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Retail Channels Converge at Warp Speed: Are Executive Hiring Practices Keeping Pace?

March 3, 2020
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In today’s dynamic retail food industry, the distinct separation between food retailers is largely the exception rather than the norm. Conventional wisdom asserts a simplistic but outdated rationale for the sharp boundaries that differentiate retailers. The traditional retail model held that consumers who needed to fill prescriptions or shop for personal care items went to a drug store, those who wanted a quick snack or soda shopped at a convenience store, and people who needed produce, dairy products or canned goods shopped at a supermarket. Prepared foods and meals were largely the province of restaurants. In today’s retail marketplace, the traditional drug store customers of old may do their shopping online.  C-store customers are likely to pick up a “grab and go” fresh salad and a soda or candy bar, and supermarket consumers may shop for frozen food or canned goods at a drug store or warehouse club. Prepared foods are no longer the exclusive domain of restaurants with food prepared to go now available in a variety of retail outlets. And the growing demand for even more optionality is driving prolific growth in online options. Blue Apron’s home delivery service features pre-portioned meals with specialty ingredients that are “fresher than the supermarket,”, and simply require final cooking at home. I grew up in Eastern Pennsylvania as did one of my partners at Allen Austin. We both fondly remember Philly soft pretzels as a local snack staple. I am now a resident of Dallas and my partner lives in Houston. Until recently, our access to Philly pretzels was limited to buying them at the Philly Pretzel airport kiosk when traveling to Philadelphia. Now, PretzelsDirect.com offers “soft pretzels…. baked fresh daily in the Italian Market, the heart of South Philly. They are fresh packed after cooling and shipped direct to your door. Now no matter where you are in the country you can enjoy Philadelphia Soft Pretzels.” These examples illustrate that online retailing has fundamentally changed consumer’s buying habits and expectations: we now expect virtually instant access to almost anything, anywhere, anytime.

Let’s take a deeper look at the current retail landscape. The term “grocerant” is now used to describe hybrid grocery stores and restaurants with respect to ready-to-eat foods. Progressive Grocer, a popular industry website and online magazine now includes “Grocerant” as a separate department choice alongside traditional departments such as Center Store, Produce & Floral, and Meat & Seafood. It further cites the powerful influence of economic and demographic factors, busy modern life, and consumer’s keen interest in a global foodie culture as drivers for this new trend. This growing movement now has such momentum that a “Grocerant Summit” is scheduled to take place late in 2016.

The hybridization of restaurants and grocery stores hasn’t gone unnoticed by the Culinary Institute of America (CIA) either.  Recently, the CIA formed a collaborative called Appetites + Innovation: Shaping Our Future, National Leadership Collaborative for Retail Foodservice. This new collaborative seeks to draw upon the expertise of foodservice and prepared foods leaders from various sectors including convenience stores, deli, foodservice, supermarket, and natural/organic. Its mission is summed up in Appetites + Innovation’s program overview: In both independent stores and large chain operations, corporate chefs, directors of culinary innovation, vice presidents of perishables and foodservice, and others in similar retail leadership positions have to deliver an on trend portfolio of menu items and packaged fresh foods that delight the customer and deliver profit margins that drive sustainable growth.”

Convergence is everywhere; the consumer has more cross-over options than ever, and the traditional structure of well-established and distinct channels is being transformed. Digital and physical channels are converging as consumer’s demand for accessible, available and deliverable shopping experiences continues growing and morphing at a rapid pace. Specialty food retailers now offer premium experiences with prepared foods through in-store demonstrations, dining areas, and upscale food counters. For instance, I recently attended a cooking class lead by a local chef in the fine dining restaurant where he has been executive chef for over fifteen years. Result? I now view that particular restaurant as both a first-rate dining destination and a great in-house cooking school. Not only are food retailers creating quasi-restaurant experiences, some now operate full-service dining areas. A new classification of food retailing, sometimes referred to as specialty convenience, combines a limited assortment of premium groceries with hot food bars, indoor and outdoor dining options, and ready-to-eat meals featuring locally curated ingredients.

Okay, so what’s the point? How does all of this relate to executive hiring practices? I think the million-dollar question boils down to this: With the ubiquitous, warp-speed convergence of retail channels now the industry norm, are boards and management teams of retailers sufficiently altering their executive recruiting and hiring strategies to keep pace with this rapid change? I don’t think so. Why? What we are experiencing in the retail food business is transformational. The mix of skills, experience and character attributes that once characterized the requisite ingredients for an effective, successful leader in the old retail paradigm are almost certainly growing obsolete. Today’s dynamic, ever-changing retail food domain demands new types of leaders. Okay, ‘that makes sense, so what’s the problem?’ you may ask. Today, the executive hiring criteria used by boards and management teams in many retail businesses is often a generation behind the current market realities.  For example, having conducted executive searches for many retail clients over the past twenty years, I have observed an interesting pattern, especially in the retail grocery channel.  During the initial stages of several searches, the boards expressed a willingness to consider executive candidates from different types of retail food backgrounds, that didn’t fit the traditional mold. They went so far as to approve search parameters that were sector agnostic. However, as the searches progressed and the candidate vetting process got underway, their initial openness and flexibility began to dissipate.  They just couldn’t get their arms around the possibility that candidates without specific retail grocery credentials might be able to understand and succeed in the supermarket world. Consequently, their REAL criteria for hiring executives was often misaligned with what was really happening with their businesses.

Is there a solution to this conundrum? Yes. Is there are universal panacea? No. In this new order of converged channels and ever changing retail hybrids, should Boards and management teams be more open to candidates with more diverse career histories, with blended backgrounds that incorporate elements of several different types of food retailing? Probably, but only after engaging in some good old fashioned front-end blocking and tackling. Properly executed, all executive searches should begin with a thorough needs analysis where important issues culture, organization, critical success factors, performance expectations, leadership attributes, company vision and strategy are examined. Furthermore, since the new normal for the retail food business is characterized by constant, rapid transformative change, boards, management teams and search committees should also consider asking and answering the following even more fundamental questions:

 

  1. What business are we really in?
  2. What markets do we really serve?
  3. Who are our customers?
  4. Are we market makers, or fast followers?
  5. What are our core competencies?
  6. Where are we going, and what is our strategy to get there?
  7. How do we define our culture?
  8. How do we measure success?
  9. Who are our competitors?
  10. And what are the conditions of satisfaction for achieving success?

 

It may look like a lot of work, but sourcing the right talent, especially senior leadership talent is fundamental to the success of any enterprise. And there’s likely an added benefit to adopting this level of rigor as part of your executive search process – it can’t help but strengthen your organization’s strategic instincts.

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