Snappy Shopper grocery delivery app

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.

Are dark stores really a threat to store outside of dense urban areas?

I’ve listened to the Gorillas founder talking in a podcast recently and they said they would be interested in looking at lower population areas, possibly 100k and less. They’ve started to learn that if you do your job right you can conquer smaller population areas and make significant sales volumes. That they are saying that is a real risk to the majority of those 35,000 independent retailers.

How many stores is Snappy Shopper partnered with?

It’s changing every day. We’re onboarding PayPoint retailers on daily basis, we’ve integrated with the PayPoint One terminal so when they switch it on there’s a Snappy Shopper button there saying ‘do you want to find out more’, quite a lot of retailers across the country are pressing that button every day.

Ultimately in terms of hitting that number, getting from the thousand or so stores we have to the 3-4k is definitely achievable and for us, it’ll be about making sure we’re working with the right retailers. That’s a really important part of our proposition because we invest our own money into those retailers to help them scale, but obviously the retailer has a part to do in that partnership too.

PayPoint One integration fixes the gap between availability in store and online for those retailers, but what about for non-PayPoint stores?

EPOS integration is a huge issue because from a retailer’s side its just extra work. If they change prices or update their product range they have to do the same on Snappy. Even though we have a team to help with that, it’s still another thing to do on the to do list, and we don’t want to be a thing on a ‘to do list’.

From a consumer perspective if that product file isn’t maintained you get things like substitutions which damages that customer experience. So that integration with PayPoine One removes those barriers, we get stock and inventory updates automatically, so if a price changes, a new stock item lands, its updated on snappy platform, the great news is that we’re starting to see other integrations with other EPOS providers.

Why have EPOS companies been slow to come onboard?

I think initially they were looking at Snappy and saying ‘hmm, is it going to work? There’s three or four other companies doing the same thing, should we invest the time to integrate it?’ but what we’ve seen over the last quarter is a lot of those EPOS companies coming back to the table saying ‘we’ve seen a lot of demand from our retailers and we’d like to look at a commercial partnership and technological integration’ so it solves those very real problems of managing the stock and inventory, passing the orders back to the shop automatically so they can reconcile themselves and remove the need for keeping a separate fil on the app.

Manual alignment also takes up our staff time and we’re focused on helping retailers grow so when we are stuck in admin tasks as a tech company we challenge ourselves to solve that by extending the platform to do integrations. Paypoint proved that could be done but we’ve gone on to plug in two other EPOS providers live and at least another two that are being developed.

Can you say who the two EPOS companies already live are?

I probably couldn’t say which are live but we’d like to make some announcements about that because it’s a really important piece of the puzzle for those retailers that have that epos.

Around 10% of Snappy Shopper sales are coming from around 20 stores, what sets them apart from a rest?

When you get to the level of our top retailers it’s fabulous. They are doing over £1m a year on the platform. We are think of making the £1m retailers club with information on what you need to do if you want to join.

What really sets them apart is digital representation of what they are in the physical world. An understanding of their local community and who their shoppers are. Having the right products at the right prices for those customers and also the nice little touches.

A good example from one of our top three customers is that every Friday a customer would order a bottle of dark rum. In the comments the customer said ‘it would be brilliant if I could get a fresh lime with it.’ What the retailer decided to do is have a couple limes in the shop and pop one in the bag on a Friday. The review came back saying how exceptional it was, how they felt so valued. There’s other great examples of that – putting free items in a bag for loyal customers or putting a hand written note in there is a great little way of bringing that in-store community feeling online. It’s live dialogue via the platform with reviews from the customer and feedback from the retailer. Snappy Shopper is different because it’s not someone on payroll on in the gig economy throwing your bag at the front door and running away to get the next delivery, it’s really that personal service that’s the digital manifestation of the relationship you have when you walk in the shop. That’s what sets them apart and it’s almost impossible for a dark store to replicate.

If you’ve got a lot of volume at the top end and the average sales per site in 2021 was £2188, what is the long tail like?

When you’ve got retailers doing £20k per week you have others ramping up doing a couple hundred pounds a week. Actually the vast majority start from ground zero, some have an unofficial service over the phone and that gives an immediate level of trading, but otherwise that’s why we invest thousands of pounds in each retailer at the start when we onboard them, to drive them up to that £2k per week as quickly as possible. At any time we will have tens of retailers in ramp up, on that journey to £2k. When we are onboarding faster and faster, which we have been since the PP partnership you do have a larger longtail of immature retailers just starting at £0, going up to that £2k maybe over a 10-12 week period.

With current inflationary pressures in stores, is that a threat to Snappy Shopper?

I don’t see that as a threat, one of our big unique selling points is on the shelf pricing, that’s a great starting point. If your starting point is inflated prices and you need to find another 5-10% that could well be a tipping point. I think if your prices are the same as on the shelf you are protected in some ways.

Also once you get a mature retailer fulfilling that delivery themselves that delivery charge actually becomes margin enhancing, if you imagine a retailer with one driver doing 4-5 deliveries an hour to 10 deliveries an hour at £3 per delivery, you can get to a point of making £18 to £30 an hour of delivery income and you are certainly not paying your delivery driver that. So we are finding mature stores have extra revenue that enhances the basket margin, it’s a real opportunity for Snappy that the proof is in the pudding in how we set our prices up.

If you are starting from a position where everything is inflated anyway, it could tip the balance for that customer, it just becomes too expensive. It’s also not fair that the extra cost is passed onto the retailer, which is the default position of the large marketplaces, they say ‘our commission has to be at this level, so you either have to charge the customer more or take more commission from the retailer’, I think that starts to grate when you look at an extra 3-5% points.

How is ultra fast delivery changing consumer expectations of Snappy Shopper’s deliveries?

It’s the law of diminishing returns, do customers really care about getting goods in 20 or 15 or 10 minutes? We don’t believe in that, if people really need something in 10 minutes, the concept of expecting someone to bring it to you is not a sustainable business model.

For us 30-60 minutes is the sustainable business model, if you need something and it arrives in 30-60 minutes you’re going to get a feel good factor, especially if you’ve paid the same price as in-shop and a level of delivery charge you’d expect to pay. We don’t believe consumers are making the decision on where to shop based 10 minutes versus 30 minutes.

What impact does a dark store opening nearby an existing site have on Snappy?

The thing for us is that we don’t need to focus on the densely populated areas, with the dark stores it was almost exclusively a London thing, they’re now rolling out further afield across the UK but if you look at the 35k independent retailers they are community retailers, not just in the city centres. It comes back to if you can map within 1.5 miles of the 35k stores, it’s a fantastic distribution network and we believe Snappy will be the solution, we don’t believe they will come there any time soon, they are going to fight it out in the city centres and for us it’s all about making sure in those areas we get those retailers trading really successfully which makes it really difficult for a dark store to come in.

So you are saying there hasn’t been a huge impact on Snappy sites where a dark store has opened nearby?

No we’re not in a place where the retailers have seen are dark store come in and their snappy sales being impacted.

What’s your response to Snappy partners that are aggrieved that their contract prevents them from working with rival platforms, yet it doesn’t prevent Snappy from working with a rival shop next door?

We had to make the decision really early on, on do we become a ‘me too’ business model? At two ends of the spectrum you have the established marketplaces which charge a huge commission – they make more money per order than the retailer and we thought that was plain wrong. That’s part of the reason we exist is to democratise that technology and avoid that same fate for convenience retailers, if you speak to any takeaway on Just Eat about the margin they are losing, we don’t think convenience should go in the same direction.

At the other end we had a few competitors with similar businesses to Snappy that started out at the same time on a non-exclusive basis, a pure technology play and the onus was on the retailer to figure it out, we firmly believe the retailer needs much more support, it’s not just about saying ‘here’s an app’ it’s saying ‘here’s how you operate a home delivery service, we’ll hold your hand, take you on that journey’. We’ll also help with some of the things that might be a pain point for the retailer such as getting a delivery vehicle, getting it branded and the cost of marketing to your local community.  

Clearly you don’t want your existing customers cannibalised by an app, you want to say ‘just down the road is a big four supermarket, it’s out of walking distance but I believe I can deliver to that residential area’, we help retailers reach those customers through digital campaigns on Facebook and Instagram and with leaflet drops and promotional banners around the area. It all has a cost and it comes into thousands of pounds, so we had to decide if we believe retailers need that support, we have to be confident that the retailer is equally committed to us.

If we go to our investors and say we’re going to spend thousands of pounds with this retailer, but they’ve also got this other app and what could happen is we could promote this home delivery service for this store but the customers might then use this other app, then our investors would say ‘absolutely not, we’re not going to spend thousands of pounds promoting someone’s business if they’re not going to invest in us.’

 That’s really where the decision came from, we decided that investing those millions of pounds that you are seeing in our latest accounts on those retailers, we would have to have commitment from the retailer that they were committed to Snappy. That’s where the terms of our partnership come from.

What about geographic proximity? If Snappy needs guarantees of exclusivity, why do partners not get the same in their local area?

We firmly believe if we are in a race against dark stores, we need to make sure Snappy is as appealing as possible to as many customers as possible and what that means is when you come onto the app and put your postcode in at home or at work, you need to find stores nearby. From a consumer perspective having choice is good. Actually, what also happens with choice is it drives better performance of the end proposition.

For example in Dundee where we started, we started with one retailer doing great numbers, £10k per week on the platform but covering the whole city, up to  3-4 miles away. If you send a driver four miles one way, if there’s other orders happening how are you going to get the other driver back and still meet those 30–60-minute slots?

We said to the retailer ‘We are going to bring on another retailer, if you want to continue serving that area you can but we believe we need a store that can reach those customers quicker, and you’ll still have that time radius that you own.’ When the second retailer came on there was a slight dip in the first retailer’s sales, but the second retailer then brought a lot of new customers to the platform and both stores increased. We then brought a third in when we had two mature stores in the city and now all three are doing record breaking sales.

There’s a certain kind of understanding we’ve developed that from a consumer’s perspective that things like choice are important because it means the range of products and the delivery time they serve creates a competitive tension that’s really important. What we absolutely won’t allow to happen is a situation where we have a fantastic retailer on the platform and we have another retailer come on that doesn’t deliver and damages the overall proposition, burns customers or gives a poor experience that damages that first retailer, that absolutely won’t happen, and we have to monitor the data on a daily basis to make sure it doesn’t happen. That’s our learnings from it and as we go forward, we believe the market will mature and allow more stores on the platform. In the short term it will always be about one store in an area but over time that will change.

If you go on an established marketplace like Just Eat, it would be like if in the city where you live Just Eat saying there’s five Chinese restaurants but you will only ever find one on the app. That might be great from the Chinese restaurant’s perspective, even if they aren’t the best Chinese restaurant everyone has to order from me but we don’t want to play god. Telling people who they can and can’t shop with, carving out areas and saying ‘this is exclusive to you even if you don’t serve it well’ – That’s not what Snappy is about. It is about good retailers providing a good service to customers and it’s not in our interest clearly to have a good retailer on our platform and bring on a substandard retailer that damages the first retailer and our brand. It comes back to the ethos of partnership and that when the tide comes in it rises all ships together.

Are there further retailer or customer facing improvements to the platform planned?

As a tech business we are constantly pushing our team on our roadmap so the EPOS integration initiative is a really big one and we’re also enhancing our in-store picking app to make it easier for retailers to use our technology to do the picking and that links back to EPOS as well. We’re also working on some exciting features around loyalty. We have some consumers who literally use Snappy Shopper every day so what we want to think about is ‘how do we reward them, how do we create a loyalty programme that’s rewarding for those customers?’. There’s a whole host of new features and enhancements we’re investing in that our retailers will benefit from.

Why should EPOS firms work with Snappy?

We are firmly of the mindset that in 3-5 years every convenience store will either be doing home delivery or be under serious threat to its existence.

As we move towards that place retailers are going to move to home delivery and we believe Snappy will lead that market, yes there will be other ways, dark stores, supermarkets and the restaurant marketplaces doing convenience. If that’s the case, its important for EPOS providers to provide an integrated solution.

So from their point of view I can imagine a world if we’ve got retailers where most of their business is online, and we do have that, they may well change EPOS just because it does plug into Snappy Shopper. That’s something that could well become a reality so we want to make sure those integrations are done in partnership.

You spoke about additional investment in stores after the ramp up, can you discuss this further?

For some of our retailers it goes way beyond that [launch promotional spending]. One earlier this week, a retailer in England is three months in and has had a great start, they said ‘we like the idea of an electric vehicle and would Snappy contribute to wrapping it with co-branding?’ Se met them half-way on that which is over and above the standard launch investment that we make.

I’ve spoken to some stores stuck at around 3-4 transactions a day on Snappy who are hesitant at making the investment to scale up their sales. What would you say to them?

Engage with us in that discussion. It may well be that we can support with advice and guidance about how retailers have gone from four orders a day to 10. Engage with your account manager and ask what they can do to support you. It may well guidance and support, it may well be additional financial support. Not only will we support retailers in that ramp up period, if the retailer is pushing boundaries, we have permission to invest over and above, things like vehicle wraps, additional door drops, sponsoring a football or rugby club, these are all things we are doing.