A new online grocery app is taking the competition to Uber Eat’s supermarket offering, and says its model means better service for customers and better conditions for delivery drivers.
Teddy was launched earlier this month in Auckland and Queenstown by former Sky TV executive Chaz Savage and bar-owning brothers Ricki and Daniel Taiaroa. The founders have previous form, having also started Food on Q in 2016, a restaurant delivery business covering an area in the South Island including Queenstown and Frankton.
The Teddy app is an online grocer but its point of difference is speed, with a $8.99, 30-minute turbo service or a “pool” delivery, priced at $5.99. This comes to you within two hours, although it currently has free delivery on offer to entice people to give it a try.
Teddy contrasts its delivery times with the big two supermarket chains, Foodstuffs and Woolworths, which it says offer delivery but usually next-day is the fastest available option.
The Commerce Commission's market study into the grocery industry found the majority of New Zealanders purchase groceries in store, but online sales are growing. In New Zealand, online grocery sales are estimated to account for 5.7% of all grocery purchases, compared with 5.9% in Australia, 8.1% in Japan and 24.4% in South Korea.
Woolworths, owner of the Countdown, Fresh Choice and SuperValue brands, told the Commission its online sales had increased from 3% of total sales in 2014 to more than 13%.
Foodstuffs, a co-operative, has the New World, Pak ‘n Save and Four Square brands. New World's North Island stores started offering online ordering and delivery of groceries in 2017 with South Island stores launching this service in 2021, while Pak ‘n Save has online ordering with click and collect options.
Other players have also seen an opportunity, with Supie launching online in April 2021 and rumours Australian outfit Geezy Go might cross the Tasman doing the rounds in late 2021.
But it’s Uber Eats that the trio are eyeing up with their quick delivery supermarket model.
The tech giant announced a tie-up with Foodstuffs in late 2021 which means 22 North Island Foodstuffs stores are on the Uber Eats app, allowing people to get rapid delivery of selected supermarket items for a flexible delivery fee, which can be between $3 and $4, and $4 service fee.
Uber Eats drivers get paid a “base amount” which the company says is calculated on estimated delivery time, distance and whether there is more than one delivery, and they get to keep 100% of tips paid by customers. Of course, tips are optional and at the discretion of the customer and New Zealand doesn't have a strong tipping culture.
Ricki Taiaroa says Teddy is positioning itself “quite differently” in the market than Uber Eats, which relies on a gig economy system of drivers choosing when to log into its app.
He says Teddy controls the customer experience better than its competitors because the person in customer service who handles your order is employed by Teddy, as is the person who collects your items and makes sure you get what you ordered, through to the delivery drivers who will get your order to you on one of NZ-brand Ubco's trendy electric bikes.
“We think that’s an area where we can separate ourselves. All our employees are employees, and will have access to our employee share programme. A lot of marketplaces treat employees as a commodity, and they don’t even know if they are going to get paid properly for a function.”
Ricki Taiaroa says people look overseas at grocery delivery models and read “scary articles” about how those services work, but its investors have understood why its model its different.
While the Taiaroa’s and Savage own 23.53% each of Teddy Technologies shares, it has heavyweight backing from the likes of The Warehouse founder Stephen Tindall’s investment firm K1W1 and Goldman Sachs partner David Gribble.
"The support behind us has been awesome," Savage says. "Not only the people who put cash in, but the whole ecosystem around startups and investments has been really supportive."
Teddy is sourcing its groceries from a split of Foodstuffs’ Gilmours wholesale business and dealing directly with suppliers, with Savage saying it’s about 50-50 now between the two.
Savage says the Teddy founders know they can’t “compete with the big boys” on price, and a scan of the goods offered on Teddy shows it's not a budget shop, but it is a convenient, fast shop.
On the Teddy app a block of Anchor butter is priced $8.99, while the same block is $10.19 from a Foodstuffs Fresh Collective store in Auckland on Uber Eats.
Of course, where Foodstuffs can drive down prices is with its own brand items, and this is where it gives Teddy a run for its money on price and speed of delivery.
Through Uber Eats you could buy a 1.5 kilogram bag of Pams branded sugar for $3.19. Teddy has 500 grams of Chelsea sugar for $4.
But on branded milk, Teddy is cheaper. Teddy is selling 2 litres of Anchor Blue milk for $5.99 while Uber Eats/Foodstuffs has the same bottle for $6.19. However, Teddy doesn't yet have a budget milk for sale, whereas Foodstuffs has a Value Standard two-litre bottle for $4.79.
Ricki Taiaroa says in its first few weeks of operation treat foods and indulgent purchases have been popular alongside alcohol sales, which he says was expected from the customer research Teddy did before launch.
It has been a rapid business build for Teddy. The three say they have been working on it for most of this year, with building the technology and app itself the most time consuming part. Getting groceries to sell has been less of a challenge, Savage says.
"We've found the industry in New Zealand really warm and friendly ... but it is complex, and I wouldn't say the solution we have got now is the one we will end up with, ultimately. We need a big wholesaler to give us a range to minimise the complexity of our operation, and they've been pretty openminded about the whole thing, they're trying to make it work."
But direct relationships with NZ suppliers and shining a light on NZ products is where Savage sees potential. He says Teddy hasn't had one knock-back from its approaches to product suppliers, and says by being "really digital and really clever" it can showcase products like Duck Island ice cream or Jess' Underground Kitchen's meals.
Teddy has two warehouses, one in Grafton, Auckland, and one in Queenstown, and the big business goal is to expand Teddy into all main NZ centres within the next 12-to-18 months.
It may need more money to scale as fast as it wants to and could potentially hold an investment round early in 2023, but the Teddy founders who got their online supermarket up and running with a year, are confident that will be doable.
28 Comments
So the value proposition to the shopper / consumer is what? Cheaper prices?
In New Zealand, online grocery sales are estimated to account for 5.7% of all grocery purchases, compared with 5.9% in Australia, 8.1% in Japan and 24.4% in South Korea.
No idea where they got this data from. Japan has one of the highest concentrations of urban grocery retail in the world. Online grocery sales don't make sense. Companies like Nielsen have been making such grandiose claims, yet it's unlear how they're measuring it.
Post: Kantar Worldpanel provided the data. Therefore, margin of error will be large (if the data itself is not complete garbage).
J.C. So the value proposition to the shopper / consumer is what?
In my opinion, the value is TIME. It will easily take me 1 hour to drive to the supermarket, find a park, walk through the aisles to do the groceries, wait in the queue and pay, load the car and then drive back. So I consider paying $5.99 to $8.99 for 1 hour of my time extremely cheap.
Fair point Dr Yvil.
In terms of a business, if all customers were like you and req'd 60 mins of travel time and SKU collection, this business might not be profitable. Also, it makes no sense for a shopper to use the service if the shopper basket value is not sufficiently large enough. For ex, 40 SKUs offers more economies of scale than 15 SKUs.
2nd post in 2 days that I totally agree with you on, what would be cool is a system for mainly dry good etc, that could scan all the local supermarkets on price and load my click and collect order to minimise my costs, leaving me to sort the speciality items......
the dominant duopoly will simply revise there terms and conditions to stop the electronic orderflow..... much like they try to stop diary owners filling shopping trolleys with items that are cheaper then their own wholesale channels.... Some of the supermarkets ban products from these channels..... the pricing monopoly is so powerful.
grocer.nz already allows you to compare price of items at local supermarkets. The "hard" part would be making the orders on the grocery store websites, doable, but like POLi it's going to be a violation of the T&Cs. It would also need updating with every website update.
It won't just be the 5.99-8.99 though. By the looks of things, their prices are substantially more than mainstream supermarket prices (2L of milk for example is $3-4 at Pak n Save). Seeing as Pak n Save has click and collect, then you're paying quite a premium to not have to collect your own groceries. I hope they do well, as it sounds like a much better service than Uber Eats, but it looks like quite a lot to pay for convenience - though it sounds like their target market is people needing a few bits and bobs rather than doing a big shop.
I agree, would be great for those times when you're making or about to make dinner and realise you're out of something like onions or stock or whatever. You can usually find other things to prepare in that time, versus spending 20+ mins popping into the shops to grab something. Even more so if you were hosting.
An interesting finding from the Commerce Commission paper:
- Across all major grocery retailers in 2019, around half of revenues came from sales of products on promotion
What does this mean? It means that manufacturers and brands are "buying sales". Promotions are a "cost of sale". It means lower profit margins for producers. This was from 2019 when things were good.
This is precisely what New World have been pulled up for having so many different terms for what appears to be a sale but often is simply the usual price with a fancy label. Also has everyone noticed over the last 2-3 years the implementation of digital labels where you cannot compare the sale price to the price it was before as they don't display it. I feel this criminal as nobody can tell a sale if they cannot do the comparison themselves.
You'd want something like this:
I'd imagine the capital outlay is pretty high
"delivery drivers who will get your order to you on one of NZ-brand Ubco's trendy electric bikes."
This concerns me. Ubco's are more motorcycle than e-bike and hence come with all the concomitant safety issues. While it might sound like a fun part-time job for young or low-income people, is risking life and limb so someone can get their groceries fast worth the risk?
It doesn't seem to me they could protect any (potential) competitive advantage. If the existing big players offer an express service for a couple bucks more, these guys will have nothing? I admit I tend to be cynical in business, but when I look at this and see they are looking at bringing in more cash in early 2023? Early investors looking for quick risk relief? What am I missing?
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