How the Pandemic Inspired Me To Start an On-Demand Grocery Startup

Vitaly ALexandrov

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Published: May 4th, 2022

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Vitaly ALexandrov

Founder, Food Rocket

Founders

140

Employees

Food Rocket

foodrocket.me

from Chicago, Иллинойс, США

started January 2021

Founders

140

Employees

Discover what tools Vitaly recommends to grow your business!

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Zendesk

crm

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Taxjar

Discover what books Vitaly recommends to grow your business!

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Hi, I am Vitaly Alexandrov, the founder & CEO of Food Rocket— the fastest grocery delivery startup in California and Chicago. I’m a two-time winner of the Oxford’s Fund scholarship. I previously founded the international CRM agency “Out of Cloud” and gathered two prestigious awards at Tagline Awards in 2017 and Loyalty Awards in 2018.

At the age of 27, I published a best-selling book titled Email Marketing Strategy. In 2019, together with business partners, I launched Foody — a startup to optimize the procurement process for restaurants in the US; the company has been showing a 20% growth MoM.

I built my Food Rocket team of up to 150 people in less than a year. I was also named one of the top rising stars among grocery delivery startups by Business Insider. In 2021, I was nominated for the Forbes 30-under-30 list.

What's your backstory and how did you come up with the idea?

Over the last few years, I’ve built several startups in Silicon Valley, and they were always around the food industry. For example, the first Foodcast helped retailers to predict future sales and decrease food waste. Then, Foody helped restaurants have all of their suppliers in one place and place orders through the mobile app. Once the pandemic started and restaurants were shut down, we decided to pivot.

Try to solve just the hard problems. The rest will be solved by others.

The pandemic created new consumer demand for fast and safe on-demand grocery delivery. I believe that the U.S. market has a great capacity for that. I saw how quickly e-commerce startups were growing all around the world.

Plus, food retailers were one of the few industries that were boosted during the lockdown. I realized that we already have all that is needed: we have strong partnerships with the best suppliers, we know the market in San Francisco, and we are the experts in the foodservice industry. All that was left was to merge everything.

That’s how Food Rocket was founded, offering the fastest grocery delivery in California and Chicago. Food Rocket delivers groceries within 10–15 min after the order is placed. And that’s the real deal.

Take us through the process of designing, prototyping, and manufacturing your first product.

We build our products based on deep research and analysis. We invest lots of resources in both B2C and Back-office streams of our business. We do lots of interviews both with our customers and with internal users of our systems. This lets us understand not only how users use our products but how they feel it. This understanding of feelings makes us create the best in industry products that help our business grow and scale.

When we create something new we also do A/B testing to find the fit that our customers will like most. We adapt to our customers to find the most popular groceries in the area by local market analysis.

But it wasn’t easy. I had no experience with real estate. How to search and how to rent? What permits are required? At the same time, I was facing challenging portfolio questions. What milk brand should we store and offer? How to manage the categories?

A lot of questions and no room for mistakes. But I never considered the possibility of giving up. Because if everything was easy, it meant that everybody could succeed. Finally, we hired just the right people with great expertise and deep knowledge of the market. During the hard times, I always say to myself: “Try to solve just the hard problems. The rest will be solved by others.”

Describe the process of launching the business.

At first, we tried out different vendors that satisfied our requirements both in terms of price and quality. The fresh produce category is a difficult one, and all our partners have different methods of packaging and shipping vegetables.

For example, our first order of tomatoes came from the vendor in big 40-pound bags instead of being prepackaged for consumers. Because additional packaging at the warehouse would impact the speed of delivery to end-users, we had to make a new order. And those 40 pounds of tomatoes in a bag just stayed in our office.

Later we raised $2M to open the first three dark stores. Despite that, we faced a lot of challenges while opening the first dark store, with 75% of our customers already ordering more than once per week. It’s a very high rate of conversion. We even have clients making 2-3 orders per day. And it’s real. Right now we are working on opening two new dark stores in Chicago and up to 150 more across the country within the next 12 months.

We are passionate about building the next unicorn. Everyone in top management has had a successful exit experience, so everybody knows how to build a business that’s attractive to investors. At the same time, the majority of our team has relevant experience in terms of building an online grocery business.

Since launch, what has worked to attract and retain customers?

As with any other long-term relationship, building retention takes time. Every industry approaches retention rate growth differently, including e-commerce. There are unique approaches to customer segmentation and satisfying clients' needs that e-commerce must employ to ensure a good retention rate.

Entrepreneurship is not a job, but rather a calling.

To help boost your retention rate in the e-commerce sphere, here are a few tips to keep in mind.

Solve the problem that's the most important to the client. This should be your top priority. Aim to do this as early as possible. Before scaling your product, you have to ensure that it solves some important problem or provides new opportunities and abilities for potential clients. Find your early adopters, and utilize their honest feedback before moving forward in the process.
Be the most effective at solving your client's problem. Once you've established that you can solve the problem, you're halfway there. Solving the problem doesn't guarantee success, however. You have to do so in a way that's innovative and effective.
Segment your clients. For improved retention, you must understand how to streamline the customer's journey from one step to the next. A challenge for us was eliminating the "valley of death" between the first and second orders. We did this by giving customers a small promo code across the first three orders rather than offering a single, larger discount on one order.
Take care of your clients. Customer service has an overwhelming influence on retention rates. Try to anticipate problems so that clients never have to experience issues with their orders. We covered this challenge by utilizing different metrics for each stage of an order's movement and set up chat alerts to monitor any deviations. We also closely tie our employees' motivation to improving these metrics. We work for users. The key goal of our business is to provide quality services to our users. We think about user performance first and foremost. We are passionate about our product. User’s features have the highest priority.
Introduce new value. Your business is always in the "experimental" stage when it comes to seeking out fresh market insights. You should always be looking for ways to tighten up the products and services you offer, and you should constantly be field-testing new ways to provide more or better value. There are always ways to improve metrics and identify new methods of delivering value to existing and potential customers.

How are you doing today and what does the future look like?

We plan to invest in the opening in Chicago and to launch around 160 dark stores by the end of 2022 in the U.S. In Chicago, we plan to cover more than 600,000 households in the areas of West Loop, Gold Coast, Wicker Park, Lincoln Park, South Loop, and River North.

We are going to invest more than $15 million in the opening of a new delivery zone and will create more than 2,000 jobs. Chicago is the third-biggest U.S. city with more than 2.6 million residents and has one of the highest population densities per square meter, which is key to the rapid grocery delivery business.

I never considered the possibility of giving up. Because if everything was easy, it meant that everybody could succeed.

The decision to expand in Chicago was based on factors such as population density, average annual income, e-commerce post-pandemic growth, and crime rates to provide the most comfortable working environment for the team. California, where Food Rocket launched in 2021, has 60% of customers ordering a second time, and a $30 average bill.

Even though Chicago is an extremely competitive market, we plan on moving the entire team there. The software and AI we use not only allow us to reduce delivery times but also to more precisely select an assortment for each consumer. Of course, we also rely on local producers, whose products will be available to Chicagoans within 10-15 minutes of placing an order.

Through starting the business, have you learned anything particularly helpful or advantageous?

Entrepreneurship is not a job, but rather a calling. Throughout the day, I both manage the team’s operations and plan for the future. Although we work 16-18 hours a day, there’s no burnout. Because entrepreneurship is a calling, not a profession. I don't like the word "vacation" because I do what I like and I don’t feel like I need a vacation from it.

I don't consider my first two projects - Foodcast and Foody - mistakes. I had some tough battles with my agency partner Out of Cloud, who did not believe in their success. In addition, I knew that these were not the projects that I would sell for $ 1 billion in five years. Nevertheless, I realized I needed to take action, dive into this industry head first, and then, thanks to my entrepreneurial aptitude and ability to read market signals, I would discover a model that would grow exponentially.

E-commerce is a super-specific and professional business with low margins. If you want to build something big from the beginning, you have to find a strong team with experience in category management, warehouse management, IT, etc. If anybody thinks that this business is easy, they are dead wrong. Our first task was to assemble the best team on the market. As soon as we started, we thought only about this one task.

What platform/tools do you use for your business?

Onfleet helps you save a lot of money on building your dispatch system for drivers. It gives you the ability to launch your driver’s app routing system in a matter of days if not hours.
TaxJar helps you calculate sales tax in real-time. TaxJar helps you to collect the right rate on every product in more than 14,000 taxing jurisdictions.
Zendesk helps you launch your support tool from day one.

And of course, AI algorithms. The groceries are ordered through an app that offers recommendations on selection and prices. Using AI technologies, the app selects the closest dark store that offers the fastest delivery time and the lowest costs of putting together and delivering the order. The cost of delivery is free for any order, while the cost of groceries is similar to the local supermarket prices.

What have been the most influential books, podcasts, or other resources?

James Kerr, Legacy: 15 Lessons in Leadership. There are different types of team management. For us, athletic style is the best. Startup is a team sport, so it’s important to learn how a team works and plays.

Advice for other entrepreneurs who want to get started or are just starting out?

I don’t like giving vague advice, so I’ll focus on top tips for starting an e-commerce business:

Build a strong IT system. Your IT system must ensure the uninterrupted functioning of your business and the daily support of the order system.
Choose a specific niche/trends that will drive sales fast. In our case, we decided to compete with the large competitors by offering ultrafast 10–15 minute delivery of all kinds of groceries, including fresh produce.
Have a great marketing experience in terms of finding scalable online and offline channels. Collecting feedback and customer feedback management is essential in e-commerce marketing.

Are you looking to hire for certain positions right now?

In 2022 we plan to create more than 2,000 jobs, and we are actively hiring at the moment. You can check out all open positions on our website.

Where can we go to learn more?

If you have any questions or comments, drop a comment below!