EP267 - Deep Dive into Food Commerce with Matt Newberg of HNGRY
EP267 - Deep Dive into Food Commerce with Matt Newberg of HNGRY
Matt Newberg (@thenewb) is the founder of HNGRY (hngry.tv). In this episode we deep dive into the rapidly changing digital grocery and digital restaurant industries.
Topics Covered:
- Changes in competition between grocery, QSR, and fast casual.
- Digital restaurant marketplaces (Door Dash, Uber Eats)
- Digital grocery marketplaces (Instacart)
- Ghost Kitchens (food industry version of private label)
- Delivery vs Pickup
- On Prem vs Off Prem Consumption
- Emerging digital grocery top-off market (GoPuff, Instacart, DoorDash)
- Amazon evolving grocery strategy (Amazon Fresh, Just Walk Out, Delivery)
Episode 267 of the Jason & Scot show was recorded on Tuesday June 16, 2021.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
Transcript
Jason:
[0:24] Welcome to the Jason and Scot show this is episode 267 being recorded on Tuesday June 15 20 21,
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.
Scot & Matt:
[0:40] Hey Jason and welcome back Jason Scott show listeners Jason one topic we have really wanting to do a deep dive on and is one of your favorites,
is the impact from covid on the grocery and restaurant industry so we thought we’d invite a True Food expert
Matt Newberg he is the founder of hungry hungry is a new media platform examining the impact of technology on how people eat Matt welcome to the show,
thanks so much for having me guys it’s awesome to be here.
Jason:
[1:10] Matt we are thrilled to have you nobody but you will ever get this but Clubhouse comes up all the time and I’m like I was on clubhouse back when it was cool in like.
Scot & Matt:
[1:23] That was fun I really enjoyed that and it’s definitely gone somewhere else but but yeah definitely I’ve tapered off of that a little bit.
Jason:
[1:32] I’ve uninstall that I feel like it’s totally jumped the shark but you you invited me to a food chat like early on and so I feel like a rare moment of me being an early adopter.
Scot & Matt:
[1:45] That was fun.
Jason:
[1:46] That was fun so we’re going to jump into all things food and hungry but before we do our listeners always like to get a little bit of.
Behind the scenes color on our guests so I’d love to hear a little bit about your background and how you got interested in the food industry.
Scot & Matt:
[2:06] Yeah course so my background is kind of really in the technology space I was a product manager most recently a Vimeo and.
You know I started getting really kind of curious about the food delivery space I’d say towards the end of 2018 I took a trip to India and I’ve been reading about ghost kitchens and while I was working in Tech I was making video content around food,
and it was really kind of just like Food Tours kind of like Munchies style and I.
[2:37] When I saw when I heard what Travis kalanick was doing in Allah with Cloud kitchens I decided I had to kind of merge this.
Kind of what I was doing with video content and start examining kind of the technology behind the food industry and when I reached LA and early 2019 to shoot this my I just had one of those moments where you kind of see the,
you know like the impact of technology inside of a a like food operation it was it was it wasn’t like,
walking into a q SI restaurant it was like walking into like you know Ground Zero of this like new I didn’t know what to think of it and I was just blown away by how many tablets and people screaming and shouting and they’re like,
you know 20 or 20 some odd kitchens Under One Roof and.
[3:31] You know put out a video in 2019 kind of profiling that kind of for the first time giving people a taste of what ghost kitchens were it got a great response and I kind of dropped everything and decided I was going to start writing about,
Food & Tack on a weekly basis so that started really ramping up hungry and late 2019 and then the pandemic it and,
I’ve been covering everything from you know,
dark convenience stores to ghost kitchens and virtual Brands all the way down to an alternative protein and a few other little Trends here and there like personalized nutrition which is basically wearables and,
the gut microbiome and how that’s going to basically play a role and personalizing a lot of the food that we eat over the next few decades in my view,
and it’s been a wild and crazy Journey especially,
with everything that’s happened I could have never predicted it and I think the timing of me kind of picking this as my as my beat was,
it was a great move so it’s been it’s been a lot of fun.
[4:35] Let I have a million questions just on your intro but let’s start let’s start it I’m not sure Andrew on the show tell me a little bit about the hungry business model are you doing like a sub stack kind of
direct crater direct to an audience thing or is it more of a paid video Channel or ad-supported how does that work.
Yes it started out with video which was you know it’s all been completely free and then I started adding an October I launched a pay wall paid subscription product,
for industry insiders and so that gives them access to premium content every week and also maintain a free Weekly Newsletter so the goal is to kind of build this community,
of Industry insiders and also you know create a funnel through the free newsletter so that’s kind of been the model to date.
[5:24] Are you using this abstract platformer can you say what platform oh no I’m using something called ghost which we basically customized,
charge is a pretty high commission so just basically pay for the stripe fees and,
and that goes subscription is very cheap so yeah basically rolled my own kind of version of sub stack,
and with ghosts you get to control more it’s you kind of you know they can’t just shut you down someday and less like the internet and show you down or something
yeah it’s like a modern version of WordPress and I should also say that I have a podcast as well called the feed you can check it out I’m definitely nowhere near the number of episodes as you guys but hopefully one day I’ll get there and,
we know done a few in-depth videos on you can search for them on YouTube and they’re about you know they range in length but they’re around 20-30 minutes long kind of deep dives into a particular topic.
Well the the super secret of our show is when I have three listeners and one of them is Jason’s mom so while we’re waiting on episode you may be ahead of us on Muslims.
Jason:
[6:31] We made an early decision to go quality quantity over quality.
[6:38] And I should point out the other fact you can’t say you have 30 Minute Podcast and that they’re deep Dives because we usually haven’t finished our intro in the purse.
I’ve heard that all content needs to be more brief and so Scott and I like the buck we don’t like to follow the industry Trends we like to set.
For too long yeah so there’s a bunch of things we want to jump into but side note before we do are you wearing a glucose monitor right now.
Scot & Matt:
[7:09] No I did that last summer for about a month I tried.
Two different programs one was called clear and based in the Netherlands and other ones called levels and since that since I was going into that.
Yeah there’s been a number of other startups that have popped up that are they’re all using the same freestyle Libre technology Hardware sensor which is made by Abbott,
and they’re just kind of innovating on the software layer layer above like you know,
daily logging of your meals and tracking your levels so and then you know obviously making recommendations about what you should or should not eat but it was definitely fun it was definitely like a really good learning experience and I highly recommend anyone do it,
you don’t have to be a pre-diabetic or diabetic it’s really powerful information.
Jason:
[7:59] Yeah if nothing else I super admire Abbott Labs because you think you figure about.
Only about you know forty percent of the American population has diabetes so your Tam is just not big enough if you can only sell to be with diabetes so they figured out a way to sell the glucose monitor to the whole world.
But yeah.
Scot & Matt:
[8:19] Yeah I wish I wish it was for the entire world I mean it’s pretty hard because you have to get a doctor’s note.
Jason:
[8:25] Yeah and it’s still kind of expensive for not for Off Script use right like yeah and so for listeners that probably don’t know what we’re talking about like this is this,
kind of trend I would call it an extension of the kind of self measurement thing where people are using these real-time glucose monitors that you wear,
to get like really detailed insight into how the food you eat in the timing of that impacts your.
Your blood glucose throughout the day and they can you know prescribed changes to your diet and lifestyle based on on your body chemistry.
So did you find it useful or was it a gimmick for you.
Scot & Matt:
[9:08] No definitely useful like I have some tips now like in tricks and little hacks like if I’m going to eat something that I know is in a spike my blood sugar I’ll take a little bit of apple cider vinegar,
to kind of flatten this bike if I do happen to eat something that makes me feel a little sluggish I definitely like walking for about 10 or 15 minutes is a good,
Goodwin and then like the order in which you eat foods like always eat your fiber before your carbs so if I’m going to eat pizza I always gotta order a salad,
or even better but the salad on the pizza if you’re into that sort of thing so,
and levels makes it really fun they give you all these little mini hacks that you can do and you can kind of see whether they work for you or not and that’s kind of the whole idea it’s highly personalized so what my what might work for me,
isn’t necessarily going to work for you because we you know you and I we might share you know something like 98 to 99 percent of the same DNA but we,
we only share a very small percentage of the same gut microbes so that’s kind of where the the Magics secret sauce I guess lies.
Jason:
[10:14] Yeah yeah I think I’ve talked to several people who did some variation of that program in most say that they were like somewhat surprised that they had like a preconceived notion,
that there were certain foods that would like really Spike their blood sugar or wouldn’t.
That right sometimes the test were validating but often they learned that their body responded a little differently than they expect.
Scot & Matt:
[10:38] Yeah like I went to town you know I started eating everything under the sun and the first week.
Jason:
[10:43] Well in the name of science.
Scot & Matt:
[10:44] Yeah exactly and like honestly eating the cheeseburger wasn’t bad it was the it was like the Coca-Cola I had with it or.
You know having it’s all about the ratio of like fats to carbs and if that’s if that ever gets to be you know certain that gets out of whack then you’re going to have a spike.
Jason:
[11:05] That’s why I just go pure carbs.
Scot & Matt:
[11:07] Did you try a venti Starbucks vanilla latte boy Jason you know you can guess what that would have done.
Jason:
[11:16] Oh my God like yeah I’d be yeah we don’t need to go there so let’s pivot to be to be food.
And that one of the things that I admire about you is you you take your journalism seriously,
so if I’m remembering right one of the first conversations I had with you you casually mention that you posed as a Amazon Fresh delivery driver so that you could sneak,
Amazon Fresh store that that was at the time a dark store in LA.
Scot & Matt:
[11:49] Thank you that yes that is correct.
Jason:
[11:55] So the so that’s kind of how I discovered you I am a paid subscriber to the newsletter I’ve been following you ever since in Scotland I’ve been wanting to talk about a bunch of these kind of macro food trends,
and so I thought you would just be a great person to have a perspective on those so if you’ll indulge me for like a 30-second setup.
The biggest thing I talked about with clients in terms of this macro trend is,
what I call the the breaking down on the swim lanes and by that what I mean is in the pre-pandemic world.
There were certain occasions where the American family was going to buy their calories at a grocery store and make their own meal for at-home consumption,
and there would be other occasions when they were going to stop at a q Sr like McDonald’s and very likely consume those calories in the car on the way home,
and there would be other occasions when they were gonna stop at a fast casual restaurant and have a Applebee’s sit-down dinner and.
Applebee’s competed with the other fast-casual restaurants McDonald’s competed with the other cure SARS and hi v– or Albertsons competed with the other grocery stores.
[13:09] They really didn’t they each had a share of the American stomach and they didn’t really necessarily compete hard with each other and in my mind one of the things that happened,
either coincidentally or because of the pandemic is,
they have all moved in each other space and by that what I mean is you can now have you know ready to eat meals delivered from Whole Foods and then an hour,
um
you can’t you know obviously you can get all those those meals delivered for at-home consumption which is mostly how a restaurant meals got consumed in the last year,
but you can also use your Mobile Order ahead Applebee’s have your meal waiting for you,
walk into the restaurant have the food already served pay at a touchscreen and walk out and kind of have it faster turnaround and Applebee’s as you would have in a McDonald’s.
And oh by the way McDonald’s we’ll do it our groceries with your.
Right so so I kind of feel like all those those swim lanes are off and everyone is competing for every calorie now does like am I seeing that right is that.
Scot & Matt:
[14:14] Absolutely I think it’s you know Grocers becoming rest you know they the term grocer Aunt became a thing and then you had restaurants becoming Grocers like your local,
you know,
Neighborhood Restaurant was using their you know us foods are what are you know their supplier to basically instead of like trying that into prepared food they would just sell those raw ingredients at the onset of the pandemic.
Yeah so much so much happening but the job to be done remained the same you know feed me a certain level of quality and nutrition and convenience.
Jason:
[14:52] I loved restaurant by the way I hadn’t heard that so I’ll be using that now although your Porter every time I.
Scot & Matt:
[14:58] I’ve stolen the calorie swimlane so we’re even now.
Jason:
[15:02] Okay awesome so one thing that just super timely it’s Scott.
Knows all too well US Department of Commerce publish all this retail sales data every month and I geek out on it and it published this morning,
and one of the things I always like to look at that I think has been fascinating is,
one of the categories in the US Department of Commerce data is food and beverage retailers and another category is restaurants like the US Department of Commerce.
Definition of retail includes restaurant,
and so I went back in history and looked at like what’s oh cool what’s the breakdown in dollars people spent it restaurants versus food and beverage stores and for most of the last decade it was kind of.
[15:53] The pandemic hits and it went 70/30 which by the way surprises people people expected like oh restaurants lost even more.
Because of home delivery of restaurants rest you know and of course the Qs are staying with drive-through,
it was like 7030 and and then it kind of leveled off to maybe like 60/40 5545 and I’ve been curious to see if it’s gonna.
Ball all the way back to 50/50 if there’s if there’s going to be a flip and in this month data so it’s middle of June so the Mets data just came out,
and the the restaurant Trade Organization is publishing a version of the data this morning that shows that like restaurants surpassed.
Grocery stores for the first time and you know since people are the pandemic.
And side note they kind of.
Jigger the data they’re not comparing restaurants to grocery stores they’re comparing restaurants and bars too.
Scot & Matt:
[17:00] Yeah right there.
Jason:
[17:01] Grocery stores and grocery stores are a subset of the.
Food and beverage retail so like I would argue it ought to be food and beverage retail against restaurant and Grocery and in that case the Gap has narrowed but restaurants are still losing but the restaurant industry of course wants to take the most positive spin so he,
you followed that at all and you have a hypothesis or a prediction about like with the with the post pandemic ratio looks like.
Scot & Matt:
[17:29] Totally yeah so it’s D I was looking at that data today and I saw Jonathan maze from restaurant,
from that restaurant publication published this and I Dig Dug in and I saw that five billion dollar Gap and I was like you’re adding in the bars and like subtracting the liquor stores,
so that’s a five billion dollar Gap.
You know in the grand scheme of things yeah you could basically say it’s 50/50 now and I would expect that kind of as you know vaccinations are increase and you know the weather gets warmer and that sort of thing,
you know historically food at home I think you know pretty much.
Eclipse food away from home up until you know it started getting really neck-and-neck I think around like.
You know 2019 as the economy was really booming you know I think it’s generally a sign of wealth and developed countries is you know a strong strong restaurant,
consumption and our consumption so longer-term you know what where does this where does this all go I.
[18:37] I think it goes to grocery to be honest with you I I think these things are the same blips that we saw in covid or kind of going to happen in a you know as re-openings happened this summer and so.
[18:51] I think longer term you know like the seismic shift of these things like yeah they can they can change on a dime but like the longer term sustainable Trend I think is food at home,
and what that looks like it’s just going to change it’s not going to be it’s going to be more meal solution driven things as we as you mentioned.
You know where you’re getting you know maybe a famous chef has created a frozen type of product or,
fresh prepared product or maybe there’s even a ghost kitchen inside of a Walmart you know and so then how do these things get counted but clearly anything get sold through these retail channels is going to get counted as food at home and like technically
if I’m consuming if I’m consuming restaurant delivery today that’s being counted as food away from home right even though I’m consuming it at home,
right and deliveries you know something like close to 10% of of the that entire and you know sector so.
You know I do think over time as these like quick Commerce players and we’ll talk about those you know enter the market they’re going to be doing more and more restaurant style meals,
and and that will because it works because the unit economics are better in that scenario I think it’s just gonna.
Still some share away from the unsustainable Marketplace restaurant delivery model.
[20:10] When you when you entered the what got you into hungry you talked about Travis’s new start up maybe and I’m kind of the the new but I feel like you guys are at a 400 level and I’m still at 101,
but you know so maybe explain what it is he’s the Uber founder explain what it is he’s building and kind of
what you know about it and then you know how prevalent are these ghosts and I always get confused because some people say ghost and darkest that the same thing or is there some difference
yeah it’s all the same ones just slightly friendlier I don’t know which ones from your honesty but.
Jason:
[20:45] Dark Knight versus Casper.
Scot & Matt:
[20:46] Ghost makes me think the Snapchat so yeah goes kitchen so you know,
I think this you know you’re seeing these Trends play out in both Grocery and restaurants which is like startups that are basically owning more and more of the value chain so.
Cloud kitchens is really at its core real estate company there’s a real estate side to it where they’re actually going into you know they’re buying up distressed properties that are located in these zip codes where there’s High,
yeah demand for delivery food and you know they do a lot of research into what those demographics are in advance they buy that building at that they basically lease it to you know called 20 or 30.
Restaurants you know or food entrepreneurs that want to do delivery they set them up with a tablet that lists them on every single major,
delivery Marketplace they also you know can license some of their own in-house Brands to them,
and so they own those Brands they own the software tablets and now you’re kind of like.
[22:00] You know this food entrepreneur trying to make it work for delivery with all these you know twenty to thirty percent commissions and you need to do about like I’d say seven are 50k and,
and top-line sales to break even in one of those kitchens they can cost you know six or seven thousand maybe even more and it’s about 200 square feet so you can fit like maybe two people in there.
And you work for kitchens I guess is kind of about it yeah a lot of people have compared them to we work but the you know they actually we work with leasing spaces and they’re buying spaces and the reason they’re buying their buying these properties is too.
You know really improve the value of that real estate over time and use technology to figure out,
what brands should be put into these kitchens who should we go after what virtual brands should we sell what other kind of,
non-food kind of convenience items should be sell along side that and I think over time you know it’s going to be a full-on.
Vertical play where they started with the real estate and they’re just going to move into the last mile component because right now with all these drivers coming in you don’t gain the efficiencies of true batching because,
everything is fragmented across you know we’re whoever owns the customer whether it’s door – ubereats Postmates and so,
what I believe will happen over time is that.
[23:21] Kitchens becomes it’s kind of like a Smile hyperlocal Amazon that’s in your neighborhood and they’ve just co-located a bunch of restaurants and and they’re that,
who do enough delivery volume where it doesn’t make sense for them to be doing another brick and mortar right so obviously in covid every restaurant became.
Effectively a de-facto ghost kitchen because they weren’t able to see customers now as dining rooms you know Roar.
You know you’re not going to be able to do as much delivery volume so the brands that want to do that we’ll have a kind of,
experience Center that’s augmented by this dark infrastructure and the in the goal is to make that infrastructure kind of plug in play and you could light up a bunch of different markets you know pretty quickly and launch new Concepts so,
that’s a that’s kind of a medium winded answer but I can dive into any of those aspects more
a couple quick ones so is this like into neighborhoods in Allah and or because he’s like a gazillionaire off of uber going public or as this I can you know I’d be shocked that it’s in 80 cities and doubling rapidly what’s the scale.
It’s I have I’m tracking close to 60 right now in the US with some good keys and percentage of them are coming online right now.
So larger than I would have guessed here 1 and tier 2 markets.
[24:47] And then Mark Lori just left Walmart and his doing something kind of like this with his brother are they the same thing or does he have a different concept,
I wrote about that one last year that I believe there is something close to 300 million on a 1.3 1.5 billion dollar valuation.
It’s.
Different model because they’re actually leveraging instead of ghost kitchens where you have multiple Brands each day are basically retrofitting like Sprint Sprinter vans electric Sprinter vans into kitchens that can basically cook the meal,
Watson route to you within this small neighborhood in New Jersey Westfield New Jersey I think and.
[25:30] The idea is that they can do more deliveries per per hour and also unlock higher average order value is because there’s selling it to families where you know there’s four people or maybe more ordering from,
this concept so they basically license.
Well-known restaurants in New York City and some other cities and then bring them to the suburbs and the ideas that like that brand recognition,
you know that there’s demand for that brand outside of that core geography and they basically license that concept,
on behalf of from the restaurant tour and then they train those chefs in their commissary that’s just like one big commissaries not subdivided into ghost kitchens to basically like create these sous vide packs of meals,
and then it’s just kind of sitting in the back of the van where like the the final prep State the final,
work gets done to heat that meal while it’s in route to the customer so you could get your food and like.
10 15 minutes depending on where the nearest van is if you put in your address into this app you can kind of see what you got.
[26:37] So it’s it’s a kind of a crazy idea there’s no some people when I put that out there they’re calling it the quality of food delivery I think was kind of harsh but you know.
I’ve been tracking that one for a while it was called it was going under a stealth name called food truck ink and finally it’s called Wonder.com so,
be very careful to see how that fits in with Mark Lori’s bigger umbrella which he’s calling his like new futuristic city.
Jason:
[27:05] Yeah yeah people are going to want to eat in the city of the future.
Scot & Matt:
[27:09] I hope so yeah but I hope that they socialized from time to time.
Jason:
[27:12] Me too one of the things that’s interesting about the whole ghost kitchen model is its West capex intensive and coincidence.
And an sorry Trend at the moment is because of work from home and remote work like populations are shifting around right now so review.
If you had the perfect restaurant location before the pandemic in your spending a fortune on rent.
It likely isn’t the perfect location anymore because a bunch of your your target audience moved from San Francisco to Austin or whatever.
Feels like the ghost kitchens may be able to be a little more agile.
Scot & Matt:
[27:55] Totally yeah the idea is you.
I guess you can sign a yeah you basically signed a 12-month commitment and it depends on.
You know the city but they were doing different types of arrangements to get people in there,
definitely more flexibility and less yeah you spend 50k to a hundred K on kitchen equipment,
I think they’re located in markets where you know they expect that demand to continually grow but it when compared to a brick-and-mortar like absolutely like.
There was a period where you know even certain ghost kitchens in Manhattan weren’t operating because they were in.
You know like business districts like by dye and Tribeca and a lot of people had left the city so.
You know you were in the clubhouse I think with Corey from zul and and that was that was the example there,
but generally speaking I think you know the bed is that you know delivery will continue to grow wherever the cloud kitchen is located because they’ve kind of.
Pick that market on purpose.
Jason:
[29:03] So let’s let’s zoom up to Mack returns again for a moment so.
Like you know how much of the stomach restaurants will win back like I think the jury’s out like you know I’m like at the moment I’m expecting there’ll be some Revenge dining if you will and.
You know because there’s so much pent-up demand that we’re definitely going to see a spike in restaurant usage whether that.
Persist or not remains to be seen but it feels like one of the things that it’s much more likely to be permanent is.
Regardless of where you get them a greater percentage of calories are likely consumed at home than before the pandemic I just feel like you know a lot of the restaurant meals are forever going to be delivered now or consumed at home.
Scot & Matt:
[29:50] Yeah I yeah I think between grocer be between grocery delivery or between Grocery and food delivery at home the yeah home becomes bigger than it was before for yeah I definitely agree.
Jason:
[30:04] So then one of the the trends that comes up is okay so you know digital grocery wasn’t a huge thing before the pandemic it instantly overnight became a huge thing and it’s got and I have talked about in a bunch of context on their show.
When something is a brand new trend,
the smart thing to do in the thing everyone does is outsourced right so when e-commerce for apparel was a brand new thing there were a bunch of you know e-commerce companies you Outsource it to Target and Toys R Us Outsource their e-commerce to a,
Bookseller in Seattle called Amazon right and over time as as a business becomes more real and more legit.
[30:44] Increasingly as a mistake to Outsource it because it.
You know your core customer experience and So lately we’ve been talking about that a lot with.
Digital grocery space and you know so many people Outsource to instacart and is that really in the that made sense in the short run is that a good long-term solution for grocery stores.
Obviously restaurants.
Very rarely stood up their own digital infrastructure it seems like the overwhelming majority relied on these marketplaces which I guess door – and ubereats are the two.
Two biggest and my understanding is that the unit economics or the restaurant totally totally suck through those marketplaces.
Is is that going to be the way that customers always discover their delivery restaurant meals or like we’ve seen in other categories of e-commerce do you think.
More restaurants will try to have their own digital ordering experiences or how could that play out.
Scot & Matt:
[31:44] Yeah I think that the direct channel is going to definitely become you know it’s become a must-have you know you have to have your own direct channel so the question is how do you manage these two things right and and this goes for groceries as well as restaurants right,
all these apps are kind of disintermediating the relationship between your customer and your business,
you know and so the goal is to figure out how to make those sales incremental on the marketplace and then drive you no longer term retention through.
Do your own channels and so you know it’s the card has its own white-label tack you know they’ve.
They’ve been able to create a suite of products that you know Grocers can kind of pick and choose from if they don’t want the marketplace you know Wegmans is a good example of this they’ve you know Leverage The White Label,
they’re also on the marketplace you know as far as the restaurants you know obviously doordash has storefront,
I’m pretty skeptical of but you know there’s also door – drive on top of all these white label platforms whether it’s cow now or,
yeah it’s square has an integration I think with a door – now so all these POS ordering systems are going to have Integrations with last-mile fulfillment so.
[32:59] I think it’s just going to be about balancing it out and being smart about how you kind of load balance those two all these different channels and the number of channels is going to continually increase I.
And so you know it’s a must that you have a you know it’s become a mustard every grocer and every restaurant have their own direct ordering and you know,
we can get into the microfilm and all that stuff but.
Jason:
[33:26] I do want to get there it is it’s funny,
I you know I spent a lot of time with clients in the restaurant space and I talked a lot about needing to own,
the customer experience which is increasingly digital I mean I think Panera came out like last month and said that over 50% of all their orders are now from the website so there are digital first restaurant.
And every time I bring this up with clients that are like yeah but Jason you don’t understand the magnitude of the problem like we could never own our own delivery like you know how much delivery capacity that would require it’s impossible to build.
And I’m like have you heard of Pizza Hut.
Like it seems like there are all these restaurants that just it’s endemic in their model that they’ll have delivery like every independent Chinese food restaurant in America has always delivered it seems it seems odd that.
Restaurants are so reticent to own their own own capacity.
Scot & Matt:
[34:23] Well it is true that like if you if they were actually going to go and hire all those drivers you know whether they be contractors are full-time employees that,
it does require a lot of demand and it does involve a lot of know-how that they don’t necessarily have so it does make sense of why this was the Easy Choice in the pandemic for them to like steal so much Airway and,
you know because there was no other solution right that’s like easy so I think the thing there is to really break down the things that they can do themselves and the things that they should Outsource and I think when it comes to.
Yeah delivery that’s clear like no no restaurant unless you’re you know Domino’s or,
you know you have a ton of local delivery demand is going to like really operate their own Fleet,
a lot of people will just Outsource it to like door – drive or now lift this getting into that space Uber has an API and although has a aggregate kind of API that will allow.
Best messages basically paying this real-time Marketplace of these services and just pick whichever is going to be faster and cheaper they can kind of set the parameters of like.
You know how fast or how cheap they want it to be and they could pass or subsidize it to the customer so you know that that part I don’t expect restaurants to do I absolutely think restaurants need,
have their own website whether it’s you know some sort of CMS that their licensing from someone else or build it themselves and then integrate it with a door – driver one of these other players.
Jason:
[35:52] And I guess that is one of the interesting like so if you look at some of the other segments of e-commerce that evolved by a company I talked about often is this company called GSI and in the early days of e-commerce.
[36:05] If you know an investor said hey should we get an e-commerce that the CEO ago yeah I’m gonna hire this company GSI to do it TurnKey right because the,
in the same way that it was easy and it was an economically meaningful in the same way that you might you know put your menu on door – when it’s not economically meaningful,
and by far was the easiest thing over time.
Every retailer realized hey it’s a mistake to Outsource this this business to GSI and we need to own that but Jesus I didn’t actually go away or go out of business like a GS I mean a bunch of money in the,
the founder of GSI is this guy Mark Ruben who owns the 76ers and Fanatics and a bunch of other good things so he’s a success story and Jesus I still exist today,
they they operate under different name called radio and they pivoted from,
providing all these Services TurnKey and sort of Outsourcing it to providing the Ava cart services that a retailer you know didn’t think it made sense right so they weaned in order management.
Fulfillment and 3pl services and you know kind of over time so we gradually moved away from the selling everything as a bundle and.
Seems to me that like you know you can imagine not all of door – but some part of,
instacart and doordash could could follow that same trajectory.
Scot & Matt:
[37:31] Totally yeah totally see that playing out like that so some of those that you talked about if the restaurant too,
as a consumer these things quality of delivery is pretty bad I don’t know if there’s any good data but mine’s probably like 60 to 70% and getting the order right and getting it here kind of within the window and I don’t know if that’s,
I’m in a smaller City so maybe that’s just part of the city here but I don’t know if you guys in Chicago and La have the same problem.
Jason:
[38:01] I heard the triangle is going to be the biggest city in America and.
Scot & Matt:
[38:03] We do we do it were considered a Goldilocks City because we’ve got this interesting we’re kind of like we match the u.s. demographic or something in a certain way anyway City search was launched here because the.
So if I’m a restaurant one of the things that makes Amazon Amazon is the control that customer experience so it seems like even if I’m going to use one of these Network things it’s not are never going to be a good as doing it myself you just think the economics are not there to do it yourself.
[38:32] As far as I know I think Rick yeah it depends what you’re saying would you define by doing it yourself if it’s owning the customer relationship that’s just the front end right so let’s Domino’s never made.
[38:46] Delivering the pizza they make my all the money on the actual,
you know Pizza itself on the margin of the products right so do what you do best on that Customer Loyalty right to whatever loyalty system you’re going to use with your own front end but outsourced,
you know that last mile component where the driver picks it up and you know delivers it to your customer that last component you know and so why should why should anyone have to go and build that.
Because if Pizza you’ve spent all this time the whole thing breaks down when the pizza gets their cold because right.
You know they delivered 60 other things and the pizza was last yeah I mean there’s there’s also you could also you know hire your own Fleet and then leverage these other software players there’s one called get Swift there’s another one,
called on flea basically allow you to manage your own drivers and yeah I think you know part of it is like product Innovation right like
obviously Dominos engineer’s it’s Pizza to be like,
yeah keep retain the heat very well and that kind of impacts this comes full circle with the cut the glucose monitor right it’s like makes you feel like crap after but you know.
But so I think it’s kind of a combo of like designing things that work for delivery like literally like testing.
You know there are restaurants that would like literally go and.
[40:13] Test order their products and see that okay we need to like cook it at this temperature so that by the you know the time it hits this guy’s house 30 minutes later it’s like at the perfect.
You know crunch or whatever and like that’s you know that’s a little extreme but like you kind of have to factor that in,
and then as far as like the drivers you know screwing up and doing other things like I don’t know you guys I guess like.
I think it’s just asking a lot for the long tail of restaurants like forget the major Q Sr s write this you know the long tail of restaurants you know,
to to do this kind of thing and you have to remember a lot of the reasons why these guys even got on delivering the first place was because Uber and Postmates and all these guys and door –
Offered Logistics when GrubHub just started as a pure market place that was sitting on top of the existing kind of Chinese restaurants and pizzerias that were already set up to do this through the phone right so,
they’ve kind of unlock that for it for a long tale of restaurants I would have never done delivery had they had they not have access to this on-demand Fleet so.
I think it’s good that Fleet is here to stay but I think the way in which I just think.
[41:26] You know the vertically and it’s clear that the vertically integrated model is much better and you can see this with like chains like cluster truck.
Which is you know just a vertically integrated goes kitchen that works with a shot of Kroger yeah good brand yeah and as Lori didn’t come.
Jason:
[41:44] Cluster truck is what was left.
Scot & Matt:
[41:46] What a cluster truck.
So I think you’ll see a mix of this kind of white label with the door – drive and then like the vertically integrated kind of first-party player that you know,
is basically delivering and maybe leasing the space or owning more and more Upstream to get better data online,
okay when should you fire this item and you know on on your stove top and you know just to make sure that the timing is the food is not just sitting out there waiting for a driver like a lot of these POS connections have not even,
been linked up right is like no kind of connection between like what’s in my inventory or what.
[42:25] Yeah and and and what’s being listed on the marketplace right so that’s why you get all these like out of stocks and refunds and and,
you know restaurants are not updating customers on like what the ETA is are because there’s no transparency into those operations because they’re operating in completely offline,
yep
the worst here is our local Moe’s where they have six iPads and they forget to check them and yeah exactly I have to go in because you can never get them delivered Within
an hour of placement and when you go in there’s like all the frustrated ubereats people sitting there waiting and they haven’t even pulled the little tab off of the
eight iPad that is the growth of what
the one that’s super frustrating is Panera because they did their own delivery here locally and then they just started Outsourcing it to GrubHub I think in the quality like literally went down,
like 80% but they also
you know they seem to be ahead and I think Jason one time mentioned over half of their orders are digital now and that that’s kind of more like the Starbucks mobile
kind of thing we’re more and more people are ordering digitally from the restaurant either be in or out you have any interesting data on that or they are they kind of,
are they ahead of the Packer they are most restaurants that have mobile ordering getting to that 50% mark.
[43:46] No I think I think there’s only gonna be so many brands that can own that with the customer I mean Jason probably knows better but you know.
There you know the the golden standards are like the sweet greens the Starbucks is and there’s payments actually has a great ranking Pym NTS shout-out to the no vowel Club,
um they they have a great ranking of.
Food delivery apps or restaurant apps by you know how well they they do loyalty and all these other things,
Casey’s General Store is a very interesting use case that I would say like somewhere in the 60% range of transactions flow through their mobile app whether it’s loyalty or delivery or pickup.
Which is pretty fascinating.
One thing to remember and this goes back to Olo is that the majority of these transactions are going to be pick up or curbside pickup,
deliveries still pretty small and,
so it’s you know as much as everyone talks about delivery delivery delivery I think pick up deserves.
[44:56] Yeah Fair mentioned because.
That’s a lot of people are doing that to just save time when they when they get to the store and I think you’re going to see more of this Q are ordering and other types of channels where,
you can kind of use the menu and maybe even order before you sit down now is that going to be a romantic night out with your spouse you know when,
you’re dining out for a nice you know a nice dinner like no but there are certain occasions where it’s going to make sense to.
Like you shouldn’t be waiting right and so that’s kind of what this is all about just you no more free time to do more fun stuff.
Jason:
[45:36] Yeah no I do think that’s interesting I think there are going to be use cases where people are going to like consider foregoing the wader to be Advantage right like it’s.
In some cases it’s annoying when the waiters not writing down your order in your you know they’re going to get something wrong versus being able to like beam your order exactly how you want it directly to kitchen and there are other times when that ordering is an important part of the.
The Ambiance and the experience right.
Scot & Matt:
[46:05] Totally yeah yep and that’s the rise of the Q R that I think we saw the covid-19.
Jason:
[46:11] Yeah yeah yeah but you’re the mighty QR code is back I think that’s a article on you’re on the homepage right now isn’t it.
[46:24] Let’s come back to them and then I do want to Pivot because in classic Jason Scott Peck fashion were using were burning Through Time,
to grocery a little bit because you did you did kind of talk a lot about the,
prevalence of pickup versus delivery and I think that that is also very prominent in how it seems like digital grocery is playing out.
Um
[46:49] The bike in the same way that a you know as a fast TurnKey solution a lot of people Outsource their restaurant business to Door – a lot of Independent Grocers were pretty quick to Outsource their,
some quite large Grocers Outsource their gross their digital grocery to instacart and one of the things that’s interesting to me about these marketplaces getting a bunch of the business is,
they then have opportunities to kind of cherry pick pieces of the business that they want to steal from their Marketplace Partners right and we.
Racine Amazon do that with private labels the you know arguably like the door – is our are doing that with ghost kitchens,
and there are some rumors about instacart you know having their own warehouses to fulfill,
um like top up orders and I’m curious if you have seen any of that or if you.
Hypothesis about how that might play out not shockingly instacart totally denies.
Scot & Matt:
[47:55] So yeah I mean this has been a narrative that’s been a been there for a while and it makes sense that people fear those because the constant story with technology and these you know kind of,
offline businesses has generally been like David versus Goliath and.
I can say so I put out a story about instacart getting into microfilament with Publix,
I’m not sure where this is going to be deployed but they’re basically,
building an MSC with Publix and they may be doing it with more Grocers but this is the info I received.
[48:31] And I think it’s the cart it’s going to be a it would be a very poor decision for them to become a first party retailer and compete against,
it’s there Grocers and unlike door – where there’s I don’t know how many.
Hundreds of thousands of businesses on there there’s only a few hundred Retail Partners on the instacart platform.
And each of those partners are very meaningful I mean like the head of the tail are you got Albertsons you got Kroger you know these are big big big partners,
and so if they were to ever take that data what those customers aren’t they basically have,
aggregated and basically wanting competed against those partners that would just be all out Warfare
and I don’t I’m I’ve spoken to people there and I’ve done some homework into this and I really don’t think that that’s,
in the cards for them despite the fact that there’s so many other guys coming up who are vertically integrating and and there’s obviously lots of Pros to that.
When I see in the car doing as a response to that kind of thread is just basically,
creating more virtual storefronts on top of like d2c companies or getting into other non-food categories that can be sold from kind of any kind of Warehouse that may not be a two hour.
[49:51] Fulfillment time it might be a two-day fulfillment on them that will eventually work its way to same day,
that’s kind of the high level there it’s a lot of other Grocers you know so-and-so cards I think offering MFC micro fulfillment centers are automated,
and usually attached to a retail store because you kind of automate the bulk of items you know picking through this system and then you’re picking the rest of the store and that has its own set of challenges we can speak that’s a very long debate,
but you know.
Yeah they’re not going to centralize that process it’s going to be done on a per grocer basis in they’re going to offer that in the same kind of fashion I think is they’re going to offer that Enterprise white label solution because once you hit,
I don’t call it three four thousand orders is when you have to start looking at okay I need to move to a dark store I need to do a manual pick in a dark store that’s.
Attached to my store because you don’t want,
no customer wants to go in and see all these Shoppers coming in and ruining the experience rights and the Grocer’s know that every order that gets fulfilled from like inside the stores.
When you’re doing this is just going to be lost Revenue so.
They definitely want to to not Outsource it but like move it outside of the store because when you start messing with the store your cannibalizing those sales so.
Jason:
[51:14] That’s the equivalent of Scott’s experience of standing in line behind the 12 Uber delivery driver.
Scot & Matt:
[51:19] Exactly and that’s that’s just like that’s kind of the moment where like going back to like why I got into the space when you have those moments where you see like the majority of people here are not actually consuming this food right it’s like,
then you’re like holy crap we’ve entered in some other weird phase of the future.
Jason:
[51:36] Yeah I remember I distinctly remember going to pick up a fast food order during a pandemic and I like popped into this restaurant and they have reconfigured the whole dining area to be pick up tables for the eight different food delivery companies.
Scot & Matt:
[51:50] Yes that’s every every restaurant out here is done that and put like little printed signs like this is the door – table this is the GrubHub table.
Jason:
[51:59] Part of me was like you know what I really want to do is stand outside this window and just like see who’s winning cuz you could you could physically watch it.
Scot & Matt:
[52:07] I should steal that from you yeah I actually walk in with a.
Jason:
[52:10] What you’ll actually do the work I won’t so feel free to Steve.
Scot & Matt:
[52:12] I put on a door – masked because like it just happens to be handy and I was and I got one for free and everyone thinks that like I’m waiting for a door – or so I get to like cut in line it’s kind of fun.
Jason:
[52:25] I like it you mentioned mfcs a couple time in a lot of our listeners will be super familiar with that but just.
To take half a step backwards and then I promise to ask a question so grocery delivery is awesome,
Walmart and Kroger love selling selling digital grocery better than they love losing the order to Amazon,
but the one Inconvenient Truth is that most of those digital grocery orders right now are wildly unprofitable right because.
And that old grocery model the customer pays all the way over to pick the product and they pay the labor to drive at home and in the Digital model of customer expects Walmart to pay to pick the product and drive it home.
Which is not very favorable so,
the the working hypothesis is man you know customers are pretty happy picking up the groceries outside our curb and that saves us the delivery cost,
and if we can eventually get robots to pick the order instead of humans which is a micro fulfillment center or a MFC we can cut 90% of the picking cost,
so it does seem like that’s a big Trend right now are grocery stores by expanding their pilots of these mfcs and investing a lot more in there,
their curbside pickup experience.
[53:49] Is that the model that you see winning and and to be honest like I’m optimistic that that could potentially be profitable there’s other smart people my friends who charita.
Is pretty adamant that even with those two Evolutions that digital grocery still doesn’t have have workable unit economics.
Scot & Matt:
[54:09] I think her skepticism is definitely warranted and you know I actually you know was biased in favor of mfcs and I started digging in the last few weeks,
into the shuttle MFC technology and as well as the CFC technology that okada’s used and.
You know I can say that a lot of these early entrance into the market who are doing the shuttle technology and that’s like the takeoffs and.
Alert innovation.
[54:39] You know I think that was like the 1.0 test and I you know Albertsons did say they’re going to do like nine of those they’ll have nine up and running this year so they are doubling down,
but what I did see was like damn attic which has a shuttle product product and is also seen it being used at Amazon Fresh.
They’re actually recommending autostore for most of their Grocers and auto store,
you know the best deployment I think that we can see in the US as a philly Philly deployment It’s actually an e-commerce fulfillment center.
It’s going to sit outside of the city that will do next day and same-day delivery,
I think we’ll be pretty profitable and I think some of these shuttle ones are the jury’s out on whether or not they can actually fulfill the demand fast enough and that they can actually be.
You know they can actually have those payback’s I think auto stores targeting about a four year payback for Grocers so there’s obviously so many variables and so many different things you have real estate costs labor costs you have,
Geographic density you know it doesn’t make sense to.
[55:50] You know plop a huge monolithic C FC which has you know very low per unit picking costs and in a neighborhood like in a town like Cincinnati where there’s only three hundred thousand people.
Or you know and if you’re if you had six million people you know then that kind of works and that’s why ocado kind of really works well in the UK,
I’m skeptical what that’s going to look like with Kroger in the US and so.
[56:21] Yeah the short answer is like there’s no I think one-size-fits-all deployment because every situation is different,
but the hope is that over time you know you can get more and more stuff in the Automation and out of the store and what’s happening with some of these early 1.0 players from what I’m hearing is that they thought that they would put.
You know 80% of the most popular ordered most popular ordered skus in the Automation and the other 20% wouldn’t you know the deli meats and the dairy and all the stuff that is more it’s maybe fast-moving or perishable.
They keep it in the store it’s actually proving out to be more something like 50/50 and at that point it’s kind of a mess and you might not be paying that off for a long time so.
I think we’re going to see autostore emerge as the as the dominant provider here and,
and yes it’s an NFC technology but it can also be done kind of as an EFC kind of detached it’s not as big and monolithic as a 300,000 square foot Kroger facility with a kado it’s about a hundred twenty thousand square feet.
And it’s all about you know can you do same-day pickup same day some same day delivery if you get it in quick enough in the morning or at the night before do next day so.
That’s what I’m saying.
[57:46] Recall were running up against time so you know it wouldn’t be a Jason Scott show if we got to sneak a little bit of Amazon talking here so what do you think about all Amazon’s good,
a bunch of initiatives going on you know we’ve heard go puff is I think Jason calls him a top off kind of
the thing you know they’re evidently spinning up to compete with them they obviously on Whole Foods and are doing a tons of things there what do you think about
the the sphere of things Amazon is doing and what has the most is most interesting to you or is most likely to be successful.
[58:22] So the one thing that I have on Earth over the last month or so was the,
kind of center aisle kind of goods your non-perishables being delivered same day from Amazon they actually announced this I think right we’re literally like a week before the pandemic hit.
That they were starting this in a few cities.
And you know then covid happened demand goes through the roof and then they got to kind of just like put that aside but what I’m saying is they have this new kind of fulfillment center that’s.
Call it 45 miles outside the customer and.
[59:01] They are stocking that with about a hundred thousand of the most of the fastest moving skus that are not fresh,
and they’re building about 2 million square feet square feet per major Metro to do this so I’m actually trying to go down to San Diego and.
Do an Amazon order for that and I’ll report back you should check it out why just ordered we need you to sneak in there.
Well yeah I’m gonna do a delivery that’s what I’m saying like I’m Sino Flex driver so get a little lost looking for the bathroom but they they co-locate they’re starting to co-locate these next to their larger Suffocation centers,
so they’re kind of piggybacking on their existing infrastructure.
At the same time they’re you know they’re going to do they’re dipping their toe into grocery into fresh I think we’re tracking about 36 some odd.
Fresh stores open sometime this year.
And then obviously they have 500 Whole Food stores that they could take some of those learnings and and apply their I’m not sure how that’s going to be leveraged in the entire ecosystem you know there’s.
Obviously there’s so much there’s so many products with Amazon whether it’s like they had prime now they just finally announced that they were like going to merge that into.
[1:00:21] Poor Amazon or fresh I’m not sure and then,
you know with Whole Foods they had 365 Whole Foods and now that is getting Consolidated into just Whole Foods so I think you’re going to see them move around these different chest pieces and figure out what to do with all their assets,
I think like at a higher level what you what this is all leaning towards is this on the grocery front it’s you know.
Free one-hour delivery from one of these Whole Foods or fresh stores or maybe even a dark fulfillment center.
For Prime members and then like for cpg buyers going back to this whole disintermediation thing like a Consolidated by where some brand is able to purchase shelf space and digital.
[1:01:05] Placement on the website and building that flywheel between online and offline and then on the go pop stuff that’s like maybe.
Less perishable they’re going to just they’re going to they realize that they you know I think.
Kind of gave some of that to Walmart and Target to those stores that really want on the kind of same day so now this new infrastructure that they’re building out.
Yeah I like I mentioned two million square feet is crazy / Metro is going to kind of I think attack that pretty hard.
So that’s what I’m saying it’s two million square feet in Amazon’s a small test.
One other thing I should mention is that they’re also becoming their own distributor so once once these stores become get a certain volume it doesn’t make sense to use like Spartan ashore.
Unify so they’re gonna they’ve also confirmed in three markets LOL Orlando Maryland that they’ve also become their own distributor to those stores unlocks more margin.
[1:02:08] Al