Stealing Signs - Issue 51
Eating the (food) World, An Intro to Bilibili, goPuff's Strategy to Conquer the Market, Niches are Massive On the Internet, & MarketWagon raises $
Worth Reading
Eating the (Food) World
Tal Shachar, Chief Digital Officer @ Immortals Gaming Club
Just as we saw in media, this shift is leading to the hollowing out of the middle class. Chain restaurants with well-known brands, economies of scale, and the deep pockets needed to adapt to new funnels are thriving. Meanwhile, truly great restaurants with deep passionate fans, differentiated experiences/food, and devoted communities, COVID aside, are as well.
COVID changed the fundamental structure of the restaurant industry primarily by accelerating consumer adoption of delivery platforms, which in turn forced restaurants to prioritize new features of their offering — ambiance, location, and quality of service are differentiators of the past. The new differentiators include “unboxing experience,” digital experiences, consistency, and strength of the customer community, and the the result is a barbell effect — on one end, the large chain restaurants with economies of scale are increasing their dominance, and on the other, the long tail of restaurants with passionate customers and the ability to provide unique experiences are thriving.
The similarities between the restaurant industry and media industry evolutions — both resulting in barbells — suggest that aggregation platforms are a core driver of industry-wide change. As Tal notes, aggregation platforms serve two suppliers: 1. differentiated niche players, and 2. large businesses with entrenched brands and economies of scale. The key driver of change, though, isn’t just a new platform, rather it’s the “endless aisle” of choices and cost efficiencies that the platform rewards which result in a hollowed out middle class. The differentiated niche players stand out among a sea of food options and the entrenched brands with economies of scale 1. already acquired most customers, and 2. can win on price.
An Introduction to Bilibili
Lillian Li, Former Investor at Eight Roads Ventures & Salesforce Ventures
While videos are free to view on the platform, the registration process to be a commentator for Bilibili is perhaps the most demanding one for any social media platform today. It involves passing a 100 multi-choice questions test with at least 60 correct answers within an hour.
Every single social platform in the west that I can think of focuses on reducing the registration friction, it seems like a no-brainer esp if your priority is the growth of the platform. Bilibili’s process seems counter-intuitive until you factor in that its aim is sustainable growth. Sustainable growth means that they want to let in dedicated members who will engage earnestly with the content, and having a pretty time-consuming quiz does filter for that. It's an initiation ritual that signals and cements the bond users have with the platform. New users are also more culturally aligned with the existing community, which means fewer flame wars and less exodus of the original community. In other words, it deters the trolls.
Unlike most social media companies, Bilibili’s focus is on sustainable growth. They’re intent on cultivating a passionate, engaged user base, which is evident in their 100 question(!) sign-up exam required for admittance to the platform. While it’s working well for Bilibili, this approach is uncommon for most other social media companies for good reason — social platforms require massive scale to win. Despite a counter-intuitive go-to-market strategy, Bilibili has been able to achieve significant scale because instead of boiling the ocean, they’ve boiled a thimble, as Sarah Tavel would say. To achieve massive scale, Bilibili is attempting to penetrate a significant percentage of a niche market rather than a small percentage of a very large market — e.g. Bilibili is going after a 50%+ of all young Anime fans and Instagram went after a fraction of a percent of every young person with a smartphone.
Another interesting feature of Bilibili’s platform is the prominence of user-generated content (UGC) and ability for users to collaborate on others’ content. For example, users can augment video content with timestamped comments for all other users to see. TikTok is the best comparison among at-scale social platforms, but few others have nailed this. I wouldn't be surprised if we see collaborative UGC emerge over the next few years as social features are commoditized and niche communities grow.
It's clear Bilibili’s content and go-to-market strategies are differentiated, but these strategies are not its only competitive advantage — a byproduct of their focus on a niche community and user-generated content seems to have created a virtuous flywheel for its creators. Li suggests Bilibili will be able to retain its content creators even as it irons out compensation strategies because creators “seem to derive intrinsic value from being in the community and engaging with it through their creations.” For what other social media platforms is this true? Few, if any. But why? It seems obvious that the difference is the shared passion and common interests of the community. The value for creator’s lays in the refined community, not the tools or fame enabled by the platform.
goPuff’s Strategy to Conquer the Grocery Market
Alexandre Dewez, Idinvest
Being a fully integrated player offers significant advantages in terms of UX: Unlike DoorDash, Postmates or Instacart, goPuff does not aggregate supply from restaurants or shops. The user has direct access to goPuff products from the homepage; whereas a user has to first pick a shop and then browse through the product list of the selected shop in other delivery apps. This direct immersion into the products is a key advantage for goPuff.
goPuff mastered vertical integration. In many ways, their model mimics that of large food distributors. While each have different strengths, both goPuff and food distributors own the supply chain, inventory, and the relationship with the customer.
Two specific strengths for goPuff include data-driven decision-making and user experience. Both goPuff and food distributors collect tons of user data, but goPuff is focused on leveraging that data to deliver personalized recommendations and optimize the user experience. Most food distributors lack the technical ability and incentive to do this, though now may be the perfect time for distributors to borrow goPuff’s mindset. Their customers (restaurants) are hurting and seem primed to cling onto anyone who can provide a unique, cost-effective, and personalized experience. This approach isn’t just good for their customers, but good for business, too. Data-driven decision-making will help increase razor thin margins by optimizing the supply chain and distributors can charge a premium for a world-class, personalized user experience.
While goPuff’s user experience is much better than that of a food distributor, it isn’t revolutionary. Instead, they’ve executed eCommerce best practices to perfection. A few examples include:
showing individual products on the home screen rather than food categories or restaurant option
dynamic categories: group of curated products that changes by day, time, location, and special events.
goPuff dedicates an entire item of the menu to rewards and the number of points earned pops up when you add a product to the cart.
On the Internet, Niches are Massive
Simon Taylor, Co-Founder of 11:FS
Something as simple and inclusive as allowing a customer to use their true name is, in theory, something big banks support. Putting your true name on your card seems great until you bump into all of the small problems that cause. How does the bank credit score a person's true name if that's different from the name they used when KYC was performed? How does the bank update all of its CRMs, fraud systems, and risk systems across its whole value chain?
Niches are massive and their unique needs need serving. This concept is the foundation of vertical SaaS companies, which have exploded in recent years. Examples include Squire, management software for barbershops, and Boulevard, management software for salons and spas — both have raised millions in funding from top venture capital firms.
Simon uses Daylight, a bank by and for the LGTB+ community, to demonstrate the power of niche communities. He notes they’re building with a community rather than for a community. What’s most interesting about this approach is that Daylight isn’t building new banking technology. Instead, they’re building a community using a stitched together infrastructure of existing banking tools which allows them to focus on the customer experience and nuances of their community’s needs. The critical insight is that the advantages of this approach are amplified when targeting a niche.
<stuff> Weekly
LOL Weekly: Adriano Celentano
lol it’s so good
Funding Weekly: MarketWagon
The process can best be seen at the company’s central Indiana hub, which serves customers in 17 surrounding counties. Over a typical week, about 100 local farmers and artisan food producers place their available items on Market Wagon’s consumer website, where the company’s approximately 10,000 Indianapolis-area clients shop. Then, the night before orders are to be filled, each producer is issued a “pick ticket” telling them exactly what they’ve sold and to whom.
Producers typically receive about 75% of the price of their products, while Market Wagon gets 25% (grocery stores and other traditional produce sellers typically split the cash about 50/50). The firm’s cadre of part-time drivers is compensated hourly, with Market Wagon covering mileage.
MarketWagon raised a $4.66M seed round from Tapas Capital, Village Global, New Stack Ventures, and others.
MarketWagon is building a vertically integrated company to connect farmers and end consumers, much like goPuff’s model for convenience store goods. I’m most curious about long-term defensibility. Many farm-to-consumer marketplaces have popped up as of late and it seems likely farmers will multi-tenant across many marketplaces to increase sales and reach unless these companies build differentiated products. It is possible that these marketplaces can “win” a particular geography with a relatively undifferentiated product, but this approach is unlikely to produce outsized returns for investors.
MarketWagon’s vertically integrated approach is a good step towards long-term defensibility, but it poses a few significant risks. One of their key strengths is most concerning: same-day pick. While highly valuable for consumers and farmers, same day-picking and packing requires highly coordinated operations and a streamlined supply chain. It’s a key point of differentiation on a small scale, but it seems extremely difficult to scale to many different geographies.
MarketWagon developed a highly effective model in their first geography, but it appears they're reliant on a high penetration in a few markets which likely limits their scale potential.
Baseball Weekly: Theo Epstein’s Cubs heydays
Patrick Mooney and Sahadev Sharma, The Athletic
The night the Cubs clinched the NL pennant for the first time in 71 years, Jon Lester invited the team to his home just north of Wrigley Field. Pearl Jam frontman Eddie Vedder was on hand to celebrate a near-perfect game — Kyle Hendricks and Aroldis Chapman combined to face a minimum of 27 Dodgers batters — and the journey it took to finally get to the World Series.
“It was basically a souped-up version of a high-school house party,” Harris said. “Around 5 a.m., the night finally felt like it was winding down. Theo grabbed me and said, ‘Harris, we’re going to bars.’ I said it was 5 a.m. and there are no bars open. So, without skipping a beat, he said, ‘Fine, we’re going to Wrigley.’”
Thanks for the memories, Theo.
Art Weekly: Exhibition at Mazel Galerie in Brussels
Peter Ceizer, 2020
All Ceizer’s work is typographical or type based, his work mostly consists of clean retro-style script designs and hand lettering as well as colorful abstract compositions with type based shapes.
Ceizer’s choice of words, phrases and subject matter are empowering, humoristic and poetic. While studying the craft of typography, Ceizer started deconstructing letters to create colorful abstract compositions. His abstract work suggest a dream state of mind in which he blurs the line between words and figure, letters and abstract art. His paintings and wooden pieces balance color and shape, creating a playful and uplifting dynamic.
