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"You know what this place needs," I said to myself this morning, as I went into the little store around the corner where I buy my daily coffee, my breakfast sandwiches, my late-night potato chips, and my emergency tampons. "What it needs is less stuff, and to be inside my apartment building, and also to accept Apple Pay."
No, of course I didn't say that. If you're a living human being in the United States who has ever had a dollar in your pocket, you've probably been in a bodega — or, depending on where you live, maybe you call it a corner store, convenience store, deli, packie (short for "package store"), or party store. Maybe it's attached to a gas station. Maybe it is a gas station. For some reason, former Google employees Paul McDonald and Ashwath Rajan think all of them need to be disrupted.
A Fast Company story this morning profiled Bodega, the duo's startup (which has drawn investment from high-profile firms like First Round Capital and Forerunner Ventures, as well as executives at Facebook, Google, and more), which seeks to replace these corner stores with boxes. Specifically, five-foot-wide, wifi-enabled boxes stocked with non-perishable goods, which we can access by downloading an app, and picking up the items we'd like in view of a computer-vision camera which will automatically charge us for our purchase. "Eventually, centralized shopping locations won't be necessary," McDonald told Fast Company, "because there will be 100,000 Bodegas spread out, with one always 100 feet away from you."
The backlash was swift. Declaring that you want to replace family-run, neighborhood-oriented storefront retail with computerized protein-bar transaction cubes is not really the fast track to community embrace. There's a lot to loathe (and a lot to mock) about Bodega, including the name itself, which nods to the immigrant families who often own the stores the startup wants to put out of business. (Thoughtfully, Fast Company asked McDonald about that. He replied, "We did surveys in the Latin American community to understand if they felt the name was a misappropriation of that term or had negative connotations, and 97% said 'no'.")
Fortunately for its critics, and unfortunately for McDonald, Rajan, and their investors, Bodega faces more obstacles than just a morning of high-intensity Twitter loathing. A range of conveniently located, beautifully merchandised kiosks with an easy app-based point of sale and an evolving range of user-calibrated products seems like a nice, attractive idea. But something like that is built on an intensely complex logistical apparatus — and any mention of that sort of thing seems to be missing from McDonald and Rajan's talking points, which focus mostly on what they call "the last hundred feet."
These efficiencies aren't gravy, though; they're essential. They work by way of a simple economy of scale: If you run a few dozen machines (or a few thousand), it becomes possible to buy your products at a discount, to warehouse the products more effectively, and to both fill and repair your vending units in a more streamlined way. These businesses live or die by logistics.
This is where things seem likely to fall apart for Bodega. Even with their wifi connections and app-connected camera sensors, the units themselves are still just offering consumers a basic model of unmanned commerce — only with smaller, fancier machines to process the transactions. What Bodega does offer as a differentiator are the number of unique products per unit (100, the average vending machine has 20-40), and the promise that the products will not just be tailored to their general environments — protein bars in the gym, tampons in a sorority house — but to their specific users. A promise of "machine learning" will, as Fast Company explains, "constantly reassess the 100 most-needed items in that community."
At 100,000 units — the scale McDonald and Rajan envision — that's ten million items that are active at a time, plus reserve products for restocking, plus new products to introduce as the "machine learning" (I'm sorry, I just can't) cycles out low performers. Across specialized markets and user-informed preferences, the number of SKUs (industry shorthand for a stocked product, rather than an individual unit of that product) that Bodega would be dealing with would quickly climb into the thousands.
So many products, across so many Bodegas, in so many unique configurations poses a set of phenomenally complex logistical conundra: How are the products purchased? Where are they warehoused? How are they bundled for distribution to their unique Bodegas? Who restocks the Bodegas? How are the restocks transported? How can the company ensure that there's sufficient route density — that there are enough Bodegas in each local area, which need to be restocked frequently enough, on harmonious schedules, to cover the costs of labor and transportation?
Labor is not a minor issue, with a company like this one. "Unmanned retail" isn't a precisely accurate phrase: There may not be a person ringing up your transaction, but there are plenty of people working to maintain a system that allows that absence — even the famous midcentury automats were just the outward storefront of a working, fully-staffed kitchen. Bodega's warehouses will need to be staffed. The trucks will need to be driven. The Bodegas themselves will need to be manually restocked — each can, bottle, and box placed one by one onto each unit's shelves. Many traditional vending machine companies employ restockers who double as machine repairers. Will a Bodega restocker be trained to fix a busted computer-vision camera?
Critics of Bodega are already comparing the startup to Juicero, the highly investment-valued cold-press-at-home juice company that collapsed spectacularly after its $400 juicing machine was revealed to be a pricey paperweight. It's not that the machine didn't squeeze well — it's that it wasn't necessary. The fruits and vegetables in Juicero's pre-mixed packets were already diced so finely that they were, functionally, already juice.
But I think the better analogy here is Blue Apron. Like Bodega, Blue Apron took something that involved leaving the house and engaging in moderate human interaction — in their case, grocery shopping for dinner — and slickly repackaged it in a way that it seemed actually to be selling a balm for recipe anxiety. Bloomberg's always very smart Matt Levine called it "a tech company in the sense that its product is not meals, or ingredients, but simulacrum." The problem was that the simulacrum wasn't proprietary. As soon as it became clear that there was a demand for meal kits, everybody else got in on the action, too.
In a market full of clones, imitators, and knockoffs, all Blue Apron had going for it were its early entry advantage, and its skill at packaging and distributing meal kits better than its competitors — but even that wasn't enough to save it from the ravenous race to the bottom of a newly oversaturated market. After a few years of rapid growth as a private company, Blue Apron went public in July. The data revealed by their S-1 (a formal statement filed to the SEC when a company plans to sell stock in an IPO) raised eyebrows, with numbers pointing to unsettlingly high customer churn and an eye-watering cost of new-customer acquisition. Their Q2 data confirmed these problems, among others, leading to a stock nosedive so severe that you couldn't short Blue Apron even if you wanted to.
Even if Bodega does, improbably, slay its logistics dragons, its success will serve mostly to prove to imitators that this is a space worth being in, and it'll drown.
In Silicon Valley, Bodega's success will not be measured by how well it truly replaces the stores it wants to eliminate — by how many lives it makes better, how many jobs it creates, how many communities it strengthens, or how many families it serves. Like most startups, its success will depend on whether its founders and investors make money, either by cashing in with an IPO or selling to a bigger company for a tidy profit. The target is probably the latter, and probably Amazon, with the sales pitch not Bodega's market positioning or logistics system (ha!), but the actual hardware of its vending devices — a low-footprint storefront that bridges the gap between Amazon's pickup lockers (non-instantaneous, but zero human interface) and its instant pickup stores (instantaneous, but you have to briefly interact with someone).
When I joined in on Bodega's public Twitter flogging (with tweets including several that turned into this article), I got a reply from Nadim Hossain, a startup executive who's done time at several major Silicon Valley success stories. He wrote, "Appreciate your insights! Curious why Bodega is eliciting such strong negative reactions? If it works, you've proven it's an audacious idea."
Inside of that lives a peculiarly Silicon Valley syllogism: Success is heightened by outside skepticism, therefore outside skepticism may be an indicator of success — Hossain later tweeted that he thinks the Bodega idea "has merit." But I'm more stuck on that word, "audacious." I think Hossain means it to be about boldness and daring, which are qualities that remain to be seen — if the startup fails, it won't have been bold and daring, it will have been foolhardy. But I think by another meaning, Bodega is already audacious: It is rash and thoughtless. It's ethically and culturally bankrupt, but it also seems to be poorly constructed and unsustainably scaled. So it'll be the other kind of bankrupt, too.