The Exchanges

Q Okay, so that makes total sense. That's absolutely fascinating. God, I'm loving this, Ralph. I was like, that's on the, like, labor, uh, Costing side. When you look at the real estate costing side and on the micro fulfillment and the warehouses, how does that cost structure differ when comparing, say, Mexico to markets in the US?

A Yeah, so in Mexico, our average lease cost for the type of warehouses that we are leasing is in between the 3000 to 5000 US dollars per month, which is obviously a fraction of what we would pay in the United States, where lease costs are then rather in between the 15 to 20,000 US dollars per month. However, with the Higher contribution margins. And again, coming back to the contribution margins after cost of picking and after cost of delivery that are for Latin America and the United States in between the five to five for Latin America to 10 US dollar type of contribution margin per order at scale for any of the hubs at maturity that we are in. You can then easily calculate how many orders we would need on a monthly basis to break even on the respective lease costs in any of the given areas. So if we have, let's take the higher amount for a country like Mexico and Brazil of approximately 5000 US dollars per store per month at a five US dollar contribution margin, we would need 1000 orders per month in order to break even on the actual lease cost. And in our most mature hubs in Latin America, we are already generating 500 orders per hub, whereas we would only need 1000 per month in order to break even on the actual lease cost. So we're already in a situation in Most of our Latin American cities and geographies that we're in, where we are either close to breakeven on the actual l…

AI assessment note: “in Mexico, our average lease cost... is in between the 3000 to 5000 US dollars”

Q What would move the needle in bringing down your delivery and picking costs?

A Moving the needle would be, uh, reaching like just further scale in every single neighborhood that we're in. Uh, at this point of time, we just started operations across our, like, 200 areas, 200 neighborhoods in which we're in, as you know, about a year ago. We know from our previous experiences, uh, as part of Foodpanda Delivery Hero, uh, that scale moves the needle. If we, uh, reach a business volume and the penetration in each of our neighborhoods that is twice as high as it is today, I think we can increase delivery efficiency by another 50%. I think, um, with increasing, um, order density and with increasing, uh, penetration and scale, um, you create yourself the ability for order stacking as well, which we're not leveraging at this point of time. At this point of time, every delivery writer goes to the customer returns to the hub and waits for the next order to arrive. Um, so order stacking, increasing penetration, increasing scale and warehouse automation, um, are potentially three. Of the most important, uh, levers in order to, um, increase the delivery efficiency even further.

AI assessment note: “Moving the needle would be, uh, reaching like just further scale”

Q What would move the needle in bringing down your delivery and picking costs?

A Moving the needle would be, uh, reaching like just further scale in every single neighborhood that we're in. Uh, at this point of time, we just started operations across our, like, 200 areas, 200 neighborhoods in which we're in, as you know, about a year ago. We know from our previous experiences, uh, as part of Foodpanda Delivery Hero, uh, that scale moves the needle. If we, uh, reach a business volume and the penetration in each of our neighborhoods that is twice as high as it is today, I think we can increase delivery efficiency by another 50%. I think, um, with increasing, um, order density and with increasing, uh, penetration and scale, um, you create yourself the ability for order stacking as well, which we're not leveraging at this point of time. At this point of time, every delivery writer goes to the customer returns to the hub and waits for the next order to arrive. Um, so order stacking, increasing penetration, increasing scale and warehouse automation, um, are potentially three. Of the most important, uh, levers in order to, um, increase the delivery efficiency even further.

AI assessment note: “Moving the needle would be, uh, reaching like just further scale in every single neighborhood”

Q Investors always have misconceptions. We always think we're smarter than we are. What do you wish investors knew or saw about the model that you find across the general investor base they don't?

A I think the general investor base Investors should look into a traditional P&L of a traditional supermarket or traditional offline retailer. An investor should look into the P&L and also the unit economics of one of these like most successful online marketplace companies, which are purely working on third party supply. One compare that against the P&L that we're having. There's certain metrics that investors can look into. If we compare ourselves against an offline retailer, we yield a significantly higher revenue per square feet. Of like any retail or like retail space type of infrastructure than they do. We yield at maturity three times higher revenue per square feet as in Whole Foods, which is an incredibly professional and incredibly beautiful company. But even though in terms of the real estate element of our business, and we talked about the lease cost and so on, we generate a three times higher revenue per square feet than a traditional retailer. We have the ability to procure more local, more direct, More data driven because we know our customers and we know what they're ordering and what they're ordering. So we can bring down inventory losses, which are baked into our product margin. So our ability to drive the more positive gross margin than offline supermarkets is significantly higher. So even, and we run on an SG&A structure on a people cost structure that is signif…

AI assessment note: “We yield at maturity three times higher revenue per square feet as in Whole Foods”

Q Okay, so that makes total sense. That's absolutely fascinating. God, I'm loving this, Ralph. I was like, that's on the, like, labor, uh, Costing side. When you look at the real estate costing side and on the micro fulfillment and the warehouses, how does that cost structure differ when comparing, say, Mexico to markets in the US?

A Yeah, so in Mexico, our average lease cost for the type of warehouses that we are leasing is in between the 3000 to 5000 US dollars per month, which is obviously a fraction of what we would pay in the United States, where lease costs are then rather in between the 15 to 20,000 US dollars per month. However, with the Higher contribution margins. And again, coming back to the contribution margins after cost of picking and after cost of delivery that are for Latin America and the United States in between the five to five for Latin America to 10 US dollar type of contribution margin per order at scale for any of the hubs at maturity that we are in. You can then easily calculate how many orders we would need on a monthly basis to break even on the respective lease costs in any of the given areas. So if we have, let's take the higher amount for a country like Mexico and Brazil of approximately 5000 US dollars per store per month at a five US dollar contribution margin, we would need 1000 orders per month in order to break even on the actual lease cost. And in our most mature hubs in Latin America, we are already generating 500 orders per hub, whereas we would only need 1000 per month in order to break even on the actual lease cost. So we're already in a situation in Most of our Latin American cities and geographies that we're in, where we are either close to breakeven on the actual l…

AI assessment note: “in Mexico, our average lease cost... is in between the 3000 to 5000”

Q In as many markets as possible, or you have the choice to focus on unit economics and make that payback period as fast as possible, make AOVs as high as possible, and really make the core zones profitable zones. How do you balance between growth at all costs, and not all costs, but, you know, a priority towards growth, or a priority towards make zones profitable as soon as possible?

A Yeah, so that's a very good question. So first and foremost, and just Coming back to what I said at the very, very beginning, there are very, very strong secular trends out there. There's a strong demand for a better, a more personalized, a more convenient, a faster online grocery offering out there. So there's demand out there, and we're capturing that demand. And already more than 50% of our new customers are generated by us organically. They're coming to us through word of mouth, Through organic referrals or basically other type of, like, organic channels that we've opened up. So more than 50% of our new customer growth is organic, free of charge, without any marketing. So that growth we have anyway. In addition to that, we are tailoring marketing campaigns, complementary marketing campaigns to the organic growth that we are seeing to adjust for the most efficient way of growing our business. So we're putting already most marketing dollars where we have already established The most efficient procurement capabilities and delivery infrastructure, and where we already have been able to have a high quality type of assortment available to our customers. So marketing spend is already adjusted towards those cities and those geographies where we have created ourselves the strongest ability to yield positive unit economics, and we will keep on doing so. So we think that in our busine…

AI assessment note: “strong growth and positive unit economics are not a contradiction”

Q Ralph, hit me. What's your thoughts on the biggest challenges?

A I think from, from our perspective, um, the two main challenges and they influence each other. On the one hand side, and Adit said so rightfully, customers expect you to have a very comprehensive supermarket assortment. Customers do not look at us as basically a convenience on demand type of service, just for like top up purchases or so. They're looking at us. They expect us to have a comprehensive assortment from fresh to packaged food to convenience articles to basically everything that a supermarket or hypermarket could offer. And that's because of the low penetration that we talked about. So there's a high demand from the customer side with regards to the assortment. Which is a higher demand than, uh, what we have seen with, uh, basically, uh, similar players in, I don't know, markets such as, uh, Europe or in the U S on the flip side. It's significantly more challenging to resolve on that assortment because you can't rely on existing distributors. You can't rely on partnerships with existing supermarkets because they do not work very efficiently. They can't replenish that flexibly, uh, and that frequently and that dynamically. So you have to build a lot of that assortment or a lot of that procurement and supply chain infrastructure yourself. You have to become the warehouse and the logistic and the procurement company yourself. And only then you are able to fulfill the ver…

AI assessment note: “the two main challenges and they influence each other”

Q Ralph, hit me. What's your thoughts on the biggest challenges?

A I think from, from our perspective, um, the two main challenges and they influence each other. On the one hand side, and Adit said so rightfully, customers expect you to have a very comprehensive supermarket assortment. Customers do not look at us as basically a convenience on demand type of service, just for like top up purchases or so. They're looking at us. They expect us to have a comprehensive assortment from fresh to packaged food to convenience articles to basically everything that a supermarket or hypermarket could offer. And that's because of the low penetration that we talked about. So there's a high demand from the customer side with regards to the assortment. Which is a higher demand than, uh, what we have seen with, uh, basically, uh, similar players in, I don't know, markets such as, uh, Europe or in the U S on the flip side. It's significantly more challenging to resolve on that assortment because you can't rely on existing distributors. You can't rely on partnerships with existing supermarkets because they do not work very efficiently. They can't replenish that flexibly, uh, and that frequently and that dynamically. So you have to build a lot of that assortment or a lot of that procurement and supply chain infrastructure yourself. You have to become the warehouse and the logistic and the procurement company yourself. And only then you are able to fulfill the ver…

AI assessment note: “the two main challenges and they influence each other.”

Q to 20 contribution margin, when you have that then as your, kind of, wiggle room, as we'd call it in the UK, it's so academic, but when we have that wiggle room in particular, on a, kind of, at scale per order basis, what are the largest concentration points in the cost structure then, when you look at that 18 to 20 and where that goes from a cost base?

A I think the biggest cost lever that you have in this business is indeed your ability to procure efficiently and procure efficiently is a function of procuring as direct as possible, which only works if you make a shift towards more local producers. If you keep on relying on the large global CPGs, your ability to drive a significant product margin is limited because they are forcing a certain pricing on you. So fortunately, Consumer demand is trending towards more and more local products and more and more local brands. That goes in our favor because we can use that demand consideration that is out there for building an assortment that is predominantly physically generated or built by a lot of local brands, especially on the fresh and fresh grocery side. And again, as we increase the share of local products and local brands, as we increase our data pool that tells us what Customers need and when they need it so that we only procure what is actually needed and bring down inventory losses to a negligible degree. I think that product margins can converge at scale towards even 50% of revenue over time. And again, we're very, very satisfied and very happy that even though we are like a very early stage business, we're now converging globally to the 40% gross margin benchmark.

AI assessment note: “biggest cost lever that you have in this business is indeed your ability to procure efficiently”

Q quick fire, I think that people forget That, like, businesses are levers, and actually you could build the world's largest search engine for groceries through the Joker platform and use that to subsidize a breakeven delivery platform. I think people completely forget this. My question to you is, how do you think about that advertising element and building in the search engine play, which could be a huge, huge business?

A We see that as one of, like, the strongest future levers for additional value generations. Not only because we have enormous scale, not only because we still keep on having 15% weekly growth in new customers. So we're accumulating a lot of customers that are highly engaged, that keep on coming back on a weekly basis, that have very, very strong retention rates. So that makes us a very, very attractive platform because we have stickiness, we have loyalty in what we are building, and wherever there's loyalty, there's interest from brands and services to look into how to monetize that in addition to what we're doing already. So yes, we see a strong opportunity for For integrating some of those services. And the other element is that we're disintermediating between the producers and the customer. We don't have like three, four or five middlemen involved, which you usually have in the offline retail world. That in between the producer, in between the farmer and the customer, you have many, many different layers so that one side doesn't understand the other. So while disintermediating that, we also can create a more direct way to communicate, to promote, To potentially advertise and to appreciate each other, which I think builds into and fits into the overall long-term plan to monetize on the type of platform that we're having outside of the product margins and delivery efficiency th…

AI assessment note: “We see that as one of, like, the strongest future levers for additional value generations.”

Q Listen, I want to finish on my favorite though, which is like fundamentally, what are the next five years hold for you and for Joker in particular? We said about the space moving forward in particular, where's Joker in five years time?

A I think we'll be one of the leading e-commerce companies in the US and Latin America. We want to be the company that basically differentiates by the customer satisfaction that we drive by customer experience. We want to be seen as the company that has ideally the highest NPS score based on how we deliver things to the customer. And I think if we achieve that, then the financial outcome of how we are doing things and what we're doing will just follow. And there's no reason why we shouldn't be as big Or bigger as our previous company, Deliver Hero, because the market potential is there. We are more experienced team with amazing investors, and there is still so much space in this online world, which is only at its very beginning.

AI assessment note: “we'll be one of the leading e-commerce companies in the US and Latin America.”

Q the level of personalization on a per hub basis, but in terms of just like the scale, when I spoke to Nazim at Getty, he was like, you know, the lesson that we had is a thousand SKUs of the entire catalog, too small, 2000 too big, 1500 is the sweet spot. Have you found there is a sweet spot in terms of breadth of catalogs to satisfy consumer demand?

A Well, this is also like one of the dilemmas or one of the potentially also misconceptions that we want to basically find a resolution for because at this point of time, yes, we're getting pushed a certain amount of like standard products. There's a gentrification of commerce happening, a gentrification of CPG brands and CPG strategies happening because like the product assortment That we're getting offered is more and more generalized, is more and more gentrified. However, consumer interest is getting more and more proprietary, more and more individualized, more and more customized. So there's a growing gap between what is being offered by the big commerce companies and how is it being offered to where customer demand is developing to. So we would contradict and would oppose the strategy of focusing on standardized catalogs because the joker business is Reversing the thinking of a standardized catalog. So for us, it's not focusing on a standard set of SKUs, be it 1001 1500 or 2000 SKUs that we want to bring to people in the most standardized and maybe in a fast delivery type of fashion. For us, it's the other way around. We want to bring the most individualized product catalog to every single consumer, and we achieve that by having the most dynamic way of inventory rotation and procurement, and by opening up our supply chains To more than just the big CPGs that are only in an a…

AI assessment note: “we would contradict and would oppose the strategy of focusing on standardized catalogs”

Q What is the biggest misnomer about the last mile delivery space, quick commerce, convenience space? You're in the middle of it. What's the biggest misnomer where you're like, oh, Not again.

A That every single e-commerce company or every single last mile delivery company is put into the same buckets, and that from the outside world, and sometimes also from investor or public perception, they're being seen as exactly the same. But as I've tried to articulate, there's so many different and justified approaches on how to basically tackle the large commerce opportunity out there. And only because people and companies are able to deliver on demand, Only because there are certain companies that can deliver within an hour or within 15 minutes doesn't mean that they're competing head to head, because in terms of personalization, sustainability, local product offerings, and so on, there's so many different ways of doing it, and each of those strategies and philosophies has a justification.

AI assessment note: “That every single e-commerce company or every single last mile delivery company is put into the same buckets”

Q the level of personalization on a per hub basis, but in terms of just like the scale, when I spoke to Nazim at Getty, he was like, you know, the lesson that we had is a thousand SKUs of the entire catalog, too small, 2000 too big, 1500 is the sweet spot. Have you found there is a sweet spot in terms of breadth of catalogs to satisfy consumer demand?

A Well, this is also like one of the dilemmas or one of the potentially also misconceptions that we want to basically find a resolution for because at this point of time, yes, we're getting pushed a certain amount of like standard products. There's a gentrification of commerce happening, a gentrification of CPG brands and CPG strategies happening because like the product assortment That we're getting offered is more and more generalized, is more and more gentrified. However, consumer interest is getting more and more proprietary, more and more individualized, more and more customized. So there's a growing gap between what is being offered by the big commerce companies and how is it being offered to where customer demand is developing to. So we would contradict and would oppose the strategy of focusing on standardized catalogs because the joker business is Reversing the thinking of a standardized catalog. So for us, it's not focusing on a standard set of SKUs, be it 1001 1500 or 2000 SKUs that we want to bring to people in the most standardized and maybe in a fast delivery type of fashion. For us, it's the other way around. We want to bring the most individualized product catalog to every single consumer, and we achieve that by having the most dynamic way of inventory rotation and procurement, and by opening up our supply chains To more than just the big CPGs that are only in an a…

AI assessment note: “we would contradict and would oppose the strategy of focusing on standardized catalogs”

Q is one thing which I just struggle with when I, you know, you walk around London, stay around for And you walk down my street, I see Zap, I see Gator, I see Jiffy, you name it. They're just going through the roof on the CACs. How do you think about, like, bluntly resource allocation towards customer acquisition and lessons that you have in terms of what's worked for you?

A Yeah, I think on the customer acquisition side, and we've proven that as part of, like, previous companies, you have to hyper-focus on experience. So the biggest lever for having efficient customer acquisition and for having profitable customer acquisition is actually the experience itself. I mean, obviously it's a mid to longer term focus that not every company has, but doubling down on product, on technology, on customer service, and hence optimizing for the highest possible customer satisfaction, which is measured among other principles via NPS. Focusing on that is your biggest lever for customer acquisition, because the better you experience, the higher your customer satisfaction, the higher the retention rates and the frequency of ordering, the stickier the proposition gets. The stronger your word of mouth effect, the stronger the referrals, the stronger your brand recognition, and the stronger your ability to efficiently structure and efficiently operate also your paid marketing. So that's one lever. The second lever is as we have learned from retail companies and from the large CPGs, and there is obviously also something and a lot to learn from. It's a question of branding as well. Having a great branding, having a great brand philosophy, having a brand philosophy and brand values. That are state of the art, that are appealing, articulating them, communicating them, obvi…

AI assessment note: “the biggest lever for having efficient customer acquisition... is actually the experience itself”

Q you mentioned earlier are not, not quite as efficient as they could be. I do want to ask one final thing before we move into a quick fire. One other great way to kind of internalize as much margin as possible is also to have own brand products. How do you think about own brand? Do you want to have Joker branded products over time? What are the thoughts there?

A No, private label is a big focus of ours. We're doubling down on our efforts with regards to basically a private label product offering. It doesn't necessarily mean that you would need the Joker brand. Or that you use and leverage the Joker brand for offering certain products, but creating brands ourselves as we have direct access to the producer, I think is an incredibly strong proposition because as I said before, branding drives loyalty and branding drives customer lifetime value and branding drives customer acquisition. And that does not only translate into the company's branding, but also into a single product branding. And you can have a key differentiator if a significant part of your assortment is Brand exclusive to yourself.

AI assessment note: “private label is a big focus of ours. We're doubling down on our efforts”

Q Final one. The business has changed so much here. How have you changed as a leader, do you think? And how's your leadership style changed?

A I think the way I've changed is I personally have become significantly more focused on understanding, brainstorming, and analyzing how we can build a more efficient procurement and supply chain infrastructure, because I've identified that myself over the last A few months as the key success factor to build sustainable and profitable business. That's an area of expertise that we as a team didn't have before because we were coming from the consumer marketplace, last mile delivery type of environments. So my operational focus and my intellectual focus has shifted towards procurement, supply chain, understanding how it works, understanding how we can reshape it. Having realized that in no country of the world do you find a well efficient, And well vertically integrated or sustainable supply chain type of company. So that is how the functional focus has changed for me. Other than maybe like 10 months ago when we started the business, and yes, we're seeing that the COVID infections will keep making us busy or having us busy, that I've more and more spent time face to face with the team in our respective countries. And so we've started the business remote while working over Zoom calls and video conferencing and telephone calls. And I think my management style is, uh, Change significantly towards personal interactions, being with a team in every single country that we're in as much as …

AI assessment note: “my management style is, uh, Change significantly towards personal interactions”

Q to 20 contribution margin, when you have that then as your, kind of, wiggle room, as we'd call it in the UK, it's so academic, but when we have that wiggle room in particular, on a, kind of, at scale per order basis, what are the largest concentration points in the cost structure then, when you look at that 18 to 20 and where that goes from a cost base?

A I think the biggest cost lever that you have in this business is indeed your ability to procure efficiently and procure efficiently is a function of procuring as direct as possible, which only works if you make a shift towards more local producers. If you keep on relying on the large global CPGs, your ability to drive a significant product margin is limited because they are forcing a certain pricing on you. So fortunately, Consumer demand is trending towards more and more local products and more and more local brands. That goes in our favor because we can use that demand consideration that is out there for building an assortment that is predominantly physically generated or built by a lot of local brands, especially on the fresh and fresh grocery side. And again, as we increase the share of local products and local brands, as we increase our data pool that tells us what Customers need and when they need it so that we only procure what is actually needed and bring down inventory losses to a negligible degree. I think that product margins can converge at scale towards even 50% of revenue over time. And again, we're very, very satisfied and very happy that even though we are like a very early stage business, we're now converging globally to the 40% gross margin benchmark.

AI assessment note: “I think the biggest cost lever that you have in this business is indeed your ability to procure efficiently”

Q What has driven that effect? Sorry. And then we'll do a quick fire after hearing from Addit, but I was driven that effectiveness. Five percent is a lot. What works?

A I think it has to do. Um, and again, curious to understand how it's, um, basically how it works in, in, uh, in other parts of the world and especially in other emerging markets, but again, in, especially in Latin America. There are, as I said before, limited, um, limitations in terms of how publishers, how the big brands can conduct advertising campaigns at this point of time. There are limited possibilities to do like out of home advertising in certain markets. It's restricted. It's banned. It's forbidden to actually do, uh, out of home advertising. And again, the existing online platforms have very, very limited, uh, targeting possibilities. Um, and that's why, um, the barrier or like the threshold Of having like something attractive in place is relatively low because again, yeah, all other existing platforms, um, are not sufficiently attractive for, uh, the big brands, uh, to spend on media. Um, the other thing is that especially in Latin America, it is a very, very large CPG dominated type of, uh, ecosystem. Um, so it is at this point of time, not, uh, an environment where a lot of like local brands Uh, and local producers, um, um, got like to a sufficient, uh, exposure relative to other markets of the world. And hence the big CPGs are fighting for customers, potentially in a bit more concentrated way than in other parts of the world. And hence, uh, there is more, uh, appet…

AI assessment note: “existing online platforms have very, very limited, uh, targeting possibilities.”

Q So I had Simon from Rappi on the show, and he said that like, they define the driver success as four drops per hour. And so I totally get you in terms of like, when you remove the inefficiencies, like you can afford them. As long as they're efficient enough. Like, how do you define driver efficiency and driver success?

A We define basically success as the intersection of NPS or employee NPS. Basically making sure that our riders are entirely motivated, entirely basically happy with the experience that they have being part of the Joker team, and we measure success on the customer side entirely through NPS. The intersection of NPS, so having happy customers, And having happy employees, including the riders, because they're employees, that intersection of both attributes drives customer lifetime value, drives customer retention rates, drives customer frequency. And the results of customer retention rates and customer frequency as part of our micro hyper-local business drives as an output a sufficiently high so-called efficiency rate and a sufficiently high gross profit. But we're not optimizing for getting a certain drops per hour, which we think is The wrong metric to focus it because you have to focus on whether you make your customers happy and whether you make your team happy. Everything else is an output. And that's the philosophy that we are running. And we see that even though we are only like six months in business, we have the basically first neighborhoods turning profitable now, even though we expected that ourselves to come in significantly later. So unlike basically also recent companies and marketplace companies that we have been involved, we've shown to ourselves that this philosophy…

AI assessment note: “We define basically success as the intersection of NPS or employee NPS.”

Q You said there about the convenience element and the speed, and I think absolutely that is a big component of it. In terms of, like, delivering on that promise to the consumer, you know, bluntly you need a great driver acquisition network. How do you approach acquiring the first drivers? What's worked in terms of driver acquisition? What hasn't worked, and how do you think about that?

A I mean, for us, and I think that is also different to most other like on demand or delivery companies, it's not a differentiation between who do we need on the engineering side, for instance, and who do we need on the delivery side. All of those important team members, all of them equally treated, all of them enjoy the same benefits. So we're not looking at delivery riders being part of a gig economy type of infrastructure, but we are aiming at employing our riders as Full-time employees. We make them basically part of our team, of our culture, and then an equally valued, basically a team member as they would be on the engineering side, on the marketing side, on the operational side, and so on. So that is our philosophy. And it goes for delivery writers, as well as for people that work in our warehouses, for the people that are like packing the bags, for the people that work in our customer service. All of those are Joker team members. So that's why for us, it's not a question of how do we get cheapest access to writers? No, it's how do we get People into our team from all kind of different functions and environments. And given that we're, again, vertically integrating, focusing on relevance, taking all inefficiencies out of the system, we can actually afford having riders employed as full-time employees and appreciating all kind of full benefits. And that's why we're not in di…

AI assessment note: “we are aiming at employing our riders as Full-time employees.”

Q Can I ask, in terms of that experience and that frequency, what do you think is great frequency? It may not be what you have today, obviously, because of maturation of markets, but is it like, is it two times a week? Is it four times a week? Is it, what does great look like in your mind, and what would you hope to achieve?

A I think we would see that as an output as well. So, like, I've been asked the question, like, what is the ideal SKU amount? You asked that question earlier, right? How many SKUs do you need to have? How many products do you need to have available? What is the right frequency? The customer determines that. So I think we can run a profitable business if the customer comes back just once per week, like four times per month. We can also run a profitable business, obviously, if he comes back six to eight times a week. We have customers that are coming back basically 10 times a month. So I think it is an output, and we optimize for being able to deliver what the customer needs at a particular moment. We are increasing the amount of instances and the amount of use cases. At this point of time, we're able to deliver grocery products. We're able to deliver convenience products. In the future, we will open up to other product categories so that if you're sitting at home or in the office, or if you're at a gathering at an event or wherever you are, you have the ability to order what you need in that particular moment. And it will always be very grocery and convenience focused. Yeah. No doubt about that. But like with the very particularities around specific brands that you need. And I think there will be some kind of like customer education and we see the customer education ourselves. Peo…

AI assessment note: “The customer determines that. So I think we can run a profitable business if”

Q What has driven that effect? Sorry. And then we'll do a quick fire after hearing from Addit, but I was driven that effectiveness. Five percent is a lot. What works?

A I think it has to do. Um, and again, curious to understand how it's, um, basically how it works in, in, uh, in other parts of the world and especially in other emerging markets, but again, in, especially in Latin America. There are, as I said before, limited, um, limitations in terms of how publishers, how the big brands can conduct advertising campaigns at this point of time. There are limited possibilities to do like out of home advertising in certain markets. It's restricted. It's banned. It's forbidden to actually do, uh, out of home advertising. And again, the existing online platforms have very, very limited, uh, targeting possibilities. Um, and that's why, um, the barrier or like the threshold Of having like something attractive in place is relatively low because again, yeah, all other existing platforms, um, are not sufficiently attractive for, uh, the big brands, uh, to spend on media. Um, the other thing is that especially in Latin America, it is a very, very large CPG dominated type of, uh, ecosystem. Um, so it is at this point of time, not, uh, an environment where a lot of like local brands Uh, and local producers, um, um, got like to a sufficient, uh, exposure relative to other markets of the world. And hence the big CPGs are fighting for customers, potentially in a bit more concentrated way than in other parts of the world. And hence, uh, there is more, uh, appet…

AI assessment note: “existing online platforms have very, very limited, uh, targeting possibilities.”

Q Yeah, from a supply, from a supply chain, and from a warehousing perspective, what makes the best sites? How do you choose them?

A I think first and foremost, we have seen, and we are observing, um, that there is an increasing demand from a customer side for local products, for local brands. Be it on the fresh side, or be it on the packaged food side, or any other type of, um, basically consumer goods. Which, um, obviously also adheres to the world's demand for more sustainability. Only if we build more local, uh, procurement and supply chain, uh, processes, can we save this world from a total collapse? If we keep on relying on global supply chains, on carrying products, uh, from one part of the world to the other, um, we're neither able to operate efficiently, profitably, nor sustainably. So one of the things that we're Resolving and which adheres to the increasing customer demand for more local products and for more local brands is to watch out for how much can we procure locally? How much can we procure from local farmers? From local food producers, from local producers of any type of convenience goods and shorten, um, basically the procurement, uh, processes because we would only need to bridge like a relatively, um, a relatively small, uh, relatively small distance. The other thing that we have seen is that it's not only, um, that it's not sufficient to only rely on an accumulation and an aggregation of, uh, a variety of small, Basically micro hubs, which are often referred to as like dark stores, but…

AI assessment note: “you need to work in combination of like smaller warehouses and bigger distribution centers”

Q That is very, very kind of you, but I do want to start with some context here. We've seen the meteoric growth of the last mile convenience delivery space over the last 18 months, so tell me, how did you come to found Joker, and what was that aha realization moment that you had to do Joker?

A I think it's not only me personally, but we are a team of colleagues of business partners that has been working together for a very, very long period of time. So some of us have like 20 years experience of working together. And throughout all these like two decades, we have built a variety of different consumer businesses. So we are passionate about building consumer businesses. We are intrigued by the idea of adhering to consumer demand, have a positive impact to the world, building something that gives back to consumers, making consumers life become more convenient and easier and more enjoyable. That's why, like, building Joker is for us as a team a natural progression of our interest and of our motivation.

AI assessment note: “building Joker is for us as a team a natural progression”

Q of delivery there, the one thing that, you know, people do say with the elongated delivery times Is that you can actually batch it to have multiple customer orders in one delivery trip? How do you think about that? Does it always have to be one trip for one order? And I guess, you know, what for you is really great driver efficiency, say on like a per hour basis?

A So I think the first thing that we have determined is, and that is a reason why some of the marketplace companies that we came out of that marketplace context as well, where your supply constraint, where you need to work with like Third party supply, third party stores, third party restaurants, is that you can't basically efficiently optimize the demand to supply type of consideration. You can't bring the supply closer to the demand, because you're constrained by the available stores or restaurants that are out there, which are not optimized for an on-demand delivery type of environment, but they're optimized for basically walk-in customers. The first dilemma that we have Learned from coming from this, like, marketplace type of context that we have been working in for many, many different years. How do we make delivery, first of all, more efficient by moving supply closer to demand? How on top of that do we increase delivery efficiency by reducing the size of our delivery polygons and allowing for delivery time that is as short as possible? So those two elements are the main drivers behind a delivery efficiency in our model that is twice as high on average than with a typical marketplace companies. And hence allows us on top of our higher gross margin that we have because of the ability to procure directly to then drive a significantly higher net margin as comparable public com…

AI assessment note: “you do have the ability at scale, obviously engaged in some kind of stacking.”

Q Can I ask, on the marketing dollars, what percent of AOV is spent on the marketing dollars?

A It's very different at the beginning of a certain activity in a, in a given city, in a given neighborhood. So as we open new hubs, as we activate new neighborhoods, as we get into new cities, initially, we engage in a lot of marketing to what we call activate the given neighborhood. To activate a given city, to create a certain brand awareness for what we are doing, and for kickstarting the generation of new customers, which then over a time horizon of three to six months yields into the situation that we now have almost on a global basis, where then more than 50% of new customers are generated organically. So you start with a very, very high marketing investment, and over time, already after the first, like, three to six months in any given neighborhood, Slightly start to reduce to have a profitable payback periods within a reasonable timeframe. And you might appreciate that, especially on the marketing side, there are some sensitivities that we prefer to keep to ourselves.

AI assessment note: “there are some sensitivities that we prefer to keep to ourselves.”

Q Tell me, my friend, final one. I'm just too intrigued. You know, I sit here in London, you know, DJ got acquired. There's acquisitions left, right, and sand. Is this a sheer market of consolidation? How do you see this playing out in the next, I think it'll happen quite quickly, in the next 18 months to two years? What happens on the consolidatory element?

A So from our point of view, this industry, it does not face a demand issue. If 50% of customers are coming to us organically, that's a proof point. For this business to be at the right time and in the right markets and fulfilling a customer demand that is not fulfilled differently. The key to success in this business, how do you structure your procurement and supply chain capabilities? How are you able to disintermediate middlemen to procure what is needed and when it is needed based on a very data driven machine learning based type of engine that you have to create? How do you balance in between local brands and Private label brands and the large CPGs that they're still demand for. And how do you yield a product margin of 40% and more in a logistically very, very complex way? Because it's not only making an agreement with a local producer, but you need to make sure that the product somehow gets from the producer into your warehouse and existing supply chain and procurement infrastructures are not made for that. So you have to build it yourself and have to look into how to structure that in the most efficient way. And then later on, and to look into how do you then build An even more efficient delivery machine where the 15 minutes delivery time promise is key to success in order to drive high margins after your delivery costs. We think that in one hour or two hours delivery type…

AI assessment note: “So from our point of view, this industry, it does not face a demand issue.”

Q That is very, very kind of you, but I do want to start with some context here. We've seen the meteoric growth of the last mile convenience delivery space over the last 18 months, so tell me, how did you come to found Joker, and what was that aha realization moment that you had to do Joker?

A I think it's not only me personally, but we are a team of colleagues of business partners that has been working together for a very, very long period of time. So some of us have like 20 years experience of working together. And throughout all these like two decades, we have built a variety of different consumer businesses. So we are passionate about building consumer businesses. We are intrigued by the idea of adhering to consumer demand, have a positive impact to the world, building something that gives back to consumers, making consumers life become more convenient and easier and more enjoyable. That's why, like, building Joker is for us as a team a natural progression of our interest and of our motivation.

AI assessment note: “building Joker is for us as a team a natural progression”

Q Yeah, from a supply, from a supply chain, and from a warehousing perspective, what makes the best sites? How do you choose them?

A I think first and foremost, we have seen, and we are observing, um, that there is an increasing demand from a customer side for local products, for local brands. Be it on the fresh side, or be it on the packaged food side, or any other type of, um, basically consumer goods. Which, um, obviously also adheres to the world's demand for more sustainability. Only if we build more local, uh, procurement and supply chain, uh, processes, can we save this world from a total collapse? If we keep on relying on global supply chains, on carrying products, uh, from one part of the world to the other, um, we're neither able to operate efficiently, profitably, nor sustainably. So one of the things that we're Resolving and which adheres to the increasing customer demand for more local products and for more local brands is to watch out for how much can we procure locally? How much can we procure from local farmers? From local food producers, from local producers of any type of convenience goods and shorten, um, basically the procurement, uh, processes because we would only need to bridge like a relatively, um, a relatively small, uh, relatively small distance. The other thing that we have seen is that it's not only, um, that it's not sufficient to only rely on an accumulation and an aggregation of, uh, a variety of small, Basically micro hubs, which are often referred to as like dark stores, but…

AI assessment note: “you need to work in combination of like smaller warehouses and bigger distribution centers”