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:0:00:01} JP, can you start by providing some context to your story building Crosstown donuts?

{audio:0:00:08} The story starts about eight years ago, in 2013. I'd been in London at the time for about four years, and being initially born in the UK, I grew up in Australia and moved back. I found that the specialty coffee scene was in its infancy in London. When I moved over, it was really surprising that there weren't many places you could go to get a decent flat white. The story for Crosstown stemmed from creating this specialty coffee concept and how we could scale a business around that sort of theme. But it evolved to what we're most well-known for at Crosstown now, which is the sourdough donut. We invented the sourdough donut. It's got a little cross on it; it's quite well known in London.

{audio:0:01:14} We saw a gap in the market for a high-quality handmade product. It was all quite mass-produced and artificial, so we thought, why don't we do scratch baking, use the best ingredients, and develop innovative flavors that use ingredients from the seasons? Why not use, for example, rhubarb, when it's in season, or stone fruit, or whatever we could get our hands-on, and pair it with specialty coffee? The long story short is that we started as a market store, myself and my business partner Adam Wills. Over the last eight years, we've grown it quite considerably into, I guess you could say, an omnichannel brand that's got multiple locations throughout London and is now expanding outside of London. It's not just sourdough donuts anymore. It's cookies, ice cream, and of course, we've got the specialty coffee. There is a whole range of vegan products as well, such as vegan donuts, vegan cookies, and vegan ice cream. That's the story in a nutshell. We started with the idea of pairing coffee with donuts, and it's grown to become an omnichannel hospitality brand now.

{audio:0:02:46} What was the history of your relationship with Deliveroo, or delivery in general?

{audio:0:02:53} One of the USPs of Crosstown, aside from its product and its brand, has been the progressive mindset. It's always been quite an innovative brand. I didn't know at the time, to be honest, but when I look back at it now, we're always pushing the boundaries of technology and innovation. When we first started in the market stall, we were the first tent to accept Amex with no minimum spend, for example, and people were like, woah, this is crazy, you're a market stall. We were one of the first brands to adopt Deliveroo. When I first met Deliveroo, there were less than 10 people there. It is, in a true sense, a startup business, and of course, has grown significantly over those years. We were an early adopter of that technology.

{audio:0:03:54} To put it simply, if I had to think about why we did it, I fully believed that consumer habits would change and evolve and that people would start ordering online. Thinking back to 2014, if I had to crystal-ball gaze in five to 10 years, would people be ordering with their phones, would they be expecting delivery of products, of foods? I fully believed that would be the case. So we adopted Deliveroo, and we were also a launch partner with Uber Eats. When they launched in London, we were one of the first brands to use them. It was really interesting to see the early dynamic of acquiring customers, to see consumer habits change and evolve, and to see the beginnings of some purchasing patterns. People demanded Crosstown through those marketplaces.

{audio:0:05:01} What did you see in those early days, in terms of consumer habits?

{audio:0:05:05} It was relatively new and innovative in some sense, but I think it was mostly driven through heavy discounting through the marketplaces. So sign up to Deliveroo or Uber Eats and get £10 or £20 free credit and spend it on what you want. Free money can shape habits pretty quickly, and from my view, it started to evolve into, how do we build our product around hitting moments for these customers that they might not be able to get in-store? How do I engage with those customers more directly? That sort of leads us to Slerp. If I had to summarize as simply as possible, I felt that the hospitality sector was ripe for some kind of innovation and disruption, and it would form a part of people's habits to buy online.

{audio:0:06:16} What was the founding story of Slerp?

{audio:0:06:24} We go back again about six, seven years. As you know now, we were an early adopter of Deliveroo, an early adopter of Uber Eats. There were two big questions that were annoying me in a simple way. One was, how do we engage with our customer directly? We put our blood, sweat, and tears into creating the Crosstown brand, which was growing and had a cult-like following, and was getting a lot of traction. But we didn't know who our customers were that were buying through the marketplaces. So how do we engage with them directly? The second part was the customers were asking us, hey, I want to buy Crosstown for the weekend, or I've got someone's leaving party or a wedding or whatever it was. We couldn't facilitate those types of orders through an ecommerce solution like the marketplaces. So I went on this journey back in 2015 to look at how to do direct-to-consumer online ordering ourselves. How do we transact through Crosstown’s website and engage in that customer base?

{audio:0:07:47} I started by looking at what I call the traditional ecommerce providers, Shopify, Squarespace, Magenta, WooCommerce, the platforms dominating the non-food or retail aspects of ecommerce. What I quite quickly learned was that they would just not fit the purpose of hospitality. When you have a multisite location like Crosstown, you've got different opening times, and you've got different menus at each location. For example, if you want to do on-demand ordering, pre-orders, and nationwide delivery, those platforms just don't fit into what you need as a hospitality operator. I realized there was a gap in the market to have, essentially, a white-label ecomm solution dedicated to hospitality. I was thinking, if I'm a brand and I'm in a space where I'm growing, there are surely others thinking like this as well. That was the first learning, which I bucket up as ecommerce, which is what Slerp is probably most well-known for now.

{audio:0:09:09} The second learning stemmed from what I would call order management. It became increasingly complex to answer very simple questions at Crosstown, such as, how many donuts do we have to produce tonight? We are a bakery that operates 365 days a year and produces fresh goods every day. Answering that question became hard because of all the different shops and the markets; we were wholesaling to Selfridges and an airline at the time and Harrods, Whole Foods. We were doing catering; we were doing online. It was becoming very difficult just to aggregate that information. We were using Excel, and we had two staff members punching all these numbers in to get to what we would ultimately call a production schedule, which was the flavor of the donut and how many we had to produce. It would say we're going to produce 10,000 donuts tonight; this is the breakdown; these are where they've got to go, and here's the packing slip that the drivers have to pick up. It just didn't make sense.

{audio:0:10:17} I was wondering, is everyone doing this by Excel? How does this work? Are we doing it wrong? I’m throwing people at it; is this the right way? I started speaking to my peers, and I started speaking to other operators in the sector. I asked, how do you manage this stuff? It became clear that the number one tool was Excel. This was interesting. How about if we could create a cloud-based order management system that would allow you to input your store orders, automatically import your online orders, upload purchase orders from wholesale accounts, and produce production schedules, packing slips, and route sheets; these are relatively unsexy things, but very mechanical and very key for operations.

{audio:0:11:08} What I realized I was thinking of, essentially, a simplified ERP system. ERP systems are clunky, made for big businesses, not built for SMEs, and particularly not built for the hospitality sector. That's where the name comes from. Slerp stands for Simple Language ERP, which no one actually knows about or cares about. Still, it gives some people an insight into what I was thinking, an ecommerce link to all the management and getting these systems to talk together to ultimately fulfill two very simple goals for operators; to drive top-line revenue and drive bottom-line growth because you can target the revenue side and the cost savings and the operational fishing season, and not just have a huge head office throwing bodies at some of these manual tasks.

{audio:0:12:07} That was the thinking back in 2015. I then incorporated the company in 2016. I sat on the idea for a while and thought, this is pretty mad. I'm scaling this donut-led concept called Crosstown. Why am I thinking of a tech company? But the more I researched, the more I thought I was onto something quite big. Then we went on the journey of building out the MVP, the first version of Slerp in 2016. Then in January 2017, we turned it on and put it on Crosstown’s website, and 10 minutes later, we got our first order.

{audio:0:12:51} From 2017 to 2019, I quietly learned and immersed myself into how this could work for this sector, and I became obsessed with it. How could we build a solution that's not only relevant for Crosstown but broader hospitality businesses? We launched the product officially to market at the end of 2019. Slerp is very much a pre-pandemic business even though people might think it's not. We've got a history that goes back a number of years. Then we started to grow from the end of 2019, and as we know, the world changed and tipped upside-down in March. We were growing like this, and then we went like that. The Slerp name started to spread throughout the sector, particularly in London, about how we could enable these businesses to have a channel to sell to their customers because they lost their walk-in trade. We've been on a pretty crazy journey since then. We had a small team; we've still got a small team, but it's a little bigger now. We're focused on fulfilling that vision, which is to be that digital business partner for the hospitality sector to help them sell more and manage better.

{audio:0:14:18} Back to the point around Shopify and Magenta, why can’t they do this?

{audio:0:14:28} That's a good question. One of the fundamental differences is the checkout flow. The architecture of a traditional ecommerce solution, like Shopify, is you view your items. Let's say you’re looking for a jumper. You add your jumper to the basket, and on your last page of the checkout, you punch in your delivery details, your payment details and off you go. When you have a multi-premise operation and every site can have different stock and different opening times, that complexity of where that stuff comes from becomes very difficult. Shopify is generally built for warehouse solutions, which is one location, and you pick that jumper from that location and send it.

{audio:0:15:20} So what happens if you've got this jumper at one location and not the other, and you want to do an on-demand delivery. Suddenly, that complexity of the time and location and need of that product can't fit into a Shopify-like checkout solution because it's too late in the process for Shopify. You've got your delivery details and payment details on the last page; I needed to know that up front to realize, hey, that jumper is not in stock where you are. You can only have this order type, or you've got to get it from this location, hence the delivery period is X, Y, Z. I realized that from when we were scaling Crosstown; having that time and location-based settings is the key differentiator compared to many retail-led eCommerce solutions.

{audio:0:16:13} It's that on-demand element because you want to eat the food within an hour, preferably?

{audio:0:16:20} Yes; I think the flexibility of offering the customer when they want it is probably one of the biggest habits that has formed in the last three years or so; if you want it now, if you want it later today, you want it on the weekend, if you want it a month out in advance, that dictates when people want to consume things when it comes to food. Whereas when it's retail products, they are more tolerant of, I'll get it in one to five days; I don't care when I get it. But with food, it's a lot more time-sensitive. I think that's where the world is going. People are getting more specific about when they want to have things, and offering those different order types as a platform to operators and giving them flexibility is one of the big reasons why Slerp is getting a lot of traction.

{audio:0:17:19} Do you think there could be a risk for the likes of Slerp or Olo, where I think we’ve seen Shopify go into warehousing and trying to own more of the delivery piece? Do you think, as consumers demand quicker delivery and more convenience they could start venturing into on-demand and restaurants?

{audio:0:17:40} I think the landscape’s going to evolve continually, to be honest. Shopify is competing with Amazon now. If you think about it, Amazon is the marketplace, Shopify is the D2C solution, and they're going at it in the retail realm. In some cases, you could say the same thing's happening in food, where you've got the marketplaces, Deliveroo, Uber Eats, Just Eats, and the white label solutions like Slerp are sort of in the brand’s corner, empowering them. The logistics piece is really interesting. It's a sector within itself and it's extraordinarily complex.

{audio:0:18:26} You've got this interesting moment now where you have traditional 3PL providers – the DHL, FedEx, and Royal Mails of the world – who live in a very traditional ecosystem with not much innovation and it's quite slow-moving. Then you've got this on-demand world; it's completely separate, but it's still logistics. It's all about instantaneous deliveries and quick access to products, and they're going to somewhat converge to some point. It's about how those traditional players can get a piece of this on-demand world and how these on-demand players can think about going into the 3PL world. I think that convergence is where it's going to get quite interesting. Particularly, they've got to listen to the customer base, which is saying, I want things as soon as I can. I don't want to wait five days. It's not acceptable anymore. How these companies gear up to do that will be quite interesting.

{audio:0:19:32} Let's say I'm a restaurant. I'm going to be using Uber Eats, Just Eat, or Deliveroo in London, if not all three. How would Slerp fit into my stack?

{audio:0:19:49} There are some interesting things on there. Slerp is what we call a white-label solution. We're a B2B service. People who use Slerp to power their restaurant or their website don't translate that to the customer; we're in the background. How we're different from a marketplace is that we essentially power people's websites and social channels to engage and transact with their customers directly. For example, if you go to crosstown.co.uk and go to checkout, you're using a Slerp powered ecommerce solution.

{audio:0:20:32} So this is what Olo would offer with their ordering?

{audio:0:20:36} Yes; Olo is a US player with something that's a little bit different but in the same sphere as what we do. We're not trying to channel people to Slerp's website. We're powering the customers or the restaurant to say look, drive traffic to your own channel, engage with your customer directly. One of the big differences is that the operators get the customer data so they can converse with them and have that dialogue and remarket to them. That's quite a significant and important piece. We're in the hospitality sector. We want to provide that hospitable service online as much as we do offline. There has been quite a shift in mentality there, for the sector to say, hey, we want this now. We want the ability to do that. What are the tools and technology that we can have that enable us to do that?

{audio:0:21:43} There’s another interesting point because not everyone is on the marketplace. It might seem that way, but there's a whole host of brands that avoided marketplaces, and they've done it for several reasons. They might want to engage with the customer and they can't get the data from their customers. It might be that they don't want to pay the commissions; 35% is a standard rate from a lot of these marketplaces, which is a huge hit to take. They want to have control. They want to know where they can deliver to. When you're in a marketplace as an operator, you can't even control the radius or the location of where your restaurant can deliver. Say, for example, I've got a shop around the corner. I'm currently sitting in Shoreditch in East London; I’ve got a shop on Brick Lane. I can’t tell you where Deliveroo will deliver from that shop. They don’t tell us. So it gives us no control as to know how far can we go, and that, to me, is quite a big limitation of being on a third-party provider. There are quite a lot of brands that have come onto Slerp that have never done ecommerce.

{audio:0:23:06} Are your customers mainly premium or higher-end brands?

{audio:0:23:09} There's a mix. Some of them are higher-end brands and we service not just restaurants; we service deli shops, butchers, bakers, bars, hotel groups. There are a lot of subsectors within hospitality that are not restaurant-led. Restaurants tend to take up most of the conversation, but there's a whole cohort of hospitality brands out there. Some have not been exposed to the marketplace because they’re not in the restaurant sector, but they’re in the hospitality sector. Many of them are not well known, and I think the pandemic has almost changed that mindset, like I said, where they've had to look at how they become more omnichannel and how they reach their customers because they’ve had to.

{audio:0:23:59} Is it the case that a lot of your customers were traditionally not on the marketplace, and they're looking for their own solution to go direct to customers?

{audio:0:24:08} It's a real mix. Some have been using marketplaces for years, some have never used any, and some are new to both.

{audio:0:24:18} So you’ll go in and build the front end for them or have an API for them to build their own website; how does the solution work then? If I go on Crosstown and order, how does the backend work?

{audio:0:24:30} We provide the whole checkout solution that they can customize. You can get set up within a day. The quickest onboarding, I think, is 28 minutes. If you know what you want to sell, you have the images, and you know the pricing, you can get set up very quickly. It's a turnkey backend solution, so you don’t need to know any code. You can change all the settings by toggling buttons, putting out things on a slider. If you don't want to do delivery, turn it off. You don't want to do pickup, turn it off, and you can do it all at location level. We put a lot of effort between 2017 and 2019 building out that dashboard, which we call controls, and the onboarding piece so that you don't have to do any of the heavy lifting. We connect to all the different services; it’s customizable to however you want to run your ecommerce solution.

{audio:0:25:29} They can connect it with Uber Eats or whatever courier they may be using already. Why is that different?

{audio:0:25:33} They can connect with third-party courier companies that can do the last mile piece. There may be people that are using on-demand delivery. They can use their own drivers if they want to. They can use a combination of both. And they can also connect to the nationwide delivery companies like the DPDs and DHLs of the world. It really is customizable to how you want to run your business and how you want to set up your online channel. If I had to sum up what the big change has been, it's the education piece. It's telling and educating these operators now, saying this is what you can do with an online channel. It's up to you how you want to run your online store and what order types you want to do, and all the settings you've got at your fingers. That's very different from how marketplaces are run where it's set up on the marketplace, you're away and you've got no control, but they generate orders for you. One of the challenges of onboarding is the education pieces of this new tech going hey, this is a little bit different. I call it the next wave of ecommerce for the sector. You understand marketplaces, now take it to the next level and do more order types and have more control.

{audio:0:27:08} If I went on Crosstown, I’d be on a Slerp website. You’d run the backend checkout. The restaurant owner can effectively choose what they offer, so it might be curbside, pickup, or scheduled delivery with the DHLs, or even an on-demand with Uber or Deliveroo if they're more of a restaurant, so they can choose the different settings?

{audio:0:27:34} On-demand would go to a third-party courier that's not connected to Uber Eats or Deliveroo. It's using a third-party logistics company.

{audio:0:27:45} So like Stuart or one of these players that you work with.

{audio:0:27:49} Yes; there are multiple different ones out there.

{audio:0:27:53} But that means it would probably benefit restaurants that don't use the marketplaces if they can't integrate with Uber’s courier network.

{audio:0:28:06} We always see ourselves as a complementary solution to the marketplace because we’re not going to be a marketplace. If businesses want to do on-demand orders and connect to a third-party courier, there are plenty of options out there, and we facilitate that. If they also want to do the on-demand deliveries from the marketplace, they can do that. A lot of them run them in parallel.

{audio:0:28:38} So the marketplace is more for lead generation or driving volume, and then they’ll use you or a solution like Slerp for actually owning the customer.

{audio:0:28:50} That's one way of putting it. The interesting part about marketplaces is that the more broadly known pitch is they're great at generating demand for you, but what happens when you're a brand, and you get put on a marketplace? You get put against 25,000-plus brands, and you become part of a marketplace where people can choose from your competitor. There's a very strange relationship forming where marketplaces now are creating their own brands. They're creating their own virtual brands and doing dark kitchens and things. It's quite a strange relationship when your marketplace is your supplier, and it is also your competitor because it's creating brands. So if they control the ecosystem, what are they going to put at the top of the listing? It's a bit like Amazon. If you want to buy batteries on Amazon, what’s the first thing you see? Amazon Basics.

{audio:0:30:07} But they would argue that they're serving the customer. And they would say that we're giving the customer the choice, and if Amazon batteries are cheaper than Duracell batteries, they would argue it’s more competitive. So who do you think really owns the customer on those marketplaces?

{audio:0:30:40} Deliveroo does, or Uber Eats does, because Crosstown doesn't know a single customer that's ever bought from Deliveroo; they're a four-digit number to us. As a brand owner, I would like to have that hospitable service to my customer base, to the Crosstown fans and customer base, and that is exactly what Slerp is trying to facilitate and put the brand owner in control. I fully believe, as well, that this is not only driven from a need and want from the hospitality sector; it's also being driven from the end consumer. Consumers are telling the brands, I want to be able to purchase from you. I'd like more options as well.

{audio:0:31:31} I’m interested from a restaurant perspective. Let’s say we have a £20 order on average. I’ve got the option to pay the third party the 30% commission per order but don't get any customer details. How does it work if you go through Slerp? What's the pricing? What does the delivery vendor actually charge?

{audio:0:32:16} The pricing for Slerp is we take a standard 7.5% commission, so it's less than the marketplaces, and the merchant can dictate the cost of the courier charge. So they can choose what they want to do with that.

{audio:0:32:36} By Stuart or these other companies?

{audio:0:32:39} Yes, so if you're a restaurant and you're using Stuart, Stuart will have its rate cards, and it might be £5.40 for delivery, but if the restaurant says I want to make it £2.50. That's fine, they can do that, and then they'll eat the difference in the cost. So the extra £2.90 involved will be taken off from the merchant, and we'll take 7.5%. We don't mark up the courier fees. We just take off the product value. So again, it's giving the flexibility to allow the merchant to choose how they want to set up the pricing based on what they're selling.

{audio:0:33:18} That was part of the challenge where, clearly, the advantage of the Uber-style delivery companies have is that they have an at-scale on-demand delivery network. They can deliver orders as cheaply as possible. I've checked the rate card of Stuart or these other places, and they're quite expensive because they're not at scale. How do you see restaurants approaching that, given it's more expensive to deliver?

{audio:0:33:43} Exactly what you’ve nailed on there is that you can start to look at your average order values, and Slerp’s average order value at the moment is somewhere between £35 to £45. So you do that math on it. If you’ve got a £30 order and you've got 30% on the marketplace, they're taking £12. So if you have that same product at the same price on the marketplace, and we take 7.5%, and you decide to charge £2, £2.50, £1, whatever it is for delivery, and you take that off, then you're still up in the green. Are you in the green? Then you're better off doing it, plus you get all the customer data. They're the type of mechanics that merchants are learning about. Now they've got this at their disposal, how do they start to price things, the different delivery options? How do they set their menu pricing? It's quite well known that when you're in a marketplace, you mark up the product's price. So a £10 burger in premise might be £13.50 on the marketplace to account for commissions. The end consumer is ultimately the one bearing a lot of the costs. We've seen some interesting things evolve where some marketplaces are now charging a service fee on the customer. You might have a basket size of £40, and another 10% service fee is charged to the end-user.

{audio:0:35:12} I was just looking earlier and Deliveroo now charges a 5% service fee.

{audio:0:35:16} Okay, interesting. So ultimately, they’re charging at both ends. They're charging the merchant. They're charging the consumer because they're subsidizing the delivery cost pretty significantly. I think the bigger, broader question is how do these marketplaces get profitable? It's a really interesting question, and I don't think anyone knows the answer to it quite yet.

{audio:0:35:44} Looking through that, the order value is almost double on Slerp than it would be on the other players. Say a 7.5% fee on a £40 average order, that's £3 for you guys, and then let's say the delivery fee is £5 on a subscale courier network. Do you see the restaurants taking part in that delivery fee, or is the customer willing to pay that?

{audio:0:36:18} It's a mix depending on who the merchant is. There's a mix of some people passing on the full fee; there's a mix of some people subsidizing it.

{audio:0:36:43} Is it that the premium brands that pass it on because the customers are willing to pay?

{audio:0:36:47} I think it's also an education piece. At Slerp, we have to educate these operators on how they can set up the different rate cards. It gets quite specific because every location can have its own rate card based on the order type. So depending on how far you want to go and what your AOV is per location, you can start to re-tailor things. The interesting piece is that the AOV is higher. I think there’s something in that. Once a customer is engaged with a brand, potentially they’re willing to spend more. You can have a deeper and richer product menu, for example, that’s not just geared towards on-demand delivery. You can start to rethink about moments.

{audio:0:37:39} We have people selling barbecue kits for the weekend only, so if you were on the checkout and you selected Saturday, you might see a different menu than if you selected Monday. That becomes interesting. It's targeting different days of the week – Mother’s Day, Valentine’s Day, Christmas – building menus around these different themes, starting to presell and engage with their customers, and do marketing campaigns and outreach to their databases to say hey, we're doing this, come buy from us direct.

{audio:0:38:13} Going through the economics again, let’s say the restaurant pays the delivery fee. If it’s £5, you guys take £3, the gross margin of the food is typically 75%, minus the Slerp fee, minus a £5 delivery fee; you're going to get up to 60% incremental margins when you do direct, but that doesn't include marketing to the customer. So does it only work for brands that have that huge brand equity that don’t need to market?

{audio:0:38:55} It's easier if you've got a well-known brand and you have a good social following and a good email database, of course, because you've got an engaged customer base to initially target. But the way that I always think about this is that if you're setting up a food establishment and you have a restaurant, you want to put bums on seats. In the same way, you have to put bums on your website. What is the difference? If you've got 50 covers to serve in-store, how do you engage with your local community to get those people to come to your restaurant? Think about doing the same thing to your website. That's the mentality shift that's happening now is to go, well actually, my customers aren’t just limited to the people that can walk in. And, if I do this right, I could have 200 pre-orders that far exceed my ability to do the 50 covers and turn the table twice that night.

{audio:0:39:55} That's quite an interesting piece from, particularly Valentine's Day, which happened in February. We had quite a number of brands knocking in six-figure amounts of two days of sale. They were like, wow, we could only have turned the tables X-number of times. There are only so many tables we have, but we did 500 pre-orders, and we had no wastage because we had all the orders upfront, we could prep everything, we could staff appropriately, and we were way more profitable. When you have moments like that paint the picture to them, it starts to paint a different picture of how they should approach their business, particularly coming out of a pandemic.

{audio:0:40:42} We did some research, just released this week, with KAM Media. The big star in the surveys was 90%, or nine out of 10 people, want their favorite brands to continue offering online ordering and building menus so that they can buy direct. So regardless of things opening up, people still want to be able to engage with them. That might be because they’ve moved out of London, they can’t get to a good restaurant in a hurry, or they're at risk, and they don't want to, or actually, they're just quite happy having a dinner party at home and ordering in. I think different habits are being formed by the end consumer, not just the restaurant.

{audio:0:41:26} Do you see some of the orders that come through? Are they mainly for scheduled delivery rather than on-demand?

{audio:0:41:34} There’s a real mix. We've started to offer on-demand, scheduled, and nationwide; that’s how we think about the order types. We're seeing the orders increase across all of them. It’s really interesting that once you start to provide these different levers and options to operators, they start to build different menus for different times of the week or different calendar moments. They start to flex and think, okay, I want to target something coming up in June. Yes, it's May now, but why can't I presell stuff now? Why not?

{audio:0:42:20} What’s the biggest challenge you find restaurants have in going direct?

{audio:0:42:28} It's very new to them. I'm saying the obvious here, but hospitality businesses don't traditionally have a digital marketing team or an ecommerce team in their repertoire. It's very much front of house, ops managers and so on; people in restaurants. What we’ve found, particularly during the last 12 months where a lot of people have been on furlough, the people owning the ecommerce piece might be a restaurant manager where, to be honest, it’s not their forte. You're educating someone who doesn't have a baseline understanding of this. So that's been a challenge, and what we see now is a lot of people hurrying to build digital teams, online teams, delivery teams to manage these functions. This is probably the biggest transition we’re seeing.

{audio:0:43:27} You see them building out delivery teams as well, doing their own delivery?

{audio:0:43:33} As in building out teams of people to manage these functions, that's what I mean. To think about, okay, we better update our menu, we'll get photography done or whatever they have to do that is dedicated for that channel. People are not just the restaurant manager who's got to manage the in-store staff and the online. That's probably been the biggest challenge. I think the next biggest challenges which we'll face in the next six months, as we come out of lockdowns, is that some significant staff shortages are occurring in the sector. A lot of people left. There are many Europeans who work in hospitality, particularly in London, and getting staff is difficult.

{audio:0:44:20} We see that at Crosstown, even, whether it's in the bakery or on-premises. That pool of people we can draw upon is smaller, and everybody's in the same boat. They're trying to attract talent. The world will go through a natural transition, and we’re going through it now in London and the UK. We've got outdoor dining, and soon we'll have in-premise dining. Operations need to gear back up, and we need to keep online ordering front of mind for these businesses. But I think the mentality shift is, it's been a step-change. I knew this was going to be a thing, but it's just accelerated so fast, and the mentality shift of the broader hospitality sector is so far forward from where it was 18 to 24 months ago.

{audio:0:45:11} Roughly what percentage of your customers use marketplaces and Slerp?

{audio:0:45:16} I don't know, to be honest. We haven’t gone through and surveyed everyone, but I would suspect it's at least half, if not the majority.

{audio:0:45:28} Do you see them trying to convert customers from marketplaces to direct?

{audio:0:45:33} Yes. Ultimately, they want to have a sustainable business, and that means being more profitable. If Slerp can deliver that, they will. If it means engaging with their customer base, why wouldn't they? I think there's going to be some channel exchange, but as I say, it's a complementary solution to marketplaces. Crosstown still uses Deliveroo. We're still on that platform. Slerp just happens to make up the vast majority of our online orders compared to it. So once you get your D2C channel, cranking it can be more meaningful, and it's growing faster.

{audio:0:46:21} So you’ve always used them as a mix to fill volume up by Deliveroo.

{audio:0:46:25} Yes, this is the thing. I have nothing against what marketplaces do. I know it seems counterintuitive because I'm building Slerp, but they have done an amazing job to shape consumer habits, provide a new way for businesses to do business. I just think Slerp is an evolution of that. I still think there's a place in the market for marketplaces. I think what will change is they have to get profitable. It's quite well known out there that Just Eat, Uber Eats, and Deliveroo are pretty much at each other's throats at the moment, trying to go after each other's territory. They will generally do that through pricing and discounting. Eventually, it will have to get to a point where there’s a sustainable business for it to function, and maybe that means changing the price of delivery.

{audio:0:47:28} If you think back five years ago, where it used to be a flat rate of £2 or £2.50, it was always stagnant. Now it's flexible, and it goes up to £5.99. Natural things are happening in the market that will go back to more of the equilibrium of this is what it costs to deliver this good within 30 minutes. It's quite mindboggling when you think about it that a delivery in 30 minutes can be cheaper than something that is sent and takes seven days. That doesn’t make any sense. So I’m looking forward to the day when the real cost of delivery is reflected to the customer, and they can choose to say, I do want to get it in the next hour and I'm going to pay £7 for it.

{audio:0:48:22} Why doesn’t Slerp integrate with Uber or Deliveroo, similar to what Olo does in the US? I think they have a Rails model where they connect directly with DoorDash?

{audio:0:48:35} It’s something that Slerp could evolve to become. I think the US is a little bit ahead of the game where there's a bit more. You could call it collaboration. I think there's potentially somewhat of a restriction in the marketplaces opening up their APIs and giving out too much information to third parties. What I think is an obvious step for these players is to open up their courier network. Deliveroo and, in particular Uber, have an open API to their courier network that someone like Slerp could plug into and benefit from their fleet.

{audio:0:49:21} They don’t have that in the UK.

{audio:0:49:24} They’re just not offering it yet.

{audio:0:49:26} No. In the US, a service called Uber Rush was piloted, I think in New York or LA.

{audio:0:49:37} Yes, Shake Shack were partnering white label with Uber, so they tested this out.

{audio:0:49:43} Yes, and partly Sweetgreen.

{audio:0:49:48} But that’s not available in the UK yet.

{audio:0:49:54} When they open up their APIs, are you going to add Uber Eats to your platform?

{audio:0:50:02} For us, we want to provide the options to the merchants. We want to give them the flexibility of who they're going to use. We're already seeing some very specific requests such as, I only want to use green couriers because I've got a really big sustainability policy. I'm a B Corp, so it's electric vehicles, pushbikes only, and we'll push them down a certain route, so they only connect with those services. I think you're going to get more and more niche requests like that, and just like Uber has recently launched in the UK, green vehicles only, that all happened in the courier space. We're completely agnostic to courier integration. We're about ecommerce. We're about providing the platform.

{audio:0:50:50} I guess you kind of want to integrate with Uber because that allows the restaurant to have on-demand. If the restaurant has a good enough brand and a good enough marketing team to have direct traffic, then to fulfill that order with Uber, people are able to say, I can get my food within 45 minutes.

I think part of the change that I've had when I've used a restaurant that had a kind of their own white label is that you don’t get the on-demand delivery. Because Stuart and the other players don't have a scaled network, it's not the same purchase. If I order with Just Eat, I know I will get my order within 45 minutes, hopefully, but from Stuart and the other players, it’s more like a scheduled delivery. You have to plan it in advance.

{audio:0:51:43} I think it’s evolving very, very quickly. Interestingly, Stuart's biggest customer is Just Eats, so it is an evolving ecosystem. Because of the demand that the market is seeing, many courier players are popping up. When there's demand, the supply will eventually meet the demand. Particularly with us, we get requests all the time from new couriers going, hey, we just launched, can we integrate with you. Or, we're building out an API. Are you interested? And we'll just continue to offer that service to those players.

{audio:0:52:30} How do you split your customer base up?

{audio:0:52:37} We define them by subsectors where we say, bakeries and sweet treats, restaurants, hotel groups, delis and provisions, bars and breweries. Even within restaurants, there are subsectors like fine dining, quick service restaurants, independents. You can go to as many layers as you want.

{audio:0:53:02} What’s your mix roughly between the categories?

{audio:0:53:05} Restaurants probably make up about 60%, and the others make up 40%.

{audio:0:53:11} Within restaurants, what's the fine dining situation versus the rest? How do you split that up?

{audio:0:53:17} Couldn't tell you off the top of my head, but in terms of segment, we're quite concentrated in London at the moment geographically. We are across the UK, and particularly over this year, we’ll make a push into furthering the UK and beyond that into Europe. We think this is an international business. I didn't set this up just to be London-centric. One of the biggest learnings from growing Crosstown, which is eight years old, is it's difficult to scale a food-and-beverage brick-and-mortar business fast, internationally. One of the benefits I've found of Slerp is that it's got the potential to do that a lot quicker. It's one reason I started the company, and I'm really excited about taking it forward.

Slerp & UK White Label Restaurant Food Delivery

Founder of Slerp and Co-Founder of Crosstown

inpractise.com/articles/slerp-and-uk-white-label-restaurant-delivery

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Executive Bio

JP Then

Founder of Slerp and Co-Founder of Crosstown

Interview Transcript

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Slerp & UK White Label Restaurant Food Delivery (May 16, 2021)

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