The Exchanges

Q the metric that once you added, I think it was five friends. You were like a retained or an engaged user thinking about kind of order frequency and cohorts. How do you determine a retained go puff user? Is it three orders in a month, five in a year? A week. What is the frequency which shows you that you have a retained user with a behavioral change towards GoPuff?

A Yep. There's actually two ways to look at it. A customer that orders across three categories in their first order will spend 600 dollars more than that year than a customer that orders from one or two categories. So it's not just how, it's not just how frequent they order. It's what is the first time, the very first time they get them to go up, what is their shopping behavior? So are they coming into the, with the intent of, Hey, like, you know, I heard this place has really great ice cream. I'm going to buy a pint of ice cream. That customer on their first year will spend less money than a customer that comes and buys their ice cream and also buys a snack. And also buys some, some household items and maybe some medicine, right? More categories means significantly more spend that first year. So what we try to do, um, is, uh, breed better discovery on the first experience, right? Give a broader, uh, uh, broader kind of category, uh, discovery, right? When we, when you launch GoPuff, especially on the new time customer, And also we try to drive behavior to get to two orders in the first 14 days. That's really, really important. So like what you're seeing is that you have your biggest drop off from order one to order two. Then you have a smaller drop off from order two to order three. And once they get to the third order, They're our customer. They're not, they're not leaving. If …

AI assessment note: “Once they get to the third order, They're our customer.”

Q Final, final one for a quick fire and it's incredibly fast. So don't worry. Um, if you were to choose one competitor that you most admire, who would it be?

A You know, I think for us, since day one, when we, when we launched GoPub, we have a look, you know, almost in awe at Amazon, obviously. Like, I'm talking about not, not from, from the instant need space, but from a global e-commerce perspective. Everything that, that we saw from Amazon and Bezos, why we hired so many people from Amazon, is because we have an immense amount of respect for what they built, right? Specifically in the U S getting into any industry they see fit. And then, uh, for many years dominating in that industry, uh, was something that we drew a lot of inspiration from. So I think, you know, not even in our industry, I think it's probably the, the most complicated and amazing business in the world. And I think what they built from A logistical perspective and then, uh, expanding to new business units, right? Whether it's, uh, FBA or AWS, uh, is something that we take a lot of inspiration from as we launch our new businesses, right? Whether it's a group of ads or some of the new businesses we have brewing that are, that are launching in the next two quarters.

AI assessment note: “we have a look, you know, almost in awe at Amazon, obviously.”

Q What can you do to drive? What can you do to drive that into order?

A Instead of, instead of doing an incentive, right? You know, us, like many other e-commerce players used to do an incentive only off one order, right? All of our incentives now are, uh, value over time. Right. We built a gamification into our, into our platform where daily you could come in, you could spin the wheel, uh, get, uh, free puff points, uh, which can be then used for, for prizes. You can win things and spin the wheel, like, uh, you know, white claw sponsored a Tesla. So one customer is going to, is going to get a free Tesla, uh, or live nation tickets, uh, on a global scale to see their favorite artists. So like we give people a reason to keep coming back, even not to purchase, to just keep coming back in the app and utilize it. We built challenges within the map. So missions, uh, if you start a new order three times in a row, you get increased amount of, uh, Of, uh, of points, which then can be redeemed for prizes. And one of the single largest driving factors is we improved FAM tremendously. So we started the year with 11% of our subscribers being FAM customers. So FAM is our subscription program. Uh, two quarters later, 11% has now become 30%. So 30% now of our, of our ordering customers are FAM customers, and their behavior, especially if we get them on their first order, is widely different. Then customers that don't sign up to FAM, right? Whether it's the first,…

AI assessment note: “All of our incentives now are, uh, value over time.”

Q So my take was, you know, obviously I invested in Airlift. Um, my take was bluntly that as the cost of capital went up, Uh, capital intense, low margin, uh, businesses became more and more of a challenge for investors to finance. Would you agree with that summarization? Or would you say that's not, not fair to categorize our, our space as capital intense and low margin?

A If this business is done right, it's actually not a low margin business, right? So if you, if you set up your, your structure correctly, And you're buying correctly and your ads business is working correctly. And now we're launching a whole new host of businesses that, you know, I think they're going to improve our margin structure more. Our gross margin structure is actually among the best in, you know, if you categorize like a retail peers, instead of our tech peers, right? It's among the best, right? We have gross margin in the high thirties, low forties, depending on the region that you're in. And It's actually really, really healthy margins to operate a profitable business, especially on a unit level. Um, what I'll say, though, is a lot of people You know, I don't want to, I don't want to beat a dead horse here, but a lot of people, when they were expanding to city to city, they, they just weren't focused on, you know, how do we build really, really strong margin profile in the business, right? It's no question, right? Infrastructure is expensive, right? You have to, you have to build buildings, to set up racks, you need equipment, the whole nine yards, but the return on capital on this business and how fast these markets pay back is really, really incredible once you start humming correctly. Right. In the beginning, right. It took maybe a year or a year and a half for a b…

AI assessment note: “If this business is done right, it's actually not a low margin business”

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: “being relentlessly focused on things that are only going to drive Kind of better consumer behavior”

Q How does batching actually change the economics? To me, listening from the outside, I go, I, I see it, that makes sense, maybe a five, 10% difference, but it doesn't, like, make an inherently unsustainable business suddenly sustainable. How does batching actually change the economics, just to help me understand that?

A So you need a lot less drivers when you batch to fulfill a lot more deliveries. So your cost on a per order basis, it's actually not a 10 or 15% swing. You know, in a market that has a high ODH, the amount of orders a driver could fulfill an hour, versus a market that has a weak ODH, the cost difference on the variable cost side could be as high as 50%. Right. So it's a, it's a massive difference of like, you know, a Metro that looked good or a Metro that doesn't look good. And generally speaking in our business, a Metro that doesn't look good is a new Metro, right? Because it doesn't have enough orders yet on a per day basis where you can effectively batch because batching only works well is if enough orders are coming in or the system can predict enough orders are going to about to come in and the same two or three square block radius Of a given city or neighborhood or wherever that MFC is placed. So if you're going to able to, you know, with a high degree of confidence predict that, hey, an order came in, the next two, three minutes, wait to send that order out. Next two to three minutes, another order is going to come in within that same block, or, you know, in a really good city, orders are just flying in, right? Right? They're doing, you know, five, six, seven, 800 orders a day, right? You don't even have that problem anymore, right? The system is just kind of working in …

AI assessment note: “cost difference on the variable cost side could be as high as 50%”

Q the metric that once you added, I think it was five friends. You were like a retained or an engaged user thinking about kind of order frequency and cohorts. How do you determine a retained go puff user? Is it three orders in a month, five in a year? A week. What is the frequency which shows you that you have a retained user with a behavioral change towards GoPuff?

A Yep. There's actually two ways to look at it. A customer that orders across three categories in their first order will spend 600 dollars more than that year than a customer that orders from one or two categories. So it's not just how, it's not just how frequent they order. It's what is the first time, the very first time they get them to go up, what is their shopping behavior? So are they coming into the, with the intent of, Hey, like, you know, I heard this place has really great ice cream. I'm going to buy a pint of ice cream. That customer on their first year will spend less money than a customer that comes and buys their ice cream and also buys a snack. And also buys some, some household items and maybe some medicine, right? More categories means significantly more spend that first year. So what we try to do, um, is, uh, breed better discovery on the first experience, right? Give a broader, uh, uh, broader kind of category, uh, discovery, right? When we, when you launch GoPuff, especially on the new time customer, And also we try to drive behavior to get to two orders in the first 14 days. That's really, really important. So like what you're seeing is that you have your biggest drop off from order one to order two. Then you have a smaller drop off from order two to order three. And once they get to the third order, They're our customer. They're not, they're not leaving. If …

AI assessment note: “And once they get to the third order, They're our customer.”

Q Final, final one for a quick fire and it's incredibly fast. So don't worry. Um, if you were to choose one competitor that you most admire, who would it be?

A You know, I think for us, since day one, when we, when we launched GoPub, we have a look, you know, almost in awe at Amazon, obviously. Like, I'm talking about not, not from, from the instant need space, but from a global e-commerce perspective. Everything that, that we saw from Amazon and Bezos, why we hired so many people from Amazon, is because we have an immense amount of respect for what they built, right? Specifically in the U S getting into any industry they see fit. And then, uh, for many years dominating in that industry, uh, was something that we drew a lot of inspiration from. So I think, you know, not even in our industry, I think it's probably the, the most complicated and amazing business in the world. And I think what they built from A logistical perspective and then, uh, expanding to new business units, right? Whether it's, uh, FBA or AWS, uh, is something that we take a lot of inspiration from as we launch our new businesses, right? Whether it's a group of ads or some of the new businesses we have brewing that are, that are launching in the next two quarters.

AI assessment note: “we have a look, you know, almost in awe at Amazon, obviously.”

Q amazed by that. But anyway, uh, flowing into the space, and it's a very different landscape today. Capital's dried up across the board, but especially in this space, um, we've seen businesses go bust in the space, uh, many. Um, I wanted to just start with a little bit of why. Why do you think That capital has dried up specifically for this space, and what are the core drivers?

A You know, I think, uh, Harry, capital markets have not been friendly for any growth companies over the last, uh, I would say two to three quarters, but we're talking about instant needs specifically. You know, we say this all the time, uh, Ikir and I, when you're starting a business as complicated as our business, right, where you have so much technological needs, supply chain needs, Logistical needs where you really need to nail it before you scale it. You have to really focus on the inner crux of your business, the infrastructure of your business before really expanding in a very big way. And that's what we did for our first couple of years. We spent a lot of time building the technology inside of the four walls of the building, building operational excellence, and then really scaling the business by, you know, proving that we can deliver really strong unit economics. Pretty much everyone else in the instant need space from across the globe had the opposite strategy. You know, all we need to do is open up a whole host of buildings. We'll figure out the tech later. We'll figure out the operational excellence later. We don't have a supply chain set up. It's fine. We'll figure it out later. So it was scale it, then nail it strategy. And you know, when The capital market started getting more constricted. They realized their underlying business isn't all that strong, right? They'r…

AI assessment note: “They realized their underlying business isn't all that strong, right? They're not producing really strong unit economics.”

Q Can I ask, you know, given what we said about kind of the capital availability for the space itself, um, is this a race to profitability now for everyone surviving in the space?

A I think any company in any space that's not thinking about profitability right now and is not focused on profitability, there's a higher chance they're not that the, these companies will probably not exist in the next year or year and a half. I mean, no matter how strong your balance sheet is, because you know, no one, no, no one has a crystal ball. No one knows how long this is going to last. No one knows how long the capital markets are going to continue to stay depressed. And the reality is, I can speak for us, you know, we built a new financial model that's completely self-funded. Right. One that doesn't require any more outside capital. One that only looks on our balance sheet. And by the way, it's not one where we said, Hey, we're going to cut all costs completely. We're going to stop innovation completely. We could be profitable even faster, but you know, you want still somewhat of a balance of being able to continue to grow, continue to innovate, right? Like our kitchens business, for example, is crushing. Every week is a record from the week prior, right? We want to continue to invest into that business. Because it's doing well, but we're not going to invest how we used to invest, right? We're not going to be opening up, you know, two or three dozen buildings a month, right? That have kitchens. So it's a balance between, um, you know, driving really strong EBITDA and s…

AI assessment note: “any company in any space that's not thinking about profitability right now... will probably not exist”

Q How does batching actually change the economics? To me, listening from the outside, I go, I, I see it, that makes sense, maybe a five, 10% difference, but it doesn't, like, make an inherently unsustainable business suddenly sustainable. How does batching actually change the economics, just to help me understand that?

A So you need a lot less drivers when you batch to fulfill a lot more deliveries. So your cost on a per order basis, it's actually not a 10 or 15% swing. You know, in a market that has a high ODH, the amount of orders a driver could fulfill an hour, versus a market that has a weak ODH, the cost difference on the variable cost side could be as high as 50%. Right. So it's a, it's a massive difference of like, you know, a Metro that looked good or a Metro that doesn't look good. And generally speaking in our business, a Metro that doesn't look good is a new Metro, right? Because it doesn't have enough orders yet on a per day basis where you can effectively batch because batching only works well is if enough orders are coming in or the system can predict enough orders are going to about to come in and the same two or three square block radius Of a given city or neighborhood or wherever that MFC is placed. So if you're going to able to, you know, with a high degree of confidence predict that, hey, an order came in, the next two, three minutes, wait to send that order out. Next two to three minutes, another order is going to come in within that same block, or, you know, in a really good city, orders are just flying in, right? Right? They're doing, you know, five, six, seven, 800 orders a day, right? You don't even have that problem anymore, right? The system is just kind of working in …

AI assessment note: “the cost difference on the variable cost side could be as high as 50%”

Q Can I ask, before we touch on kind of leadership through more macro challenging times, um, we said we're friendlies and so we can do this, but I'm just, I was interested. Why did you pull out of Spain?

A I don't think we should ever launch Spain. This is like, Harry, me being very, very honest with you. Uh, we got into Spain via the Deja acquisition, and We probably should have pulled out immediately instead of waiting to pull out. I think as a, as a founder, uh, when you're in the midst of a bull market and everything is going great and your core us business is rocking and, you know, things are just piling on top of each other. Good things I'm talking about piling on top of each other. And everyone is telling you to do more, right? Because you've shown a massive track record of operational excellence. Um, you kind of get, uh, this idea that you can take on more than you should take on. And we've always had a nail it then scale it mentality. And Spain was a scale it then nail it strategy, right? We should have, what we really should have done in, in Europe is we should have owned the UK, right? We're now like, I think, 25% market share in the UK and instant needs. You know, that in the next two months will be in the low to mid thirties, right? And we're going to continue to grow and kind of dominate, dominate there. We should have become the number one player in the UK, only UK then expanded to our next country. I mean, that's what we did in the U S as we continue to kind of expand throughout States. We used to own a market, entirely own a market, kill everybody in there and th…

AI assessment note: “Spain was a scale it then nail it strategy, right?”

Q Uh, listen, I'm going to do a quick fire round, which means you're screwed if we do it too. Tequila shot, but, um, uh, so I say a short statement, you give me your immediate thoughts. What gets harder and what gets easier with scale?

A What gets harder, you know, is managing people and culture, right? You have to be even more transparent, and you have to spend, uh, an even bigger time with your team to make sure that everyone has the same vision and understanding we're going through. It gets easier, right? At least for us, we don't have to live in warehouses anymore. So, uh, so I think just living accommodations got easier for, for Kira and I. I think all jokes aside, right? Um, it's a different kind of hard work. Kira and I still spend a day in the week inside of the MFC every single week, right? We travel to a new MFC and we visit it. So I think it's a core and important part of who we are. Uh, but you know, the physical labor gets easier. The mental labor gets a lot harder.

AI assessment note: “the physical labor gets easier. The mental labor gets a lot harder.”

Q amazed by that. But anyway, uh, flowing into the space, and it's a very different landscape today. Capital's dried up across the board, but especially in this space, um, we've seen businesses go bust in the space, uh, many. Um, I wanted to just start with a little bit of why. Why do you think That capital has dried up specifically for this space, and what are the core drivers?

A You know, I think, uh, Harry, capital markets have not been friendly for any growth companies over the last, uh, I would say two to three quarters, but we're talking about instant needs specifically. You know, we say this all the time, uh, Ikir and I, when you're starting a business as complicated as our business, right, where you have so much technological needs, supply chain needs, Logistical needs where you really need to nail it before you scale it. You have to really focus on the inner crux of your business, the infrastructure of your business before really expanding in a very big way. And that's what we did for our first couple of years. We spent a lot of time building the technology inside of the four walls of the building, building operational excellence, and then really scaling the business by, you know, proving that we can deliver really strong unit economics. Pretty much everyone else in the instant need space from across the globe had the opposite strategy. You know, all we need to do is open up a whole host of buildings. We'll figure out the tech later. We'll figure out the operational excellence later. We don't have a supply chain set up. It's fine. We'll figure it out later. So it was scale it, then nail it strategy. And you know, when The capital market started getting more constricted. They realized their underlying business isn't all that strong, right? They'r…

AI assessment note: “They realized their underlying business isn't all that strong, right? They're not producing really strong unit economics.”

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: “You gotta, ah, hire taller faster.”

Q Can I ask, you know, given what we said about kind of the capital availability for the space itself, um, is this a race to profitability now for everyone surviving in the space?

A I think any company in any space that's not thinking about profitability right now and is not focused on profitability, there's a higher chance they're not that the, these companies will probably not exist in the next year or year and a half. I mean, no matter how strong your balance sheet is, because you know, no one, no, no one has a crystal ball. No one knows how long this is going to last. No one knows how long the capital markets are going to continue to stay depressed. And the reality is, I can speak for us, you know, we built a new financial model that's completely self-funded. Right. One that doesn't require any more outside capital. One that only looks on our balance sheet. And by the way, it's not one where we said, Hey, we're going to cut all costs completely. We're going to stop innovation completely. We could be profitable even faster, but you know, you want still somewhat of a balance of being able to continue to grow, continue to innovate, right? Like our kitchens business, for example, is crushing. Every week is a record from the week prior, right? We want to continue to invest into that business. Because it's doing well, but we're not going to invest how we used to invest, right? We're not going to be opening up, you know, two or three dozen buildings a month, right? That have kitchens. So it's a balance between, um, you know, driving really strong EBITDA and s…

AI assessment note: “any company in any space that's not thinking about profitability right now”

Q And what's the core differences between the old financial plan and the new financial plan you mentioned? What are the big changes?

A It's less buildings. Um, so what, what drives, you know, on a unit level, you could be really proud. So if you look at like on a, on a metro basis, all of our existing metros are producing, you know, cash flow. So you have your, your call calling your cash cows, right? Philadelphia, Chicago's, uh, Boston's, Miami's, uh, all of our Texas markets of the world that are, are producing cash flow. Uh, but you have a lot of new markets that need time to get first to unit economic profitability, then EBITDA profitability. So if you continue to open up markets, you're going to continue to have You know, an existing business that produces free cash flow, but, uh, a new business, right? This emerging business that's still, uh, requiring investment and causing the overall picture to be negative, right? I'm talking about the, the overall, uh, uh, EBITDA picture. So for us, that meant, you know, opening up significantly less buildings. So, you know, less, less kind of fixed costs out the door, not focusing on initiatives, Um, that are, you know, might be good for tomorrow, but you know, not so good for today. Like I'll, I'll give you one that hits kind of close to home. We launched a pharmacy business, uh, in Philadelphia. We're actually delivering prescription drugs to folks. And I love that business. And it's one that I think we'll come back to one day, but we just said, Hey, man, you know…

AI assessment note: “It's less buildings.”

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: “I actually don't think baskets are going to change... but the assortment inside of the basket is going to change”

Q Can I ask, before we touch on kind of leadership through more macro challenging times, um, we said we're friendlies and so we can do this, but I'm just, I was interested. Why did you pull out of Spain?

A I don't think we should ever launch Spain. This is like, Harry, me being very, very honest with you. Uh, we got into Spain via the Deja acquisition, and We probably should have pulled out immediately instead of waiting to pull out. I think as a, as a founder, uh, when you're in the midst of a bull market and everything is going great and your core us business is rocking and, you know, things are just piling on top of each other. Good things I'm talking about piling on top of each other. And everyone is telling you to do more, right? Because you've shown a massive track record of operational excellence. Um, you kind of get, uh, this idea that you can take on more than you should take on. And we've always had a nail it then scale it mentality. And Spain was a scale it then nail it strategy, right? We should have, what we really should have done in, in Europe is we should have owned the UK, right? We're now like, I think, 25% market share in the UK and instant needs. You know, that in the next two months will be in the low to mid thirties, right? And we're going to continue to grow and kind of dominate, dominate there. We should have become the number one player in the UK, only UK then expanded to our next country. I mean, that's what we did in the U S as we continue to kind of expand throughout States. We used to own a market, entirely own a market, kill everybody in there and th…

AI assessment note: “we got into Spain via the Deja acquisition, and We probably should have pulled out immediately”

Q Is this an acquisition opportunity for you with many of these players really looking for access? We've seen them looking for access. We're both in the business. We've seen them shopping around and their brokers shopping around. Is this one where you're like, actually, we have a real opportunity to buy something at a good price here that wouldn't be around without us buying them?

A You know, yes and no. Um, and the reason being is like, it's such a massive distraction to integrate a shitty business. Uh, and, uh, you know, some, some of these businesses have a decent amount of customers and it just makes sense to, to think about acquiring them for the user base. Right. Which is very different than, you know, in our business, the logistical tech logistical business, um, To acquire a business that, you know, doesn't have really good infrastructure. It doesn't have really good tech. You have to scrap everything. You have to integrate your systems. You go into their buildings, their buildings are, you know, they're trash, right? They're not big enough, or they have the wrong equipment and they're set up all incorrect. Like the, the distraction of, of having to do this, it, the juice is just not worth the squeeze, you know, nine out of 10 times, but at one out of 10, Right. Where you had a really strong founder or a group of founders and. Are very hungry. They're really focused on building the right kind of business. It's worth looking at. We saw that in DJ, we saw that in fancy where, you know, not necessarily the businesses were very big or strong, but the founders were so good and they matched our values so well that it just made sense to integrate. Now today, uh, in today's environment, we're, we're being very, very picky, right? I'm bringing on businesses …

AI assessment note: “You know, yes and no. Um, and the reason being is like, it's such a massive distraction”

Q Not at all, but I do want to start, you know, we see the meteoric rise of GoPuff over the last few years. I want to go back to the beginning a little bit and set some context. So what was that aha founding moment for you with GoPuff?

A You know, we were young, man. We were in 19 years old when we thought of the business of Kira and I, and essentially Kira was GoPuff one point out. He was always driving us around everywhere. Kira, can we get snacks? Kira, can we get Drinks. What can we do to kind of make sure we can utilize each other in all aspects of our lives? Because he's the only guy with the car. And we realized that there's two pretty big problems. Stores were not so convenient. On-demand delivery services were on demand, and Akira's not very scalable. So we thought about how do we rethink this problem? How do we redo it? And the initial idea was very different than what else was out there, right? We said, instead of partnering with folks and kind of creating this third-party marketplace, The only way to effectively solve this problem for both consumers, which is first and foremost, and then ultimately unit economics, is by vertically integrating. So owning the entire experience end-to-end, owning the micro-fulfillment centers, the inventory, and everything in between. And Ari, I gotta tell you, in 2013, that wasn't a very beloved idea.

AI assessment note: “Akira was not very scalable. So we thought about how do we rethink this”

Q Not at all, but I do want to start, you know, we see the meteoric rise of GoPuff over the last few years. I want to go back to the beginning a little bit and set some context. So what was that aha founding moment for you with GoPuff?

A You know, we were young, man. We were in 19 years old when we thought of the business of Kira and I, and essentially Kira was GoPuff one point out. He was always driving us around everywhere. Kira, can we get snacks? Kira, can we get Drinks. What can we do to kind of make sure we can utilize each other in all aspects of our lives? Because he's the only guy with the car. And we realized that there's two pretty big problems. Stores were not so convenient. On-demand delivery services were on demand, and Akira's not very scalable. So we thought about how do we rethink this problem? How do we redo it? And the initial idea was very different than what else was out there, right? We said, instead of partnering with folks and kind of creating this third-party marketplace, The only way to effectively solve this problem for both consumers, which is first and foremost, and then ultimately unit economics, is by vertically integrating. So owning the entire experience end-to-end, owning the micro-fulfillment centers, the inventory, and everything in between. And Ari, I gotta tell you, in 2013, that wasn't a very beloved idea.

AI assessment note: “essentially Kira was GoPuff one point out. He was always driving us around everywhere.”

Q So my take was, you know, obviously I invested in Airlift. Um, my take was bluntly that as the cost of capital went up, Uh, capital intense, low margin, uh, businesses became more and more of a challenge for investors to finance. Would you agree with that summarization? Or would you say that's not, not fair to categorize our, our space as capital intense and low margin?

A If this business is done right, it's actually not a low margin business, right? So if you, if you set up your, your structure correctly, And you're buying correctly and your ads business is working correctly. And now we're launching a whole new host of businesses that, you know, I think they're going to improve our margin structure more. Our gross margin structure is actually among the best in, you know, if you categorize like a retail peers, instead of our tech peers, right? It's among the best, right? We have gross margin in the high thirties, low forties, depending on the region that you're in. And It's actually really, really healthy margins to operate a profitable business, especially on a unit level. Um, what I'll say, though, is a lot of people You know, I don't want to, I don't want to beat a dead horse here, but a lot of people, when they were expanding to city to city, they, they just weren't focused on, you know, how do we build really, really strong margin profile in the business, right? It's no question, right? Infrastructure is expensive, right? You have to, you have to build buildings, to set up racks, you need equipment, the whole nine yards, but the return on capital on this business and how fast these markets pay back is really, really incredible once you start humming correctly. Right. In the beginning, right. It took maybe a year or a year and a half for a b…

AI assessment note: “If this business is done right, it's actually not a low margin business”

Q Clearly did something brilliantly right the first time. I want to start for those that maybe missed the first show, which is a little bit of context, you know, two to three minutes. How did you come to start GoPuff? And what was that founding moment?

A You know, Harry, it's kind of crazy. It's been almost 10 years, right? We've been at this for a decade, which is a little, a little crazy, but GoPuff started by solving our own use case, right? Kira and I were college students who, You know, realize there's a pretty big need in the market, right? Everyone was going to the convenience store, the drug store to pick up everything they needed. And that experience as a student wasn't always very safe and it wasn't always great. Everyone was always busy. Then we said, you know, why doesn't anyone stock and deliver all these goods, uh, to students kind of across the country, right? And we could start this in Philadelphia and You know, we had a little bit of an unorthodox start, start, as you know, Harry, we didn't raise money for our first three years. Uh, we were kind of profitable from day one, uh, used the profits from Philadelphia, right? And back then GoPuff was a different service, right? You know, today we're 5000 items. Back then we were a hundred to 200 items, snacks, drinks. Uh, and we use the profits that we had from that kind of early GoPuff one point O to expand to five cities until we raised our first round. And then Gupov really started changing, right? Alcohol, ice cream, vert counter medication, baby, pets, this kitchens business that we have, all these new verticals to now where we are today, you know, uh, over a tho…

AI assessment note: “GoPuff started by solving our own use case”

Q What can you do to drive? What can you do to drive that into order?

A Instead of, instead of doing an incentive, right? You know, us, like many other e-commerce players used to do an incentive only off one order, right? All of our incentives now are, uh, value over time. Right. We built a gamification into our, into our platform where daily you could come in, you could spin the wheel, uh, get, uh, free puff points, uh, which can be then used for, for prizes. You can win things and spin the wheel, like, uh, you know, white claw sponsored a Tesla. So one customer is going to, is going to get a free Tesla, uh, or live nation tickets, uh, on a global scale to see their favorite artists. So like we give people a reason to keep coming back, even not to purchase, to just keep coming back in the app and utilize it. We built challenges within the map. So missions, uh, if you start a new order three times in a row, you get increased amount of, uh, Of, uh, of points, which then can be redeemed for prizes. And one of the single largest driving factors is we improved FAM tremendously. So we started the year with 11% of our subscribers being FAM customers. So FAM is our subscription program. Uh, two quarters later, 11% has now become 30%. So 30% now of our, of our ordering customers are FAM customers, and their behavior, especially if we get them on their first order, is widely different. Then customers that don't sign up to FAM, right? Whether it's the first,…

AI assessment note: “All of our incentives now are, uh, value over time.”

Q NetSuite product or Salesforce stays the same, you might not have the same cadence of innovation of product, but when you cut cost here in our businesses, you really feel it, and then it creates this negative flywheel effect where In most of those other services, I don't use them anymore, because it's so shit across those three dimensions. Do you see what I mean, and does that concern you?

A Yep. So, it absolutely, uh, concerns us, and, uh, probably not in the way that you're, you're thinking about it. It's, I think, you know, looking back and being a little critical on ourselves, like, GoPro was never built to be a 10 or 15 minute delivery service. And I think because the consumer on a global scale, right, I'm talking outside the U.S., right, we're focused on the U.K. for a second. In the U.K., the consumer was almost taught that 10 or 15 minute delivery is a norm. Maybe in somewhat, in New York, that was the case too. And that's not a sustainable business model. Any stretch of the imagination. The reason why it's not sustainable predominantly is because you can't batch orders, right? What makes, uh, you know, a group of orders really, really profitable is if a driver can leave with two, three, four orders at once and still deliver it quickly. So what we learned from on the consumer side, uh, I'm talking about the, the U S business, and I think it translates really well on a global scale too, is People don't necessarily want a really fast delivery. They want a really consistent delivery. So they read that really have like a 30 minute average with, you know, a seven, eight minute deviation, then like a 20 minute average with a 15 minute deviation, right? Where, you know, there's an inconsistency in delivery. And that's kind of been our go to for Yeah. Five, six, se…

AI assessment note: “Yep. So, it absolutely, uh, concerns us”

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 NetSuite product or Salesforce stays the same, you might not have the same cadence of innovation of product, but when you cut cost here in our businesses, you really feel it, and then it creates this negative flywheel effect where In most of those other services, I don't use them anymore, because it's so shit across those three dimensions. Do you see what I mean, and does that concern you?

A Yep. So, it absolutely, uh, concerns us, and, uh, probably not in the way that you're, you're thinking about it. It's, I think, you know, looking back and being a little critical on ourselves, like, GoPro was never built to be a 10 or 15 minute delivery service. And I think because the consumer on a global scale, right, I'm talking outside the U.S., right, we're focused on the U.K. for a second. In the U.K., the consumer was almost taught that 10 or 15 minute delivery is a norm. Maybe in somewhat, in New York, that was the case too. And that's not a sustainable business model. Any stretch of the imagination. The reason why it's not sustainable predominantly is because you can't batch orders, right? What makes, uh, you know, a group of orders really, really profitable is if a driver can leave with two, three, four orders at once and still deliver it quickly. So what we learned from on the consumer side, uh, I'm talking about the, the U S business, and I think it translates really well on a global scale too, is People don't necessarily want a really fast delivery. They want a really consistent delivery. So they read that really have like a 30 minute average with, you know, a seven, eight minute deviation, then like a 20 minute average with a 15 minute deviation, right? Where, you know, there's an inconsistency in delivery. And that's kind of been our go to for Yeah. Five, six, se…

AI assessment note: “it absolutely, uh, concerns us, and, uh, probably not in the way that you're”

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 Final one. What do the next five years hold for you and for GoPuff? Just how big could this be?

A Now, Harry, this is like a generational opportunity for us. We were saying that in 2013, we had, I think, all the opportunities in the world to exit this business along the years. It's not even something that we frankly entertained or considered. Our TAM globally is massive, right? It's over 10 trillion right now and growing, right? We're expanding into multiple categories. That's not only great for the customer, but also increasing our TAM exponentially. And I think this business over the next five years is a multi-hundred billion dollar business. And got a long way to go and a lot to build, but we're really pressing on the accelerator and moving in a very aggressive fashion as a byproduct.

AI assessment note: “over the next five years is a multi-hundred billion dollar business”