‘We are absolutely determined to keep the customer touchpoint under our control’
Supermarkets in the Netherlands are packed almost like sardines, at least compared with elsewhere in the world. Another player joined the fray around 18 months ago: the start-up Picnic, a mobile-only supermarket that uses electric delivery vehicles instead of stationery outlets. Its rapid growth has put the fear of god into incumbents like Albert Heijn, Jumbo and others.
Founded in 2015, the new kid on the block offers its mobile grocery shopping services already to more than 50,000 customers in several Dutch cities. Moreover, thousands of enthusiastic Picnic fans are looking forward to when Picnic will start serving their city. ‘Despite the high supermarket density in Netherlands, customers are looking for better service and convenient home delivery’, reports Daniel Gebler during his talk at the 24th Business Breakfast by foryouandyourcustomers in Munich. But that’s not enough to explain the tremendous success of Picnic. Is it maybe the ultra-reliable up-to-the-minute precise delivery? Or the free delivery service and extremely fresh produce? Or the focus on mobile-based shopping that slashes the cost of physical retail stores and comes packed with handy features that make the whole shopping experience so much more convenient? Or is it the steady stream of improvements to the company service and app? Jens Plattfaut and Jonathan Bauer from foryouandyourcustomers Munich wanted to hear more about the world’s fastest growing online supermarket.
Jens Plattfaut: Mr. Gebler, what is the secret of Picnic’s success?
Daniel Gebler: Our concept is simple: We deliver all supermarket products including all the food you love, at lowest price, without delivery fee, always fresh, always on-time to your home. For this mission we had to develop from scratch a completely new delivery concept. We call it Milkman 2.0 since it combines the convenience and customer service of the old milkman with the competitive prices and assortment of today’s supermarkets. In essence, we reinvented an old retail concept by using today’s technologies like smart phones, artificial intelligence, and IoT. The result is clear: Using latest technology and putting customers first creates a truly loyal customer base that loves your service.
Jens Plattfaut: There was a headline that sent ripples through the Dutch market – and probably not only in the food sector. It claimed that a consortium has awarded Picnic €100 million – a record-breaking amount for a European start-up.
Daniel Gebler: We will use this funding to roll out Picnic throughout the Netherlands. We plan to roll out to 70 additional cities, which will cover a large part of the of the country. In doing so we will create 10,000 new jobs and add 2,000 new electric vehicles to our delivery fleet.
Jens Plattfaut: Good that you mention the delivery fleet. Other online retailers use external service providers, but you run your own vehicles. Why?
Daniel Gebler: Food logistics is very complex. We have built our own electrical vehicles that are able to deliver very efficiently and make sure the three temperature zones of food are well managed. This means great quality of product from the warehouse to the customer.Traditional third-party logistics provider are not able to cover the full range of food logistics requirements.
‘No external logistics providers: We are absolutely determined to keep the customer touchpoint under our control, and that would not work with an external logistics provider.’
Besides that, there is another reason which might be even more important. As a mobile-only service, Picnic does not have the customer contact of retail stores. However, we see our customers at their homes when delivering the groceries. Thus, the customer contact of our delivery boys and girls becomes an essential part of the service proposition. That is why we use fresh and service-oriented delivery agents and call them runners. Even more, our runners do not focus only on the basic on-time delivery but aim for some special customer delight to remind everybody how much we value them. We are absolutely determined to keep the customer touchpoint under our control, and that would not work with an external logistics
Jonathan Bauer: Before the interview, you mentioned that the Picnic service was tested in stealth mode for six months with 300 customers. How did you obtain the essential information you need to guarantee today’s service?
Daniel Gebler: It was actually fairly simple. First, we interviewed our customers and used questionnaires. Second, we asked our runners to provide detailed reports on the customer touchpoint. Third, the actual order details provided insightful and conclusive information about the customer satisfaction. Then we improved the service together with our customers on weekly basis and tested many variants of our service proposition.
Jonathan Bauer: It sounds like you want to respond quickly to any change in the customer journey: is this what sets Picnic apart?
Daniel Gebler: We run our business in weekly sprints. On Monday we decide which improvements and changes we will make. On Tuesday we implement suitable experiments in our system, which may involve 10, 15 or even 20 new proposals. The experiments are conducted on Wednesdays and Thursdays, and by Friday we are able to analyse the results and define the improvements for the next sprint. This is a strict heartbeat that sets the pace of our company from day one – in terms of our logistics concept as well as our mobile shopping app. We have kept this method until now: each week needs to run smoother and better than the week before. A week without improvements is a lost week for Picnic.
‘An idea that is ignored for longer than four weeks is dead.’
Jens Plattfaut: So you are talking about the impetus to improve (coming) from inside the company. To what extent do the employees – in their various roles – have a say in the future development of the company?
Daniel Gebler: Every employee is encouraged (and actually does) suggest improvements. This is deeply ingrained in the DNA of our company and is an cornerstone of our culture. Since day one we live and breathe democratisation of innovation. It doesn’t matter whether a proposal comes from the CEO or a warehouse employee. Each proposal is equally important. It is immediately reviewed and will be implemented assuming it provides significant value for our customers. An idea that is ignored for longer than four weeks is dead.
Jonathan Bauer: Picnic plans to expand, and the company will very quickly cover the entire Dutch market. How do you want to preserve your start-up culture?
Daniel Gebler: It is certainly a challenge to preserve the start-up culture when you are growing from a few dozen employees (where each stand-up is an all-hands meeting) to more than 1.000 by end of this year. It is essential that the culture evolves as we grow and reflects that teams are co-located and that roles and responsibilities are re-defined at scale.
From the very beginning we focussed on building the right culture. We summarize it in three words: think, dare, do. Think means that every action, every experiment must be based on a systematic thought process. The proposal is fully thought through from start to finish. Dare means that we will only initiate experiments that make significant changes. We focus on experiments that allow for major progress that have the potential to lift the service to the next level. We cannot waste time with slow micro-improvements. And Do means that we can only be successful if we eventually also execute the experiments and improvements. We strive for healthy balance between analytical understanding and excellent execution.
Jens Plattfaut: The metrics are clear evidence of your success. Picnic’s revenue in 2016 was €30 million, after just 18 months on the market. The idea appeals to people so much that potential customers are initially placed on a waiting list. It can take several weeks until they are eligible to place their first orders on the online platform.
Daniel Gebler: The waiting period has become significantly shorter in the meantime. The idea behind the waiting list is that we want to ensure that we offer our customers the best possible service from day one. For instance, we promise our customers that deliver all their groceries to their homes precise on the minute. This means we operate within a fairly tight schedule. We can grow only in an organized manner to guarantee this service level. And once you’re in, you will never be in line again!
Jonathan Bauer: You started out with one warehouse. Now you have completed a secondone, and you use your own fleet of delivery vehicles. Did you team up with logistics or warehousing experts, at least in the early phase?
Daniel Gebler: When developing a completely new logistics concept, expertise with old warehouse and logistics implementations is less relevant. Our starting point was simple: How do we need to organize our logistics supply chain to make it possible that we can deliver without delivery fees and at the lowest price? It became quickly clear that the existing models which both serve the stationary as well as the online trade are not sufficient. The key is a supply chain which is geared to the specific needs of online commerce, which is optimised to the customer’s needs and can be dynamically adapted to changing customer requirements.
‘Free delivery of groceries will open up the supermarket business for online commerce in the same way as Zalando transformed fashion retail.’
Recent decades have seen little or no fundamental innovation in terms of how the food retail sector distributes its products. But that might change now due to revolutionary developments in the area of logistics. Free delivery of groceries will open up the supermarket business for online commerce in the same way as Zalando transformed fashion retail.
Jens Plattfaut: Picnic is a mobile-only supermarket. Other retailers are eyeing the market or have already introduced responsive concepts to secure a presence on all channels. Why is your company so determined to remain exclusively mobile?
Daniel Gebler: In the early days we had quite a few discussions about whether we should launch also a traditional webshop. We realized that our app should model more than the traditional e-commerce buying journey. It needs to be the shopping list in your pocket where you can add at any point in time a new item. Now, when you notice that you run out of a certain item, you can simply open the app and add the product to your personal shopping basket. And when your basket is complete, you simply tap on the order button and look forward to receive all your items the next day. Customers have now their shopping list always at hand and can shop while commuting on the train or during the advertising breaks on TV.
Jonathan Bauer: The customer journey at Picnic is built around the app. How important is user experience to you?
Daniel Gebler: The whole shopping app is built around the mission to make grocery shopping simple and fun for everybody. Customers buy 30 or more items when visiting a stationary food outlet. So now they are using a smartphone display, and we have to ensure that the shopping experience is as simple and convenient as possible. The process of navigating through the various categories is extremely easy for our customers, and we also offer recommendation functions that are based on personal shopping habits. All of this speeds up the shopping process. Picnic customers can buy all their groceries in only a few minutes, instead of scheduling half an hour to amble through a supermarket. Even more, the app lets our customers track their delivery in real time, so they know precise to the minute when they can expect their groceries.
Jonathan Bauer: Data management is a very important aspect at Picnic. It applies to more than just the process of delivering food, doesn’t it?
Daniel Gebler: We apply a right data analytics approach: from customer acquisition and online shopping, to warehousing and distribution. This means that we collect the right data, which we then filter, depending on how precise it is. Then we use only data that is significant to our business. Data plays three essential roles in Picnic. First, we personalize the app to make the shopping experience as simple as possible. This means classical product ranking and recommendations, but also personalization of app features and user flows. Second, we use data for forecasting. The entire capacity planning for our logistics supply chain depends on our ability to predict precisely how many orders we need to handle tomorrow, the day after tomorrow and next week. The third aspect is in the area of customer acquisition. We work with platforms like Google and Facebook and monitor closely customer acquisition costs and campaign efficiency.
Jonathan Bauer: Picnic carries a relatively dynamic range that is adapted all the time to suit customer wishes. Have you considered selling private label products?
Daniel Gebler: In addition to the full supermarket assortment with A-brands and private label products, we offer also in each city regional products. For instance, in Amersfoort we offer specific organic products and certain spices that are produced only in this particular region. We apply this concept to other areas as well and get a lot of positive feedback from our customers.
Jens Plattfaut: You spoke earlier of plans to roll out Picnic throughout the Netherlands. Can we look forward to you expanding your services to Germany as well at some stage?
Daniel Gebler (smiles): We have international ambitions but we focus for the time being on the Dutch market.