The Exchanges

Q I have to ask this one. It's not on the schedule, but you mentioned your parents and kind of working and learning from them in the early days. What was like the biggest takeaway from working so young, seeing them operate as small business owners? What was the biggest takeaway?

A It's kind of the other thing I mentioned. It's humility. My parents and Akira's parents, why we were best friends and we worked so well together, like raised in different parts, not knowing each other until college, but like almost an identical upbringing, right? It's kind of even strange how that worked out. You know, this humility portion of, you know, sitting down, be humble, learning, listening to your customers, doing whatever it takes for them was ingrained to me, like at age 10. You know, it kind of shoved into my brain. Hey, you know, you, you better do whatever it takes for them because they can ultimately shut down this business by just choosing not to come here, by choosing, you know, to go somewhere else and doing something else with their business. And, you know, my mom specifically even really, really drilling that into me. I think it made me a better human for it, right? Not just in business, but as a human being itself.

AI assessment note: “It's humility... listening to your customers, doing whatever it takes for them”

Q It'll be good. Uh, final one for you, my friend, where is go puff in five years time? Very simple.

A Well, in the U S uh, I think, uh, we are the undisputed leader in instant needs, right? We cover a third of the U S hopefully that number is much higher in, uh, in five years and we've broken into and becoming the dominant player in a lot more categories, right? Again, I've never thought that I'd be an authority in the baby and pet category. I think I'm going to be saying in five years, you know, a lot more categories than I ever thought that I'd be an authority in, uh, but we're an authority in, uh, the five years from now, I think on a global scale, we're continuing to, to dominate expansion. But I think this time around, we're going to own a market entirely and then open up other markets that we're going to own entirely before expanding to new markets. So I don't know how many markets that includes, but, uh, you know, we're excited to see, excited to see this thing unfold.

AI assessment note: “five years from now, I think on a global scale, we're continuing to, to dominate expansion”

Q Tell me, what do you know now that you wish you'd known at the start of GoPuff?

A You gotta, ah, hire taller faster. And taller doesn't mean, like, a person that comes from a pedigree of a background, but a person that has deep subject matter expertise in a, in a given topic. So, You know, all the advancements that we made on the routing side, for example, we hired subject matter expertise, routing, subject matter expertise, you know, seven years ago instead of five years ago or four years ago, we would probably be even more advanced today. So, you know, I think, you know, kind of given the state we were in our first three years of being boot shopped, we had to be very, very careful on the, the talent we bring on board because of how much it costs. If, We hired some of that talent earlier, especially on the engineering and product side, we would have been even further. I mean, like, you know, we're, we're the furthest ahead of any incident needs player by a massive margin. Uh, but that war margin would be even wider. If, uh, it were able to hire even earlier.

AI assessment note: “hire taller faster. And taller doesn't mean, like, a person that comes from a pedigree”

Q Had you known that it was coming, is there anything else you would have done? What else would you have done differently? Like closing Spain straight away would have been one. Is there anything else that you would have done differently?

A Probably wouldn't have tested as many things as we've tested. Right. I mentioned pharmacy to you as one. It's like, it's not even the money aspect of the distraction factor for the team. I'm like, not focusing on the things that matter most. Like I mentioned kitchens earlier. We probably opened up too many kitchens too fast. Like right now we're, we're ready to open up a lot more kitchens, right? Because the business is so well oiled and the shortman is right. Amelia, who's running that team. Uh, she's done a really, really phenomenal job at continuing to scale that business. In general, we were moving very, very fast because the market was rewarding us for moving fast, right? Because we continue to deliver in a really big way. Kira and I continue to over deliver in the things that we do. We had a really great team around us and the market is like, you know, wires. We did everything that like, you know, then our investors, we'd be doing even more, right? We were saying no so much. They're like, you know, what about Southeast Asia? What about Japan? What about, You know, the rest of your, we said no so much to things, but in hindsight, we probably should have said no even more and just really focused on the things that we're exceptional at instead of, you know, continuing to, innovation is good, but innovation just for the sake of innovation is not good. You know what I mean? In…

AI assessment note: “Probably wouldn't have tested as many things as we've tested.”

Q competition I don't think served you well. I think, you know, the likes of local players in the UK made you go to the 10 minute delivery when, or try and do the 10 minute delivery when it wasn't optimal. It obviously increased cax for everyone. Do you actually think that this period will cause a lot of people to not be in business anymore and only the strong survive?

A I think any business across any industry that's not focused on profitability is cooked. And instant needs is no, um, is no exception. So I think, you know, I'll touch on your earlier point, right? It is An incredibly sad moment as a founder to have to say goodbye to people that you personally hired. That's going to happen kind of on a macro basis across the board and a lot of companies. And yeah, for sure. Right. It's like on a, on a human level, it's pretty sad that a lot of folks are going to lose their jobs. And, um, you know, hopefully we'll, we'll rebound in a big way as it relates to instant needs. I think a lot more people are going to find it really hard to stay in business, especially the people that are today, which is, you know, a good majority that are thinking that this is not so bad, right? You know, we're going to, we're going to come out the other side of this, uh, really strong, or this is going to be over in a quarter or two and Harry, who knows it very much. You know, again, no one has a crystal ball. No one knows. Uh, you know, what's going to happen in the future. But, you know, my experience, I've seen that paranoid founders are usually the founders that win, right? The ultra paranoid, right? That are prepared for anything, right? Are usually the ones that win. And, you know, that's how we're treating it. We're, we're, we're ready for anything that, uh, uh…

AI assessment note: “any business across any industry that's not focused on profitability is cooked”

Q terms of like the unit economics being so good, as you mentioned, when you have increased marketing costs, like Bunny, we both know the space is getting more and more competitive when we're fighting for the consumer more and more, and we're going to see tax go up traditionally. It's just how the game works. How do you think about that and the impact of tax increasing, impacting unit econ?

A You know, we always said the best marketing is operations. If you deliver an incredible experience to customers, your customers will bring more customers. It's why it's a quarter. I think it's going to grow to 30% of customers this year come from in-app referral. So folks that are getting onto the platform, it's extremely cost effective, right? It's the lowest CAC you can get right outside of organic is kind of in-app referral. And that channel is growing as a percentage of our new customers because we're just getting better and better at delivering a really phenomenal experience and increasing GoPuff's use case. There's no secret, right? This business started as a college delivery service. College, while it's an important part of our business, Is in the low teens as a total percentage of our customers, and we've dramatically expanded the use case of what makes GoPup so special, right? We introduced alcohol, introduced pet and baby, over-the-counter medication, household, and we're going to continue to press on the innovation lever on introducing more and more products that are really, really important for our customers, right? We call it like this infant needs category. Delivering anything that anyone needs very, very fast, and while we only have relative, right, we have four and a half thousand SKUs per micro-fulfillment center, we don't have the massive tail of That a tradit…

AI assessment note: “the best marketing is operations. If you deliver an incredible experience to customers”

Q Is that the governing metric of success in your business, do you think? Or is it AOV? Or is it, what is the governing metric of success in your mind? And I know it's difficult to say, but if you were to pinpoint one,

A So the first thing is like none of it matters if you're not producing positive unit economics. So a market is not producing, you know, if you're not making, if you're making less If you're, you know, economics are negative, right? It, it really doesn't matter, right? On, on what, what you want to do, what you don't want. Like today, our focus is a little different than, you know, maybe the way that you want me to answer that question. Like when you're growing, right? You want, you want to do everything, right? You want to increase basket or you want to reduce costs. That's all right. The only way to, to, to deliver, you know, positive unit economics. Once a market is achieved, right? It's target unit economics where there's Four dollars positive on a per order basis, or we have markets that are doing eight or nine dollars positive on a per order basis. After that, the only thing that matters is volume, right? Because like you need to produce enough volume then in that city to cover your fixed cost. And so you're not positive on a gross margin basis. You're positive on an EBITDA basis. So the first step right in this business is, you know, deliver positive unit economics, right? And that's through, you know, starting with a healthy gross margin, right? So that means you had an underlying, you know, right built business, right? You have good vendor relations, you have the right d…

AI assessment note: “After that, the only thing that matters is volume”

Q Does it change your inventory? Do you think about, Hey, how do we introduce more? Uh, you know, we have pound land in the UK, I guess it'd be dollar general in the U S but like very much like very dollar centric products, which shine on that. It's a dollar each. Do you think about changing inventory in that way or not?

A Yeah, I've been studying a lot, uh, the past two recessions that have been happening in the U S and you know, what are the industries that Grew through recessions. Um, alcohol is particularly resistant to, uh, any effects of an economic downturn. I think people, you know, that's funny. We were joking. People, I think drink when they're happy or they drink when they're sad. Uh, I think the, the type of alcohol that's purchased, uh, during a recession is different, right? People are not going to be buying your two, 300 dollar price tag item, but they're going to be buying more of your 15, 20 dollar price point items. I actually don't think baskets are going to change from a dollar amount perspective, but the assortment inside of the basket is going to change, right? More of the kind of budget, uh, budget bottles, uh, but more quantity versus one kind of high ticket, high end item. So we've been leaning into alcohol, uh, in a really big way. Convenience also grew. Um, during the last recession, uh, you know, especially a few categories with inconvenience, vices do very well. So we've been focused on, you know, studying the trends of the two previous, it's the best data we have. I've never lived through a recession. The closest thing I've had, uh, to economic downside was on a micro basis, you know, because we didn't raise any money, uh, in the beginning. So we had to behave like w…

AI assessment note: “the assortment inside of the basket is going to change, right? More of the kind of budget”

Q Is that the governing metric of success in your business, do you think? Or is it AOV? Or is it, what is the governing metric of success in your mind? And I know it's difficult to say, but if you were to pinpoint one,

A So the first thing is like none of it matters if you're not producing positive unit economics. So a market is not producing, you know, if you're not making, if you're making less If you're, you know, economics are negative, right? It, it really doesn't matter, right? On, on what, what you want to do, what you don't want. Like today, our focus is a little different than, you know, maybe the way that you want me to answer that question. Like when you're growing, right? You want, you want to do everything, right? You want to increase basket or you want to reduce costs. That's all right. The only way to, to, to deliver, you know, positive unit economics. Once a market is achieved, right? It's target unit economics where there's Four dollars positive on a per order basis, or we have markets that are doing eight or nine dollars positive on a per order basis. After that, the only thing that matters is volume, right? Because like you need to produce enough volume then in that city to cover your fixed cost. And so you're not positive on a gross margin basis. You're positive on an EBITDA basis. So the first step right in this business is, you know, deliver positive unit economics, right? And that's through, you know, starting with a healthy gross margin, right? So that means you had an underlying, you know, right built business, right? You have good vendor relations, you have the right d…

AI assessment note: “none of it matters if you're not producing positive unit economics.”

Q I totally get you. Uh, final, final one, I promise. Has there been one investment have you disagreed with the board on making? And it doesn't mean there's like a board disagreement, but like, you know, board members have, I think we should focus on ads. I think we should focus on kitchens. I think we should focus on, has there been one where you've disagreed?

A I don't think this agreement probably is the wrong word, but you know, I think midpoint last year, there was a lot of conversation, not just with our board, but investors on how fast we should be moving in Europe. And a lot of folks were really pushing us to expand to Germany faster, uh, expand to other areas in Europe faster. And I'm really glad that we did it. So It wasn't, it wasn't very much a desire, it was more of a conversation than anything else on like, you know, how fast should we be moving in Europe and how many countries can we open up? Because like, it's, it's like, uh, yeah, it's funny, right? You, you do well, right. And you start producing results. You know, people are just like, you know, just keep replicating that, right. You get some pattern recognition, just keep replicating what you've been doing. Uh, but it's not always that simple, right. I'll just kind of continue to layer again. It doesn't match our, our core tonnet of nail it and scale it. So I think that's probably been the only one in the last year Where, you know, we've had conversations about how fast we should be moving in Europe, how much we're expanding. Obviously today, everyone's looking back and saying good that we did it and good that we're, we stayed focused. Again, in hindsight, probably should have had it a little bit more focused if we knew this was going to happen on a bull market basis…

AI assessment note: “a lot of folks were really pushing us to expand to Germany faster”

Q so I've run out of names already of, you know, baby good providers. But I'm sure there's many, and I'm sure they want to be number one on GoPuff's discovery. How do you think about paid product promotion? Because, you know, when you look at Amazon today, that paid search is a huge business for them. How do you think about that? And what are the internal discussions on that?

A You know, we created a group a few years ago called GoPuff Marketing Solutions for this exact need, right? Again, we have our consumer products, and then our CPG partners are our customers as well. And they were telling us about a breadth of We created some really, really amazing tech for our CPG partners to use and ultimately not just grow their share on GoPub, but grow their share nationally and regionally in the places that are really important for them as well. It's a place that we're investing a whole bunch of dollars, right? And the bulk of it is happening through kind of product innovation and really making sure we're listening to our CPG partners and then innovating ultimately in that regard as well. So really, really great relationships with kind of Unilever's, P&G's, Mars, Nestle's of the world. But we're also working with a lot of the local players that have like a one million dollar budget instead of, you know, a multi-billion dollar budget that said, hey, I'm not big nationally, but I'm an authority in Dallas, Texas. How do I grow my business here? So it's really important to kind of pull both of those levers.

AI assessment note: “we created a group a few years ago called GoPuff Marketing Solutions for this exact need”

Q competition I don't think served you well. I think, you know, the likes of local players in the UK made you go to the 10 minute delivery when, or try and do the 10 minute delivery when it wasn't optimal. It obviously increased cax for everyone. Do you actually think that this period will cause a lot of people to not be in business anymore and only the strong survive?

A I think any business across any industry that's not focused on profitability is cooked. And instant needs is no, um, is no exception. So I think, you know, I'll touch on your earlier point, right? It is An incredibly sad moment as a founder to have to say goodbye to people that you personally hired. That's going to happen kind of on a macro basis across the board and a lot of companies. And yeah, for sure. Right. It's like on a, on a human level, it's pretty sad that a lot of folks are going to lose their jobs. And, um, you know, hopefully we'll, we'll rebound in a big way as it relates to instant needs. I think a lot more people are going to find it really hard to stay in business, especially the people that are today, which is, you know, a good majority that are thinking that this is not so bad, right? You know, we're going to, we're going to come out the other side of this, uh, really strong, or this is going to be over in a quarter or two and Harry, who knows it very much. You know, again, no one has a crystal ball. No one knows. Uh, you know, what's going to happen in the future. But, you know, my experience, I've seen that paranoid founders are usually the founders that win, right? The ultra paranoid, right? That are prepared for anything, right? Are usually the ones that win. And, you know, that's how we're treating it. We're, we're, we're ready for anything that, uh, uh…

AI assessment note: “I think a lot more people are going to find it really hard to stay in business”

Q I totally get you. Uh, final, final one, I promise. Has there been one investment have you disagreed with the board on making? And it doesn't mean there's like a board disagreement, but like, you know, board members have, I think we should focus on ads. I think we should focus on kitchens. I think we should focus on, has there been one where you've disagreed?

A I don't think this agreement probably is the wrong word, but you know, I think midpoint last year, there was a lot of conversation, not just with our board, but investors on how fast we should be moving in Europe. And a lot of folks were really pushing us to expand to Germany faster, uh, expand to other areas in Europe faster. And I'm really glad that we did it. So It wasn't, it wasn't very much a desire, it was more of a conversation than anything else on like, you know, how fast should we be moving in Europe and how many countries can we open up? Because like, it's, it's like, uh, yeah, it's funny, right? You, you do well, right. And you start producing results. You know, people are just like, you know, just keep replicating that, right. You get some pattern recognition, just keep replicating what you've been doing. Uh, but it's not always that simple, right. I'll just kind of continue to layer again. It doesn't match our, our core tonnet of nail it and scale it. So I think that's probably been the only one in the last year Where, you know, we've had conversations about how fast we should be moving in Europe, how much we're expanding. Obviously today, everyone's looking back and saying good that we did it and good that we're, we stayed focused. Again, in hindsight, probably should have had it a little bit more focused if we knew this was going to happen on a bull market basis…

AI assessment note: “a lot of folks were really pushing us to expand to Germany faster”

Q I ask, how do the margin, ah, levels vary when comparing, you know, your most mature markets, your Philadelphia's, your strongest markets in the U.S., to your incredibly new markets, say in Europe, or any that you expand to? What does that margin, you said high thirties, low forties, is it like negative on the margin side and new? What does that variance look like? Just help me understand that.

A So it's, margin is not the only element to profitability, right? You, you need a healthy basket size, right? Because if you have, you take dollars to the bank, right? Not percentage points, right? So like, as an example, alcohol is our lowest gross margin percentage category, but our highest gross margin dollar category. Is baskets are much higher with, with alcohol baskets than alcohol baskets. So you rather lose a few percentage points on, on the gross margin percentage side and gain, you know, 10 or 15 dollars on the, on the basket size or overall, you know, the dollars that you bring to the dollars you bring home are much higher. So across the U S today, right? I'm going to exclude Europe, all the new markets that we expand into generally look very similar. Right. They start with a slightly slower basket size because there's kind of direct correlation between tenure and AOV. The longer you stay on the platform, the more you start ordering on, on GoPuff. In Europe, um, They're going to kind of focus on the UK for a second. Basket has grown a lot over the last two quarters, but it's still kind of double digits lower than what we see in the US when we were starting to market. So it's grown fast. Um, I think the number one focus we have in, in the UK specifically today is continuing to drive a higher basket. And I'll give all the credit, uh, to our teams over there. They've don…

AI assessment note: “margin is not the only element to profitability, right? You, you need a healthy basket”

Q before the show, um, wonderful, uh, wonderful conversation I had with him, but he told me about all the different avenues and products that you can build. And I'm fascinated. When you think about that and the question that we just had there, in this new, more capital-constrained, newer financial, like, plan world, how do you fundamentally prioritize between the initiatives you do do versus those that you don't do?

A A lot of products that you build in the product roadmap, uh, are things that are good for you or things that are good for the customer. And sometimes there's an overlap on things that are good for you. You meaning the team or the company, uh, and the customer meaning the customer. So sometimes there's an overlap. So being relentlessly focused, uh, I'm talking about like the consumer product team, as an example, being relentlessly focused on things that are only going to drive Kind of better consumer behavior. So whether it's better discovery or better basketball, and I'll tell you like a feature that we're launching, you know, that we, we've talked to a lot of customers and the feedback they get is, you know, place an order on GoPuff. And right after I place an order, I'm like. God, I forgot toothpaste or a light bulb or batteries, right? Immediately after I click the place order button. So we'll give people a chance, right? Two minutes post their order to continue to build their basket for anything that they want. Remind people, Hey, these are the items that you most frequently, most people most frequently forget, uh, after, after placing an order. So a lot of those kinds of features where we're really listening to the customers and like, I'm talking a bit now just from consumer product roadmap perspective. Uh, that we're really doubling and tripling down on. On the driver sid…

AI assessment note: “A lot of products that you build in the product roadmap, uh, are things that are good for you or things that are good for the customer.”

Q Couple of things I just want to touch on. I, I use GoPuff a lot. I'm not going to say how much, um, but, uh, I use GoPuff a lot and I've never seen the points and I, obviously I have them. Is that a product mistake of GoPuffs respectfully that I didn't know there was a point system and I didn't see the incentives respectfully?

A I'll tell you, we, we don't do as good of a job. Uh, I'm assuming Harry, you order most of your orders in the UK. Uh, we don't do as good of a job on the product side and on the point side, uh, from a priority perspective. They've been prioritizing, rightfully so, discovery in new categories rather than loyalty. Um, we're gonna have a more, there's some things that, from a copy and paste standpoint, didn't work from the US to Europe. Um, so we said, you know, we're gonna have a very, very local approach Assortment building, right? Like, you got, you had to build a very local assortment, uh, in market, uh, and I think we learned that the hard way when we just launched, uh, in, uh, in Europe for the first time. But there's some things that work really well on the global scale, and I think we should prioritize loyalty in, in Europe in a bigger way, the same way we do in the US. That's going to change over the next, throughout the end of the year, we're going to make that a lot more evident in our, specifically in our UK markets.

AI assessment note: “we don't do as good of a job on the product side and on the point side”

Q I ask, how do the margin, ah, levels vary when comparing, you know, your most mature markets, your Philadelphia's, your strongest markets in the U.S., to your incredibly new markets, say in Europe, or any that you expand to? What does that margin, you said high thirties, low forties, is it like negative on the margin side and new? What does that variance look like? Just help me understand that.

A So it's, margin is not the only element to profitability, right? You, you need a healthy basket size, right? Because if you have, you take dollars to the bank, right? Not percentage points, right? So like, as an example, alcohol is our lowest gross margin percentage category, but our highest gross margin dollar category. Is baskets are much higher with, with alcohol baskets than alcohol baskets. So you rather lose a few percentage points on, on the gross margin percentage side and gain, you know, 10 or 15 dollars on the, on the basket size or overall, you know, the dollars that you bring to the dollars you bring home are much higher. So across the U S today, right? I'm going to exclude Europe, all the new markets that we expand into generally look very similar. Right. They start with a slightly slower basket size because there's kind of direct correlation between tenure and AOV. The longer you stay on the platform, the more you start ordering on, on GoPuff. In Europe, um, They're going to kind of focus on the UK for a second. Basket has grown a lot over the last two quarters, but it's still kind of double digits lower than what we see in the US when we were starting to market. So it's grown fast. Um, I think the number one focus we have in, in the UK specifically today is continuing to drive a higher basket. And I'll give all the credit, uh, to our teams over there. They've don…

AI assessment note: “margin is not the only element to profitability, right? You, you need a healthy basket size”