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Just Walk Out Self-Checkout Technology with Tim Costello
Episode 133rd August 2022 • Supply Chain LEAD Podcast • Supply Chain LEAD Podcast
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Tim Costello from UST Global joins Mike to discuss the role that future seamless checkout plays in the future of retail.  Tim has years of experience at Walmart running stores, Amazon running warehouses and now is leader at UST global exploring the retail technology of the future.   

Transcripts

Mike Graen:

Hello, my name is Mike Graen. And I'm extremely

Mike Graen:

excited to talk to Tim Costello. I've known Tim for a long, long

Mike Graen:

time. He spent over 12 years with Walmart in store operations

Mike Graen:

and various stores in the Northwest Arkansas and Oklahoma

Mike Graen:

area. So he had a lot of experience up to including the

Mike Graen:

store manager. He then left Walmart and spent a couple of

Mike Graen:

years at Amazon working on their warehouse operations. And now he

Mike Graen:

has left them to go to a company called UST Global, where he is

Mike Graen:

working on automated store technology. I can't think of

Mike Graen:

anybody better to talk about store operations and the

Mike Graen:

technology to support that then my good friend Tim. Welcome,

Mike Graen:

Tim.

Tim Costello:

Thank you, Mike. Thank you appreciate that fine

Tim Costello:

introduction. And as a way of remembrance, my Walmart retail

Tim Costello:

career, my whole retail career began when I was 49 years old.

Mike Graen:

But you look 49 now, Tim, so how does that work?

Tim Costello:

When you work for Walmart, they don't allow it.

Tim Costello:

It's not part of the SOP.

Mike Graen:

So the Walmart experience and then the Amazon

Mike Graen:

experience and now you're UST Global actually started, you

Mike Graen:

started that path when you are 49. Well, what do you do before

Mike Graen:

you were 49?

Tim Costello:

So before I was 49, out of high school, I spent

Tim Costello:

12 years in the Navy poking holes in the submarines out

Tim Costello:

there in the world. And I was a missile technician working on

Tim Costello:

the Poseidon and Triton submarines and missiles. After

Tim Costello:

that I got out I found a dove into a sales.com career

Tim Costello:

because.com was coming along. And I grew that for a whole

Tim Costello:

bunch of stuff. So I carried a bag and sold a lot of third

Tim Costello:

party services down into the dark commerce throughout San

Tim Costello:

Jose and everywhere else on the West Coast, living in Salt Lake

Tim Costello:

City at that time. After that, I found that I was a decent

Tim Costello:

operational mind and started consulting a number of years.

Tim Costello:

And then that consultation grew into business structuring and

Tim Costello:

asset protection and not the kind of asset protection that

Tim Costello:

Walmart does. But multimillionaires who are

Tim Costello:

looking to structure their assets so nobody can file a

Tim Costello:

lawsuit against them in a court of law. So it makes it hard to

Tim Costello:

get to their assets. So we did that for a while. And then I

Tim Costello:

retired. And then we moved to Bentonville, Arkansas for Carrie

Tim Costello:

my wife to get her career going after raising the kids. And I

Tim Costello:

was literally, you know, became a master gardener and Benton

Tim Costello:

County and just hung around did a bunch was Davis County. I

Tim Costello:

can't remember what county was there now. But beyond that I got

Tim Costello:

bored.

Tim Costello:

So I applied to Walmart, and I couldn't get in the home office

Tim Costello:

for about a year. And I didn't want to work for anyone else

Tim Costello:

because I didn't have a Fortune 5 company on my resume. So I

Tim Costello:

said I'm gonna go work for Walmart. Finally Carrie wakes up

Tim Costello:

one day and says, hey, just go work in a store. And I said me,

Tim Costello:

we're going to store what would I do? I don't know anything

Tim Costello:

about that. Literally. Other than a shopper, I knew nothing

Tim Costello:

about retail. Well, I you know, did what she said applied. The

Tim Costello:

next day 2741 there across from NWAC gave me a call wanting me

Tim Costello:

to be an overnight stalker. And I asked her the personnel person

Tim Costello:

isn't that illegal? And she didn't get it. So I said, Yep,

Tim Costello:

I'll be over.

Tim Costello:

A very fine friend named Matt. Harold gave me my first

Tim Costello:

interview. I think he's a market manager somewhere up in Missouri

Tim Costello:

now. Fine fella and I began my Walmart career as an overnight

Tim Costello:

stalker at 2741.

Mike Graen:

Did you have to spell stalker to make sure that

Mike Graen:

they were clear which one you meant?

Tim Costello:

No, sir. There was no test after my job.

Mike Graen:

That's awesome. Wow. Well, first and foremost, I had

Mike Graen:

no idea about your Navy career. Thank you so much for your

Mike Graen:

service. I don't think we say that enough for all the people

Mike Graen:

who are suffering and making the ability for us to be able to

Mike Graen:

live a safe lives, etc. We take some of that stuff for granted.

Mike Graen:

But number two, you had you did have an interesting career

Mike Graen:

before Walmart. But I do know, you spent a number of years in

Mike Graen:

store operations and I really want to get your perspective on

Mike Graen:

you've worked for a couple of really big retailers one being

Mike Graen:

Walmart and one being Amazon different roles obviously but

Mike Graen:

now you're working on kind of future technology for stores

Mike Graen:

itself. So I want to start off with first and foremost you

Mike Graen:

know, based on your previous experience, the first question

Mike Graen:

we ask people is we are always involved interested in retail

Mike Graen:

but I'm interested in any perspective you have. Have times

Mike Graen:

you not as a store person but as a customer have been

Mike Graen:

disappointed by a retailer. You thought you were gonna get

Mike Graen:

something and you end up not getting it. You got any stories

Mike Graen:

because I think these stories helped help the store operations

Mike Graen:

and retail understand the pain that's created from a customer

Mike Graen:

who gets disappointed any any, any stories like that.

Tim Costello:

Too often. Like every single one of us have gone

Tim Costello:

to the store and we want to put together something. Either it's

Tim Costello:

a dinner or a picnic or a celebration, whatever it is. And

Tim Costello:

we are, we have found ourselves frustrated, because we were

Tim Costello:

gonna go to this store, get everything we needed, and be

Tim Costello:

done, right one hour trip, you're all good to go. And you

Tim Costello:

can go plan and do the rest. But then you end up spending two or

Tim Costello:

three more hours, that particular day or the next day,

Tim Costello:

wandering around trying to find the things that you wanted to

Tim Costello:

find it that one store, or there's been bad enough routines

Tim Costello:

where I've just left the basket set. And I just went to the next

Tim Costello:

door. Right, so now that store has lost my wholesale, not part

Tim Costello:

of it. Because I just didn't, I didn't have time to go to many

Tim Costello:

visits. So yes, it's extremely frustrating to get into a store

Tim Costello:

expect normal items to be there. I'm not talking about you know,

Tim Costello:

unicorns, I'm talking about things you'd normally buy. And

Tim Costello:

when they're not there, it's extremely frustrating.

Mike Graen:

So you spend enough years in stores, working stores:

Mike Graen:

as a customer, when I come in, and I'm looking for the five

Mike Graen:

items for my barbecue, or whatever I'm going to go and you

Mike Graen:

don't have two have them. I get frustrated, obviously. But I'd

Mike Graen:

like to know from a customer perspective, why? Why is it so

Mike Graen:

hard to keep items in available for a customer to purchase?

Tim Costello:

It is a ongoing battle, to maintain the process

Tim Costello:

in a retail store. If the store manager is not checking on that

Tim Costello:

process, every single step of the way, which means that store

Tim Costello:

manager now needs to know every part of the process. They're not

Tim Costello:

going to be as good at doing that process as their associates

Tim Costello:

because their associates become masters of that product. And

Tim Costello:

they know the synergy of how that all works. But you're going

Tim Costello:

to know all the checkpoints along the way as to what you

Tim Costello:

should see when that process is done well. Right. So you rely

Tim Costello:

upon your associates. So one you got to teach, you got to train

Tim Costello:

them, and you've got to keep them going in that process. Or

Tim Costello:

you will be out of stock. And if you're out of stock, like Sam

Tim Costello:

Walton said, you know why that shelf is empty? And everybody

Tim Costello:

looks quizzically at him? I don't know. Cuz the customer

Tim Costello:

bought it all. Now what do you do? And they get all the

Tim Costello:

shoulder shrugs? I don't know, order some more. Yeah, right,

Tim Costello:

fill it up. Now, that was the old Kanban system to keep that

Tim Costello:

filled, so that the customer doesn't have to look at an empty

Tim Costello:

shelf.

Mike Graen:

The supply chain is so complicated, is again, if you

Mike Graen:

put your store manager hat on running a brick and mortar

Mike Graen:

store, let's say you got several 100,000 items that are in a

Mike Graen:

store. And the products are not in the store. What are some of

Mike Graen:

the challenges you mentioned training is one but one of the

Mike Graen:

other ones that I know that we've talked about a lot is

Mike Graen:

perpetual inventory accuracy, which is it says I have five but

Mike Graen:

I don't have any and therefore I don't sell any I don't order

Mike Graen:

any. That may be one of the opportunities. Is there others

Mike Graen:

that you can think of that, that the product is is physically not

Mike Graen:

in the building?

Tim Costello:

So we Walmart and many others, Amazon, et cetera,

Tim Costello:

they're all very focused on that last mile delivery. Right? How

Tim Costello:

do I get it from my distribution center, my fulfillment center or

Tim Costello:

my store to the customer? The customer is going to come pick

Tim Costello:

it up and all those are fine thoughts. And our friends at

Tim Costello:

Walmart doing a great job I know some of right but the reality is

Tim Costello:

that next to last mile delivery because that's how you're going

Tim Costello:

to fulfill the last mile delivery with all the items that

Tim Costello:

customers ordering. I can tell you I've ordered online

Tim Costello:

sometimes and I've done them all Instacart Walmart target the

Tim Costello:

whole bit right? Every single one of them shorts me a product

Tim Costello:

every single time I ordered. If I'm doing a roast and they short

Tim Costello:

me a roast, what else was everything good for? So so that

Tim Costello:

next to last mile delivery, as I'll paraphrase it because I

Tim Costello:

think nobody else is talking about that. But it's in stock,

Tim Costello:

right? Oscar score, Walmart cars, everybody else calls it in

Tim Costello:

stock, whatever you want to call the process to keep that shelf

Tim Costello:

full, so that your online grocery pickers can pick it,

Tim Costello:

your customers can choose it, et cetera, is crucial. Absolutely

Tim Costello:

crucial. And that will never change in retail. It will always

Tim Costello:

be keeping the shelves full.

Mike Graen:

But I think one of the competitive advantages at

Mike Graen:

least from my perspective and people that I've talked to as I

Mike Graen:

can't remember a time where I ordered something from from a

Mike Graen:

pure play online fulfillment retail like an Amazon and I got

Mike Graen:

to I got it out of stock. Didn't happen.

Tim Costello:

You know why? Because it doesn't matter what

Tim Costello:

you order. That product is in stock somewhere. And my time in

Tim Costello:

Amazon, I'm telling you I have never seen a more complex

Tim Costello:

customer delivery model than they employ. Literally, you

Tim Costello:

could order five items, and let's just say that your

Tim Costello:

fulfillment center happens to be OKC one, the one that I ran,

Tim Costello:

right, and you only three of the items are in that fulfillment

Tim Costello:

center. The system knows it the minute you place by, right. So

Tim Costello:

now it immediately employs a mechanism that's going to go

Tim Costello:

find it wherever it is, get it picked at that facility, dropped

Tim Costello:

into a tote, that tote go to a special truck called reactive,

Tim Costello:

right? And that reactive freight moves within a couple of hours

Tim Costello:

to the next fulfillment center, like DFW to OKC one, or FTW,

Tim Costello:

six, to OKC one, see, one are told to to, you know, whatever,

Tim Costello:

you're moving that in there. And as an operations manager at OKC

Tim Costello:

one, I had five hours when that truck arrived to get that item

Tim Costello:

stowed into a bin, right. So that's Priority Freight, we get

Tim Costello:

that stone is customer orders, right? Yeah, once that's stowed

Tim Costello:

in the system now it says, oh, all your five items are now

Tim Costello:

here. Put them together, pick them, send them downstairs, put

Tim Costello:

them in a package, send them out on the truck to one of the

Tim Costello:

delivery centers. And then boom, all of a sudden, you get it. And

Tim Costello:

to you and me, it's like magic. You can imagine the physical

Tim Costello:

effort going on behind the scene for hundreds of millions of

Tim Costello:

products. Every single day, I would get six or seven reactive

Tim Costello:

trucks into my center every single day.

Mike Graen:

Wow. Wow. Well, here's the other big interesting

Mike Graen:

thing is we don't have these things called customers coming

Mike Graen:

in and stealing product and Associates stealing product and

Mike Graen:

third parties coming in here and moving product. You don't have

Mike Graen:

those in an Amazon warehouse, right. So you've got a much

Mike Graen:

better controlled environment. So a retailer like Walmart, how

Mike Graen:

do they win in that environment against Amazon? Because they are

Mike Graen:

winning. And they're doing very well, because they have these

Mike Graen:

4600 locations that are within 10 miles of a store. How do you

Mike Graen:

compete against an Amazon model when you're a retailer like

Mike Graen:

Walmart?

Tim Costello:

So that's a very interesting question. I just

Tim Costello:

happened to be on LinkedIn this morning. And my distant friend

Tim Costello:

Carissa Sprague, who knows the SVP over there ecommerce

Tim Costello:

delivery, I see her taking photos in a distribution

Tim Costello:

fulfillment center, and it looks just like the Amazon ones,

Tim Costello:

yellow guardrails, concretes. Shelves the whole bit, right.

Tim Costello:

That's how you compete. Walmart didn't didn't sleep. Right. I

Tim Costello:

remember Doug McMillon, five years ago at a conference for

Tim Costello:

all the store managers right store manager meeting, I forget

Tim Costello:

whether it was year beginning or holiday meeting. I don't know

Tim Costello:

which one it was. But he sort of portrayed the graph of retailers

Tim Costello:

that don't make that jump. Right. And he intimated that,

Tim Costello:

you know, Walmart could be one of those retailers that doesn't

Tim Costello:

make that jump. But of course, he has seen too, with lots of

Tim Costello:

smart, talented people to create this exact same thing. So as

Tim Costello:

they're tying this together, as Walmart builds their

Tim Costello:

marketplace, Walmart is very well positioning themselves to

Tim Costello:

just run right alongside because quite frankly, I believe Amazon

Tim Costello:

has peaked. I believe they are, they're going to build a few

Tim Costello:

fulfillment centers. But they're done building 65 a year, right?

Tim Costello:

We're running out of cities, they might expand around the

Tim Costello:

world somewhere, but here in the US, they're pretty peaked.

Tim Costello:

They're going to build a new one to move new technology into it,

Tim Costello:

but they're going to abandon the old ones are using for some

Tim Costello:

other purpose. And Walmart's ramping it up. But Walmart has,

Tim Costello:

you know, 5000 stores. And when Greg Friend was in my store one

Tim Costello:

day, he asked me a question, what do you think, Tim? I said,

Tim Costello:

You know what, Greg, I think you ought to take about two thirds

Tim Costello:

of a supercenter, right, shrink it down to about 60, something

Tim Costello:

thousand square feet, but the most moving brick and mortar

Tim Costello:

skews in that area, and use all the rest for a fulfillment

Tim Costello:

center is now you've got you know, 3500 fulfillment centers

Tim Costello:

around the country that you can now fulfill out and some of

Tim Costello:

that's come true. They've, you know, Salem, New Hampshire, they

Tim Costello:

retrofitted a place. They're doing the drone delivery out of

Tim Costello:

my old store and a couple others. So they are trying

Tim Costello:

everything. And like Greg, for instance, I don't care if you

Tim Costello:

fail, just try, right. Let's give it a shot. Right? See if it

Tim Costello:

works, because it might work and might work and true leaders are

Tim Costello:

never afraid of failing, right? It's just one more way that

Tim Costello:

didn't work. Keep on going.

Mike Graen:

That's right. That's right. Well, I am going to put

Mike Graen:

my money on Walmart for sure. And it's not because I've spent

Mike Graen:

40 years working with them. But here's the reality. I can now

Mike Graen:

get on my computer, order everything I need. And within

Mike Graen:

two hours, it's sitting on my doorstep. I don't know that

Mike Graen:

Amazon's ever going to be able to compete with that. So I like

Mike Graen:

their chances. But there's a lot of process stuff that has to

Mike Graen:

happen. So let's switch gears a little bit. I mean, I couldn't

Mike Graen:

think if I was UST I couldn't think of a better person than

Mike Graen:

you who've had all this experience running store

Mike Graen:

operations at Walmart and then with Amazon, to say, Tim blank

piece of paper:

What is the retail tech going to look like

piece of paper:

to support what we need to do for our customers? Walk us

piece of paper:

through some of the cool stuff that's going on at UST. And what

piece of paper:

do you think is the top of the list for some of these retailers

piece of paper:

to consider?

Tim Costello:

Excellent. So number one is frictionless

Tim Costello:

commerce. That's what it's called now, right? Don't make

Tim Costello:

your customer work too hard for them to give you money. When I

Tim Costello:

ran my store, I literally pictured people walking into my

Tim Costello:

store with fistfuls of money, daring me to trade them, right?

Tim Costello:

You got what I want, I want to give you some money. 99% of 1%

Tim Costello:

we'll talk about later. But those things are never going to

Tim Costello:

change. Right? brick and mortar is not going away. In fact,

Tim Costello:

you'll find Amazon's moving towards brick and mortar. So

Tim Costello:

we're trying to figure out how to make brick and mortar better.

Tim Costello:

Right? So it's down to shrink into the most number of skews

Tim Costello:

that moves. You know, the neighborhood market does that,

Tim Costello:

well, they could use some GM enhancements to get some stuff

Tim Costello:

in there. But they're doing really well with that. So let me

Tim Costello:

let me stop here real quick, because I hear people go, Oh,

Tim Costello:

with E commerce, everything's gonna delivered to your house,

Tim Costello:

you never even have to go into a brick and mortar store, you

Tim Costello:

obviously think that's not gonna happen? brick and mortar is not

Tim Costello:

going away. Okay? I mean, I may not live long enough to see my

Tim Costello:

prediction come true. But 50 years from now, brick and mortar

Tim Costello:

still gonna be here. Yeah, brick and mortar has never changed

Tim Costello:

from the general store right. Now, back in the general store,

Tim Costello:

everything was behind the counter. So he his shrink was

Tim Costello:

really good, right? He had everything accounted for, and he

Tim Costello:

gave you in charge you. But now we have very open stores. And

Tim Costello:

we're trying different mechanisms to keep most of the

Tim Costello:

merchandise in the store until it's paid for, and account for

Tim Costello:

all the inventory that's coming into the store, as we can get it

Tim Costello:

stocked, right. So keep your keep your nest together. So that

Tim Costello:

brick and mortar is never going to go away. Right? That's just

Tim Costello:

going to stay through some notes out here that with brick and

Tim Costello:

mortar, there now has to be a way to take care of it.

Tim Costello:

So when they converted my store to 100% self checkout on the

Tim Costello:

front end some of the complaints from the customers were where's

Tim Costello:

my W2 for bagging my own groceries? And after a while, I

Tim Costello:

thought of a good response that was sort of funny and sort of,

Tim Costello:

you know, ease the tension a bit. And that was: Did you stop

Tim Costello:

driving because you had to pump your own gas? It worked on a few

Tim Costello:

not all of them, right. But they were more concerned about the

Tim Costello:

cashiers. Where's my cashier? Where's the one that took care

Tim Costello:

of me all the time. And there's still some that I'm friend on

Tim Costello:

Facebook with that were in my store, right? And they're

Tim Costello:

wonderful people, they show up to work, they take care of the

Tim Costello:

customers. They didn't go away. What they did in my store was

Tim Costello:

take all of those hours and shift them into that ecommerce

Tim Costello:

world. Right? So they made it run more efficiently. Yes, the

Tim Costello:

customer can now check themselves out. In fact, Walmart

Tim Costello:

has done such a great job of reducing the cash registers on

Tim Costello:

the front end to all the self checkouts that now they don't

Tim Costello:

have enough self checks. Yeah, that's true, literally, that now

Tim Costello:

you're in line at the self check, right? So if you use

Tim Costello:

their scan and go, and you're running around the store

Tim Costello:

scanning, now you'd have to wait in line at a self check to get

Tim Costello:

up there to bag your groceries, checkout, that kind of stuff to

Tim Costello:

figure that out. But now they have lines self check. Could you

Tim Costello:

imagine? Yeah, it's amazing. So brick and mortar is not going

Tim Costello:

away. So with frictionless commerce, the idea is twofold.

Tim Costello:

One is, how do I keep my inventory in the building till

Tim Costello:

it's paid for? How do I detect when it's picked up? How do I

Tim Costello:

properly put that into a virtual basket? Right? And how do I

Tim Costello:

assign that virtual basket to someone I know and who's going

Tim Costello:

to pay for it. So in some of the smaller stores I'm working on

Tim Costello:

there's a turnstile that lets you in the store. Right, and you

Tim Costello:

scan your QR code, the door is open. We know who you are. We're

Tim Costello:

tracking you with cameras and sensors. And then they're doing

Tim Costello:

3D modeling to know where your arm is up and down from the

Tim Costello:

shelves. And then the shelves are scaled so that it knows what

Tim Costello:

you pick up. It puts that in your virtual basket. When you're

Tim Costello:

done shopping, you go to the turnstile, you walk out, it

Tim Costello:

opens within eight or 10 seconds, you get a receipt. What

Tim Costello:

if I change my mind, I pick something up and I look at it I

Tim Costello:

decided I want and I put it back. You can put it down

Tim Costello:

anywhere in the store. Why? Because of the scale of shelve.

Tim Costello:

It knows what was in your basket, how much it weighed.

Tim Costello:

When you pull that out of your physical basket and place it on

Tim Costello:

a shelf somewhere in the store. Couple of things happen. One,

Tim Costello:

the store manager app gets a notification that has a

Tim Costello:

misplaced item. And at Walmart that might be like the Keystone

Tim Costello:

Cops running around trying to put the store back together,

Tim Costello:

right? But it doesn't sit there long because you know it's there

Tim Costello:

and you got to clear the alarm.

Tim Costello:

The second thing is it knows what it weighs. So unless they

Tim Costello:

put it on the floor, right which doesn't have a scale; as long as

Tim Costello:

they put it on a shelf that scaled, it knows where it goes.

Tim Costello:

Now there is some technology a little bit in its early

Tim Costello:

advancement, where we don't need any scaled shelves, and we can

Tim Costello:

detect and see items with all these cameras takes a tremendous

Tim Costello:

amount of computing power, as you might imagine, and that's

Tim Costello:

being developed. But we're deploying it here and there to

Tim Costello:

try it out and check it right. The whole idea is have your

Tim Costello:

customers walk in, tell you who they are, shop, whatever they

Tim Costello:

want, and then leave, and then you get a receipt. So obviously,

Tim Costello:

for the folks who are listening to this podcast, they have seen

Tim Costello:

the Amazon Go commercials way they call it just walk out

Tim Costello:

technology. Yes. Zooming that says what you're referring to,

Tim Costello:

that is part of the technology. Correct. I visited that store in

Tim Costello:

Bellevue, Washington in the Factoria square. And I spent

Tim Costello:

four hours in that store one afternoon to check out all the

Tim Costello:

technology, I wanted to know everything that was going on, I

Tim Costello:

talked to the associates, how do they stock the service counters

Tim Costello:

is the cool technology because they're slicing meat and all

Tim Costello:

that cheese and stuff. And then when they had right before they

Tim Costello:

hand it to you, they scan it with a barcode scanner, because

Tim Costello:

it's got just the typical label, then they hand it to the

Tim Costello:

customer and the systems pick up who that customer is right. And

Tim Costello:

then they go about their business. Now they've got two

Tim Costello:

types of customers in that store, which is really cool.

Tim Costello:

They have a traditional shopper, and then they have a just walk

Tim Costello:

out shopper. So if you want to traditionally shop, all the

Tim Costello:

events that you're creating in that store by lifting items, and

Tim Costello:

all that kind of stuff are tracked but not attributed to a

Tim Costello:

basket. Right when you get to the cashier, you do the normal

Tim Costello:

cashier thing, they bag it up and out you go. But if you're a

Tim Costello:

just walk out customer, you do all your picking and grabbing,

Tim Costello:

and then you get to the front of the store. And there's a

Tim Costello:

turnstile. You scan your QR code or palm or whatever you've got.

Tim Costello:

And then it opens and it starts generating your receipt. Now,

Tim Costello:

Amazon does have humans in the loop. So nothing's leaving the

Tim Costello:

store, they're going to make sure the the because it's so

Tim Costello:

technology technologically beginning that they're trying to

Tim Costello:

make sure the receipt is accurate, because an accurate

Tim Costello:

receipt is the ultimate gift to the customer. Right and to you.

Tim Costello:

So they've got humans in the loop. So you might not get your

Tim Costello:

receipt for two or three hours. But when you get it, hopefully

Tim Costello:

it's correct.

Mike Graen:

Well, I've done that in the Seattle store. And I was

Mike Graen:

a little bit surprised when I walked out. It probably took not

Mike Graen:

two hours, it probably took 45 minutes before I finally got a

Mike Graen:

receipt and an actual debit from my account. I was like, Well, I

Mike Graen:

wonder what it took so long. I should have done it right away.

Mike Graen:

found out later they were doing an audit process to make sure

Mike Graen:

that that was in fact correct. Because I don't I'm assuming the

Mike Graen:

world's worst thing is somebody who didn't buy something and

Mike Graen:

gets charged for it. And then the PR that goes with that.

Mike Graen:

Right?

Tim Costello:

It gets charged for three of them.

Mike Graen:

Yeah, good point. Good point. Yeah. So where do

Mike Graen:

you where do you see this going? So clearly seamless technology,

Mike Graen:

because the front end is probably the number one. I mean,

Mike Graen:

well, it's probably a lot of things, dirty parking, lots

Mike Graen:

dirty bathrooms, you know, product that's out of stock. But

Mike Graen:

I hear more than people anything waiting in line to check out

Mike Graen:

either self checkout today, or main checkout is the most

Mike Graen:

frustration. Your technology sounds like it's game changing.

Mike Graen:

Why isn't it everywhere?

Tim Costello:

It's expensive. Right? It's not cheap, per

Tim Costello:

square foot. Right?The most of the stores we're doing are sub

Tim Costello:

1500 square feet. Because they're sort of the bleeding

Tim Costello:

edge. They're the early adopters. We're working all the

Tim Costello:

bugs out there and all the features and trying to make it

Tim Costello:

work seamlessly because frictionless can't create more

Tim Costello:

friction, correct and called the enemy called frictionless,

Tim Costello:

right? So you got to take care of the customer.

Tim Costello:

To do something like a Walmart store, it'll have to be an over

Tim Costello:

ceiling retrofit more than every scale on the shelf type of

Tim Costello:

thing. Correct, because it would be so tremendously expensive.

Tim Costello:

And then you get to items clothing, right clothing hangs

Tim Costello:

on a hanger. Now you got to have some kind of scaled hanger RFID

Tim Costello:

helps there a lot, right. Do you segment up your store? Do you

Tim Costello:

divide it into chunks and make people checkout three times?

Tim Costello:

Again, that's not frictionless. So all of us are trying to

Tim Costello:

figure out exactly how that does. Now, us t is a systems

Tim Costello:

integrator. Okay, so we bring all the different hardware

Tim Costello:

together. And we write the back end to make it all sing. Right.

Tim Costello:

So that's our function, we build it and we make it work

Tim Costello:

altogether, right? And so, so it's an expense type of thing.

Tim Costello:

You remember when you're in my store Naira and putting the ESL

Tim Costello:

is in? Yeah, it was a huge expense, just to put the

Tim Costello:

electronic shelf labels all around a neighborhood market.

Tim Costello:

Right. And I don't know if they're even still there,

Tim Costello:

because I've been gone from that store for three years. But you

Tim Costello:

know, don't know.

Mike Graen:

Well, I can tell you, I can tell you, I think

Mike Graen:

there was a brief pause but I think if you would go to the

Mike Graen:

store 4108 in Elm Springs, Arkansas, the new Walmart kind

Mike Graen:

of future store, which includes a lot of things, which is right,

Mike Graen:

you're gonna see electronic shelf labels in that entire

Mike Graen:

Supercenter. So I think they're, they're coming back to that

Mike Graen:

because it makes sense. It just eliminates one more task for

Mike Graen:

associate to do a bunch of price changes and things like that.

Tim Costello:

Nobody, nobody liked doing price change.

Mike Graen:

Nobody liked changes. So let me ask you a

Mike Graen:

question. Let's talk about USD a little bit. I wasn't one

Mike Graen:

planning on going here. But I think you open up the door for

Mike Graen:

something because I'm a firm believer, if you're going to be

Mike Graen:

in retail these days, especially in a brick and mortar

Mike Graen:

environment, you have to know two things: you have to know

Mike Graen:

what you have. And you need to know where it's located all the

Mike Graen:

time? Do you really want to participate that level?

Mike Graen:

Unfortunately, as we talk to many different technology

Mike Graen:

suppliers, somebody goes, well, I've got the answer. It's RFID.

Mike Graen:

Not for everything. It's not. I've got the answer. It's a

Mike Graen:

robot with a scanner. Not for everybody. It's not, I've got

Mike Graen:

the opportunity, which is a fixed camera over you know,

Mike Graen:

dairy, not for everybody. It's not, oh, I've got an up me

Mike Graen:

algorithms. There's all these other things. So what is the

Mike Graen:

future? And that will you and I didn't talk about this question

Mike Graen:

before, but the future is multiple sensors based upon the

Mike Graen:

category type, which allow you to know what you have and where

Mike Graen:

it's located for both on shelf availability purposes, but also

Mike Graen:

from a seamless checkout. If I've taken one, you can tie it

Mike Graen:

to me. I think that's possible. I don't think it's possible

Mike Graen:

tomorrow. But I think it's possible to figure out how that

Mike Graen:

seamless checkout experience you does us t play a role to

Mike Graen:

integrate that kind of stuff together.

Tim Costello:

We do. I was just on a conference call the other

Tim Costello:

day with a company who I won't mention yet. But they have

Tim Costello:

something that goes on a shelf that will tell you your instock

Tim Costello:

level. So it's measuring the can a can of vegetables only weighs

Tim Costello:

so much, right? If you've got an average, and then you've got a

Tim Costello:

bunch of these on the shelf sitting on that particular mat.

Tim Costello:

Now it tells you you have 12 of that thing.

Mike Graen:

Excellent. Because usually it's either binary, it's

Mike Graen:

either I have it or I don't have it, which is helpful. But it's

Mike Graen:

not real helpful. Because by the time you know, you don't have

Mike Graen:

it, you've got an out of stock, right?

Tim Costello:

That's correct, okay, or somebody else, put

Tim Costello:

something on that mat in the wrong spot, you should get an

Tim Costello:

alert, hey, this thing weighs 79 grams instead of 65 grams, right

Tim Costello:

might be the wrong product, you could run around the store and

Tim Costello:

fix those type errors. But on shelf availability, is the

Tim Costello:

number one focus for many retailers worldwide that I

Tim Costello:

visit, no matter what the technology is, no matter what it

Tim Costello:

is on shelf availability, is it in fact, we talked to one, and

Tim Costello:

they said if they could simply get on the shelf, what they've

Tim Costello:

got through distribution, you know, and get it to the store

Tim Costello:

and get it on the shelf. Their sales, top line revenue would

Tim Costello:

increase five points. Into the size this retailer that is

Tim Costello:

billions of dollars.

Mike Graen:

Wow. That's huge.

Tim Costello:

So I mean, Walmart's the same right? When I

Tim Costello:

was at Walmart, if if I go visit this Walmart over here in

Tim Costello:

Georgia, where I'm sitting and I say where I'm at, right, but But

Tim Costello:

I can tell you, I can walk around that store. If you give

Tim Costello:

me about eight weeks in that store, I'll increase the sales

Tim Costello:

in that store three points, just by getting in stock. And you

Tim Costello:

know, sometimes it's just zeroing out something that you

Tim Costello:

think you have that you don't have. Revenue matters.

Mike Graen:

What's interesting, Tim, is that's what this podcast

Mike Graen:

is all about. The only thing that we want to talk about is

Mike Graen:

this concept of on shelf availability. And first off,

Mike Graen:

it's not something that you can measure very easily because the

Mike Graen:

way you measure on shelf availability, for a high volume

Mike Graen:

thing may be an algorithm like Oska. For apparel, that doesn't

Mike Graen:

work, because I may sell one pair of jeans every two weeks, I

Mike Graen:

can't tell if it's not on shelf. And frankly, they all look like

Mike Graen:

the same size and color combination. So I think it's

Mike Graen:

going to be multiple different sensors, algorithms, fixed

Mike Graen:

cameras, robotic cameras, RFID, all working together. But

Mike Graen:

somebody's got to figure out how to put all that together to

Mike Graen:

really say what do I have and where is it located? Because to

Mike Graen:

your point on shelf availability is not an option anymore for

Mike Graen:

customers, because here's the deal. If I go to a Walmart and

Mike Graen:

they don't have it, I'm pulling out my phone, I'm using Walmart

Mike Graen:

Wi Fi to order it from Amazon. Congratulations: you just had me

Mike Graen:

switch over to Amazon, and then you would make it worse as you

Mike Graen:

used your Wi Fi to order it from him. Right, which is really

Mike Graen:

good.

Tim Costello:

It is is a double edged sword, you know, for the

Tim Costello:

customer, so you gotta be installed. That's what everybody

Tim Costello:

is talking about worldwide all the time. That's right.

Mike Graen:

Well, this has been fascinating. Tim, here's the one

Mike Graen:

final question for you. What have I not asked that I should

Mike Graen:

have what's burning in your mind that the boy, I sure wish he

Mike Graen:

would have asked this question because I think that would be

Mike Graen:

really helpful to hear. What do you think the future looks like?

Tim Costello:

So no matter what we do, and I was actually on

Tim Costello:

LinkedIn reading a couple of Sam Walton letters that somebody had

Tim Costello:

posted up that he wrote in 1980, about taking care of the

Tim Costello:

associates, right, who take care of your customers, he never said

Tim Costello:

a bad word. But he said, our associates make the difference.

Tim Costello:

And that's an associate anywhere, right? If you're in

Tim Costello:

retail, and you're an associate, you are the frontline soldier

Tim Costello:

with that with that customer.

Tim Costello:

As a store manager and a leader, the only thing that I would love

Tim Costello:

to tell other store managers and leaders is how to empower your

Tim Costello:

people. And Walmart gives you a number of these right? Number

Tim Costello:

one is a tool, right? We call it a TC 70. We call it a RFID

Tim Costello:

scanner, whatever. And then along with that tool, you have a

Tim Costello:

process, right? So now I got a tool, I got a process to use

Tim Costello:

that tool could be a number of processes. And then you give

Tim Costello:

that associate a strategic vision of why that process is

Tim Costello:

used with that tool and what the ultimate goal is, all of a

Tim Costello:

sudden, now, they are empowered to make decisions that you don't

Tim Costello:

have to make, they are empowered to take care of your customer.

Tim Costello:

So all you need to do as a store manager after a couple of years,

Tim Costello:

once everybody's perfect in your store, which never happens, is

Tim Costello:

kiss babies and shake hands. That's the ultimate goal, the

Tim Costello:

store manager is to have nothing to do. Because the associates

Tim Costello:

are that awesome. So brick and mortar is not going away. Retail

Tim Costello:

associates are not going away. Stocking associates,

Tim Costello:

distribution associates, they're not going away.

Mike Graen:

Tremendous. And let me just throw out one more

Mike Graen:

compliment to you because you and I worked together at one of

Mike Graen:

your the Neighborhood Market store when we were doing

Mike Graen:

electronic shelf label process. I specifically heard you more

Mike Graen:

than more than a number of times: teach, coach, ask

Mike Graen:

questions. And one of the things you always asked is "What does

Mike Graen:

help look like?" "How can I help you?" "What can I do for you?"

Mike Graen:

And little did I know that two minutes later, you're driving

Mike Graen:

around in a floor cleaner. Now why is the store manager

Mike Graen:

cleaning the floor? That's somebody else's job? No, you

Mike Graen:

decided that was one thing that you could do. And somebody said

Mike Graen:

that could look like help. You're driving around the floor

Mike Graen:

cleaner. So you embodied servant leadership, when you ran stores,

Mike Graen:

you ran really, really good stores. They were every time I

Mike Graen:

was at the home office, they said yeah, to go over check out

Mike Graen:

Tim's store because he's really on it. He knows exactly what's

Mike Graen:

going on.

Mike Graen:

Is it and I'm not telling you that just because we're on the

Mike Graen:

podcast, but you were always very well thought of in the home

Mike Graen:

office. You know, if you want to go to a store and really figure

Mike Graen:

out what's going on, go to Tim store. And it was if you didn't

Mike Graen:

have the biggest store the biggest volume and the most

Mike Graen:

number of customers or center but you had a store that people

Mike Graen:

trusted you are running the process and treating your people

Mike Graen:

with respect and kindness. And I think that's what really

Mike Graen:

matters. So, Tim, I appreciate your time so much. We'd love to

Mike Graen:

have you back on a future podcast because the future of

Mike Graen:

technology to your point is going to be how do you make that

Mike Graen:

more of a seamless experience? How do you make sure that all

Mike Graen:

the products that the customer wants when they come in are

Mike Graen:

there and available for them so you don't disappoint them and I

Mike Graen:

think you're spot on with the work you're doing at UST.

Tim Costello:

It's a lot of fun, a lot of fun and the reason I

Tim Costello:

work at UST because it's bleeding edge.

Mike Graen:

Awesome. Well, thank you very much safe travels my

Mike Graen:

friend and I appreciate all your time.

Tim Costello:

Thank you, Mike. Always a pleasure.

Mike Graen:

We'll see you later. Bye bye

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