An Interview With Martita Mestey
Authentic — Does the customer identify your product as more ‘real’ than their other options?
As part of our series about the future of retail, I had the pleasure of interviewing Al Sambar.
XRC Labs is a NYC-based venture fund and startup accelerator, focused on retail technology and consumer goods, with partners including Mastercard, The Estée Lauder Companies, The TJX Companies, GS1 and others. As XRC Labs General Partner, Al Sambar leads their Opportunity fund, an early stage fund investing in disruptive tech and retail capability startups. He also works with XRC’s Brand Capital Fund which invests in fast growing consumer brands. Prior to XRC, Al spent 15 years as an early stage venture investor and 25 years as a Retail & Digital Strategy Consultant and Practice Manager at Kurt Salmon Associates and Accenture Strategy.
Thank you so much for joining us in this interview series! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what brought you to this specific career path?
I spent 25 years in management consulting, delivering business and operational strategy to Fortune 1000 companies in the consumer goods and retail industries. I also led consulting practices at both Kurt Salmon and Accenture Strategy. Beyond my experience consulting to the retail and consumer industry, I have been an active early stage investor, founder and advisor for 15 years; including investing first capital in over 40 startups, starting accelerators (like XRC Labs) and running early stage micro funds.
Can you share the most interesting story that happened to you since you started your career?
Hah, my career seems like a long string of ‘interesting events.’ The folks running the firm I worked for as a newbie probably saw one or two industry-changing shifts in their careers. For me, two years after I started, the internet happened, then mobile, then machine learning and artificial intelligence (AI). Now we have virtual reality (VR), augmented reality (AR), crypto, robotics… and the list goes on. The retail and consumer sector has simply been an ever-faster and more fascinating space to work in. Just thrilling.
Are you working on any new exciting projects now? How do you think that might help people?
Our venture fund invests in disruptive early stage companies, so we can take some great risk on companies which may take a few years to work out. This means it’s important to bet on things that would really make a difference. We especially see great opportunities in two areas: sustainability and consumerized healthcare.
Regarding sustainability, we are simply living in amazing times with a real need to rethink how we make and package everything we consume. For us, that means investing in food production alternatives, packaging and distribution. You can see our portfolio startups changing how food is made. Proper Good makes healthy food with a fashion-esque, rapid innovation model, bringing new meal flavors to market in weeks instead of years. But shifting to sustainable living will also mean shifting away from traditional disposable commerce. That’s why you’ll see alternative commerce startups in our portfolio like Recurate helping brands support peer-to-peer recommerce, Joymode helping you rent instead of own and SAVR making the world of open box/refurb available to everyone.
Regarding healthcare, for most of us in the U.S., this is a broken mess. But technology is on the precipice of fundamentally allowing consumers to solve health issues that in the past would have required endless visits to clinics and perpetual treatments. So we like to invest where we see this changing quickly. This includes provider solutions like rapid low-cost whole genome sequencing (Sequencing), platforms to enable better tele-health care (MD Integrations) and tools like the reinvention of the stethoscope.
None of us are able to achieve success without some help along the way. Is there a particular person to whom you are grateful, who helped get you to where you are? Can you share a story?
Of course, I am the product of my family. My parents were school teachers who put heavy value on study and intellectual discourse. They came from incredibly diverse backgrounds and points of view: one an immigrant from the middle east, the other a midwestern farmgirl. But every night at the dinner table was a debate over a topic from school or current events. It instilled in me a great appreciation for thoughtfully looking at things from different points of view.
How have you used your success to bring goodness to the world?
I certainly try. I have two passions these days, and both involve helping individual people. As an early stage venture capitalist, my first obligation is to support great founders. We have an extraordinary investment record of doing this without regard for gender, skin color, school alumni, or other inherent biases in the VC world. That is important to me and my fellow XRC partners to bet on great founders doing worthy things, then help them achieve success.
Outside of the venture world, I also love the arts. I try to fund 5–6 emerging artists from around the world each year and provide them with residencies in my glass art studio in California (Monterey GlassWorks), so they can grow their careers and gallery representation. This year we have artists from as far away as New Zealand and Poland, as well as local young artists who are emerging to their first juried shows and gallery representatives.
The Pandemic has changed many aspects of all of our lives. One of them is the fact that so many of us have gotten used to shopping almost exclusively online. Can you share a few examples of different ideas that large retail outlets are implementing to adapt to the new realities created by the Pandemic?
I don’t really want to talk about retailers adapting to the Pandemic; it’s too boring at this point. We’ve all done click and collect and web shopping till we’re sick of it. I want to look at retail post-pandemic. Customers are desperate to get out and about again, and I think we will see some great improvements in retail from those pre-pandemic days.
I think you will see three things accelerate post-pandemic:
- Legacy retailers spending to bring in-store digital and interactive experiences (e.g. Walmart investing in interactive stores). Simply put, stores today do not have enough screens and interactive tech to enable a true omni-channel experience. Pre-pandemic retail was a slightly modified version of 1990’s retail and needs a big injection of tech to support interaction.
- Digitally native brands increasingly opening up retail stores and channels. This is happening both because the large retailers now have media services that can help them grow, as well as in response to the runaway Customer Acquisition Costs (CAC) happening in digital at the moment. I also think the large commerce platform players like Shopify will help more brands sell across many, many channels including physical retail.
- Completely new retail concepts. I ran into PingPod the other day in NYC, which is a ping pong sports club, and of course I’ve followed 100 Thieves for years, which is an esports team and collectable apparel brand. These are examples of such fun retail concepts. Just a few years ago, who would have thought you would see these interacting with your favorite brand through Discord and Twitch? It’s easy to imagine a future where customers qualify for a local in-person retail experience by winning enough games in VR. Trans-channel retail is going to emerge from the bleeding edge to mainstream over the next 3–5 years simply because we all crave more and better human interaction from retail.
The supply chain crisis is another outgrowth of the pandemic. Can you share a few examples of what retailers are doing to pivot because of the bottlenecks caused by the supply chain crisis?
Short term, there was a lot of rapid reaction — for example, finding new ports, sourcing alternatives, even swapping product. But long term, this means folks will finally make serious commitments to more near and onshore sourcing. This can result in short term, inflation-driving costs, but long term it is both better for the environment and ultimately for the consumer if we reinvest in nearshore, on-demand manufacturing vs. historic shopping for the absolute lowest cost labor environment.
How do you think we should reimagine our supply chain to prevent this from happening again in the future?
Alluding to my previous answer, we have multiple portfolio companies that help manufacture in-market and on-demand using modern manufacturing techniques. But beyond that, there’s been a huge surge in circularity — the planful design in sourcing, selling, and use through end-of-life so goods don’t create waste. Supply chain issues didn’t create this circularity surge but made it so much more economically considerable.
In your opinion, will retail stores or malls continue to exist? How would you articulate the role of physical retail spaces at a time when online commerce platforms like Amazon Prime or Instacart can deliver the same day or the next day?
YES! I’m a huge fan of malls. Sounds odd coming from a guy who has investments in so many digital and streaming platforms, but experiential retail will never go away. Horrible class C malls will. Instead, Class A spaces near great transit hubs or mixed-use residential are fantastic places to provide experiential retail. BUT, all of that makes for a horrible place to go pick up your on-the-go commodity stuff. So both online and offline will prosper, divided along these lines of convenience vs. experiential.
The so-called “Retail Apocalypse” has been going on for about a decade. While many retailers are struggling, some retailers, like Lululemon, Kroger, and Costco are quite profitable. Can you share a few lessons that other retailers can learn from the success of profitable retailers?
It isn’t really rocket science. All three of those retailers mentioned are purpose-driven retailers. The customer understands that purpose and each retailer focuses hard on delivering against their unique purpose on every channel the customer uses to live their lives. The retailers failing because of the “Retail Apocalypse” are those that found themselves unable to explain to their customers how they fulfill their purpose better than competitors. Seriously, Radio Shack died, because it couldn’t serve its purpose as well as a dozen other competitors. This will always be true — evolve or dissolve.
Amazon is going to exert pressure on all of retail for the foreseeable future. New Direct-To-Consumer companies based in China are emerging that offer prices that are much cheaper than US and European brands. What would you advise to retail companies and e-commerce companies, for them to be successful in the face of such strong competition?
The Greater China Sellers (GCS) are massive on reseller marketplaces like Amazon and ebay, and it sure doesn’t seem like those platforms have interest to clean them up or demand transparency for their customers. So, waiting for someone else’s marketplace to solve this is pretty useless.
Next, the real antidote for brands is authenticity, authenticity, authenticity. There are so many direct channels available to merchants today where they can have real, direct conversations with their customers. Brands today don’t have to depend on retailers that intermingle them with generic knockoff brands. For those commodity sellers that do need to be on the marketplaces, it makes it even more important to master modern digital and social strategy. AI and platform tools like Shopify and their app ecosystem make these authenticity tactics available to modern brands, but for most, the gap is a talent one. So many new tricks to learn… so little time!
Based on your experience and success, what are the five most important things one should know in order to create a fantastic retail experience that keeps bringing customers back for more? Please share a story or an example for each.
In my previous days as a strategy consultant, our M&A group used a research process to predict how likely consumers were to purchase in the future. We researched 22 different factors in order to find a better predictor than Net Promoter Score (NPS). A terrific tool really, it consistently outperformed NPS in predicting consumer future spending. Very useful for M&A valuation work.
What I remember most though was that out of all of those 22 factors, we were able to get superior correlation consistently based on three simple consumer perception questions.
- Purpose — Can/does your product/service serve a purpose which the customer identifies as very important in their life?
- Authentic — Does the customer identify your product as more ‘real’ than their other options?
- Tribal — Does your customer feel like they are joining a group of like minded individuals when they use your product?
Optimizing against these three levers consistently produced the greatest increases in future consumer spending, but suspiciously missing are convenience and value. Those two only come into play when there are multiple competitors equally performing against my three points above. So, pretty simple takeaway to remember; brands that are purposeful, authentic and tribal will have better pricing power, margin and growth potential.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
TrueCost VAT — Climate change is the epic problem of our time and one for which I believe future generations will curse us for our inaction. We suffer from a version of the Tragedy of the Commons where there is simply no cost associated with destructive behavior to our planet. I don’t see this solved until the purchase goods and services cost accurately reflects the true cost to not just create the product but also return it back to a biodegraded state. For example, single use plastics would be unaffordable because the TrueCost VAT to store it for eternity in a landfill would be uneconomic.
How can our readers further follow your work?
Readers can connect with me on LinkedIn here, and you can learn more about and follow XRC Labs at www.xrclabs.com.
This was very inspiring. Thank you so much for joining us!
Al Sambar Of XRC Labs On The Supply Chain and The Future Of Retail was originally published in Authority Magazine on Medium, where people are continuing the conversation by highlighting and responding to this story.