Retail Tech Updates: Feb ‘21

Source: CB Insights

Jeff Bezos’ steps up to the chairman role, Ecommerce as logistics, and the rise again of Hyperlocal logistics

My reflections on interesting developments in retail, ecommerce, logistics & supply chain in January 2021.

Big News: Jeff Bezos hands over Amazon reigns to Andy Jassy

• In his letter to employees, Jeff Bezos’ talks about ‘Invention as the root of Amazon’s success’. Inventing new things and then making them normal, in few years is what he described as quintessential Amazon. (I wonder: How many public company CEOs use that word!)
• I read initial chapters of ‘The Everything Store’, and watched an initial speech of Bezos to revisit his definition of ‘xponential’ growth —

“In the spring of 94, web usage was growing at 2300% a year. You have to keep in mind human beings aren’t good at understanding exponential growth; it’s just not something we see in our everyday life. But things don’t grow this fast outside of Petri dishes. It just doesn’t happen.”

• While we are at it, do read the great post by Ben Thompson on ‘the relentless Jeff Bezos’.
• We have seen xponential growth across the board though recently, mostly in financial markets and startups — Tesla Stock (700%+), Bitcoin (800%+), Clubhouse users, retail tech startup valuations (300–500%+)!

Big Theme: Ecommerce = Logistics and the resurgence of hyperlocal!

Ecommerce = Logistics

• Ecommerce (or Amazon) began at the logistics end, as an efficient way to get something from an infinite shelf (books to begin with).
• So efficient ecommerce logistics is based on complex algebra — how much inventory, how many SKUs, size of the products, how fast they can be shipped, frequency of purchase, customer willingness to walk/drive to pick/collect, do the products needed to be kept hot or cold?, etc.
• The resultant multi-dimensional scatter plot tells why we store furniture in large warehouses (credit: Landmark GCC, my ex-employer) and milk and grocery is available below each building.
• So rather than looking at ecommerce as a share of retail (which varies from 5–20% in major economies), better to look at retail which can be 1) delivered as parcels, 2) could be delivered or picked, and 3) that can’t be delivered. That gives rise to different delivery models, one of which is hyperlocal (other big theme for the month, below!)
• Source: heavily borrowed from Ben-evans.

Source: Ben-evans

“Ecommerce is the Store, Store is the new Warehouse, On-demand Hyperlocal is necessary”

• Twelve months of COVID has unbundled shopping and ecommerce. Retailers always knew stores were the most important, just that now ecommerce is the biggest store for them and well, store is the new warehousing & fulfilment point.
• Instant delivery formats require scaling store fulfilment and hyperlocal delivery. Apart from food delivery, CPG, Groceries, Luxury fashion etc., are already amenable to hyperlocal, and lots of action happening on that front in India, ME and globally.

• Personal plug: Encountered this model at Snapdeal (as SD Instant), MilkBasket (7 AM deliveries), Wadi Grocery (now Carrefour Grocery) and Landmark! As I said, difficult to make money here, SD Instant & Wadi grocery made it to the list of famous scale downs — Zomato Market, Swiggy Stores, Grofers model 1 et, al. Building on-demand hyperlocal marketplace is hard and unit economics are hard. Two good options: Own inventory or do a logistics only play! (e.g. Big Basket, MilkBasket, Ocado, Postmates, Grofers model 2, Carrefour, Noon daily, Swiggy instamart, etc.) Smart folks at Fastcompany kind agree.
• As we talk, MilkBasket is in acquisition talks with Reliance Jio for $40 Mn. MB has been my favourite hyperlocal grocery player, great model, great team, great execution. Access to capital reduced the size of the outcome. Hope Reliance plugs this model into JioMart and scale it nationally!
• Let’s crack on:

India: Hyperlocal segment in India seeing resurgence funding of $533 mn in 2020, majority going to food aggregators — Zomato & Swiggy. However few notable independent logistics players are gaining traction and scale:

• Dunzo, the hyperlocal logistics player is expanding full stack services across ecommerce, courier and commute. They raised a $ 40 Mn to bring raised amount to $160 Mn, becoming the best funded of all hyperlocal delivery players.
• Same region shipping (also termed as Ship near/ship local), is also being offered to D2C brands by fast scaling 4PL Shiprocket and Y Combinator backed WareIQ (quite promising early stage startup!)
• Hyperlocal has fast become the 2nd largest shipment volume driver in India (and apart from food deliveries, other cats are growing fast, as explained above) and similar trend can be seen in ME & globally.

Redseer — Shadowfax India Logistics Report

Middle East: Key comparables in ME: Careem NOW, Delivery Hero, Deliveroo, Mrsool, Getir, logistics networks of Noon’s NowNow & Noon Food (recently launched!) and quite a few other startups. Notable developments:

• Good friends at Noon continue to scale (crazily enough!) to launch Noon Food, a hyperlocal food delivery venture, and why not, it’s a sector valued at $3B. Founder Alabbar lowered the boom on competition by reducing restaurant commissions to 15% and exhorting other aggregators to effect a rate cut, overnight!
• Careem NOW responded elegantly by moving to a fixed rate business model, unlike a transaction commission based one.
• Turkey has its own hyperlocal scale-up — Getir, funded by none other than Michael Moritz’s firm (Dunno who is Michael Moritz, please read here!)

US/Global:

• Doordash: The in news food delivery company had a monster IPO, which has set the boll rolling for leading food aggregators to go public this year! (Deliveroo, Zomato are up next. Watch this space guys!)
• Delivery Hero has had a great run in the stock market and has followed an acquisitive growth strategy to expand presence to 40+ countries, and 25 Bn+ market cap

• Uber expanded its food delivery services, UberEATS by acquiring Postmates for $2.65 Bn, though these acquisitions are targeted beyond food delivery;
• Reinforcement of the trend by Real Estate Services Major: Hybrid Store Model, as announced by CBRE, to integrate retail with logistics real estate. Post-COVID, this new model will help accelerate the blending of brick-&-morter retail and logistics real-estate. Same concept has also been beautifully captured in the cover pic of the post! (phew!)

Thanks Jeff for kickstarting the unbundling of $25 Tr retail industry. Lots of invention there and lots of more to come, with everything centred around the ‘customer’.

Love!