fact that the carts can be branded with a retailer’s or restaurants name and colors. It’s one thing to watch a slow, black and white robot barely moving down a sidewalk make a delivery. Watching a cart branded as HEB, Albertsons, Kroger, Walmart, Target, Giant Eagle, 7-Eleven, Casey’s, CVS, etc., rapidly moving down a sidewalk carrying a large amount of orders, is something entirely different.
Tortoise Cart is a global option for retailers, especially retailers located in Europe, China, Russia, Turkey, Saudi Arabia, Kuwait, Brazil, Colombia and India. (Note to Walmart: I suggest you explore leveraging Tortoise Cart to make deliveries for FlipKart in India, as well as make deliveries from your stores in the U.S. and other countries).
Like micro-fulfillment technology, something I strongly encourage retailers to adopt, I also strongly encourage retailers to embrace Tortoise Cart. Maintaining the status quo as it relates to expensive last mile delivery is a mistake. Reducing costs and becoming profitable requires a new way of thinking, a better strategy and better tools.
Tortoise Cart has rewritten the rules on last mile delivery. It’s time for retailers to become rule breakers.
I am often asked what I’ve learned the most from my years of experience traveling and working internationally. My reply is always the same: No matter the country, companies live and die by the leadership ability of their executives. Of all the things that are required for a business to succeed, I place leadership at the top of the list.
The topic of leadership has generated countless books, seminars, articles, and opinions, all attempting to answer two questions:
1. What is the best leadership style?
2. What makes a great leader?
It’s unfortunate, but the topic of leadership has become far too complex for most individuals to understand because there are so many differing opinions. I hope to simplify the discussion in this article.
A Look To Military Leadership
It is a fact that the U.S. has had a military throughout our history as a country. The United States Marine Corps, Army, and Navy were established in 1775 — 245 years ago. (The Air Force was established in 1947.)
No discussion about leadership is complete, in my opinion, without a focus on the accomplishments and longevity of the U.S. military. The Marines, Army, and Navy are among the oldest organizations in existence in America. Why is that? I believe it is because of their leadership.
I am grateful to have served in the United States Marine Corps for six years. I served in multiple roles: armor, infantry, and as a member of the 2nd Battalion, 8th Marines Surveillance, and Target Acquisition (STA) platoon. In addition, I spent hundreds of hours learning advanced hand-to-hand combat and knife fighting.
And I would have served longer, but a training accident inflicted severe injuries to my ankle and lower back. With that said, I wouldn’t trade my experience in the Marines for anything because it taught me a valuable lesson at a young age: When confronted with adversity or a challenge, find a way to go over, under, or through it.
Upon being discharged from the Marines, I attended Drake University for my undergraduate degree and went on to earn three master’s degrees from different universities. To earn extra income, I taught self-defense to police officers, security guards, members of the military, and others interested in learning how to protect themselves.
It was during these training sessions that I discovered something that would influence my career in business and consulting: Members of the military have a warrior mindset; most civilians don’t.
Let me explain.
In simple terms, the way I define it, having a “warrior mindset” means that you won’t quit; instead, you will do whatever it takes to win a fight or complete a mission. It means being willing to invest as many hours as necessary to learn and understand what it means to be a leader.
Before I continue, let me make this clear: What I advocate in this article isn’t just for men. I have trained more than 130 women over the years to get in shape, fight with their hands or a knife, and use a handgun for self-defense. Women can learn to have a warrior mindset the same as men. (I believe this Forbes article by Jodie Cook is one of the best articles I’ve read on the topic of having a warrior mindset.)
As a consultant, I often meet with senior executives, from the CEO to members of the board. As I engage with executives, I often encounter individuals who have a disturbing lack of confidence. When I discover that an executive lacks confidence, I don’t focus on the issues that the executive believes are causing problems. Instead, I steer the conversation to the topic of fear and confidence.
In my experience, no company can succeed without confident and competent leaders. I have yet to meet a competent executive who wasn’t also confident.
How A Warrior Mindset Will Make You A Better Leader
Bestselling author and former Navy SEAL, Jocko Willink, believes in the concept of “extreme ownership.” In essence, “leaders don’t just take responsibility for their job, they take extreme ownership of everything that impacts their mission.”
I agree with Willink’s philosophy. The challenge is that most people lack the courage and confidence to carry out such a disciplined style of leadership. Are leaders born or made? I believe a little of both. However, individuals who invest the time and effort to perfect their leadership skills will always have an edge.
I strongly advise individuals who feel insecure to start their journey to achieving a warrior mindset by making a commitment to get into shape through a combination of weightlifting and aerobics. Lifting weights allows a person to see their progress and score small victories as they gain strength. Martial arts, jiujitsu, and boxing are also excellent confidence builders.
Confidence is gained through accomplishment. Set a goal of becoming the best you can be.
Warriors don’t hide from their fears; they embrace them. Accept the fact that you lack confidence, and invest the time and effort to learn how to lead. Slowly put yourself in situations where you have to lead, not manage.
According to research, Americans purchased more than $680 billion in groceries in 2019. In a word, the grocery industry is big business. To meet the demand for groceries in the U.S., retailers operate over 38,000 grocery stores, with Walmart and Kroger among the largest chains.
An interesting dynamic within the grocery industry is the low margins associated with selling groceries. Grocery retailers are also challenged by the growth of online grocery ordering and delivery. Due to Covid-19, grocers experienced a significant increase in orders. That’s the good news. The bad news is that grocers lost money on every online order they fulfilled.
For an industry as critical as grocery retailing, it’s surprising how many grocers continue to operate using a business model that has changed very little over the last 100 years.
The time has come for grocery retailers to transform. The question is how.
Don’t Improve; Reimagine
The biggest challenge facing grocery retailers when it comes to transforming their companies is having the courage to make the decision to begin the process. In my experience providing consulting to the leading grocery retailers globally, including the largest grocery retailer in the world, Kroger, most grocery retailers have a low tolerance for risk.
Unlike Amazon, where “think big” and “invent and simplify” are part of the company’s leadership principles, most grocery retailers are focused on making incremental changes that provide minimal value. This “less is better” approach has created an environment where, frankly, most grocery stores look alike, and grocers have a similar operating model and customer experience.
The exception to this, of course, is Amazon. Although the company has the least amount of experience in selling groceries, Amazon has taken the approach that, in order to excel at grocery retail, innovation is a must-have. This includes creating new technology like Amazon Go and building stores with unique formats.
A recognized expert in business and the grocery industry is Louis Borders, founder of Borders bookstores and Webvan, the first heavily automated online grocery retailer, which ceased operations in 2001. Borders has emerged with a new online grocery company, Home Delivery Service.
I spoke with Borders about the current state of the grocery industry, and he stated something similar to what I have written and spoken about in the past. Instead of improving their stores or making incremental changes, grocery retailers should question everything about their business models and store operations.
In other words, don’t just try to improve; reimagine the company.
A Methodology For Change
On a scale not seen since the first industrial revolution, businesses across multiple industries are going through disruptive changes. It is a fact that businesses must adapt and operate under a set of rules and expectations that are constantly in motion.
To survive and thrive, companies should invest the time, money and effort into designing and implementing a comprehensive and continuous business transformation, envisioning a growth strategy for the next decade and beyond.
The question is how.
My recommendation is to break down the journey into three programs that can be managed simultaneously:
1. What is the burning platform for the present? (What are the biggest pain points in the business?)
2. What will take place in our industry next? (Will it be technology, new ways to serve customers, new channels, etc.?)
3. Ten years from now, where can we be as a company? (How can we reimagine and crush all assumptions?)
Although challenging, when transformations are deployed successfully, they afford an opportunity for companies to grow, increase their competitive advantage and create a culture that focuses on shaping their future rather than reacting to events within their industry.
Specific to grocery retailers, I recommend that they focus their efforts on greatly reducing the costs associated with online grocery fulfillment and delivery, and designing new store formats that accelerate sales of the highest margin products in their stores.
I believe the best way for grocery retailers to reduce online grocery fulfillment costs is by leveraging technology to engineer new processes. For example, it is common knowledge within the grocery industry that retailers lose between $6 and $11 or more on every online order they fulfill. It is expensive and complex to assign pickers to roam aisles to fulfill online orders (labor costs), prepare and stage the orders for delivery (materials and labor costs), and then deliver the orders (delivery costs).
A much better process for grocery retailers to utilize is investing in micro-fulfillment centers to automate fulfilling orders, which I’ve previously written about. Additionally, leveraging technology related to actual deliveries can help retain greater revenue. For example, the company Tortoise is piloting the use of an electric delivery cart capable of carrying 100 pounds of groceries to make deliveries within three miles of a store.
Grocery retailers should also explore ways to create a new channel for meeting the demand for groceries. One such method is to contract a company that utilizes vans (and eventually autonomous vehicles) to provide consumers with a new way to shop. For instance, instead of ordering groceries online, retailers can stock Robomart vans with groceries, and consumers can use an app on their phones (like how Uber operates) and “hail a store.” I expect the mobile retail concept to continue to grow and generate excitement.
(Full disclosure: I am an advisor for Tortoise and Robomart, as well as many other technology companies that offer products and services to grocery retailers.)
Grocers should also think differently about their stores. Instead of maintaining their current store formats, retailers could create new store formats clearly marked based on how consumers eat: breakfast, lunch, dinner, snacks. Simplify the process of shopping with your layout.
I had the pleasure of recently speaking with Louis Borders, the founder of Borders bookstores, and the first heavily-automated online grocery retailer, Webvan.
I didn’t just interview Borders and ask him the same questions he’s already been asked hundreds of times. Instead, I challenged Borders to tell me what everyone fails to understand about himself and his continued obsession with re-imagining the grocery business.
I was expecting a lengthy explanation with a myriad of examples outlining why the grocery business is so personal to him. The reply was short and to the point. According to Borders, he is “motivated by solving major pain points in people’s everyday lives and few things are more broken and painful than the way Americans shop online and buy and receive groceries.”
Is he right? Is the grocery industry broken?
From Another Era
Grocery shopping in the U.S. has an interesting past. In the 1800s to around 1910, most consumers walked into general goods stores, handed a clerk a list of groceries and other products they needed, and the clerk dutifully filled the order.
In 1910, entrepreneurs put groceries into trucks in cities like New York and Chicago to create mobile supermarkets capable of driving through neighborhoods to sell groceries.
In 1916, Piggly Wiggly became the first self-service grocery retailer. The chain introduced aisles with shelves stocked with groceries, freezers, coolers and uniforms for their employees.
Little has changed in the appearance and function of brick-and-mortar grocery stores.
Webvan was founded in 1996 and started taking orders at its location in San Francisco in 1999. The purpose of Webvan was to offer customers the option of ordering high quality perishable products along with other groceries using a new model – online grocery ordering and delivery to your door. Although Webvan shut down in June 2001, the company provided a brief glimpse into the future.
Throughout the 2000s, companies like Amazon, Walmart, Peapod, Harris Teeter and other grocery retailers, expanded into online grocery ordering and/or Click and Collect services whereby customers order groceries online and then pick up the groceries at a nearby store.
In my opinion, the growth of online grocery ordering highlights an important fact about the current state of the grocery business and especially grocery stores — both continue to offer an experience that is from another era. Stores have barely changed since 1916, and retailers that offer online grocery ordering end up brute forcing a solution to fit into their ecosystem of stores and business model.
I have been quoted multiple times in the press that I believe online grocery ordering and delivery is the worst business model ever created. I still believe this to be true.
When customers shop at a grocery retailer for their groceries, the grocer generates about 4% margins on the products that are sold. However, when customers don’t shop in stores and instead turn to ordering their groceries online, the methods for fulfilling online orders generates a loss of $4 to $7 on every online order that is fulfilled. In other words, unless a grocery retailer charges a fee for delivery or a Click and Collect drive-thru pickup fee, the retailer loses money on every order they fulfill.
Few grocery retailers charge fees for fear that customers will buy their groceries from retailers that don’t charge fees. Truth be told, grocery retailers are trying to attract customers to place online grocery orders even though they know they lose money on every order they fulfill.
A grocery client I provided consulting to in 2019 lost an average of $10.85 on every online order they fulfilled. Their solution? Increase the budget for marketing to generate more online ordering. I was able to prove to the client that volume had no impact on reducing their costs. Unlike most businesses where volume can be scaled to reduce unit costs and operational costs, the cost to fulfill one online grocery order is exactly the same if 1,000 orders are fulfilled. (The retailer implemented my recommendations and now break even or generate a small margin on each online order they fulfill).
Listed below are recommendations for reducing the costs to fulfill online groceries while improving the business:
Increase the density of orders in the regions where the retailer delivers. The biggest mistake made by grocery retailers is that they have failed to understand the importance of density and they have failed to implement strategies to increase density.
Install micro-fulfillment centers (MFC) inside grocery stores and/or in an offsite location to automate the process for fulfilling online grocery and Click and Collect orders. I recommend AutoStore above all available MFC solutions. You can read more about the use of micro-fulfillment centers in retail here.
Utilize electric delivery carts for deliveries within three miles of a store or micro-fulfillment center. I recommend the electric and remote teleoperated delivery carts from Tortoise. 100 million people live where Tortoise is already approved to operate their carts. I like the carts from Tortoise because they’re approved for travel on sidewalks. In addition, the first generation of carts hold 100 pounds but future carts will be able to carry more weight. Most of all, using electric carts from Tortoise will reduce the cost of a delivery within three miles of a store by $6.00 or more per delivery.
Supplement online grocery delivery by using vehicles from Robomart to introduce mobile retail. Instead of hailing a car, customers can “hail a store” that will arrive at their location stocked with the groceries most in-demand by consumers. You can read more about Robomart here.
Any retailer interested in utilizing the carts from Tortoise should contact the company and pilot the carts. I especially recommend Albertsons and Kroger to pilot the delivery carts from Tortoise. Mobile retail is generating a lot of interest. Any retailer or restaurant interested in learning more about Robomart should contact the company.
Customers that order their groceries online are unprofitable for grocery retailers. This makes customer retention and lifetime value critical. According to Kroger, they estimated it will take 3 to 4 years of purchases for every online customer to reach profitability levels similar to an in-store customer.
Another weakness of online grocery ordering and delivery is that retailers lose revenue traditionally generated from impulse purchases from customers in their stores. An ‘impulse buy’ is an unplanned purchase made by a customer. When a customer shops online, they select the groceries they need and complete the order. When a customers shops in a store, they wander around the store going up and down aisles. This presents an opportunity for a customer to see something they like and buy it.
The current model utilized by retailers for online grocery ordering and delivery is broken. Louis Borders knows this better than most hence his continued focus on creating a better model for groceries.
Don’t Improve, Reimagine
In speaking with Borders, he remains steadfast in his belief that the online grocery industry is broken. Prior to the COVID-19 pandemic, only 3% of groceries sales were online. Borders argues that “of course” consumers want to be able to order their groceries online “but they won’t because they don’t like the current experience and they don’t like the lack of quality in the groceries they receive.”
The process of ordering and fulfilling groceries is indeed full of pain for grocers and customers. However, solving the problems that plague the industry can’t be accomplished by trying to improve the current process. Instead, the entire concept of how consumers meet their needs for groceries will have to be reimagined.
Enter Louis Borders’ Home Delivery Service.
Being recognized as the founder of the largest company to go bust during the early days of the dot.com era (Webvan) has its advantages. To begin with, Borders has learned from the mistakes made at Webvan. Borders learned that turning his vision into a reality was possible. Borders learned that his vision was too small.
Borders newest venture, Home Delivery Service (HDS), isn’t ‘Webvan 2.0’, it is a model for the modern era of grocery retailing. (Borders confided to me that the name of the company will be changed now that they’re out of stealth mode). At a high-level, HDS offers a new model for ecommerce built around a highly automated fulfillment system capable of leveraging robotics to perform 95% of all of the functions associated with running a grocery fulfillment center warehouse and fulfilling individual customer orders.
Formed with a $30 million investment from Toyota and Ingram Micro, Borders plans to open a network of 100 or more distribution centers 150,000 square feet. Instead of utilizing robots that take goods to persons for manual picking, Borders has designed a system whereby robots transport goods to automated picking robots. Everything associated with receiving, sorting and storing inventory and fulfilling orders, will be done using robots.
A company with a similar business model is the British technology company, Ocado. The U.S. grocery retailer Kroger has entered into a partnership with Ocado whereby they will build 20 or more automated Customer Fulfillment Centers (CFC) to deliver groceries for Kroger.
Full disclosure: I was hired as a consultant by Kroger and in 2017 and 2018, I recommended to Kroger to either acquire Ocado or partner with them to leverage their technology. Based on my knowledge of Ocado and HDS, both companies have similarities but I believe the technology from HDS is more advanced without the high cost and complexity associated with Ocado’s platform.
Automation will allow Borders to dramatically reduce costs and use those savings to offer groceries to customers for less while simultaneously providing concierge level service. The quality and variety of groceries will be significantly better than what consumers are used to seeing today in stores and when they order online. It is common for fruits and vegetables to remain in a store for seven or more days before they’re purchased. Fruits and vegetables will remain in an HDS facility an average of 24-hours.
The focus on quality is critical. The 20% of products that generate 80% of sales in a grocery store are all perishable items: meat, milk, eggs, dairy products, bread and baked goods, fruits and vegetables. If Borders is able to establish a reputation that HDS offers and delivers the “freshest of the fresh” products, it will drive sales.
The video below provide an overview of the robotics that will be utilized to fulfill online orders in an HDS facility.
Another aspect that separates Borders vision from the models currently being utilized to fulfill and deliver grocery orders is that each HDS facility will have its own fleet of specialized delivery vans staffed by a team of full-time drivers. (I agree with Borders that using gig workers to deliver groceries gives customers a terrible experience). Machine Learning and Artificial Intelligence will play a key role in operations and customer experience. Drivers will be highly trained to learn the needs of their customers, resolve issues, take returns and tell customers about new products and services.
An example of a company that uses a similar model is Schwan’s who utilizes delivery trucks and full-time drivers to deliver food to customers while also introducing new products, reviewing purchase history, and upselling to customers to increase revenue. (Schwan’s has exceptional potential to expand into online groceries, grocery delivery, meal kits and customized prepared meals on a large scale, but the company lacks the right executive team to make it happen).
I asked Borders what company or business model most resembles what he wants to accomplish with HDS. Borders replied, “HDS will operate much like Starbucks who created what I consider to be a best-in-class made-to-order model for coffee. With our automated system, we can do the same for perishables and prepared foods.” Borders referencing Starbucks as the model for HDS demonstrates that he doesn’t view HDS as a fulfillment company, he views HDS as a customer experience ecosystem.
Borders went on to state, “We are beginning with groceries and consumables but over time, we will fulfill apparel, shoes, and other retail products.”
An advantage that Borders has to gain traction with HDS is his commitment to brands and third-party sellers that under no circumstances will HDS copy their products to make a private label version available to the public. Borders has also committed to treating brands and sellers on the platform more like partners aligned around the goal of providing consumers with the best products at the best prices while leveraging the most advanced fulfillment ecosystem in existence.
Will Borders Succeed This Time?
During my discussion with Borders, I brought up the topic of Webvan several times. Borders answered my questions with ease and showed no discomfort in speaking about the poster child of the dot.com bust. Until I asked this question – Will Home Delivery Service succeed or will it be another Webvan? Borders clenched his jaw and narrowed his eyes as he spoke.
The words he was speaking didn’t have anywhere near the impact on me as did the look on face as he spoke. Make no mistake, this is personal to Borders. I interpreted his words to mean the following – Webvan failed. The grocery industry is still broken. HDS is light years ahead of Webvan. We have finally cut the Gordian Knot of the grocery business.
Will Borders succeed? Yes, I believe he will. Borders didn’t create Webvan 2.0, he reimagined the grocery business. Big difference.
I am one of the few people who has assessed most of the micro-fulfillment centers and other fulfillment robotics available across the globe. Based on what I learned from Borders, he and his team have created something very special. Let me end the suspense. I can state with no hesitation that the robotics and other technology created by Borders and his team are without equal.
However, as HDS expands into other categories, I believe leveraging technology from AutoStore to accelerate growth should be explored. A challenge I’ve seen encountered by several fulfillment startups over the last several years is their insistence on utilizing robotics they designed vs. leveraging fulfillment and micro-fulfillment solutions available on the market. Although the technology from the startups may have been superior, it was also overly complex and expensive.
AutoStore is the recognized leader in micro-fulfillment.
A tenet of Toyota’s Lean Methodology is overprocessing a product or a process is actually wasted time, money and effort. If HDS can increase speed to market without reducing performance by incorporating AutoStore into its ecosystem to accelerate growth, it should be considered as an option. (I recommend Albertsons, Kroger, Amazon, Target and other retailers contact AutoStore to learn more about the technology. In addition, retailers can learn more about AutoStore and micro-fulfillment here).
As Borders frequently states, groceries are a $1 trillion opportunity. In addition, there is no expiration date on when the human race will come to an end. It’s irrelevant that Borders is entering the grocery market with his solution in 2020 instead of 2010. A truism in business is that a superior business model powered by innovative technology, operational excellence and flawless execution, will prove to be a disruptive force. Just ask Amazon.
I’ve been asked many times if HDS can succeed without having its own grocery stores. Based on my knowledge of the global grocery industry, I believe too many analysts and retailers fail to realize that stores are not a requirement for a new entrant like HDS. If HDS successfully provides consumers with better quality fruits and vegetables, lower cost groceries, and an impeccable delivery model, HDS will grow its customers base.
Also, and this is key – Walmart operates 4,756 stores in the U.S. and 90% of the population lives within 10 miles of a Walmart. Kroger operates 2,757 stores. On the surface, it would appear that Walmart and Kroger have an insurmountable advantage over HDS. I disagree. Stores do not provide an advantage if a new entrant like HDS is leveraging technology and a new business model to give it an advantage in speed, cost and quality.
The belief grocery stores provide impenetrable protection from new entrants is false. I believe stores are in fact a modern-day version of the Maginot Line. HDS won’t compete head-to-head against any retailer, it will use its business model and technology to exploit the weaknesses inherent in how grocery stores and the grocery industry operate.
Contrary to headlines that I’ve read proclaiming that Borders wants to “Beat Amazon and Walmart” at groceries are false. Borders stated to me “We are playing the long game.” In other words, instead of trying to beat any specific company, Borders intends to outlast his competitors.
One final comment. I believe Albertsons would be wise to reach out to Louis Borders and ask him this question, Would you be interested in becoming our Ocado? Kroger has an exclusivity agreement with Ocado. If Albertsons and HDS collaborate, they can design and implement a leading-edge fulfillment and micro-fulfillment network. If Albertsons merges with Ahold-Delhaize (something I strongly recommend) the combined companies can be powered by technology from Borders (and AutoStore).
The Schmeling Effect
In the 1990s, Walmart was viewed as being unstoppable. When Amazon was founded and then began to make a name for itself, executives at Walmart openly dismissed Amazon as a threat. According to a Walmart senior executive I spoke with in 2012, “Nothing about Amazon made sense to us. Why would anyone want to shop online when they could easily drive to Walmart?”
In many ways, retail analysts and grocery executives appear to have the same point of view regarding Borders’ HDS as Walmart had of Amazon. I recently had an executive from a large grocery retailer state to me, “Why would anyone order groceries from HDS when so many consumers are Prime members or only live a few miles from a Walmart or grocery store? You can orders groceries online from anyone these days.”
In 1936, a 21 year-old boxer from Detroit named Joe Louis Barrow, but referred to as Joe Louis by the press, had amassed a record of 24 fights with 20 knockouts. The talent of young Mr. Louis was so great that none other than the writer Ernest Hemingway, himself a boxer and an ardent admirer of boxing, said this after witnessing Louis beat fellow heavyweight Buddy Baer “Too good to be true, and absolutely true . . . the most beautiful fighting machine that I have ever seen.”
To state that Louis was considered the Champion in Waiting is an understatement. It was universally accepted within boxing that not only would Louis become champion, Louis was unbeatable.
A German fighter named Max Schmeling, the “Black Uhlan of the Rhine” as he was referred to by the press, was selected to become the next victim of Louis.
At age 29 and with a record of 49 wins, 7 defeats, and four draws, Schmeling was viewed as being a good fighter who stood no chance against the Great Joe Louis. The fight, or as some writers whispered under their breath, the massacre, was scheduled to take place on June 19, 1936 at Yankee Stadium.
Overlooked at the time was the fact that Schmeling wasn’t playing the part of a victim. Instead, Schmeling was extremely confident and truly believed he would beat Louis. When asked by reporters why he, a 10-1 underdog, appeared to be so confident in the face of his impending execution at the fists of Louis, Schmeling replied “I see something.”
What Schmeling saw was that contrary to what everyone was saying and writing about Louis, Louis in fact had a weakness. The weakness discovered by Schmeling was that Louis tended to drop his left hand during a fight and he often pulled his left hand back low after throwing a jab.
To Schmeling, this meant that Louis would be vulnerable to a counter right cross, something Schmeling possessed in his arsenal of punches.
As with many scenarios where everything is supposed to work perfectly without any chance of disruption to the inevitable, things did not go as planned for the “The Brown Bomber” Joe Louis.
When the fight took place it quickly became evident that Schmeling had indeed seen something, a flaw that could be exploited. Schmeling consistently tagged Louis with right hands throughout the fight. A knock down of Louis by Schmeling in round 4 was followed by a knockout of Louis in round 12. Shakespeare wouldn’t have dared write such an ending. The invincible Joe Louis had not only been defeated, he had been knocked out by a 10-1 underdog.
Why will Louis Borders succeed? He sees something.