founder

Founder Profile: Conquering The Suburban Last-Mile Dilemma

Summary

At time of publication, May 25, Stodo had raised $47K, surpassing its $10K minimum

Many urban city goers like myself have become accustomed to services like UberEats and GrubHub to easily snag our favorite meals in minutes. Almost anything we can think of, we can get in an effortless way with on demand services. But the reality is there are thousands of suburban towns out there, where the like of UberEats and GrubHub have no interest in being at this stage because the market opportunities aren’t exciting enough to invest in.

Does that mean that families living in the burbs wouldn’t like to have their groceries or favorite pizza or alcohol delivered to their door? Absolutely not, it just means these major corporations don’t see enough early returns in it for them to want to go after it.

That is where Stodo comes in. They are becoming the on-demand delivery service for suburban towns, and are proving that they can win big with little dollars. I see an incredibly interesting opportunity for this team to become winners in an underserved portion of the on-demand market.

But don’t take it from me, check out my discussion with Adam Lopez, Co-Founder & CEO of Stodo below.
Chris Lustrino

Adam, you have had success as an entrepreneur before in the music space. So what led you to founding an on-demand delivery service?

Adam Lopez

I started in the music business doing branding and marketing for EMI and was an independent talent manager. Eventually, I ended up co-founding a talent management firm in 2011, I always knew I’d transition into an industry that was more scalable than the talent management space. At the time I conceived the idea for Stodo I was taking meetings in LA, and I saw all this on-demand delivery that made everything I could imagine accessible. That’s when I started to think, people from my small hometown in Connecticut would get exceedingly excited over this level of accessibility that hasn’t yet been seen in smaller suburban markets.

I knew that the big players like Uber were not readily trying to invest in small suburban markets, because they are all about efficiency and vertical scalability, so I thought, ‘let’s go provide an offering like it in the suburban markets.’

Chris Lustrino

For those that don’t know, how do you define Stodo as a business?

Adam Lopez

Stodo is an on-demand delivery business for all goods including: fast food, groceries, convenience items, beer, wine, spirits, all the down to dry cleaning.

Chris Lustrino

What are the challenges you think exist in this market approach that you think deter organizations like Uber from tackling this?

Adam Lopez

In our research, Uber tried to do something similar to this called UberRUSH in San Francisco, Chicago, and New York. They ended up closing all those branches down, and now I hear, ‘if Uber couldn’t make it work then how can you guys?’

We believe that accessibility to particular goods is not as big an issue in these markets because of the general public’s proximity. A small group of people will pay a premium to have items dropped off at their place, when everything they need is typically within walking distance, this directly affects price and profitability since it’s entirely based off of consumer demand, especially in a space with razor thin margins as it is. The suburban markets are much different, almost completely, and we’re talking about a consumer base that doesn’t want to have to round up the two kids to go down to the market for a gallon of milk or to pick up dinner if they don’t have to.

Chris Lustrino

On your offering page you mention that there are about 30,000 markets that can support a company like Stodo. How do you measure a market as viable?

Adam Lopez

There are a number of metrics over 40 in which we use to calculate perspective markets. A major contributor is the male to female ratio because we find 77% of our customers are female in the age bracket of 35 to 44. We also look at the average n umber of people in the household, median income, per capita income, square mileage of a town, and numerous other variables to determine the sustainability of our business model.

One interesting note is that we started this company in a town of Connecticut where the average income is $15,000 below the average state income level and have been able to prove our model works even at lower income point, which shows us that even with a lack of disposable income our service now shifts to a necessity for some people as opposed to a luxury for others.

Chris Lustrino

What is your approach to market expansion and what other markets fit well with what you are trying to do?

Adam Lopez

We have a number of markets. We picked six to seven new markets that fit directly within the parameters of those aforementioned metrics to which we are expanding.

Chris Lustrino

Are there any challenges with market adoption amongst a more suburban demographic that is perhaps not as likely to be tech-savvy? What has your experience been to date?

Adam Lopez

When we first rolled this out, we started with just liquor because this is a small town and we wanted to do something different and eye catching, we always knew we’d transition into making almost everything in town accessible but we wanted to test it with something more unique first. The news spread fast. When we showed up with what customers wanted, our drivers said the look in their eyes was like someone discovering fire for the first time. Studies show the average person only travels seven states in their lives, limiting their exposure to services like this. A lot of people have never had access to a platform like ours and they get excited when they can have similar levels of accessibility to those in major cities. Our goal is to make it as approachable as possible. A lot of the big movers in the space try to be wholesome in marketing tactics but often comes off as artificial. You can never underestimate the intelligence of a consumer, regardless of the markert, that’s why those relationships are of paramount importance to us.

Chris Lustrino

Other organizations like Postmates have had to raise tons of money to sustain a capital-intensive business model like this. How much capital do you think you ultimately need to raise to scale this business?

Adam Lopez

There are two ways we look at it: Disruptive innovation and sustainable innovation. Sustainable innovation is when a company is raising tons of money to go toe-to-toe with someone like Postmates or Uber and might not make it six months. We want disruptive innovation, where we spend very little capital to expand because in almost all of these markets the barrier to entry is so low, if it exists at all. So we need minimal capital to completely saturate a market in 90 to 120 days. There’s something to be said for being the first there, and that’s great as long as the business model is ironed out and ready for that type of expansion. By growing roots in these communities, customers feel like they’re supporting local business, and that way, if Postmates or DoorDash comes in, people in the market say ‘we’ll support local,’ there’s something intangible there, a connection, that organically builds brand loyalty. We’ve proven even basic humanization can drive great adoption and we think that’s pretty amazing.

Chris Lustrino

Why have you decided to make the business a more general anything-on-demand platform rather than become expert on just food delivery or groceries, et cetera?

Adam Lopez

We saw there was no one out there in these markets doing food as well as general goods. There are lots of hyper-focused things, but for us, we knew in these suburban markets they need more than food delivered to the home. The majority of people don’t have walking access to a bodega or convenience market, we just listened to what the market and key demographic was calling for.

Chris Lustrino

an you speak about the StodoGo membership and how you think the economics of this will work out?

Adam Lopez

StodoGo is something we’ve been toying with for a while. No one has done a successful subscription-based on-demand delivery service before in these type of markets. I was in New York and there was a subscription-based lunch delivery system that caught my eye and at first this concept seemed impossible to execute but once I took the time to deconstruct it in detail I saw that it can be scalable for delivery as well. We have people call us five times a week. With a subscription, customers can save money, gain benefits for loyalty and it’s guaranteed monthly revenue, everybody wins.

For us it’s great, though we haven’t converted it yet, we’re still ironing some things before we roll out the beta but we’re excited for what it can do for us and the consumers alike. We’re very fortunate our CAC [customer acquisition cost] is as low as it is, but with subscription based models that number always jumps up a bit so to keep it low we want to make sure it’s as flawless as possible prior to rollout.

Chris Lustrino

How are you currently acquiring customers and drivers, and what are the plans to manage these costs moving forward?

Adam Lopez

As far as acquiring drivers right now, a lot have been customers. These are people who are close to the company. We want to make it cool and fun to be a driver for us. We only need four or five drivers to cover 17 square miles, so those slots are rather coveted. We want people who are excited and interested in the humanization aspect. We locally source drivers because they know the market layout, the shortcuts, the restaurants in town, and they are invested in remembering customers pets’ names, kids’ names, that sort of thing. That builds customer loyalty that no artificial campaign can duplicate and makes it a more genuine experience overall for those on both sides of the door.

To reach consumers, it’s word of mouth, digital advertisements, local press, among other things. The print press, although may seem archaic, goes a long way for the older demographic, it almost provides validation for local businesses. Don’t get me wrong, we’re very aware that tasteful digital advertising, in many forms, is where the industry is continuing to grow; we’ve just found that when consumers are able to digest the brand on multiple levels, through multiple mediums, as opposed to a digital onslaught that is commonly adopted today, better results are achieved.

Chris Lustrino

You’ve had terrific success with getting people to place three and four orders a week. What are you hearing from customers who are repeats, and how has this compared to your expectations?

Adam Lopez

Often times new customers say a friend used the service and that convinced them to try it. Customers say ‘I can’t believe this is a thing!’ It’s something where everyone is amazed the idea is in their town. The best advertisement is always a satisfied customer and we’re very fortunate to have had so many. We’re floored by the feedback we’ve received so far. We’ve done more than $130,000 in revenue with less than $40 in total returns.

Chris Lustrino

As you think about this business, down the road do you see this being an acquisition target for on-demand delivery services that have run out of growth opportunities in more urban markets? Or do you think that this could maintain a standalone business?

Adam Lopez

At the end of the day, if you are starting a company the idea is to merge, be acquired, or IPO [initial public offering]. Once we attack and corner enough markets, I think the bigger guys will think it imperative to acquire us. We want to make sure when that does happen, whoever it may be can retain a piece of the wholesome feel we’re hardwiring into the business. If you look at someone like Walmart, there are giant superstores and then they still have “family markets” in some locations to make it more wholesome. We’d want to make sure our brand and mantra are sustained to the best of our ability if there was going to be a partnership down the road.

Chris Lustrino

From a tech perspective are there any plans to roll out driverless car technology at all?

Adam Lopez

We’ve been toying with that a bit. We’ve obtained local and state approval to test self-driving delivery. We don’t see it in suburban markets for a number of obvious reasons. It’s really apparent autonomous delivery will have to trickle down. We aren’t looking at drones; we’ve had colleagues run into issues with the FAA, and there’s much less liability when you don’t have to worry about anything falling out of the sky, we are currently exploring other autonomous robotic options however.

Chris Lustrino

What’s the customer comfort with the upcharge on food?

Adam Lopez

People are surprised at how inexpensive it is because they see the $2.99 and tend to not focus on the backend percentage. We don’t market it that way, the human brain will naturally go to the finite price over the percentage. There’s little to no customer kickback because it’s so new to most. If anything, people say how inexpensive it is overall.

Chris Lustrino

Tell us about your team.

Adam Lopez

We have myself as CEO, Jame Skoggard formerly of RBC as our CFO, David Sabal our COO along with a slew of great advisors, as well as a few others we’ve gone to for insight. Our team members really double down on their area of expertise which helps us operate as a well-oiled machine whilst continuing to be innovating when it comes to shaping and bending the on-demand model.

Chris Lustrino

What about fundraising from the crowd?

Adam Lopez

When Netcapital came, we had small office space in Naugatuck, just a cheap storefront homebase. By sheer chance, a gentleman by the name of Manuel came when we were having an investor meeting, and said ‘I think you should meet someone, I went to college with John Fanning Sr.’ Just through conversations with those two we came to the Netcapital platform and it felt like a really good fit.

Above all, it makes more sense for us to take an equity crowdfunding route because it’s further investment in the community. And the community can be a part of it, for the first and perhaps only time having access to stocks in a company like this that was created in their own backyard. Locally based investors perceive it like we are the home team, which is terrific for scaling the business.

Chris Lustrino

To what uses will you put the funds you raise?

Adam Lopez

It’s really about housekeeping and expansion. We will upgrade our office, hardware, etc., hire new drivers along with other front end personnel, and expand into five to seven new markets. Obviously $107,000 is not a ton of money, but we have a great plan in place for it to sustain us until we go for a bigger angel round in Q1 of 2019.

As you can see this team is looking to innovate the on-demand model to be more humanistic, customer-centric and accessible to many more communities in the US. My favorite part of Stodo is that their customer acquisition cost are far and away lower than any UberEats or GrubHub competitors who are burning through cash to obtain customers.

With a model uniquely designed to scale to small communities with minimal marketing dollars, I like the sustainability of the business model and the wide open market opportunity the team is sitting on. This could be an intriguing company for acquisition down the road by one of the big players as the y look for expanded opportunities to grow.

99
About: Chris Lustrino

A Boston College Eagle for life, on a mission to democratize startup investing for all people at KingsCrowd, with a passion for Fintech, investing, social impact, doing well and doing good, and an avid runner, cyclist and writer.

View Chris Lustrino's founders