These are notes from 3 recordings of CEO Ralf Wenzel discussing Jokr. Two from 20 Minute VC and one from GGV’s The Next Billion. I’ve selected key takeaways, mostly from an operator point of view as a PM for on-demand delivery platform. I’ve added my $0.02 here and there using different fonts. All emphases are mine as well.
[3] “Ralf Wenzel of JOKR: Return of Lifetime is much more important than Return of Investment”
Consumer Trend
[1] 2:45
“In the world, we see certain secular trends. We’ve also observed, over the last 20 years that consumer behavior is changing, and it’s changing at an accelerated pace. And we’re seeing that over the last few years consumer behavior has even shifted more towards personalization, even more towards instant delivery, spontaneous purchase decision. Consumer behavior has changed more towards sustainability angle…We still see there’s more and more appreciation for local products and brand as well as global brands” [1]
SH: 4 key trends that Jokr is betting on
Jokr in a nutshell
[1] 5:13
“To create a platform that resolves on all of the recurring, frequent consumer demands for consumer products, which means we’re not only limiting ourselves to convenience products or groceries. But we’re really creating an e-commerce platform that is agnostic of the product category, agnostic to amount of SKUs that we can make available to customers; To really care about what is that customers want and when is it that they need it. An intersection of what and when and the underlying algorithms that we build based on that, they determine the level of personalization. They determine when we procure and who do we procure from. They also led us to the decision of completely opening up our supply chain infrastructure to both global suppliers as well as the local producers to democratize supply chain, which is not given in our days of world.
We are breaking with that tradition of existing commerce companies both online and offline, which are only differently colored iteration of advertising business.
So whichever e-commerce business you look at and whoever offline commerce company you look at, they are largely driven by advertising. And advertising revenue, either directly or indirectly by the amount of discount being granted by CPG companies, allows retail chains and supermarkets to extract specific margin out of it. We are turning it around for the very first time and creating the real consumer centric e-commerce company that only decides on personalization, curation, assortment, and procurement based on consumer demand.”
SH: Lots of questions here –
- What does it mean to democratize your supply chain? How would local producers use Jokr’s supply chain? Would they be using Jokr’s trucks / warehouses?
- How much of these philosophies are possible right now as opposed to being an end-state?
- Getir founder said that 1,500 SKU is the sweet spot that he found through trial and error. If the SKUs are truly customized, how many SKUs can you actually support? What if I’m a niche buyer of niche Asian sauce? What if I don’t want local brand, but some international brand? In short, to what degree of customization is Ralf talking about?
Vertical Integration of Supply Chain
[1] 8:40
“Dilemma that retail industry faces is that it’s built on very manual, complex, inefficient, and loss-making supply chain. If you look into how many times a single product rotates the globe to meet the customer, how many people, parties are involved in making products become available from the producer to consumer is mind blowing to me”
“The first and most important element of our business is to completely vertically integrate our supply chain process and to take out all middlemen, wholesalers, and other 3rd party distribution logistic companies. And establish direct as possible access to actual producers.”
“If I’m able to directly go to a producer, then I can tap into a product margin pool that is significantly higher than the product margin pool of existing retail companies”
“Dilemma of existing e-commerce companies is that they work more like classified or marketplace. So they rely largely on 3rd party supplies on existing supermarkets and stores like Instacart.”
We become the supermarket, the wholesale company, warehouse, and distribution company as part of our company. Hence the profit pool on the product margin is significant
Focus on Relevance
[1] 10:30
“Almost equally important value driver is really figuring out what customers want and when is it that customers need it. So we focus on relevance. We avoid significant inventory losses and wastes that most other retail companies have”
Being data-driven in rolling out fulfilment centers
[1] 12:20
“One of the things we did was to break down entire Western worlds’ every single city into 300 X 300m hexagons. We have developed our own iteration of Google Maps type of tooling… So you can zoom into every single city of the world and can see every city broken down into micro areas. Then we plug in all kinds of data that tell us about demographic information, density, retail distribution, retail consumption, up to schools, universities, and other public / private institutions to drive conclusions out of it, in terms of relevance, we call it attractive score for building out on-demand delivery business”
SH: To me, this was one of the coolest underlying technologies that Jokr had. The company essentially has a bird eye view of each neighboor / polygon, which we thought was only available to God
Catalogue Management
[1] 14:25
“I think the way you operate warehouses, micro fulfilment warehouses is an output of how you build your catalogue. So the centerpiece of our company is catalogue management, which determines what we need to offer to a single group of customers and when do we need it to offer it”
“Catalogue management determines on a per neighborhood basis, on a per hub basis, which products we need and when do we need them. Warehouse management system and how we procure is an output of that. Obviously it’s super important to have a warehouse management system that can keep pace with the requirements for inventory rotation, different supplier you need to work with, different operations. But the input to warehouse management system, how we build it comes out of the catalogue management, which is the actual innovative piece of what we are doing with Jokr”
Focus on Neighborhood
[1] 25:30
“I think it’s for us, market is a neighborhood. It’s like a micro-area where we are serving couple of tens of thousands of customers where the delivery radius ensures us to delivery every single product within 15 minutes maximum. For us, we look at the PnL on a neighborhood by neighborhood level. Every single neighborhood that we deem to be sufficiently active for running our business, which doesn’t apply to every single city neighborhood. Those that we deem attractive, we build hub, micro fulfilment center with people that work in the hub, with associated delivery riders, with dedicated marketing…We focus on efficiency, retention, customer loyalty on a neighborhood level”
On Customer Acquisition
[1] 27:08
“On customer acquisition side, we have proven from our previous companies, you have to hyper focus on experience. So biggest lever for having efficient and profitable customer acquisition is actually the experience itself…But doubling down on product, technology, customer service, and hence optimizing for the highest customer satisfaction…focusing on that is your biggest lever for customer acquisition”
“The 2nd lever is as we’ve learned from retail companies and large CPGs, which obviously have lot to learn from, is question of branding. Having a great branding, great brand philosophy, brand values that are state-of-the-art, that are appealing…is the other big lever”
[2] 26:15
More than 50% of our new customer growth is organic, free of charge, without any marketing
On Private Label
[1] 31:00
“Creating brands ourselves as we have direct access to producers is an incredibly strong proposition. Because as I said before branding drives loyalty. And branding drives customer life time value and acquisition. That does not translate only into company branding, but also into single product branding. You can have a key differentiator if a significant part of your assortment is exclusive to yourself.“
[2] 29:46
First and foremost, we want to make sure that we do have the assortment available that customers care about. We already have a mix of CPGs, larger CPGs and local brands that we see increasing demand for, and we’ve already launched our first private label brands, which are function of filling assortment gaps.
But also looking into those products and articles that are most demanded as a function of yielding additional margin and create uniqueness factor…
At scale, we have 5 – 10% additional margin potential building private label
Unit Economics
[2] 13:45
| LATAM | US | |
| Avg. Order Value | $15 | $50 |
| Gross Profit Margin | 40% | 40% |
| Contribution Margin | $6 | $18 – $20 |
| Delivery & Picking Cost | 7 ~ 15% of AOV | 12 – 17% of AOV |
| Net Margin | ~$5 | ~$10 |
| Average lease cost per month | $3 ~ 5K | $15 ~ 20K |
Fortunately consumer demand is trending more and more towards local products. That goes to our favor because we can use that demand consideration for building an assortment that is predominantly generated or built by lot of local brands, especially on the fresh and fresh grocery side. As we increase our share of local products, as we increase our data pool that tells us what customers need and when they need it so that we only procure what’s needed. And bring down inventory losses to a negligible degree, I think product margin at scale can grow to even 50% of revenue over time
On Delivery Efficiency
[2] 10:35
The first dilemma we learned from coming from marketplace context, where we have been working for many many different years, is how do we make delivery first and foremost efficient by moving supply closer to demand
How on top it, do we increase delivery efficiency by reducing the size of delivery polygon and allowing delivery time to be as short as possible
[2] 12:40
In most mature cities, we are already between so called 3.5 – 3.7 drops per hour per rider. And that is the function of consistently sticking to 15 minute guaranteed delivery for more than 90% of our orders we are fulfilling
[2] 34:25
We think that 1 or 2 hour type of delivery system will never be able to yield the same profit margin as 15 minute delivery. So 15 minute is not only something we build to adhere to customer demand, but something that build to, adhere to, stick to, and guarantee to ourselves in order to keep on driving very very high profit margin
SH: So it’s not just that you need to efficiently manage couriers to control the cost, but more importantly it’s essential to drive higher revenue and product margin
US v. LATAM
In addition to (higher potential for average order value through personalization and entertainment) that, leveraging additional revenue stream, merchandise revenue such as advertising, placement, and sampling by allowing brands to use our infrastructure for testing certain products; our ability to drive higher average order value and additional revenue is over-proportionately higher in the US compared to LATAM
In the 5 – 10 year horizon, the gross margin for both US and LATAM will converge
SH: Given that The Information has reported that Jokr is contemplating to sell their NYC business and that they only opened 10 micro fulfilment centers (they originally planned to open more than 100), it seems fair to say the that journey of verticalized supply chain + customization +. insane competition is not easy.
Offline Retail v. Online Marketplace v. Jokr
[2] 37:17
| Offline Retail | Online Marketplace | Jokr | |
| Product type | 1st supply | 3rd party supply | 1st + 3rd party supply |
| Revenue per square ft | Significantly lower | None | Significantly higher (3x at maturity) |
| Gross Margin | Significantly lower | Lower (15% – 20% takeaway rate) | Significantly higher (thanks to advanced inventory mgmt) |
| SG&A | Significantly higher | Significantly leaner | leaner |
Sang Ha Park 
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