Speaker 1: Pushkin. If you live in a city, you've probably seen
Speaker 1: ads for one of these new instant delivery companies. You
Speaker 1: download the app, go on your phone and order the
Speaker 1: kind of stuff you might buy at a drug store
Speaker 1: or seven to eleven, and then in like twenty minutes
Speaker 1: or a half hour, your stuff gets delivered to your door.
Speaker 1: I have one of those apps open on my phone
Speaker 1: in front of me right now. It's called gopuff. The
Speaker 1: apps called gopuff. It's one of the oldest and biggest
Speaker 1: of the instant delivery companies. And also right now I'm
Speaker 1: talking on my computer to the co founder and co
Speaker 1: CEO of gopuff. Can you hear me loud? Claire? Great,
Speaker 1: thanks for doing this. I've been reading about you and
Speaker 1: playing with your app. Can you just say your name
Speaker 1: so I have it and so I don't say it wrong. Yeah,
Speaker 1: of course, Raphael illashayev. As it happens, I live in
Speaker 1: Brooklyn and New York, and go Puff delivers to me,
Speaker 1: and so I thought a fun thing to do, if
Speaker 1: it's okay with you, would be that I order something
Speaker 1: now and you sort of talk me through what's happening
Speaker 1: as a way of understanding both your company, how it
Speaker 1: works now, and also some of the things you're trying
Speaker 1: to do. You know, It's sort of the thing of
Speaker 1: the show is the problems people are trying to solve,
Speaker 1: like I love it. I love it, problem too and
Speaker 1: I love it. I'm Jacob Goldstein and this is What's
Speaker 1: Your Problem, the show where entrepreneurs and engineers talk about
Speaker 1: how they're going to change the world once they solve
Speaker 1: a few problems. Raphael and as co founder started go
Speaker 1: Puff back in twenty thirteen. They were college students delivering
Speaker 1: munchies to their friends. Today you can go on the
Speaker 1: gopuff app and order most of the things you'd find
Speaker 1: at the drug store, snacks, diapers, advil, and the company
Speaker 1: is trying to figure out how to add more stuff
Speaker 1: like produce and hot food. Gopuff operates in hundreds of
Speaker 1: cities and they've expanded from the US to the UK
Speaker 1: and France. And the number of problems the company has
Speaker 1: to solve boggles the mind. Competition, technology, logistics, hiring, politics,
Speaker 1: it is all here and today on the show, we're
Speaker 1: going to do it in real time as I place
Speaker 1: in order to figure out how the business works and
Speaker 1: the problems they're trying to solve this is fun. By
Speaker 1: the way, I've never I've never done this a live order.
Speaker 1: I'm enjoying too. I'm enjoying too. So okay, so I
Speaker 1: got the app There it is, and it says on
Speaker 1: here fifteen to forty minutes. So let me see. So
Speaker 1: the first thing is like, what do I order? So look,
Speaker 1: I'm going to order. What I'm going to order oreos.
Speaker 1: To me, the spirit of gopuff is oreos. I assume
Speaker 1: you have you do have oreos, So it's seven to fifty.
Speaker 1: So seven fifty for a bag of oreos is like
Speaker 1: higher than the grocery store, right, I would say it's
Speaker 1: pretty pretty in line to like middle tier retail, closer
Speaker 1: to what you would experience in a drug store. And
Speaker 1: then looks like my minimum order is twelve ninety five.
Speaker 1: So let's see. I mean, I feel guilty about the
Speaker 1: oreos we always need, say bananas, yeah, out of stock.
Speaker 1: It looks like you have bananas, but they're out of stock.
Speaker 1: You have let me see, should try they're too popular?
Speaker 1: Let me just see? Am I just well? You have
Speaker 1: fugie apples? Okay, eighty nine cents for fogie apples, So
Speaker 1: let me just get some fujie apples here, maybe about
Speaker 1: of water. You're a gatory appreciate cardon milk, maybe smokely
Speaker 1: um Sky's hustling, always always be selling, always being um Okay,
Speaker 1: so let's see. It looks like there's a two ninety
Speaker 1: five delivery fee and then there's a tip which it's
Speaker 1: auto populating at three ninety nine. So that's fine. I'm
Speaker 1: gonna go ahead and place the order just so we can,
Speaker 1: you know, pass go here, place order. Let's do okay,
Speaker 1: my order is being placed in here just for fun.
Speaker 1: Started the Stopwatch on the cassio twelve. Let's do it
Speaker 1: two twelve. I love it. So I just well, first
Speaker 1: of all, what's happening now? I just pushed a button
Speaker 1: and something somewhere in the world just happened in what
Speaker 1: warehouse that you want right? Tell me what's happening right now?
Speaker 1: So there's a micro fulfillment center somewhere in your neighborhood.
Speaker 1: I don't know where you live. So in a neighborhood
Speaker 1: in Brooklyn, they received an order and they got routed
Speaker 1: to a packer. Okay, so like did a bell ring?
Speaker 1: Did somebody like get a buzz on their Yeah, like,
Speaker 1: what really happened? There's an actually a buzz. Yes, there's
Speaker 1: vibrates vibrates on their handheld device. So I'll take you
Speaker 1: a kind of step backwards. When we were building out
Speaker 1: this thing, and we're building out all the technology within
Speaker 1: the four walls of the building, and then later on,
Speaker 1: you know, the last mile, we realized that there was
Speaker 1: nothing out there that can solve this for us. We
Speaker 1: didn't want to build all this software to power all
Speaker 1: these buildings. But the reality is, because nothing like this existed,
Speaker 1: we had to build a whole bunch of proprietary software
Speaker 1: to then pick and pack and then ultimately been in
Speaker 1: batch so put it into a batch of orders and
Speaker 1: then eventually send it out to the end customer. And
Speaker 1: you have to do that constantly under thirty minutes, right,
Speaker 1: So I just, oh, yeah, under thirty minutes. And also
Speaker 1: I want to pause here just to make a distinction
Speaker 1: clear that might not be obvious to people listening, and
Speaker 1: that is this is not instacart. This is not You're
Speaker 1: not a company that has people picking things up from
Speaker 1: existing stores. Right. This is your MicroWarehouse and you own
Speaker 1: the oreos and the apples. I just bought right, you're
Speaker 1: paying for the warehouse, you're paying for the apples. This
Speaker 1: is the opposite of like an asset light business, right,
Speaker 1: you're buying all this stuff and reselling it. Just classic retail. Yeah. Yeah.
Speaker 1: The problem with a third party delivery model it's notoriously
Speaker 1: unprofitable and it's not consumer centric, right, So when you
Speaker 1: don't own the inventory, you can't really tell the customer,
Speaker 1: like the same way that you just saw the bananas
Speaker 1: were out of stock. If you're ordering from a third
Speaker 1: party app you know, twenty five percent at a time,
Speaker 1: you're ordering an item and then you get in a
Speaker 1: replacement item instead of the item that you've order, or
Speaker 1: to ask you for something else because there's no real inventory,
Speaker 1: so they don't know. I'm placing the order for a
Speaker 1: thing that's not there, and it can a company that
Speaker 1: doesn't know that it's not there. That's right, You know
Speaker 1: that because it's your banana. That's not that's it is
Speaker 1: it is our banana or as our milk. Wait, I'm
Speaker 1: gonna pause and say my order is on the way.
Speaker 1: We're running behind on the interview, it's going too fast.
Speaker 1: But tell me, what does this fulfillment center look like, yeah,
Speaker 1: it looks like somewhere in between of a retail location
Speaker 1: and you would expect an Amazon warehouse to look like.
Speaker 1: Think about you know, seven to twelve thousand square feet,
Speaker 1: so larger than what you would expect the drug store
Speaker 1: to look like, smaller than what you expect a grocery
Speaker 1: store to look like. But we can pick a lot
Speaker 1: more inventory inside of the building because there's no walk
Speaker 1: in traffic that's going through the aisles. The building is
Speaker 1: optimized for you know, rapid picking, because the key is
Speaker 1: that you want to pick it as fast as possible,
Speaker 1: throw it in the bin. Then you have an algorithm
Speaker 1: that then determines like, hey, do we send out this
Speaker 1: door order right away or do we wait another dirty
Speaker 1: seconds to forty five seconds to an order work that
Speaker 1: could come in that's from the same block or the
Speaker 1: same name. A right, so we could have been and
Speaker 1: batch it better. Okay, so the driver is on the
Speaker 1: way or the delivery guy is on the way, let's
Speaker 1: talk a little bit about that. I mean, first of all,
Speaker 1: is he an employee of yours or not? So all
Speaker 1: the folks that are working inside of the four walls
Speaker 1: in the buildings are employees anyone that's delivering an order,
Speaker 1: A driver partner there ten ninety nine d a contractor. Okay,
Speaker 1: So I mean, what are they making? Fifteen bucks an hour?
Speaker 1: Twenty bucks an hour? So the national average is eighteen
Speaker 1: to twenty four bucks an hour. How much of what
Speaker 1: you eat do you order from? I order Go Puff
Speaker 1: between two and four times a day. So wow, I
Speaker 1: was a big user. If you got something on the
Speaker 1: way Now, I ordered in the morning, I got coffee.
Speaker 1: You try and break it, You try and do something
Speaker 1: really hard when you order all the time, all the time.
Speaker 1: I'll order from like a whole bunch of different categories.
Speaker 1: I'll order from items that I know that are not
Speaker 1: located in newar Introl inside of the warehouse. And I
Speaker 1: always order from a pseudo account, so no one notes me.
Speaker 1: So I'm constantly looking at things and then like, you know,
Speaker 1: my operators, I don't know if they love or hate me. Right,
Speaker 1: always always funkle, and you know how we're going to
Speaker 1: move forward. So if your order comes and it's not
Speaker 1: just right, you call the you call the warehouse and
Speaker 1: be like, okay, right, it's not hot. First, I'm trying
Speaker 1: to understand the root cause, right, it's not like like
Speaker 1: what you don't want to do is like this is
Speaker 1: just a blame game of like, hey, this person messed up,
Speaker 1: and like what caused this defect? And then you drill
Speaker 1: in like one or two layers deeper with like was
Speaker 1: it a process issue? Was it a tech issue? Like
Speaker 1: was it a staffing issue? Like like there's a whole
Speaker 1: host of issues that could have caused that problem. Ninety
Speaker 1: five percent at a time, when there's a problem, it's
Speaker 1: within something new that we're trying to do. So it's
Speaker 1: it's activated by me because I'm ordering a lot of
Speaker 1: the new stuff. I want to be testing it, and
Speaker 1: like they'll they'll be issue because it's like it's it's experimenting.
Speaker 1: So like you don't want to like fault people too
Speaker 1: hard for trying and like you want to fail fast
Speaker 1: and learn quickly, you know what I mean. So you
Speaker 1: don't want to hit people too hard for trying stuff
Speaker 1: and not working out the first time around. That's okay,
Speaker 1: you know, I mean, we'll learn and we'll move past them.
Speaker 1: We'll you know, we'll get better. Dex Can you talk
Speaker 1: about out a problem you're trying to solve now, one
Speaker 1: of the hardest problems for us to solve is grocery.
Speaker 1: Grocery meaning basically produce fruits and vegetables. Fruits and vegetables. Yeah,
Speaker 1: so okay, first of all, tell me why it's a problem.
Speaker 1: The products don't have an expiration date, so like a
Speaker 1: banana might start looking bad, you don't want to start
Speaker 1: delivering that product. So it's a whole host of new
Speaker 1: technologies that we have to build in to go inventory,
Speaker 1: to really make sure that, you know, we could deliver
Speaker 1: it properly and profitably. And in two, the retraining of
Speaker 1: all of our associates. You have to train people what
Speaker 1: does a good banana look like versus what a bad
Speaker 1: banana looks like? You know, you can't put it into
Speaker 1: the machine, like you can't automate the meaning of a
Speaker 1: bad banana. Yeah, and in some sense, yes, So okay,
Speaker 1: I'm just gonna pause here and say we're at seven minutes.
Speaker 1: We're do a time check. Seven minutes looks like I
Speaker 1: can actually see It's like when you're, you know, calling
Speaker 1: an uber or something. I can see where the delivery
Speaker 1: guy is and the dude has looks like moved away
Speaker 1: from my house a little bit. So I guess I
Speaker 1: was not first on his list. The order might have
Speaker 1: been batched, so like the keys that still keep it
Speaker 1: in the in the delivery window that they use it.
Speaker 1: Like again, what a lot of people would do, or
Speaker 1: a lot of people that are entering the space for
Speaker 1: the first time would do is just like optimize, like
Speaker 1: bring it as fast as humanly possible, And that might not.
Speaker 1: I don't know what's happening specifically with your order, because
Speaker 1: obviously I'm not I'm not I'm not looking at it.
Speaker 1: But like the reality is is like we're optimizing to
Speaker 1: build the best kind of consumer experience and build a
Speaker 1: long staining, generational, profitable business. So, Okay, you were early
Speaker 1: to this business, and tons of other people with huge
Speaker 1: amounts of money are coming to copy you and do
Speaker 1: what you do, like lots of you know, startup VC
Speaker 1: funded businesses. But I also just read yesterday that like
Speaker 1: Walmart is trying to get into instant delivery, and both
Speaker 1: of those seem like potential problems for you in terms
Speaker 1: of like competition. What I'll tell you is, like I
Speaker 1: mean this in the most amount of respect, right, the
Speaker 1: vast majority players just won't exist six to twelve months
Speaker 1: from now, because the twelve months that is a fuego
Speaker 1: take and you're not saying in five years, you're saying
Speaker 1: in one year. Yeah, not all of them, but most
Speaker 1: of them. And here's why. Right, this business, if you
Speaker 1: don't focus on building out the tech early, and you
Speaker 1: don't focus on fundamental economics early, right before you scale
Speaker 1: the business, it's a fricking disaster. Right. You could be
Speaker 1: losing twenty thirty forty dollars every order that you deliver.
Speaker 1: So the easiest thing to do is to open up
Speaker 1: the building, right, the hardest, like, it's much harder to
Speaker 1: operate these buildings and operate improfitability and to deliver against
Speaker 1: the consumer promise every single time. And that took again,
Speaker 1: that took us a lot of years and a lot
Speaker 1: of iteration, a lot of work to do. So I
Speaker 1: just I just know what it takes to build a
Speaker 1: business like this, and if you don't invest in the
Speaker 1: fundamentals of the business early, the results are disastrous. My
Speaker 1: order is still on the way, apparently according to the app.
Speaker 1: The clock is still ticking, and we'll be back or
Speaker 1: a break to talk about more problems and see how
Speaker 1: long it takes my order to arrive, and now back
Speaker 1: to my interview with Raphael. I will say, for those
Speaker 1: of you keeping score at home tracking my order of
Speaker 1: oreos and apples, we're going to skip ahead a few
Speaker 1: minutes here and pick up the interview around twenty eight
Speaker 1: minutes after I placed the order. At this point in
Speaker 1: the conversation, we're discussing Gopuff's acquisition of this liquor store
Speaker 1: chain called Bevmo. Gopuff made the acquisition a couple of
Speaker 1: years ago. It costs them three hundred and fifty million
Speaker 1: dollars and go Puff has been trying to solve this problem.
Speaker 1: How do you keep this liquor store chain running as
Speaker 1: retail stores where customers can go and chop well at
Speaker 1: the same time using the stores as microwarehouses for its
Speaker 1: delivery business. The reason we bought it was because of
Speaker 1: the liquor licenses, so we could deliver alcohol in California
Speaker 1: in an easy way. And we did the same thing
Speaker 1: in Kentucky with a chain called Liquor Barn, and we
Speaker 1: where did these retail locations And our biggest problem, and
Speaker 1: the problem that we still have today, is how do
Speaker 1: you keep the integrity of the retail location while making
Speaker 1: it into what we call an omni store. So the
Speaker 1: store like a micro of a filment center within a
Speaker 1: very popular chain. Right, that's producing hundreds of millions of revenue.
Speaker 1: What's an example of the thing that went wrong in
Speaker 1: that in that setting? So I'll give a like an example.
Speaker 1: Let's say like something exists on the store shelf. Right,
Speaker 1: we never had walking customers before, and we have an
Speaker 1: active inventory account that's integrated between bevmo and Gopa. Let's
Speaker 1: let's say a customer there's a one bottle of something
Speaker 1: left and he took it, and it's physically in the cart,
Speaker 1: in someone's cart, So the inventory system is saying there
Speaker 1: is one of these bottles that exists in the shelf.
Speaker 1: So I go on the app and the app is like, yeah,
Speaker 1: you can buy that bottle of whiskey, and I pushed
Speaker 1: the order and then somebody who works then then would happen.
Speaker 1: They would go to the shelf, they would scan the shelf,
Speaker 1: they would look at the shelf and there's no bottle there.
Speaker 1: So that like, that's what we call an inventory defect.
Speaker 1: But the defect shouldn't exist because the bottle physically, like
Speaker 1: the way that we solve that problem is like anything
Speaker 1: under a certain amount, we're just gonna market out of
Speaker 1: stock because we're not so sure one or two bottles left.
Speaker 1: You just don't let anyone we're gonna market out of stock.
Speaker 1: And like that took us, like we didn't we thought
Speaker 1: there was something wrong with the system. And then the
Speaker 1: engineers and product folks and everything we laugh about this
Speaker 1: all the time. The best person to fix a packing
Speaker 1: problem is the person that's packing the order, right, So
Speaker 1: it took us speaking to the people in the ground
Speaker 1: to like be like, hey, like what's wrong with it
Speaker 1: with this, Like like wait, there's something wrong with our
Speaker 1: inventory management software, and like somebody worked in the store.
Speaker 1: It's like no, man, somebody some customer just had the
Speaker 1: bottle in their cart. What that's literally exactly what happened.
Speaker 1: Instead of like going to the MFC's and really figuring
Speaker 1: out what the problem is, yeah, the stores, Yeah, yeah,
Speaker 1: we try to solve it an HQ and that just
Speaker 1: didn't work. So like you gotta have a bottoms up approaching. Sorry,
Speaker 1: I apologize, but I have to interrupt. Were at thirty
Speaker 1: one minutes. I'm gonna stop to stop watch. Just got
Speaker 1: a text your non content Go Puff order has been
Speaker 1: delivered to the address you provide it. You want to
Speaker 1: just hold on one sack. I'm gonna go downstairs and
Speaker 1: get it. Great, you're right back, and now back to
Speaker 1: the show. I just went to get my order from
Speaker 1: Go Puff. I think it worked. Let's see. Okay, let's see.
Speaker 1: I love this. Yeah, right, it's action. It's like this
Speaker 1: is this okay? So let's see at the apples. You'd
Speaker 1: be glad to know the apples look good. Great, we'll
Speaker 1: do the apple test here, you're ready, good crunch or
Speaker 1: good apple? And we got the orioles. I love it. Yeah,
Speaker 1: it worked. Were you worried at all? I think there's
Speaker 1: like like like a sub level of worry, especially about
Speaker 1: the apples because it's a new business. Great, let's do
Speaker 1: a lightning round. We close this show with like a
Speaker 1: bunch of fast questions, just fast. What's one piece of
Speaker 1: advice you'd give to somebody trying to solve a hard problem?
Speaker 1: Listen more than you talk. What's the hardest thing about
Speaker 1: growing is physical real world business? Insanely quickly. I mean
Speaker 1: I'm thinking I'm talking from my perspective more than anything else.
Speaker 1: We're working sixteen seventeen hour days, seven days a week. Yeah,
Speaker 1: and after months and months of doing it, it just waited,
Speaker 1: Like you're like, the business hasn't gone into the place
Speaker 1: where we got we wanted to get to, wen't raise
Speaker 1: any money, and like you start to deteriorate a little bit,
Speaker 1: you know what I mean, Like remaining mentally strong as
Speaker 1: you're building these operationally complex businesses, especially if you're acting
Speaker 1: as a founder operator, is probably one of the hardest challenges.
Speaker 1: What's a thing in the world outside of your business
Speaker 1: that you think should be faster. Maybe transportation probably should
Speaker 1: be faster, right Like we had we had concords twenty
Speaker 1: years ago, and I think we took a step backwards
Speaker 1: on transportation. If everything goes well, what problem will you
Speaker 1: be trying to solve in say five years. So I think,
Speaker 1: you know, gobus business can become a lot more broad
Speaker 1: than just what we're doing right now. What I mean
Speaker 1: by that like if you look at Amazon's business right
Speaker 1: like FBA fulfilled by Amazon is larger now than the
Speaker 1: retail business than Amazon owned products. And by owning all
Speaker 1: the infrastructure, we're starting to think about, like, you know,
Speaker 1: what are ways that we can utilize all the infrastructure
Speaker 1: and all the technology that we built to empower a
Speaker 1: whole host of e commerce websites to power their delivery.
Speaker 1: How will you know when it's time for you personally
Speaker 1: to do something else. You know, it's a great question.
Speaker 1: I used to think about that kind of all the time.
Speaker 1: I think, you know, you get one chan unless you're
Speaker 1: like Elon Musk, right, you get like one chance in
Speaker 1: life to build something really really generational. And when I
Speaker 1: said generation, I mean multi hundred billions in market cap
Speaker 1: and like a lot of magic needs to happen for
Speaker 1: you to get like timing, product, market fit, resources, damn,
Speaker 1: Like a whole bunch of things need to like come together.
Speaker 1: I'm not embarrassed to say I don't think I'll be
Speaker 1: able to do this again at this Yeah, Like I
Speaker 1: think this is our chance to do something really really
Speaker 1: a generational once once in a lifetime. And it's like
Speaker 1: it's so much bigger than money. It's so much bigger
Speaker 1: than you know, like how I'm gonna feel on how
Speaker 1: I'm gonna behave if I sold this thing. So I
Speaker 1: love doing this, not sounding a cliche, but like I
Speaker 1: really enjoyed doing this more than anything. I don't really
Speaker 1: have any other hobbies. It's a good thing, working sixteen
Speaker 1: hours a day. Right, It's like family and go Puff
Speaker 1: and most like go Puff. It sounds like, yeah, I
Speaker 1: mean this is my life, so you know, it's uh.
Speaker 1: I can't even imagine right now life would out it
Speaker 1: as crazy as that sounds. Thank you very much. Great
Speaker 1: to talk guys. Thank you. Rafael ilishaiyev Is, co founder
Speaker 1: and co CEO of Gopuff. Today's show was produced by
Speaker 1: Edith Russolo, engineered by Amanda ka Wong, and edited by
Speaker 1: Robert Smith. The music by Luis Gara. What's Your Problem
Speaker 1: is a co production of iHeartMedia and Pushkin Industries. If
Speaker 1: you like the show, please leave a review or rate
Speaker 1: us on whatever app you're using to listen. If you
Speaker 1: do not like the show, I've taken enough of your
Speaker 1: time already, no need to leave a raining. I'm Jacob
Speaker 1: Goldstein and I'll be back next week with another episode
Speaker 1: of What's Your Problem.