Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

{audio:0:00:20} Mete, can you provide a short introduction to your previous role and responsibilities at Getir?

{audio:0:00:26} During Getir's scale up period I was their chief technology officer for 13 months, responsible for technology operations and the stakeholders who rely on that technology. The biggest thing I accomplished in that period was deploying Getir's distribution centers. After that I became their chief project officer where I was responsible for all business projects related to technology. I helped them deploy the Getir Food business into the field.

{audio:0:01:09} When you joined in 2017, what was the size of the business? How many business lines, employees and revenue did they have back then?

{audio:0:01:17} The press release at the end of 2018 showed a revenue of $50 million, the employee count was between 150 and 200 and the customer base was about one million, as far as I can remember.

{audio:0:01:44} Was this all in Turkey at that point?

{audio:0:01:47} Yes, this was all in Istanbul in 2017.

{audio:0:01:49} What was the original strategy in Istanbul?

{audio:0:01:53} Actually, it was an epiphany. Getir was founded by the owner of BiTaksi, the taxi hailing app in Istanbul. He was looking at the maps of BiTaksi and realized they could provide an available car within three minutes. He wondered if they could also deliver commodities to consumers within 10 minutes. After considerable research, they could not find any competitors or anyone who could validate the business model, so they chose to begin an exciting journey.

{audio:0:02:52} Their strategy was to serve business districts such as Maslak or Ataşehir, and cater to working consumers in the office who were craving snacks and beverages. Their first tactic in acquiring consumers was to target the business districts of the city.

{audio:0:03:31} Did they target employees of companies in offices?

{audio:0:03:34} Yes. In Istanbul one of the high-density business districts is called Maslak, and it has huge skyscrapers containing workers on a 9 to 6 time scale. The companies include multi-nationals and large local ones, with a predominantly white-collar demographic. Ataşehir is an area with a mixture of income power in the residential area, but it is also a business district. Ataşehir is on the Anatolian or Asian side and Maslak is on the European side.

{audio:0:04:20} What was the typical location and size of dark store?

{audio:0:04:29} Dark stores are strategically located within the service area and are 100m² to 200m². It is challenging to find these kinds of stores but it also has some advantages. On the larger side, competitors for office or storage space are traditional grocery chains and bank branches. On the smaller side, competitors are mom-and-pop convenience stores, barbers and bakeries.

{audio:0:05:34} In my time they had 700 to 800 SKUs; now it is 1,100 to 1,500 in each dark store. Within that space, it is simple to store and replenish goods and keep stock aging levels low. Using historical data, Getir determines a small gravitational center of the orders in that region, and will choose a store location within a 50 meter radius within that region.

{audio:0:06:24} Do you need a minimum order count and a certain limited radius to make the economics work?

{audio:0:06:35} Regions with smaller population densities have a radius of five to six kilometers. If they do not have rush hours, it is feasible for one dark store to serve a larger area, but they tend to achieve a certain number of orders per month for each dark store.

{audio:0:07:27} If the dark store achieves that number, they split the region into two dark stores. Obviously, order counts will be healthy with marketing promotions and hyper local targeting, they will try to increase the order density, similar to mitosis.

{audio:0:08:00} How many monthly orders do they have to achieve as a target?

{audio:0:08:04} Back in my time, it was 3,000 orders per dark store.

{audio:0:08:10} Are those orders an average of $20 each?

{audio:0:08:14} In Turkey it was only 40 Lira, which translated to $13 or $14 during my time.

{audio:0:08:29} With that low average order value, how many trips per hour were needed?

{audio:0:08:35} With low order density, the designated field force for a specific dark store is low. They tend to keep the average order count per rider, per hour, at around two, back in the day. We were also in the scale up period and our main priority was to keep the operation excellent, increase the order count and acquire customers in all regions as fast as possible. If we increased the order count per hour with operational excellence processes, we could drop the amount of riders in the field to fulfill the order count. We tried to increase the average order delivered per rider per hour above two, but for this business to be really profitable and efficient, the metric should be between 3 and 3.5.

{audio:0:09:56} I think Gopuff and other new players, in the US, deliver four to five orders per hour, on college campuses or in very dense areas.

{audio:0:10:13} The main difference between Getir's and Gopuff's model is the quick aspect of it. Getir promise to deliver the order in under 10 minutes, and to achieve that SLA they cannot bundle two orders in one trip. Gopuff has an SLA of 30 minutes, so can wait five to 10 minutes for a second order, which allows them to drastically increase that metric. Getir only waits two minutes to get the second order because their consumer proposition is delivery under 10 minutes.

{audio:0:11:27} How are the stores designed for efficient picking and delivery pick up?

{audio:0:11:32} In the stores, the most frequently ordered items are close to the picking area, allowing the picker to reach the goods and place them in a basket. Less frequently ordered or heavy items, such as cat litter, are shelved at the back of the store. There is a locker for valuable items such as Bluetooth speakers, iPhone chargers and other technological goods. Delivery drivers never enter the store.

{audio:0:12:21} They have a designated rest area while they wait for their order, and only come to the bench when the system triggers their phone that a new order has been assigned to them. They then pick it and ride the motorcycle or bicycle to the order location, after which they return to the dark store and hang out if they have no orders waiting for them.

{audio:0:12:57} How many employees are in each store?

{audio:0:13:01} I will speak about it in an FTE, full time equivalent way, because shifts can be transient. There are around 2.5 employees per store. One is purely focused on picking and preparing the orders, and the remainder for the upkeep of the dark store, replenishment and reverse logistics.

{audio:0:13:36} What was the split between food, drink and alcohol in a typical basket?

{audio:0:13:45} Turkey prohibits the sale of alcohol and tobacco products online, even though there is a huge consumer demand. An average order would be 25% beverages, 30% ice cream, 25% chips, 15% chocolate and the balance in smaller sub-categories.

{audio:0:14:24} It’s really these impulse purchases such as fizzy drinks, ice cream, crisps and chocolate?

{audio:0:14:31} Yes, it is impulse purchases such as munchies or junk food.

{audio:0:14:39} Was this all branded products, such as Coca Cola?

{audio:0:14:47} Yes, that is also true, but Getir have no private labels with one exception being their bottled water business. In Istanbul you cannot drink tap water so everyone orders 19 liter bottles of water for cooking and drinking. The brand name is Kuzeyden, meaning from North. Getir manufactures the water but every ice cream and chocolate is Nestlé, Coca Cola and other multi-national manufacturers.

{audio:0:15:24} So Getir source that inventory directly from Nestlé or Coca Cola?

{audio:0:15:30} Getir have a big procurement department similar to traditional grocery chains. The volume is lower at Getir, but they either buy directly from the multi-national or through a wholesaler. We negotiate the margins, SKU levels and volumes, after which they deliver the goods to the distribution centers by each purchase order.

{audio:0:16:15} So you have large procurement agreements with the Nestlés of the world, who ship products to your distribution centers that you then distribute to your individual warehouses?

{audio:0:16:29} How do you manage the replenishment of inventory per store?

{audio:0:16:34} A supply chain department at headquarters uses data to assess stock inventory levels and sell order ratios in each dark store. They calculate the supply required and create a replenishment order to distribution centers to fulfill early the following day. It is a constant twice a day cycle, in every dark store.

{audio:0:17:21} How much of each product is stocked in small square footage stores?

{audio:0:17:28} There are between 1,100 and 1,500 SKUs in a given dark store.

{audio:0:17:40} For example, is there a maximum of 10 items per SKU because you cannot fit them all in?

{audio:0:17:53} It seems unbelievable but it is true. Small convenience shops contain 3,000 SKUs. There are also different varieties of SKU such as Coca Cola, Coca Cola Light and Coca Cola Zero. The tail of the SKU is 20, 50 or 100 to fulfill the current day's order, whatever that number is. Large items, such as 10 liters of cat litter, you stock one item and replenish it 15 days later.

{audio:0:18:59} When shopping on Getir, can I see the availability of a specific dark store?

{audio:0:19:09} Yes, when you open the app you give your GPS location and it connects you to the most available dark store in your service area. You could be in the service area of two dark stores but it finds the most available one and you can see the exact inventory of that store. If something is missing in that dark store, it will not be available on the app.

{audio:0:19:40} How much of a challenge does availability present?

{audio:0:19:45} Availability is a huge KPI at Getir because it is an on-demand grocery shopping app and customer acquisition is costly. We try to avoid upsetting customers who cannot find the milk because we are out of stock. There are 12-hour replenishment cycles to achieve higher availability, and Getir even has a chief availability officer.

{audio:0:20:42} What was the major reason for customer churn?

{audio:0:20:46} Getir's prices are higher than standard market prices. Consumers who purchase impulsively do so infrequently, so they churn as it doesn't appeal to traditional grocery shoppers.

{audio:0:21:19} How would you describe the demographic of customers?

{audio:0:21:25} I do not know about age but there are two different target audiences. There needs to be a population with a high-income power level and there is a time sensitivity in an area. New York City, Istanbul and Tokyo contain Caucasians who earn large salaries, but do not have time to spend on commodities or run errands themselves. I am a heavy user of Getir and, when I crave Coca Cola, chocolate or ice cream, I cannot go or send an assistant to the grocery store to collect the items, so the app provides a convenient way to purchase.

{audio:0:22:45} The second demographic is students who do not know how to handle a budget. The third demographic are those who want affordable luxuries, and in this case, income power is not a concern. Once or twice a month they spoil themselves with an ice cream from Getir.

{audio:0:23:34} Does the average order value of $13 in Istanbul include delivery costs?

{audio:0:23:47} No, it does not include a delivery cost, which is between 50 and 75 cents.

{audio:0:23:56} How costly is Getir versus going to the local convenience store?

{audio:0:24:04} At least 10% more expensive.

{audio:0:24:07} Is it for lazy people who want to treat themselves impulsively?

{audio:0:24:20} Yes, impulse purchases or late night snack cravings.

{audio:0:24:25} How did you see customer behavior change over the years?

{audio:0:24:30} Consumers who like the service stick to it and tend to use it more frequently. It is not unusual for consumers to use Getir twice a day. Getir had no competition for the first four years and used marketing tools to become a loved brand in the eye of loyal consumers. Conversely, when using an app such as Getir to purchase unhealthy premium snack food, consumers are not left with a good feeling.

{audio:0:25:37} It feels good when they eat the ice cream, but once used to it consumers change their shopping behavior by adding the item to their bi-weekly or monthly grocery shopping. Apart from this, Getir is a good way to fulfil the convenience need for consumers who, for example, have run out of bread or butter.

{audio:0:26:33} Was the monthly target 3,000 orders per warehouse?

{audio:0:26:41} That was the target in my time but I do not know the current number.

{audio:0:26:45} 3,000 orders at an average value of $13 equates to $40,000 revenue per month per store, which seems pretty good. What was the gross margin on an order sourced from Nestlé or other big brands?

{audio:0:27:12} The commercial team were strictly confidential about margins and gross profit achieved from multi-nationals, but it was more than 40% to keep the operation running. Margins were split between the manufacturer, and consumers paying premium prices.

{audio:0:27:55} What other products could Getir introduce?

{audio:0:28:15} If you are talking about the SKUs, there is always perishables such as milk, cheese and yogurt, fresh fruit and vegetables, pasta, grains and beans used in the kitchen.

{audio:0:28:32} Could they really move into fruit and vegetables because it’s harder to manage the inventory compared to packaged goods?

{audio:0:28:40} Yes, in a tightly packed goods kind of way. Getir would sell 1kg of packaged bananas or tomatoes.

{audio:0:28:55} Is there anything unique about Getir's technology or the way they organize their stores, because there are many similar startups such as Gorilla and Joker in the US and Europe?

{audio:0:29:16} The operational data produced by the system is unique and key decisions about the field relies on data. When opening a new dark store, you can check the order locations for the previous 12 months to calculate the optimum location. Promotions also utilize data for segmentation and RFM operations within marketing. There is nothing that can be patented. It is all open source from JavaScript and databases to mobile app and map technologies.

{audio:0:31:05} What are potential sustainable advantages for Getir?

{audio:0:31:11} Usage of data and marketing tools to provide a good after sales experience can make them a differentiated player in the market.

{audio:0:31:49} Is it about getting to market first and having a really good assortment to drive traffic?

{audio:0:31:54} Getting to market first because internet gods love scale ups and having a good assortment of SKUs. Providing competitive prices is important but Getir is not in that area. Consumers will always seek the lowest price regardless of where they are in the world. Service quality is also important. If you have a good customer journey you will use the service again, whereas if you experience hiccups in your order journey, you will tend to try the competitors.

{audio:0:33:18} What was the typical monthly order frequency?

{audio:0:33:29} Back in my time, it was bi-weekly.

{audio:0:33:31} Every other week and evening or afternoon impulse purchasing?

{audio:0:33:38} Actually, it depends. The main time slot at Getir was weekend breakfasts. Breakfast is important in Turkish cuisine and in Istanbul we have no time for breakfast during the week.

{audio:0:34:06} People treat themselves at breakfast?

{audio:0:34:07} Yes, definitely; the heaviest traffic at Getir are Saturday and Sunday breakfasts, but outside of that, the main rush hours are between 7:00 and 10:00 PM.

{audio:0:34:27} Do they purchase chocolate and ice cream on Saturday morning?

{audio:0:34:33} On Saturday mornings, they purchase bread, processed meats, eggs and cheese.

{audio:0:34:45} Would people use Getir for mini grocery shopping?

{audio:0:34:51} Yes, but only for one or two meals. To prepare a good breakfast you need everything on the table, but somebody in the house has to go to the store and pick the items. Usually, the father of the house would do that, but on weekends he is lazy or entitled and simply opens an app and purchases from Getir or its competitors.

{audio:0:35:28} What promotions did Getir offer new Turkish customers?

{audio:0:35:33} There were many promotion mechanisms for customers, but for newcomers it was 20 Lira off their first purchase, which translates to 50% off. That was the biggest customer acquisition promotion mechanism.

{audio:0:36:02} Were they spending money on traditional media and 50% off first orders?

{audio:0:36:12} Getir is not fond of traditional media. They are currently broadcasting huge ATL campaigns on TV and in newspapers but marketing was mostly digital channels and networks.

{audio:0:36:38} Yes, definitely. You tend to make consumers download your app. They can download it from TV but that cannot be measured.

{audio:0:36:54} If you spend $10 acquiring a customer, with an average order value of $14, at 50% gross margin that equates to $7. Therefore, do you need to ensure that newly acquired customer places a second or third order to make the economics work?

{audio:0:37:30} Customer do retain in these commodity services, though not that frequently. With your hypothetical numbers, if you spend $10 per consumer on acquisition, and $7 is your gross profit per order, it is almost a given that the consumer will use you for at least three months on a bi-weekly order cycle, meaning they will purchase at least six times from you.

{audio:0:38:16} That equates to $40 gross profit per customer.

{audio:0:38:22} Four times payback in three months is pretty good.

Getir & On-Demand Grocery Delivery 

Picking and packing arrangement of dark stores

Assortment and pricing relative to incumbents

Gross margin and unit economics of dark stores

How Getir competed with Delivery Hero food business in Turkey

Getir & On-Demand Grocery Delivery

Former Chief Technology and Project Officer at Getir

inpractise.com/articles/getir-and-on-demand-grocery-delivery

Why is this interview interesting?

Executive Bio

Mete Alp Oğuzer

Former Chief Technology and Project Officer at Getir

Interview Transcript

Related Content

Elmenus & Egyptian Food Delivery

CEO & Founder of Elmenus

Glovo & EU Convenience Delivery

Former Corporate Strategy at Glovo

Burger King UK: Offline to Online Food Delivery

Current CEO of Burger King UK

Online Food Delivery: Spain Labor Law & Market Structure Changes

Former Head of Enterprise Sales, EMEA, Uber Eats

Audio

Getir & On-Demand Grocery Delivery (August 16, 2021)

PARTNER

Speak to Executive