The story of Daje and how we invented ​​proximity e-commerce

S01-E04 (28 January 2021)

Ciao,

this week’s episode of my sketchbook tool a little longer to come to life: you will learn about a new e-commerce paradigm and about the story of Daje, a startup that I’m helping taking off and that will change how families buy grocery from neighborhood shops in Europe.

The story of Daje and how we invented ​​proximity e-commerce

Last year, during the lockdown, shopping for food in Rome suddenly became difficult. Every day, long queues formed in front of shops and supermarkets and local markets became inaccessible due to social distancing rules.

Many people tried to shop online, but only large supermarket chains were equipped to sell online (on their own or through delivery services similar to Instacart).

In Italy, many people buy food in small, artisan shops. In Rome, you’ll find over 60 local markets, thousands of fruit and vegetable shops, artisans who produce fresh pasta, fishmongers, butchers, bakeries, pastry shops, and ice cream shops. Ninety-nine percent of these stores don't have a website or a presence on social media. During the pandemic, for the first time, some shopkeepers started posting photos of their products in Facebook and WhatsApp groups. Lacking an appropriate tool, they wanted to let their customers know that they could deliver their goods to people’s homes, and that they were available to accept orders.

The situation was surreal: the streets were empty; people gathered on balconies to sing the national anthem; we had dinner with friends via Zoom. Together with Matteo Proietti and Jacopo Gambuti, two of my former students in the Digital Product Design course at the Roma Tre University, I wondered if we might have an opportunity to help small neighborhood shops sell online. This is the backdrop for how we shaped the idea of ​​proximity e-commerce and created Daje.

Proximity e-commerce: a new paradigm

An e-commerce system is made up of six interdependent components:

When considering a business, the starting point is always a market, or a group of customers who have similar characteristics and need to buy something.

Customers don't come out of nowhere: ​​we need an organized system (sales engine) to contact them and convince them to buy our goods. Today, much of this activity can be handled online with social media advertising, content marketing, and email marketing.

The goal of the sales engine is to bring customers to a website or app: there, we must provide a shopping experience that helps them choose and purchase the right products quickly and easily.

The goods are usually stored in a warehouse and are managed and prepared for shipment in many different ways. Materials might be non-perishable, or food that has to be kept in the cold chain, or even fragile objects that must be treated with care.

Once we receive an order, we need to prepare the products for shipment and rely on a delivery infrastructure. Again, delivery has very different characteristics; depending on the market, it can be anything from Amazon couriers delivering boxes, to bike riders delivering freshly prepared dishes from a restaurant within a two-kilometer radius.

The whole system is governed by a seller who must have many skills to manage an online store, organize marketing campaigns, provide after-sales assistance, and so on.

All e-commerce can be traced back to this model: Amazon, Deliveroo, or the small online store hosted on Shopify. So the question is: how can we organize this system to allow a consumer to buy commodities online from neighborhood stores that have never sold online? The answer to this question corresponds with our formulating a new paradigm, which we have called proximity e-commerce.

We decided from the beginning that it wouldn’t be a good idea to propose that shopkeepers open their own e-commerce for a very simple reason: most of them don’t know how to use a computer and their technical skills are often limited to using a mobile app. Forget Shopify and other ecommerce platforms; there’s little chance that a baker, a butcher, or a farmer can invest time and money to learn how to successfully sell online. They know the products they sell very well (they often grow or produce them), they know how to arrange them on the counter in an attractive way, and they’re very good at telling customers about them. They already have the job they love doing and want to keep doing—they don’t want to configure a social media campaign.

At the same time, if every shopkeeper had their own online shop, customers would have an extremely difficult time finding them. Do you remember when you had to keep the flyers for all the pizzerias in the neighborhood to order a pizza at home? It’s much more convenient to use an app like JustEat or Deliveroo.

Proximity e-commerce, then, is of necessity a marketplace that aggregates the shopkeepers of a neighborhood into a single app. This choice allows vendors to build a recognizable and memorable brand, and customers know that they can find all the shops that deliver in the neighborhood in a single app. At the same time, it allows vendors to optimize the cost of customer acquisition and organize a very efficient sales engine—activities that an individual retailer alone would probably not be able to do successfully.

Once the consumers’ attention has been won, the shopping experience is one of the most delicate elements of proximity e-commerce, so we must consider two things. First of all, we must not forget that we buy with our eyes—the experience you have when you enter a grocery store full of enticing products is difficult to replicate online. Secondly, most of the products you find in a grocery store, a fruit and vegetable store, a butcher’s shop, or a fish shop are sold by weight and aren’t packaged. Thus, a proximity e-commerce must have a process that takes into account the peculiarities of the local grocery store experience, where the prices of many products vary almost daily and the final cost is determined by placing the product on the scale.

The warehouse is perhaps the easiest part of the system because a shop is already an organized system of processes for managing goods. What characterizes the fresh/perishable sector, of course, is that these products rotate very quickly and are not always available. Many grocery stores frequently change the assortment of certain products on purpose, to entice customers to come back in search of new offerings. Therefore, you need to put a tool in the merchants’ hands that helps them manage their product catalog.

Finally, the delivery system must be efficient and economically sustainable. Companies such as Deliveroo and Glovo adopted a model designed to take a hot meal from a restaurant and deliver it to the customer in less than 20 minutes. Each delivery is made individually and is therefore very expensive (the restaurant pays up to 30% of the value of the receipt, while the customer can pay up to 10 euros for the delivery service). This model is inapplicable to grocery shopping; we therefore had to invent something new. In proximity e-commerce, the customer does the shopping by putting the goods from several stores in a single cart. The next day, a delivery man collects all of the customers’ items from the shopkeepers, organizes them, and makes deliveries. Since shops and customers are in the same neighborhood, a delivery boy can pick up and deliver multiple dozens of bags in a single morning. Each customer pays only 2.5 euros, regardless of the number of bags that are delivered.

Daje: from theory to practice

The theory is beautiful, but the experiments that showed that the theory works are even more beautiful. That's why in March, Jacopo, Matteo, and I started working on a prototype of Daje, asking for the support of Alessandro Zonnino, my co-founder at Productology (a small consulting firm that offers product management training and helps aspiring entrepreneurs validate a business idea).

The goal was to test the proximity e-commerce model in Monteverde, the residential area of ​​Rome where I live. This prototype would allow us to start collecting data, understand how to organize logistics, and learn how to interact with shopkeepers and customers. But most of all, it would allow me to avoid the queues ;)

The first steps (March-July 2020)

We enrolled five stores and created a very simple site with WordPress. Each page had a list of products without prices and a Google Form with a text area where customers could write their shopping lists. Alessandro took care of the site, Matteo organized the lead generation campaigns, and Jacopo managed the operations. Every day we completed the following tasks:

• Sent orders via WhatsApp to shopkeepers

• Received confirmation of product availability and final price from merchants

• Sent the payment request to customers via PayPal

• Organized the delivery tour with a delivery boy

Order numbers grew and it was therefore necessary to start introducing some automation. The three boys adopted Zapier and built a complex system of Google Sheets with which they filled orders and managed the CRM. Immediately, we received some requests to replicate Daje in other areas of Rome, but we decided to stay focused on a single neighborhood to collect progressively more data.

In July, we finally had a clearer view of the dynamics of proximity e-commerce and the difficulties of successfully organizing the system to make it profitable. As we approached summer, we decided to stop and reflect on what we had learned.

We had data to build an economic model and we had validated some of our assumptions. Most importantly, the majority of our early customers bought from us every week despite a horrendous shopping experience.

Daje becomes a startup (August-September 2020)

We didn’t have a software developer on the team yet: Matteo, Jacopo, and Alessandro did everything by creating a mega-hack based on Google Sheets, WhatsApp, and Zapier. They performed many experiments and took orders in every possible way, such as using the forms on the site, calling customers by phone, and using Messenger chatbots.

I helped the guys prepare a deck to look for investors, and in a very short time we brought two business angels on board, with whom we began a great collaboration. Andrea Denaro and Diego Chiavarelli are two experienced entrepreneurs, and in addition to capital, they opened their professional network and constantly advised the team.

In August, Alessandro and I left Daje in the hands of Jacopo and Matteo, who officially assumed the roles of co-founders, incorporated the company, and began forming the team. They acquired three people to head up marketing, sales, and customer care, a sales guy to acquire stores faster, and a freelance developer.

The challenge was to grow in Monteverde and to expand the service to other Rome neighborhoods. The team started working using agile methodologies in weekly sprints. Every Monday, we analyzed the results, the growth rate of orders, and the critical issues.

Consolidation of technology (October-December 2020)

After seven months of testing, it became clear what can be done using SaaS and what needed to be developed as a proprietary technology. The team moved the catalogue to Shopify, chose Active Campaign for marketing automation activities, migrated from Zapier to Integromat to integrate the different systems, and selected OptimoRoute to program delivery rounds. Automations allowed us to push on the customer acquisition pedal. Orders grew, and the team decided to add three new neighborhoods to test whether the model would scale.

Managing proximity e-commerce orders is not easy. A single customer shops from multiple stores at the same time and adds all the products to a single cart. Sometimes the products are unavailable, and you need to ask customers if they want to replace them with something else. Other times, small misunderstandings arise. Customer service is Daje’s winning weapon: we handle all critical issues in real time which transforms them into word-of-mouth opportunities.

Finally, we onboarded an experienced CTO and two new, young developers. In December, the development team reorganized the entire infrastructure, created a database to merge all the data, abandoned Google Sheets, and substantially improved the shopping experience.

Ready to grow (January 2021)

Between December and January, the team also worked to reorganize communication and brand identity. As I write this, Daje is ready to open another eight neighborhoods by the beginning of March, thereby expanding service to the whole city. Kaboom!

The future of Daje

The future of Daje is to become a community where people come together to buy products online that are grown, created, or carefully chosen by friendly neighborhood shopkeepers. Their stores are lined up along the streets we walk every day to go to work, accompany children to school, and go for a stroll with friends. Europe is made of ancient cities and streets where cars barely pass. Small shops, bars, and restaurants are a key element in keeping a neighborhood alive and preventing it from becoming a depressing dormitory.

In these months of intense discussions about the vision, mission, and values ​​of Daje, we have often talked about how much we should insist on economic, social, and environmental sustainability and how to avoid ending up in the rhetoric of corporate responsibility that all big companies use to clean up their collective dirty conscience.

We realized that the proximity e-commerce model has aspects that make it intrinsically sustainable, especially if we compare it with supermarkets:

• Daje's shopping involves very little plastic, while today almost every product sold in a supermarket is packaged. (Think of the madness of buying 100 grams of salad in a plastic bag at 14 euros per kilo)

• Small shops generally choose products that will never reach a supermarket because huge chains impose unsustainable economic conditions on their suppliers and only buy on the downside, strangling producers.

• Many fruit and vegetable stalls in the market sell products that they have grown themselves or that come from the countryside around the city, rather than from Chile or New Zealand.

We have tried to summarize all these considerations into a mission statement:

We use the internet and technology to help families shop from small stores near them, thereby supporting the economy and wellbeing of the neighborhood in which they live. We work to offer customers an excellent shopping experience, provide retailers with simple tools to manage catalogs and orders, and coordinate an efficient and economical home delivery service.

Daje!