Retailers

Q&A With Ahold Delhaize Chief Digital Officer Farhan Siddiqi

Ambitious transformation about more than just e-commerce
Farhan Siddiqi
Photograph courtesy of Ahold Delhaize

As chief digital officer of McDonalds Corp., Farhan Siddiqi led the fast-food brand on a comprehensive and successful digital transformation, including the launch of mobile commerce in 20,000 restaurants, a new mobile app and the upgrade of self-service ordering kiosks.

He joined Ahold Delhaize for more of the same challenge: Taking a company and industry long associated with physical attributes and transforming them for a digital world.

Specifically, Siddiqi is at work on three customer-facing priorities: mobile experience (seeking seamless and inspiring mobile shopping experiences and leveraging mobile to enhance the in-store experience); payment solutions (offering the most convenient payment and checkout solutions to save time for customers and costs for Ahold Delhaize); and personalization and loyalty (delivering market leading loyalty programs to build customer intimacy with near-end focus on effective personalized offerings). His business priorities include meeting aggressive targets to grow e-commerce and to realize monetization, while developing capabilities in data, analytics and artificial intelligence and enabling digital use cases across the business.

In the following interview excerpt with WGB, Siddiqi talks about what attracted him to the opportunity and the challenges of big transformation, including anxiety over the role of robotics and automation; how digital transformation is about more than e-commerce; how data monetization can help pay for the investments; and whether—McDonalds notwithstanding—there is “secret sauce” for success (spoiler: there’s not).

Jon Springer: What attracted you to Ahold Delhaize?

Farhan Siddiqi: Normally when I look at opportunities, I look at three or four things. First thing: Is the industry interesting enough? And if you look at what’s been happening in grocery for the last five years, it has become quite interesting. It was one of the laggard industries compared to most other retail categories in terms of disruption that’s been happening. Ahold Delhaize already had an omnichannel vision with the acquisitions of Peapod and bol.com, but grocery in general was quite shielded. I think one of the triggers were Amazon acquiring Whole Foods, and then everybody woke up.

If you look at a broader scale, there’s a lot [that has] been happening across the entire value chain and various functions. It’s not only e-commerce finally taking off. People think that e-commerce is the transformation engine as it’s customer facing. However, there is automation and optimization underway in the warehouses, supply chain, merchandizing, marketing and fulfillment. New customer engagement channels are being adopted with a new expectation from customers on delivering against the main value propositions of convenience, quality, value, focus on health and transparency.

Let’s take delivery for example, which is reaching a tipping point in the U.S. recently,  but people have been trying to innovate there for quite some time. If you remember Webvan and Peapod were solving for this over two decades ago. But now it’s kind of becoming hot again. Another example is the food itself, with consumer preferences changing of what they eat [and] how they prepare or have it available to them in an increasingly time constrained lifestyle resulting in increased focus on ready-to-prepare and ready-to-eat meals. So, when you look at all that, there’s enough innovation happening in the industry, which makes it very interesting, challenging and fun to be part of.

Second thing is that you look at is the company. Do they have an appetite and willingness to be No. 1 or No. 2? And do they have a strong position and want to place some bets?

A third thing is in the role. Is there enough to be done that you can make an impact? If you do something, and three years from now, or five years from now, can you look back and say, “Yeah, that was fun to be part of”?

And the fourth one is, are you going to have fun doing it? 

So, all those elements were there. I was very happy at McDonald’s, having a blast over there. But you know, the challenge came, and I thought that it has all those elements, so let's take on a new challenge.

Let’s talk about some of your initiatives in Europe. There’s the new tiny store, payment innovation at Albert Heijn and electronic shelf labels.

Interestingly, innovation has been underway in the payment space. Albert Heijn probably does not yet get credit for this, but we have one of the most innovative frictionless payment systems for checkout in store.

It's not only a self-checkout, but it is one of the first takes on leveraging emerging technology. Albert Heijn also offers Tap to Go technology in some of their AH to Go formats, deployed with “tap to go” technology that allows customers to pay for groceries with a card or a smartphone without going through the register.

We have electronic shelf labels and smart tags. Albert Heijn has tested dynamic discounting of chicken and fish products at a store in Zandvoort in the Netherlands. These products will be automatically reduced in price based on sell-by date, with a higher discount for items that need to be sold soonest. The great potential of this is to reduce food waste.

Of course, the holy grail is everything autonomous. You come in, pick up your product, walk out, right?

So we have a pilot for that now as a digital store, using your payment tender to check in and doesn't even require an app. It’s not a tap and pay; it’s actually more autonomous, because it’s using very similar technologies to an autonomous store with computer vision and sensors. You’re identified not with facial recognition by the way, so it's good for if people want anonymity, but you’re choosing to identify yourself with your payment credentials, which is one of the oldest mechanisms of identifying customers in grocery stores.

The other cool aspect of this is this format can be replicated in very interesting places. Think about office buildings, high-traffic areas like train stations, college campuses, construction sites where you don’t have stores. This can be a very interesting format because it’s unmanned and open 24 hours. So, it has a lot of potential in a limited assortment. We’re excited about it.

Can you address anxiety among employees about automation coming to grocery?

I think it goes beyond grocery. This was one of the biggest discussion points at McDonald’s too. The moment people see any automation and robotics they think, “It’s about jobs and removing jobs.” But it’s about changing jobs and about keeping up where the innovation is going and being competitive, and finding efficiencies with automation as a society.

We as an employer need to take a very active role and a responsible role, [asking] what is the future of work going to be? How are we going to get ready for that? Of course, you’ve got to be competitive, but are we ethical and smart, training our employees and making sure that our people have the skills to actually work with these technologies in the future. Their goals will change, and we have to be with them.

And I don't think that the human interaction goes away. The customer service aspect and relationship-building aspect is very important to grocery. [Automation provides] more time for people to do those elements. So, I think we have to approach it that way.

So, what are the big problems that you're working on now? Is anything vexing you at work where you sit down and say, “How are we going to solve this?”

There’s a lot if you think about it. What’s vexing is the amount of transformation that needs to happen.

The exciting part is that the transformation is happening. The customers are engaging with you differently, so you’ve got to innovate. And on the customer experience, which is becoming omnichannel, you have to modernize all aspects of marketing: How you engage with the brand, enable convenient commerce, evolve servicing and drive customer engagement throughout their journey. We have to keep up with that.

Then there’s an entire transformation of the business model, where every function we do is becoming smarter. It is data-driven. It’s real time. And there’s an automation that's happening on top of it, and you have to transform all those functions. So think about sourcing, supply chain, merchandising, marketing, running your stores—everything. Underneath it all is more data, clean data, and then automation. So that means there’s a lot to be done to become relevant and compete.

Grocery is a low-margin business. So how do you continue to run the business and invest in the future of the business? That’s a classic challenge of most retail. Unless you’re a high-margin fashion or luxury brand, e-commerce is going to continue to be challenging. Very few have really figured it out. But I don't think it’s a choice. You have to do that because the consumer’s already there, and they’re not willing to pay [more] because some of the investments—because of private equity—are subsidizing these models and they're training the consumer to not be willing to pay for these extra services. So that’s what makes it interesting. How do you prioritize? What do you focus on? That is a big challenge. But individually, if you look at every aspect of it, it’s very exciting.

What are you working on that you’re confident is going to be able to scale? Where at Ahold Delhaize might we be seeing evidence of this?

We will have launched over 600 click-and-collect stores by the end of this year. And we’re going at an amazing pace: We did 124 just this [second] quarter. So that is working out. That is scaling.

There are also traditional things that are [undergoing] robotic process automation. So pricing optimization, assortment optimization. When you build those logic engines, those are very scalable. 

Alternate revenue models have further opportunity. When you start thinking about data and how do you get insights and how do you work with CPGs and share insights with them to make the ecosystem more efficient for all parties. And monetization revenue, [which is] an important part of the equation, has to be further optimized and [have] promise.

Monetization of data is a key aspect of the strategic plan.

Absolutely. It has to be, because that’s how the business works, and we have decent revenues coming from that. But the potential is much more than where we are today. It requires new, different capabilities. And once you develop those, I think it is actually a very good win-win situation for the ecosystem partners.

And it’s all about relevancy, working with your CPG partners. Because in the end, if you can drive more relevant sales for them, you can tap into more of the dollars that they’re allocating to this, which are probably going to other parties and are not as efficient. So it’s about making your marketing dollars more efficient.

Let’s discuss some of experimental things you’ve got going on at Stop & Shop. I know you've had at least one robotic micro-fulfillment center in Connecticut.

We have one micro-fulfillment center that we’re working within Windsor, Conn. There’s a lot of promise, but we’re in a proving-out phase now. We are working with the productivity levels. … So we're a little behind on optimizing it, but we’re in the proving-out phase. That’s very normal. 

Is e-commerce grocery growing as quickly as you'd like in the U.S.? Previous administrations probably weren't as happy with the growth rate as they would like to have been. So how are things going in the U.S. on that front?

I think overall grocery is still pretty slow. This is my point of view so [take it] with a grain of salt, [but] I think the current growth and adoption projections are based on some of the mature markets. The U.K. was one of the more mature markets in this space, and it tempered off at about 8% to 9%, Tesco being the highest, the rest of them being lower. And finally, I think the economics continue to be a challenge.

Certain cities or the pockets of cities that have high population density, scale and the right economics will see higher penetration.

We are firmly on track to double total net consumer online sales to 7 billion euros by 2021, having posted 29.2% growth in the second quarter.

What should the industry and competitors understand about Ahold Delhaize’s digital ambitions?

I don't think we’re signaling anything new. I think all we’re signaling is, “We’re serious about this.” And I don't think there is a secret sauce or formula. The story has been there a for a few years if you pay attention to what's been happening in retail. The playbook is there, the wins and losses are there. So, it’s a matter of, do you want to have a betting mentality for the future or not?

I don’t think the strategy is the hard part. I always say, “If you just pay enough attention to the signals, you can get a decent strategy in 60 to 90 days.” It’s all about execution. Are you going to mobilize against that and take the bets and go for it? That's what differentiates the people who are going to win or not going to win.

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