The instant delivery of groceries game is not for the faint of heart. We noted earlier this year that grocery delivery is a tough business, given the competitiveness of the market and the subsequent drying up of funding for cash-intensive sectors like this.
Even industry giants are not immune. We saw Instacart lowering its valuation to be closer to what was happening in DoorDash on public markets, where its share has also been hammered over the last six months.
Delivery company JOKR was also not immune to some skepticism in its first few months. Last October, The Information reported that the company, founded earlier this year, “has lost $ 13.6 million on $ 1.7 million of income, at the end of July. It spent $ 2.3 million dollars only for the purchase and delivery of goods.
However, the company then raised $260 million in December to become a billion-dollar company, and despite some growing pains, it appears to have believers and a business model that works, at least for the moment. It has a new AI-powered app that leverages a customer’s past shopping behaviors to provide product personalization and a new partnership with decarbonization platform Plan A, with the aim of becoming the “first climate-friendly instant delivery grocer”.
I spoke to Ralf Wenzel, Founder and CEO of JOKR, about why he thinks his business model is doing better than most. The conversation with Wenzel was modified for length and clarity.
TC: What is the current environment of dark kitchens and grocery delivery?
Wenzel: I see it from different buckets. First, we still see a very, very high traffic grocery orders offline to online grocery orders. When we discuss with customers through surveys and focus groups, we always find that customers are not satisfied with existing online ordering methods. For example, it is inconsistent, it takes too long, it’s not very personal, they lack certain products and the quality and quantity of the set. There are still flaws in the experience offline and online, but customers want basically a type of experience faster online grocery and relevant. Second, capital goes where companies generate the most efficiency and sustainability. This is why the industry has become more rational. And like [that happens] it’s easier to compete because the competition is now really for the best user experience and the greatest efficiency.
What have you been focusing on lately?
Over the past 12 months, we’ve been focused on what we call “reinventing retail,” which for us is looking at how to disrupt supply chain and procurement in particular.
How has this strategy worked so far?
This now allows us to count and benefit from a very good assortment, purchased directly from the actual producer and manufacturer. We have built our proposal more towards freshness. Compared with other players who are more convenience-oriented, we have increasingly evolved into not only an application and a service that can provide practical items, but we are able to cover a very wide range of products. such as grocery products, including a very high proportion of fresh produce, such as fruit, vegetables, fish and meat, and so we’ve established ourselves not just as an online convenience alternative, but really as a supermarket type and more complete online grocery store. We have now become fully positive gross profit at group level for our local operations in all our countries after 12 months of operation.
What does this mean now for the immediate future of JOKR?
For us, this is proof that the # 1 business model works. It also allows us to grow more sustainably in the future. It makes us more independent of external capital. With every order we ship, we now have a positive contribution margin, which essentially allows us to grow the business in a very efficient manner in terms of capital.
I’ve reported on a number of on-demand grocery delivery companies, and everyone is trying to carve out a place for themselves. Some focus on speed or are your go-to person if you need an item in the middle of cooking. However, we have seen some drawbacks industry, for example, Zero Grocery was down about a month after I realized their new funding cycle. Real estate is also expensive, which keeps costs down. What are the challenges to make it work?
By defining what the customers need and when we were able to get us the products more efficiently and in a more targeted and renew our inventory faster than any average supermarket, which for them is 30 to 45 days. We can return our inventory in about 15 days and eliminate waste. The secret sauce should be very detailed, specific and provided in the type of inventory you buy and how you buy it so that it is done regularly and high frequency so that there is a very high turnover of inventory. Then transfer this flexibility on the side of the inventory where you allow customers to develop an adherence to a platform that not only fast delivery, but by suggesting products through personalization.
A story was written about JOKR in February about a possible sale of its New York operations. The company denied this was happening. Can you clarify?
You never know where the rumors come, and we also have not commented on these rumors. We are constantly optimizing in terms of neighborhoods that we value and warehouse operations. There are areas of each city that are more applicable to those types of business models than others. We sought to optimize our footprint in New York. In terms of research in distribution warehouses, we open new stores and we closed other warehouses we reviewed what was in the right place, which was good close to different customers. But we have worked in New York, and there is no strategic changes.
What is the World JOKR footprint now and what’s next for the company?
We are present in six countries, including the United States, Brazil, Mexico, Colombia, Peru and Chile. At present, we do not expect any expansion, but rather deepen the value chain in these areas to unlock more capabilities and expand the quality and quantity of our range. We want to ensure that we have a very comprehensive grocery supply and beyond. We are already looking at other categories beyond the grocery store, for example, by expanding our offer of private brands, using JOKR as a platform to launch new brands. We’ve already launched a handful of brands over the past few weeks and ramped up those efforts even further.
We also want to extend delivery times to give the ultimate flexibility. We are already in megacities like São Paulo and Mexico City, but we still have much work to do to have complete coverage of the cities and the opportunity to go to other cities that are not covered currently. We can mainly be busy there for the next few years.