At Byte Technology we think a lot about the evolution of retail when it comes to fresh food. Historically, consumers were limited to physically shopping at traditional brick and mortar stores – whether for groceries or grabbing a meal to-go from a restaurant. Drive thru’s were the next wave of innovation when it comes to delivering a more convenient experience for customers on-the-go.
In the last five years, we’ve seen the rise of billion dollar industries around grocery and meal delivery to the home. These new models haven’t come without their own set of challenges. Meal kit companies face high customer acquisition costs and churn. Many vertically integrated meal delivery companies – Munchery, Maple, Sprig, Spoonrocket – shuttered after failing to make their unit economics work. And most recently, food retailers are starting to feel the squeeze on margins as on-demand delivery services like Uber Eats and Doordash take a growing number of their orders and command 15-30% commission.
This squeeze from on demand delivery partners is causing a new wave of innovation. One new segment, ghost kitchens, aims to decrease the cost of fulfilling orders through on-demand delivery partners. Ghost kitchens are essentially restaurants but without front of house space or staff. They enable the operator to build a brand through delivery platforms, are strategically located close to areas of high order demand, and have lower costs when compared to a traditional restaurant. The folks at Fifth Wall have a great breakdown on ghost kitchens.
Another model we’re seeing thrive within the quick serve restaurant space is a hub and spoke model. Food is produced at a commissary hub, then pushed out to brick and mortar storefront spokes. Players like Snap Kitchen, Everytable, and Proper Food have grown this model nicely. Producing at a commissary allows for scalable, efficient and consistent food production. Stores take a smaller footprint, are less costly to open and run, and deliver fast and easy service to the consumer.
Then there’s Sweetgreen’s Outpost offering that launched last fall. Outpost is a dedicated drop-off point for group deliveries housed within corporate clients. Customers order ahead of time, then pick up their food at an Outpost on the honor system. This enables Sweetgreen to offer free corporate delivery and relieve the need for a third party delivery service like Doordash. Early results have been so positive that Sweetgreen states it’ll roll out 1,000 new Outposts by the end of 2019.
At Byte Technology, we believe proximity is power. What if you could embed your store where customers already live, work, and play? That’s precisely what Byte’s platform allows food retailers to do. Whether in a workplace, at a hospital, in an apartment building, or at a gym, Byte Technology-powered stores offer consumers what no other distribution method can offer – immediacy at the point hunger strikes.
While consumers get the ultimate benefit of immediate access to fresh food, food retailers benefit from:
- A small footprint storefront that is physically embedded where consumers already spend time, thereby keeping their brand top of mind (what we call “line-of-sight marketing”),
- Real time consumer insights such as cross-purchase and substitution, consideration time, product ratings and feedback, price sensitivity and responses to promotions and messaging.
- A profitable and labor efficient distribution channel whereby a large number of orders are replenished with each delivery, on a set and recurring schedule.
- The ability to adjust pricing in real time, thereby minimizing the cost of waste on their business.
Byte calls this type of right-next-to-the-consumer distribution channel “at hand”, and we’ve seen its power first hand. The average customer shops at a Byte-powered store nearly five times a month, and even at stores that have been in place three years we see incredibly high customer retention rates. Moreover, Byte-powered stores deliver incredible value to the commercial spaces they occupy. The power of this distribution model is why clients like Everytable have incorporated Byte stores into their overall growth strategy.
With food retailers feeling the margin squeeze, we’ll continue to see new models that aim to offer quality food at an affordable price. At Byte Technology, we focus on proximity to the consumer. And we believe that having this proximity is incredibly powerful in offering food retailers a profitable distribution model and making the most convenient choice, a fresh and quality choice.