We’ve never done an interview with anybody from Snappy Shopper before, but the company (it feels odd calling something so concrete just an “app”) is fast becoming a real phenomenon in the convenience channel. Dael Links is head of marketing for business to business, and is the man who specifically deals independent store owners. How did it all start?
It was really quite organic, to be honest. You had two co-founders Mike Callachan and Scott Campbell, who were pretty much polar opposites. Mike had 20-plus years in technology and e-commerce. And Scott Campbell, who is a lawyer, and also owns some convenience stores across Dundee.
And Scot would profess to say that he was a rubbish retailer and also a pretty substandard lawyer. But his Scottish brain just works a million miles an hour. So Scott, way pre-pandemic, in 2017 or 2018 had this crazy idea that he could facilitate delivery from some of the c-stores that he had the lease for. He was no longer running the store. So he took this idea to MTC [an internet company], which was Mike Callahan at the time, and said, “Hey, I’ve got this really crazy idea. I think I can facilitate delivery from some of my convenience stores. Would you be interested in seeing what we can do here from a tech perspective?”
At that time, MTC were developing our product, which was catering to the hospitality industry, called Hunger. Suffice to say the Hunger technology was the blueprint tech for Snappy Shopper.
So they quickly put something together. And in the early stages, the orders still said, “Your order is in the kitchen”, when it came through to the convenience store. It was very much a case really trying to get something ready to deploy quickly to see whether it actually had legs.
How Scottish is it? It started up there and your main investors were Highland Technology, Kelvin Capital, Scottish Enterprise …
It’s fair to say we are a Scottish business. We were birthed in Dundee and our HQ is there, but the 170 staff are spread through the UK. We’re not Scottish-centric and the scale of the group now is over 2,500 stores, 2,500 merchants across the UK. And where our focus is right now, for the group, specifically Snappy Shopper, is expansion into England and Wales – where we are currently heading.
It looks like you started at about the right time, just as the technology was becoming truly plausible and sufficient numbers of people had smartphones. And then the pandemic hit, tell us what the effects of the pandemic was on demand and distribution for your service.
Crazy, in one word! We had a small team pre-pandemic, and quite a small estate, but Covid expedited our growth. The early adopters really saw massive growth during that period of time, but in terms of our technology, we had to move at a quicker pace, because demand was building. We had to make sure that everything that we were doing was quicker. That process then made the technology, and the group, a lot more valuable to investors because they saw that growth trajectory pretty much happen overnight.
[The lockdown] just moved everything forward for us a lot quicker than it probably would have had.
You’re in 2,500 stores now, and if you increase numbers by a by a power law, you still only cover half of them, so you’ve got potentially great growth baked into the model if Snappy keeps expanding at the rate it’s doing – and you just had another seven-figure investment in December. Where is your capital expenditure? Is it mostly in people?
Absolutely. Our focus is on delivering support for our merchants. And with that comes an overhead and people for sure. And the more the more merchants we have, the more people we need to support them.
The way that we approach marketing is not like Just Eat, it’s not like Uber Eats, we’re very efficient with our spends, we deploy at a local level instead of – and it’s a wee bit of a dig, here – but not getting Katy Perry to do a big TV campaign, for which they may be paying £100 a customer. Their approach was, we’ll throw as much as we can at the wall and see what sticks.
If you have a look at the cash burn for say, a dark store operator, it was in the millions per month, we took £20 million worth of funding [in 2021] and made that last a hell of a long time, which it still does.
We came up with a model that was producing a returning customer for single figures. So it was a case of, give us more money so we can deploy that at scale and a little bit faster. Yes, our expenditure really is people and marketing.
You say retailers can increase revenue by up to o 50 per cent when they install Snappy Shopper, and I’ve heard from participating retailers that they’re engaging a much wider catchment area for their store, from people who’ve never visited their store – which is remarkable,
Within our systems, as far as the traditional catchment area goes, you’re maybe talking about a mile. That means they’re going to always be capped at a certain level, and to be able to expand beyond that they can reinvent product lines, improve customer service. But a c-store is always going to be limited to a specific level and it’s going to be a challenge for them to get beyond that.
However, with the introduction of home delivery, they can actually deliver within a three-mile radius. They will be delivering into a catchment and a locale they would not typically have had access to previously. So, with Snappy Shopper, you often find that 80 per cent of customers that a store acquires are new customers that they would not have been able to gain access to.
How do the economics work? Because obviously, supermarkets have to charge for delivery, or they have to get a certain number of bags of shopping to make it worthwhile. It’s a big operation, they still don’t make any money out of it. Whereas I know for a c-store it is well worth providing the service. But what size of delivery is typical? And what how low can you be to make it economical or even a loss leader that’s an overall good for the business?
The average order value (and this has been this way since the platform began), is £26, something like three times the average basket. It is definitely a profitable solution for the retailer. Typically, the, the sweet spot for a retailer is around that £2k-a-week marker. On hitting that marker, that’s when it becomes exciting, that’s when it becomes profitable for that retailer. Our aim, and our intensive support for retailers, from a standing start is perhaps four or five weeks to get to that £2k mark, and our support is, is really hands-on, focused on getting that retailer to that level as quickly as we possibly can.
What are your ambitions for 2023 and longer term for Snappy? Where do you want to be and how are you going to get there?
With regard to 2023, it is supporting our merchants. But I think a couple of points to really make would be specifically that of course want to increase our estate, the number of merchants. But we also want to improve on our merchant happiness: we want to make sure that our retailers across our estate are truly happy.
Now, happiness comes from providing a full and profitable delivery service, of course. And we want to also ensure that our customers are happy. Whichever way you tackle that, taking the customer first, they’re going to be happy by accessing choice, so when they punch in a postcode, they’ve got access to a choice of retailers. They’re also going to be happy when they can obtain a product at an off-the-shelf price point, so it’s a fair pricing for the customer.
Tell us about the competitive advantage Snappy Shopper brings to the table.
We’ve just done a basket analysis across our competition – specifically the big marketplaces, the aggregators like Deliveroo, Uber Eats, Just Eat, all those – and we’re about 20 per cent to 25 per cent cheaper on a basket for the exact same product.
If we take Uber Eats, the consumer cost of an all-inclusive delivery-free basket, they’re £41.62. For us, same basket, Snappy Shopper is £34.40 all-inclusive to the customer.
So when we talk about fair pricing, customers understand, and that’s also impactful on the retailer as well. With that basket analysis, we’re advocating in-store to in-app price-matching: so happy customer, happy retailer additionally, because our cost to the retailer, again, is far less – in fact is multiples lower on Snappy in comparison to the big aggregators.
How have you managed that? Where does your revenue come from compared to the competitors?
It’s a very similar model in terms of where Snappy Shopper’s revenue and profitability comes from, but our model differs in that these big aggregators charge 15-35 per cent to the retailer, because they supply that last mile.
Now, we don’t supply that last mile provision: it’s on the retailer to own that delivery and make that delivery profitable for themselves. But with that, we charge a multiples lower retailer service fee.
And your investors are from within the business. It’s not private capital looking for massive, leveraged returns, so there’s not that kind of investor expectation? Obviously they’re in it to make money, but it’s not just to serve international finance – is that correct?
Absolutely. Just look at our board, namely Justin King and Frank Skivington. If you look back to when Snappy was founded, if you asked Mike if he could have had one or the other, he would have bitten your arm off for either. But when you have these great investors from the tech world and the retail world, their drive is really to take a model that you feel is going to be the profitable one over the aggregators, so they are invested in making this work from a local level.
What about the future of online shopping. Since the mid-noughties it’s been growing exponentially, but predictions are now that it’s going to level off and the initial profitability is evaporating because it’s simply more of a mature marketplace. So instead of having lots of capital going in, and lots of new mushrooming little companies springing up both to sell and deliver, it’s going to start contracting, there’s going to be a shakeout.
At the same time the future of online ordering and delivery hasn’t really even started yet if it’s coming from your sector with inflation and the cost-of living crisis it seems the aggregators are going to be cut off at the knees as people switch to groceries and home cooking and local services – which will be more in Snappy’s favour than, say, Deliveroo’s.
According to IGD, the market within the UK specifically will be valued at £3.3 billion, so market share is humongous, and within that you have players such as us, Uber Eats, the Getirs of this world and so on. Our focus and our direct competition is specifically the aggregators because their expansion is into convenience.
But just coming back to the points of differentiation between us and them: we’re all about supporting local, enabling local retailers to thrive within their communities. Those guys are really just trying to suck the life from the retailer to be honest and suck up all that profit.
So what you have there is just a revolving cycle because their impact is on the retailer, the retailer has an impact on the consumer and on the aggregator because they’re driving up their menu pricing because they have to, because they end up just losing money on the aggregator. So yeah, I think there’s definitely a large market to go after. We’re, really only just beginning our growth, to be honest with you, and I think the direct competition for that large market share comes specifically against the big aggregators.
What are the reasons why a retailer wouldn’t want to sign up with Snappy?
Very honestly, the biggest barrier for a retailer is the last mile provision, and certain retailers are put off by owning the delivery themselves. But within that there’s a multiple of options for a retailer to be able to sort that last mile.
Certainly, the retailers that are adding £1.5 million incrementally to their sales per year are the retailers who are running that delivery service themselves, who have a dedicated delivery driver, who have a detailed van branded as Snappy Shopper, and are really in it to drive delivery.
Is Snappy Shopper better in rural and suburban than inner-city areas?
Typically, we’re outside city centres. However, having said that, if we’re looking at the kind of key objectives for the business moving into this year, meaning the number of stores, of course we want expansion. And there are still large parts of England and Wales that we’re moving into that haven’t yet been explored. But there will come a tipping point where we will gradually move into the city centres because we can’t ignore that there will be demand from city centre post-codes.
The demographics of ageing are on your side as well, as well as the cost-of-living crisis, because people don’t want to drive so much if they don’t have to. And thinking about Scotland as well, which has a more rural geography, where you have more isolated settlements, where one c-store becomes the hub of the community – is that going to play to your advantage over, say, the next decade or two.
If we look at where we are settled in Scotland right now, it’s not so much those northern rural territories, it’s really through the central belt. And about 25 per cent of our store estate is in Scotland, so although we talk about Snappy being a Scottish business, the largest part of our estate is south of the border. But there’s still areas within Scotland that are that are untapped territory, for sure.
If you take the outskirts of Glasgow as an example, you have multiples of retailers that are doing £15k, £20k, 25k a week on delivery alone. So even though there are maybe two or three stores within specific, say three-, four-, five- or six- mile radius, and they’re in competition with each other, they’re still driving a significant profit from this service.
Last question: is there a scope for Snappy to expand its services beyond delivery? Have you done any blue-sky thinking about how you can integrate the channel with other kinds of online innovations?
One key area of our focus into 2023, is fair pricing for the consumer and for the retailer. It really is all linked to some of the work that we’re trying to deploy with brands and wholesalers directly. But if we take brands specifically, we’re building out a really great product that will enable brands to showcase their product in front of thousands of customers daily. And that becomes really exciting because not only is this going to add value to Snappy as a business, it is also going to add value to the retailer, because we were pushing a product for them specifically; and it is going to add value for the consumer, because they’re going to be able to get a branded product at a significantly lower price.
I’d say it was blue-sky thinking, except part of our model was always to work with brands directly to influence that purchase and create repetition as well.
If we highlight some work that we did several months back with brands, we put together and I’m sure you saw that where we covered £10-worth of branded products for one penny – the promotional packed-lunch bundles. A phenomenal success, unbelievable.
I’m not saying that that’s always going to work. People may tire of that. But if you apply that logic at scale, that’s really what we’re trying to do: to put something into consumers’ hands that is of high value, so they can say, “This is brilliant. I got this from Snappy Shopper.” Then you’re also driving new and frequent customers to retailer stores and you’re obviously making the brands happy because they’re getting more eyeballs and sales on a specific product that they want to push.
It really all just comes full circle.