Retailers made many changes to adapt to pandemic-era business, and some of those changes are here to stay.
Insider spoke with Buck Jordan, CEO of Wavemaker Labs, and Imogen Wethered, CEO of Qudini, on what retailers should expect from a post-pandemic retail landscape.
Transcript has been edited for clarity and length:
Insider: What trends caused by the coronavirus pandemic do you expect to last, even after the pandemic subsides?
Jordan: One big trend that isn’t going away is definitely going to be the move towards more low-touch solutions. The concern over health and human safety has transformed the way people think about their everyday life, and food’s a huge part of that. There’s more interest to automate food production and improve the whole journey from seed to fork. We have machines at Wavemaker that are autonomously making pizza and robots making drinks.
Restaurants are forced into this really expensive delivery model where takeout takes 30% cut of their profits. These delivery services, while critical, are set to be disrupted post-pandemic. You’ll see more innovations in how it’s done because the industry just can’t sustain itself at that price point. Autonomous delivery, drones delivering burritos, it’s all coming. Automating the tasks that are time intensive and repetitive will continue, with workers shifting to roles that move the needle for businesses, like customer service and other areas.
Wethered: What we’ve seen in retail is the evolution of Omnichannel. We’ve seen more and more retailers take up appointments. We also surveyed 2000 consumers to understand what they want with regards to virtual appointments and from which brands, and ti was pretty clear that millennial and Gen Z customers were three times more likely to want to engage with a brand virtually. This was in April 2020 just as COVID was hitting, so it appears that customers would have wanted to interact with brands virtually from the comfort of their home or office all along, and you’re seeing more and more retailers do that now. So I think that’s definitely going to stay.
We’re seeing a big growth of pickups, which is going to be an interesting one to watch, because we’re still having retailers say, well after the coronavirus, we’ll want to make sure that customers come through the store cause then they’ll buy something. But some of the feedback we’re getting is that customers are more likely to work with the brand if it offers curbside pickup. So is that kind of incremental sale going to be worth less or more than the customer actually returning?
Insider: 2020 was a crazy year for many reasons. What’s the biggest lesson the retail industry learned last year?
Wethered: A big part was how important stores actually are, because that’s been the big question on lots of retailers’ minds for years. You’re seeing the economy break a bit because stores aren’t open, but then also need to better integrate their stores with their online channels. So those retailers had to integrate their stock systems into their shops so they could actually use the stock from stores. You’re seeing more and more integration to use store staff to offer pickups or engage with customers virtually from the comfort of their homes. And there was a McKinsey report that said that within a matter of months, digital retail evolved 10 years when the pandemic struck.
Insider: Yeah, and there’s an argument to be made that not only did it fast track, but those that really didn’t have an online digital presence felt the pressure to create one.
Jordan: Restaurants have been killed in 2020. I think the high level lesson they’ve learned is that their business models are fragile and under threat, and they need to automate now to build efficient businesses and start addressing these big line items in their operations. Every operator has reimagined their entire operation to both decrease expenses and increase the top line.
One great example of decreasing their expenses is the dark kitchen movement. So if you’re a restaurant and you have a large front-of-house that is now just dead weight on your books, you’re paying rent and you’re getting no value out of it. So you’re seeing a lot of restaurants move out of their locations and into a dark kitchen where they’re only paying for the kitchen space. They’re much more efficient and just servicing delivery at the same time.
You see this really interesting trend towards virtual brands, where a restaurant will still be operating their own business and their own brand, and they’ll be kicking like five, six other brands, completely different, out the back door for delivery. That’s having a really significant impact on the top line of restaurants that are embracing this. So really, I think 2020 is the year when restaurants woke up and said, we can’t operate the way we’ve been operating. We need to think differently if we’re going to get to the point of efficiency and profit again.
Insider: We keep hearing this theme of the new normal and what that’s gonna look like post pandemic. What’s your best guess as to what that will look like?
Jordan: I think that the near immediate mid-term new normal and the long term new normal are very different. And also super exciting. In the meantime, I think we’ll continue to see more of a move to implement solutions that are contactless and attract customers through ease of access. That means more delivery even after the pandemic and more demand for quality and variety. Some of these that started during the pandemic are really gonna start taking off. Don’t be surprised if you continue to see more virtual brands and more robot made meals. But the kitchen of the future is what I think is really interesting.
You’ve got companies like Miso Robotics that are putting industrial robotic arms in the back of the kitchens but still working with humans. Robots working with humans is what’s going to happen over the next five years. In five to seven years, I think you’ll start seeing a fully re-imagined kitchen. So all new-build kitchens could be fully autonomous, no humans going in the back-of-house. Reduced real estate costs, almost no labor cost. If you’re able to build a kitchen in a box that just pumps out your brand’s food, I think that really puts franchising under threat.
It takes one to three million dollars to build a new quick-serve restaurant. But if all of a sudden, in order to open up a new restaurant, you just need to have a machine and drop it in place, I think that’s going to completely revolutionize the way everything operates. You’ll see consumers benefiting from better quality food, a greater variety of food options at their fingertips, and all delivered directly to them. I think with the right technology in place, you’ll see the industry bounce back with higher standards and reduce costs across the entire food supply chain.
Insider: The industry is always trying to move forward, but there are incentives to franchising. How do you weigh the pros and cons of going fully automatic versus what restaurant companies like McDonald’s are doing now?
Jordan: You gotta ask yourself why McDonald’s and everyone else is franchised. It’s just so expensive, it’s one to three million bucks depending on the brand. It controls a huge number of people and it’s a huge operational headache as well as a huge capital problem. Once the capital requirements to open up a new restaurant go down and you can finance the entire thing with a bank loan — who wouldn’t want to loan money to McDonald’s? If the cost to open up a restaurant drops from $3 million to like 1 million or half a million dollars because you don’t need to build an expensive kitchen, you don’t need all that huge real estate. At that point, McDonald’s just takes out a bank loan and hires a couple of corporate employees for front-oof-house.
I do think there is going to be a revival of mom and pops, because a lower cost of entry into the restaurant industry will mean the revival of these small restaurants.This could mean more diversity and a unique recipe scene in the market for consumers
Insider: Do you predict mom and pops also getting into the automation game?
Jordan: We’re headed towards a future where there’s gonna be a wide variety of food because people are demanding less burgers and more ethnic food. But the quality of our food is going to go way up and the cost is going to go way down because real estate costs and labor costs are going to go down. This is a competitive market, so I think mom and pops are going to have to automate.
Wethered: First, a reprioritization of the customer. I think before retailers were losing their way in terms of what to prioritize, and a lot of them were just trying to cut costs as much as possible and focus on operations. But now you’re seeing customers avoiding stores because they’re scared. Retailers are going to have to work harder to implement new processes and digital ways of managing customers in order to come back to stores. For us, hopefully, that means queues will be totally unacceptable, and digital ordering will be everywhere as well as in-store appointments. You’ll be seeing contactless, curbside pick-up as well as virtual appointments.
I think one of the really interesting things is how on top of the data retailers are going to be, because more and more people are going to work from home. If you look at surveys that organizations are sending out to their employees, you’re seeing more and more people say that they don’t want to go back to full-time working in the office. It’s really going to change retailers’ footfall, and they’re going to need to be very on top of that to understand how that shapes where they should be keeping stores and how much they need to resource those stores.
The sad truth is, the coronavirus was a big catalyst for businesses that were already on the brink to collapse. So you are going to see more empty stores, but out of that, we’re going to see more smaller brands fill up their store spaces in the future, like a resprouting of the retail industry.
Insider: Interesting. So in a way, you’re also predicting this same sort of resurrection for smaller brands and moms and pops.
Wethered: Definitely. Chain retailers have suffered more than local small businesses and your mom and pop retailers during the pandemic. You’re seeing some smaller businesses start to flourish a bit more and to come through.
Insider: Why is that? The bigger brands have more marketing power, so why do you see that trend?
Wethered: A lot of it is just about the local lifestyle. Customers are staying around their home turf more, and that breeds building a relationship with your local store. Chains normally gravitate towards central high streets and malls and places which have been much less frequented. That’s one of the big drivers. Here in the UK, we’re also seeing backlash against Amazon, like campaigns saying, “you know, who doesn’t need your money right now is Jeff Bezos.” And more people go out and buy from local retailers as a result.
Insider: You mentioned that retailers will have to start paying more attention to their data. What kinds of data does that entail?
Wethered: Everything around footfall and understanding how many customers are coming into stores and what they’re coming in for. Some of the data we offer helps retailers understand what’s happening between the footfall counter and the POS system — what the customer wanted, how long they waited, how many staff there were on the floor, and how that impacted their survey feedback or whether they walked out.
Insider: What is next for your companies? What areas of opportunity for growth do you see in 2021?
Jordan: While I’d love to get to this fully autonomous kitchen future, it’s gonna be a long ways away — five, seven years. We’re really focused on kiosks, which are really high quality vending machines. You’re gonna see an explosion of vending machines that are super high-quality food made robotically, but in front of your eyes.
We’re focused on getting this pizza robot out the door. We’ve got a boba robot that makes a boba milk tea. We’re also fully automating Chinese food and salads. I think you’re going to see a hyper-customization of your food over the next two years. People are gonna be able to say, give me 10 drops of sugar in my boba tea.
What really gets me excited about robotics and food isn’t just when you can cut labor and real estate costs. That’s boring. What’s really interesting is when you can do something that no human can do. For instance, what if you could order all eight slices of a pizza to be a completely different thing? You know, one’s Hawaiian, one sausage, one mushroom, one cheese. People would do that, but no human will make that today.
Insider: Do you envision this all being done in front of the customer’s eyes so they can be amazed? Will that help with returning customers?
Jordan: Yeah. I don’t think a kiosk or a small format robotic product is going to be successful [unless] you really show it. You can’t be behind a black wall like vending machines are today.
Wethered: For us, before the pandemic, we split focus across multiple sectors, but we really wanted to just focus on retail. Now that you’re seeing all these changes, it’s given us the opportunity to do that. We’ve been growing internationally as well, so USA, Europe, and even Asia. We’re massively expanding our virtual appointment offering, and we have been creating the concept of retail choreography, which is tying together experience operations and data. That’s what we’re building all our product towards. It’s getting great feedback from the market in terms of prioritizing those three things. The pandemic has made it even more important to make sure your operations and your customers all are tied together and you can get great data.
Insider: Your clients are spread across retail, telecom services, and financial services, is that correct?
Wethered: Exactly. We’ve got banks, a couple of insurance companies, as well as retailers in luxury fashion, like Nike, Burberry, pet retail, electronics retail like Samsung, and a number of others as well.
Insider: Buck, you have a partnership through Miso Robotics with White Castle. Are you at liberty to speak about how that’s going?
Jordan: It’s great. We’re helping White Castle make french fries and tiny little burgers. Miso Robotics is operating the fry station for White Castle. It’s an industrial, seven-axis robotic arm on an upside-down rail. It can slide back and forth, grab the fry basket, dump it in, and cook it perfectly. White Castle is rolling out [the robot] to about 10 more locations this year, and then probably a systemwide rollout, assuming we do well. Then I think you’re going to see a lot of other big brands this year embracing Miso Robotics to operate the fry station.
Insider: Is there anything I didn’t ask about, pertaining to the industry, the pandemic, the impact that it’s had on restaurants, retail, that I should make a note of?
Jordan: Wavemaker Labs has really embraced crowdfunding as a method of procuring capital. Miso Robotics has closed almost $18 million, and we’re going out for another five to 10. There’s this incredibly interesting trend towards a more democratized venture system. Prior to this, if you wanted to invest in Miso Robotics, you needed to be a one percenter and live in LA, New York, or San Francisco. But now all of a sudden it’s super democratized.
You’re seeing a revolution in finance that is also propelled by the pandemic. We’ve all read about these Robinhood traders, and they’re also investing in online crowdfunding. I think you’re going to see more embracing of public markets again. Private companies have been staying private longer, but I think you’ll see that trend reversing, all powered by interesting retail opportunities.
Wethered: I just noticed a very interesting trend over the weekend. You’re seeing online retailers buy up some of the struggling offline retailers or omni-channel retailers. Boohoo in the UK is trying to buy Debenham’s right now, and ASOS trying to buy Topshop and some of the Arcadia brands. I’m interested to see where that goes in the next couple years. They won’t be buying the stores, which sadly will mean loss of jobs, but they will be buying the brands.