“Shopping habits have changed in the last two years”: A Q&A with the co-founder of Aisle 24, Toronto’s new cashierless convenience stores
When John Douang launched Aisle 24 more than five years ago, he had no idea how much his concept—contact free, cashierless convenience stores—would be suited to our current era. Falling somewhere between a Loblaws and a 7-11, his locations (there are currently nine in Toronto with six more under construction) use digital technology and data to upend the traditional retail model. Which may sound a bit like Big Brother is watching, but Douang says it’s a way to enhance customer experience, and it’s also the way of the future. Here, he tells Toronto Life about how his stores work, what happens to your personal info and whether traditional grocers need to watch their backs.
Cashier-free convenience stores sound like a very Covid-friendly idea. Is this something you came up with because of the pandemic?
Oh, no. I got into this business about six years ago, but the idea goes back even further than that. When I was growing up, my parents owned a little convenience store called NorthWest Convenience at Eglinton and Dufferin. They ran it for around 12 years. I watched them work so hard, 14 hours a day, seven days a week. When they wanted to take a vacation, they had to shut the store.
And I’m guessing you had a part-time job there?
Of course—I was forced to work at the store when I was younger. By the time they retired, though, I had started working in the tech and digital media field. This was when streaming was in its infancy so I worked a lot on applications and systems integrations. I was doing okay, but then I reached my 30s and I started thinking about my future and long-term goals. One day I came across an article about vending technology in Europe and how there was a lot of advancement in the field.
Right, because you can get some really great food from vending machines in other countries.
Definitely. Here, though, there’s this stigma around vending-machine food—and convenience store food in general—but it’s amazing what you can get in other parts of the world. I went home and I started discussing the article with my wife, Marie. She was home with our young son at the time, and she was able to do quite a bit of research into the viability of the business model. We started in the grocery vending business where we had these very customized vending machines at various apartments and condo buildings around the city. That was 2015. In 2016, one of the companies we were working with came to us. They said their client Centennial College wanted something unique in a new student residence that they were building. In 30 days or so, Marie and I put together a proposal for a cashier-less store. They loved it, they wrote us a cheque for $25,000 and off we went.
And what happened between then and the pandemic?
By the end of 2019, we had close to 15 locations—a mix of residential and corporate offerings at the Amex headquarters, the York Regional Police headquarters. We have various advisers and investors, including Wes Hall who is on the new season of Dragon’s Den. He was so supportive and he helped us realize that franchising the business was the best way to go. So that’s what we were focused on when Covid hit.
Is that great timing or terrible timing?
Our sales numbers were going up, but the construction of new locations was put on hold. It was a bit iffy at the beginning, but by summer 2020, things really started to accelerate. I think this was when people started to realize that the pandemic wasn’t going away and life had to go on. In terms of franchisees, we started hearing from a lot of people in the corporate world who wanted to start something new.
During Covid, the contact-free checkout is a huge value add, but will that continue post-pandemic?
From a marketing perspective, the cashier-free concept has been something to promote, but I think the real value driver here is the convenience factor. Shopping habits have changed in the last two years: people are shopping closer to home, avoiding going to the large grocery store to line up for an hour and putting themselves at risk. Will these changes in behaviour survive past the pandemic? We believe they will.
On a scale from 7-11 to Pusateri’s, where does Aisle 24 fall?
I would say we’re a hybrid of a traditional convenience store and a large grocery store. Our strategy around product offering is tailored to the demographic that we’re serving. In our student locations, we’re geared towards quick grab-and-go—things like frozen pizzas and ramen. In our stores inside condos and apartments, we offer a lot of family sized meals, home and hygiene products. We’ve also been working with local distributors who don’t necessarily get the shelf space at big grocers—Crafty Ramen and a line of vegan products called Situ.
I read a headline the other day that said “Employees are not showing up to work and employers are replacing them with robots.” Is your concept a solution to the current labour shortage?
I think it is. There’s always going to be a segment of the population that’s supportive of job creation and critical of what we’re doing. My rebuttal is that we are creating jobs, just not the ones people think of in terms of traditional retail. We still need people to stock shelves, people to work in our warehouse, drivers and a lot of employees in the software development space.
You need to download an app to enter your store. Are you concerned this cuts out a certain market segment—say, anyone over 50?
We experienced this when we first launched and we responded with an off-line method for customers who don’t have a smart phone or aren’t comfortable using a smartphone. All it takes is for a customer to reach out and we can set them up with a key fob.
How do you handle technical difficulties? Every time I use self checkout, I end up having to get a real person to help.
About 98 per cent of our supply uses barcodes, which cut down on technical mishaps. When there are issues, however, we provide support through our mobile app, which connects you to a real person via text and chat.
Do you own the data you collect?
We do. Our data is very secure and it’s tokenized, which means we don’t see the actual credit card number or personal information. For us, the data is used to enhance the experience of the customer. If we know what customers are buying, we can provide them with promotions.
And what if I don’t want you to know that I buy five boxes of Pop Tarts a week? Is there a way to opt out?
Unfortunately, no. The reason for that is that our backend system tells us what has been sold, and we look at sales velocity to determine what needs to be replenished. It is predictive and it knows that certain product categories sell more during certain seasons.
In other grocery stores the self-checkout section is manned by security. I’m wondering what’s to stop me from walking out with a box of said Pop Tarts…
This is a question we get a lot and while I can’t get into too much detail, there is some smartness around the camera and point-of-sale systems that we use. We teach it certain things to identify in the camera feed, and when it identifies those things it flags them and notifies us. For example, spill detection is something we’re working on right now.
This sounds cool, but also a bit of a nightmare if you’re someone concerned about privacy and surveillance.
We get comments like that, and the answer is our concept isn’t for everyone. I think the reality is that we’re living in the age of digital and retailers are starting to recognize the huge advantages of data to back up what they’re doing. There are people who would rather go into a store and speak with a person, but I think our stores are the way of the future.
Speaking of the future, what does it look like for Aisle 24?
In 2019, we sold off about three quarters of our portfolio to a large company. Pre-Covid we had six stores, we’re at nine now and we have about 30 stores that are in construction in Ontario, Quebec and B.C. Our focus is setting up in every province over the next year or so and then in late 2022, we’re looking to move into the US market.
Those are lofty plans. How worried should traditional grocers be?
We’re not really trying to compete directly with the large grocery format. I think our concept is very complementary to theirs. I also think that a lot of these large retailers are already exploring alternative formats. We’ve seen grocers trying to gain more footprints in urban areas where you can’t just go in and open a 50,000-square-foot store. And most of these retailers are already using self-checkout technology. We’ve just gone one step further by making our stores cashier free.
I’m curious about your most important stakeholder—your parents. They must be very proud.
My mother is so proud. To see her son in the news is a very big moment for her. Unfortunately my father passed away several years ago. His approval was something that really drove me and unfortunately he’s not here to give it.
I guess your kids won’t be working the cash register.
No, but my family has always been very business-minded. I want our kids—we have three now—to see how hard we worked to create something.