Recently, I attended 2 talks during askNOC. There were two invited guests: Jonathan Low from Honestbee and Henry Chan from Shopback. Both companies are startups, having only been in the market for around a year or so. Today’s sharing was largely focused on their business and how they overcame the various challenges.
Honestbee is a concierge and online delivery service for grocery shopping. So essentially, customers can place orders online for groceries or items found at common supermarkets such as NTUC. The ‘bees’ from the company are actuallly people who will shop the necessary items and deliver them to you in an hour. I personally found this a great idea for a number of reasons.
Firstly, there is a huge incentive for consumers to use this product because there are no additional costs. The items are bought at the same prevailing price at the supermarket. Secondly, consumers can order from the convenience of their home. Thirdly, as mentioned by Jonathan, this is an asset light model. There are no storage or warehouse involved. Every purchase is made directly at the supermarket which means storage is well taken care of. Essentially, the only services that they are providing will be the shopping and delivery of items. They are able to grow well with the use of technology. For example, internally they use an Android app that allows ‘bees’ to receive orders. Nevertheless, Jonathan mentioned that currently it is still exists as a manual process. This can definitely be automated to reduced much of the overhead costs. An order can immediately be routed to a free ‘bee’ together with the list of items etc. Doing so will help save time and manpower costs as well as allow them to garner good analytics into the demographics and patterns of their customers.
Talking about how Honestbee works, Jonathan also provided some good insights into the business model. They utilise a revenue share model. Taking an example of an order of $100, they will be able to obtain a 20% commission. Out of this $20, their overall profit is only $10 as shown below. $20-$5(shopper cost)-$5(delivery cost) = $10
There are several teams in Honestbee which work together. These include: business, customer service, product (engineering, design, data), operations teams. He emphasised the crucial need for each of these teams to work hand in hand and communicate effectively.
Jonathan also shared the various challenges he faced. Factoring in the customer acquisition costs, each customer only turns profitable from the fifth order onwards. Also, he mentioned the poor visibility they have on stock availability. This is especially true due to their reliance on the supermarket to have the various products they are looking for. Also, delivery costs are only minimised with economies of scale.
The second talk was by Henry Chan from Shopback. Shopback is based on the idea of customers getting cashbacks on their online purchases. Henry provided some great insights on e-commerce as a whole. He pointed out that e-commerce in Southeast Asia has a very low penetration rate which essentially means a huge growth opportunity for the next 5-6 years. One of the key markets to tap on will be Indonesia where online shopping and mobile penetration rates are growing rapidly. Henry also emphasised that entrepreneurs must be willing to learn and have the hunger to achieve and that expanding your business is all about having the right people around you. This pointed out the importance of networking, about having good contacts in the business world.
When asked how his business adapts to smaller markets where technology is generally less advanced, he said that such a situation is indeed a good opportunity where you can have greater expansion and tap deeper into the market.
One of the interesting questions was if both the founders give employees stock options. I felt that this is a great way to align employees’ interests together with the company’s goals. While stock options may not guarantee any value, this orientation towards a common goal is crucial in my opinion.
Lastly, both of them provided an important tip for budding entrepreneurs:Don’t be shy in validating your idea. One of them even mentioned, that they requested people in Starbucks to test drive their prototype and gain feedback. I am sure validation is a crucial part every new product has to achieve and this must be done early in the prototyping stage itself.
Learnt a lot from this session and definitely looking forward to the next session.
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