One Step Up #44
This week, we look at Big Tech, Headless Brands, FB's foray into Audio, the grocery delivery market in Europe, the community group buying e-commerce model, Calendly + more
How Big Tech got so big: Hundreds of acquisitions
First, they became dominant in their original business, like e-commerce for Amazon and search for Google. Then they grew tentacles, making acquisitions in new sectors to add revenue streams and outflank competitors.
Just an incredible post highlighting the multiple acquisitions these companies have made to get to where they are.
We are moving from an era of centralized, bureaucratic value creation firms to an era of decentralized, permissionless value creation networks. As organizational models change, so too will the intangible cultural artifacts created by these new institutional forms. Brands, narratives, memes—we now choose our own headless gods.
The very idea of a brand that is decentralized challenges our assumptions about what a brand is and how it operates. In 1971, famed brand manager Stephen King of J. Walter Thompson (now the world's largest marketing agency), described the first condition for a brand's success: "First, it has to be a coherent totality, not a lot of bits. The physical product, the pack and all the elements of communication - name, style, advertising, pricing, promotions, and so on - must be blended into a single brand personality." In 2019 it is unclear whether this axiom holds true, even for traditional products and services.
A decentralized brand is a meme. It belongs to no one, and can be remixed by anyone. A decentralized brand can only be "designed" in a very limited sense. It is something different than a Coca-Cola, an Uber, or a New York Times. Decentralized brands are self-enforcing, self-incentivized, contagious narratives that emerge and evolve in ways that are unexpected and irrepressible.
A decentralized brand is a fiction made real, an egregore, a self-sovereign entity that lives through the imagination and belief of many. One does not simply decide what a decentralized brand "is." It is not something that can be created by focus groups, strategists, and identity designers. Like Bitcoin, a decentralized brand has its own autonomy, generated by the contributions of individual actors, a million person chorus acting as one.
Why is Facebook expanding into audio in this way? Four reasons:
Audio is a relatively untapped source of attention, compared to text and video.
Attention is shifting towards creators.
It serves as a hedge against possible challenges to their advertising business.
Facebook can’t buy, so they have to build.
🐑 A Pamphlet Against Getir & GoPuff's European Copycats
A full stack grocery delivery model (vertically integrated by operating a network of dark stores from which they deliver groceries in less than 15 minutes, optimized for delivery that can be in tier-2 locations contrary to traditional retail stores which must be in prime locations and which are optimised for on-site shopping) is the hardest operational business a start-up can launch.
We are talking about an Amazon-like positioning in terms of operational complexity - even worst, we are talking about perishable goods. There is complexity in every step of the grocery delivery model value chain: sourcing, warehouse operations, delivery, mobile app, brand etc. It's extremely hard to get it right.
The hottest and least understood e-commerce model: Community Group Buying
Online grocery 2.0 community group-buying
With community group buying, the format works like this:
A self-designated community leader creates and maintains a WeChat group.
Community leader sign-ups individuals from their local region (usually within their regular walking distance), each WeChat group is capped at 500 people.
They maintain a weekly or daily schedule of posting a product selection to the group. The products are links to mini-programs where residents click through to place their orders. Residents do not have to order the same products and will only need to pay when their collective demand exceeds a designated value.
The products are not limited to groceries but also include other life essentials like paper towels.
Once the residents place their orders, the entire collated order is delivered in bulk to collection points the next day for the community leader to pick up.
Community leader unpacks the bulk order and then organises this into the resident's orders. They will either deliver the order, or the residents will come to this pick up themselves.
In case of issues, the community leader is the first point of contact for the residents. They will escalate the problem to the platforms and handle the resolution on behalf of the residents.
For their work, the community leaders get 10% commission from their group orders. Given the hands-on nature of the work, a community leader can typically only manage three WeChat groups well at any one point.
With the addition of community leaders into the supply chain, the unit economics for online groceries are fundamentally changed. Now CAC is lowered since community leaders are responsible for creating their own customer groups. Customer Life Time Value (CLTV) is extended since customers have more hands-on support and social buying promotes frequent purchases. Conversion rates are much higher - can reach 10% in WeChat community group buying rather than typical 2-3% e-commerce conversions. Community leaders and customers take care of the last-mile delivery, shaving off precious additional logistics costs (lowering logistics costs is often the sole driver of profitability in marketplaces). The platform can carry fewer SKUs, buying in large quantities directly from the source rather than through intermediaries and have higher pass-through rate, which means the produce stays fresh and contributes to a positive customer experience.
Zach Reitano and the Six Businesses Before Ro
On heroes:
My entrepreneurial hero is my dad.
When I think about what we’re building at Ro, a lot of it is that we’re trying to recreate my dad with software. Our mission is to be a patient's first call. And my dad was always the first call for both me, my family, and my friends. Our home was a pharmacy, and if you had a question — whether that was about diabetes, heart disease, or an STD — the closet in our house could help. He’s saved each person in my family's life at some point.
Calendly: The $4B DocuSign of Scheduling
Till next time.
Until you can manage your emotions, don't expect to manage money.