EXCLUSIVE: Snappy Shopper CEO Mike Callachan: ‘We’re in a race against dark stores’ [FULL INTERVIEW]

Snappy Shopper [Snappy] is developing a customer rewards program, inking partnerships with EPoS firms and onboard new stores closer to existing partners to help in its ‘race against dark stores’ to achieve UK-wide coverage.

In an exclusive interview with RN, founder and chief executive of the grocery delivery platform Mike Callachan outlines what’s in store for local retailers.

Can you explain the story behind the latest financial results that show major company growth and increased losses as well?

Home delivery in convenience is growing really quickly and we believe that speed is really important as part of our proposition, so we’ve been investing heavily in two core areas. The first is our team, we’ve grown our headcount over 300% in the period and alongside that we’ve almost doubled our store estate, that’s grown by 88% so we’re investing not only in the people but then investing in our retailers, that’s why we’re showing the losses on the company.

The reason for that is simple, we believe we are in a race to protect these local community convenience stores to get them online and selling in the age of e-commerce and delivery. If we don’t do that quickly we believe there’s a real threat that the dark stores can come in and take a significant portion of customers away from those retailers.

What proportion geographic coverage does Snappy Shopper currently have in the UK?

So that number is changing every day, we are launching retailers every day across the UK. We began in Scotland and are approaching a place in Scotland where we are having to look very carefully at Scotland to identify where if any gaps remain. We are getting really good coverage of all the major postcodes and population areas around the existing convenience stores in this country.

We then had great scaling up across England, so we’ve got great coverage across England, but what I would say is that it’s more disparate, you might see one store covering quite a large number of people in a large city whereas in Scotland we’ve started to see cities with two or three stores, but generally we’re well on track to get full UK coverage and as the market matures we’ll continue to tolerate more stores being added in so not only in England we’ve got really good stores in Wales and started to get our first stores in Northern Ireland as well.

Is there a target number of stores?

PayPoint chief executive Nick Wiles believes if we don’t get to 4-5k we’ve not done a good job. I guess for us, PayPoint have a fantastic understanding and track record in convenience, Snappy are taking the approach that the market will inform [the size of the estate].  For instance,  just this year we’ve started to see aggressive numbers from the dark stores around their intentions for the UK market so things are changing quickly and it’s difficult to put a number on it and we have to adapt our strategy based upon the threat of the dark stores that we see, if they accelerate we also have to.

It’s reflected in the retailer demand, we’re starting to see retailers being much more proactive in approaching Snappy and saying ‘how can you help me out? I believe there’s a dark store opening near me’ so all of these things mean it’s a dynamic and fast paced environment but ultimately for us we believe we will have thousands of retailers trading successfully on the platform.

There are around 35,000 independent local stores in the UK, and only around 5,000 on a delivery platform. Why do you think such a large share have opted not to provide an online ordering service?

I guess for us it’s like anything, new technology emerges and you have early adopters, those not scared or worried by technology. The generation we’re from tech is second nature, but not everyone is in that category.

You’ve got people happy with the status quo and as a general trend that’s a risky position to take in retail. If you’d rolled the clock back and sat in the boardroom of House of Fraser or Debenhams or Top Shop and said ‘guys in five year’s time players like Boohoo will be buying your brand name just for the customer base and you’ll disappear’ they would respond ‘no, customers are always going to come into Top Shop, it’s how it works’ that’s the key message for us, that the hybrid model of bricks and mortar with online shopping is the best solution to the problem. We don’t believe consumers want to shop from a dark store that’s anonymous, we don’t believe they want to lose their local shop, we don’t believe people want a world with one shop called Amazon, it’s our mission and our purpose to make sure we educate retailers because it’s the single biggest barrier.

Some of the larger group customers that we’ve onboarded, they came to Snappy as the experts, almost with the perception that there’s something really difficult about it. When they came to see some of our successful independent partnered stores trading, they were amazed to see how simple it was. It’s a really important time for retailers to not rely on the status quo and look to the future and think if they believe home delivery should be an important part of their business.

It’s not just independents that have been slow to uptake deliveries, other major convenience estates such as Tesco and Sainsbury’s also don’t have widespread adoption. Why do you think that is?

We’ve seen Tesco Wish saying they are going to rollout, they have also partnered with Gorillas to learn how to do it. Sainsbury’s have Chop Chop and we having Justin [King – former Sainsbury’s chief executive] on our board so he’s giving us the inside track of what that means and how it fits in for a major grocer. I think for us, it’s clear that if consumer demand is there, good businesses will do their best to provide a solution and supermarkets are in that category. They are probably realising that the modern consumer wants this service so they’ll be thinking ‘ how do we set ourselves up to provide it?’

The exciting fact about the 35,000 independent retailers, is that there are so many of them and they are so close to where people live so they are the perfect distribution assets, so you might have a few thousand supermarkets in the UK, but it’s nowhere near 35,000. If you look at Snappy around 80% of our deliveries happen within 1.5 to 2 miles as a maximum, if you draw that around every supermarket it doesn’t get you very far, you are left with huge gaps around the country. Supermarkets will never be able to reach those customers, the beauty of our model is we have fantastic retailers delivering thousands of pounds per week in incremental sales on our platform in a population area of less than 10k people, I can’t see how supermarkets or dark stores can solve that problem. It’s really in convenience store owners’ hands to secure that market before the supermarkets or dark stores figure out a model where they can make it work.