Although Amazon continues to generate the lion's share of press coverage when it comes to retail, hidden behind the scenes are thousands of start up companies determined to gain traction in the retail industry. The challenge for start ups is generating new ideas to tackle the same opportunities that everyone sees, before the retail giants catch on.
In my role as a consultant, I provide strategy, operations and innovation support to companies located in Silicon Valley, CA and globally. I have determined that a new channel exists for e-commerce: Direct to Customer in Office (DTCO). Selling and delivering food and general merchandise to customers where they work, especially in large office buildings, is the next battleground in retail.
What I find is that many start ups are focused on the wrong thing. Trying to introduce a new line of apparel or shoes is very challenging with most start ups failing to achieve its goals. Food, however, is another story. Over the last three years I have witnessed the reinvention of how companies think about food, and with that a significant shift in the number of investors who are willing to back start ups focused on the space.
One such company taking an entirely new approach and seeing hyper growth is a San Francisco-based startup called Byte Foods.
Byte Foods was founded by Lee and Megan Mokri. Megan is the CEO of the company and Lee is the VP of Sales and Marketing. Lee got his first taste of the food industry when he launched an on-demand meal delivery company in 2014. He and the team scaled the company quickly, but saw first-hand the high cost of acquiring and retaining customers and the challenges of last-mile delivery. Lee pivoted the business and focused more on developing a technology that would be a true differentiator.
Byte Foods developed a technology similar to Amazon Go, but scaled it down to fit into a glass front refrigerator, which is placed in offices, hospital, university, gym, or just about anywhere people spend time away from home.
These Internet of Things (IOT) smart fridges are stocked with high-quality, locally sourced meals, snacks, drinks and meal kits, and employees purchase items directly from the fridge with their credit or debit card. The technology democratizes fresh food, allowing all employers (whether they have a budget for food or not) to realize the productivity gains and wellness benefits of providing fresh food to its teams. Companies have the option of subsidizing the cost of food by whatever percentage they'd like, or not at all.
According to Lee, in a recent survey of tens of thousands of Byte customers, 90% said having a Byte fridge in the office allows them to make healthier eating choices at work. But it’s not just the employees who are winning, Byte’s clients also see this as a high-impact perk, with the average client saving 150 hours of employee productivity time per month.
The secret sauce of Byte's success is the creative use of Radio Frequency Identification (RFID) technology in each of its fridges. It allows Byte a real-time view into exactly what’s in each of its fridges, purchase history, the expiration date of each product and even the ability to dynamically change prices. You can imagine how powerful this data has become for Byte, with the ability to discount products based on time-on-shelf or even predicting what will be purchased, by each customer, each day.
Lee stated that the value of data to Byte is what separates the company from being a vending machine company. According to Lee: "We are quickly gaining the ability to personalize food options for every employee in every office we service." As Byte learns more about the preferences of each customer, it will determine the optimal solution for meeting demand. For example, Byte's smart refrigerators could become a hub for receiving customer’s food requests, which are delivered to the fridge before they’re even purchased.
Byte's small-sized refrigerators are in big demand. Byte has deployed fridges in more than 500 leading Northern California companies, including Tesla, Cisco, SAP and Autodesk. Byte is also working with hospitals, apartment complexes, gymnasiums, schools, universities, and even prisons. Companies all over the U.S. are using Byte's smart fridge technology.
If workplaces are the next battleground for retail, Byte Foods is leading the charge. The technology addresses a lot of the challenges Mokri originally faced. For instance, it sells to a captive audience that is in the office each day, which removes any costs associated with customer acquisition and retention. Most of Byte's food deliveries are done on a set schedule (based on demand) in the middle of the night, which brings down the high cost of last-mile delivery. Byte also outsourced food production, warehousing and logistics, making it scalable to just about any geography where people get hungry.
Lee has plans to scale Byte nationwide once he and Megan perfect the business model and the company gathers more data related to the best local food sources in each state in the U.S. Although the refrigerators are small, Lee, Megan and the Byte team think big. It is plausible that Byte Foods could be operating over 100,000 plus smart refrigerators within just a few years.
In addition to Byte Foods, another San Francisco based start up, AxleHire, is one of the first last mile delivery and logistics companies to recognize the potential of Direct to Customer in Office retail deliveries for food and general merchandise. AxleHire CEO, Daniel Sokolovsky, stated "We designed solutions capable of meeting the needs of retailers serving large or small office buildings in San Francisco or nationwide."
Beyond Food
The next evolution of Byte's smart refrigerators includes creating units capable of dispensing popular retail products other than food. Future versions of smart refrigerators may focus on ambient cases for more shelf-stable products that don't need to be chilled.
Lee estimates his team can utilize machine learning to identify the optimal types of retail products to stock and sell in each display case. Signing agreements with CVS, Walgreens, and JC Penney would allow Byte to offer top-selling cosmetics. Agreements could be signed with grocery, apparel, jewelry, and electronics brands, including Amazon, to offer a variety of small items easily purchased and without the risk of theft.
Lee is also experimenting with the idea of creating a Byte-owned and operated marketplace allowing customers to shop for items through an app and then have the items delivered direct to the closest Byte location. No more packages sitting on the front porch only to be stolen or rained on. Future versions of smart refrigerators and display cases will include the ability to tap on a screen to order and request products be delivered to the office or home.
Byte has created another level of convenience for the customer and it has an opportunity to slowly but surely impact consumer behavior. If food and retail products can easily be purchased from a smart fridge or display case, or ordered from a Byte marketplace for delivery to a work office, Byte has the potential to generate significant revenue.
Stated another way, Byte is taking a bite out of retail sales one office building at a time.
