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12/11/2020

Shipt’s CEO is Building a Retail Ecosystem

Mike Troy
Editorial Director, Grocery Group
Mike Troy profile picture
Shipt’s CEO is Building a Retail Ecosystem
Kelly Caruso

Membership-based delivery service and marketplace Shipt launched in 2015, and just two years later it was acquired by Target. In March 2019, 23-year Target veteran Kelly Caruso was named CEO of Shipt, which now operates in 5,000 markets and covers roughly 80% of the United States. Caruso spoke with Progressive Grocer about the future of digital grocery and how Birmingham, Alabama-based Shipt is creating a third retail ecosystem to rival Walmart and Amazon.

Progressive Grocer: Let’s go back to the start of the pandemic and talk about onboarding a large number of shoppers onto the platform, and what the workforce looks like now.

Kelly Caruso: We intentionally grew our business in a different way than others in the same industry. We started in the South and grew into midsized cities throughout the Midwest. And then, after the Target acquisition, we doubled down into the major metros. In addition to starting in different-size cities, what was also unique and different about Shipt was early on, we placed a bet on the power of a personal shopper, and our shoppers are really our secret sauce. We believe that technology without a human element simply is not relevant. 

So, in the first year in the role, I spent my time really focused on three things: No. 1, crafting a long-term strategy that would position Shipt for outsize top-line growth and market share gains over the next five years, but also contemplating a pathway to profitability; secondly, it was about ensuring that we codified our purpose, that we were a company that was guided by our purpose and our vision, and for us, our purpose is to spark the connections that show how every person counts; and the last thing was about ensuring that we had diversity across the c-suite.

PG: How did those things manifest when the pandemic hit?

KC: I’ll never forget it. It was a random Thursday in March, and we shattered any previous one- day record for orders, and I knew: It’s here. And the next day, that Friday, we shattered another record. So immediately, we started to work very quickly and to get ready for the pandemic. It started by scaling our platform from 100,000 shoppers to 200,000 shoppers in about 30 days to ensure that we could meet the demand. We quickly created new product features to ensure that we’re keeping our customer and our shopper safe, things like contactless delivery and expanding our delivery windows to make sure that more people had access to same-day delivery. But we knew we needed to go beyond that to really protect our shoppers. And so it was probably three key things: No. 1, ensuring that they had access on every single day to masks and gloves, and ensuring those that were our most active shoppers got monthly care packages of hand sanitizer, masks, gloves, whatever they needed, personalized to what mattered most to them; secondly, we offered financial assistance to those that either have contracted COVID or were quarantined we offered 14 days of past pay, including tips, so that they could feel safe and not shop when they didn’t feel safe; and lastly, for those that had been some of our most active shoppers during the pandemic, we offered spot bonuses [of] anywhere from $50 to $200.

PG: How do you flip the switch and add 100,000 shoppers?

KC: We used advertising to get the word out that joining the Shipt platform was a great opportunity to earn flexible income, and we do video chats to carefully select the shoppers that we allow on our platform. We are looking for really three attributes. Their ability to shop they have to understand the difference of why a customer might want a yellow banana versus a green banana versus a brown banana. They have to be strong communicators, because there’s a lot of communication that is important to go back and forth to get the shop exactly right. And they have to have an attention to detail and be willing to kind of go above and beyond. We had to look hard at our process of how long it took from when we accepted the shopper to when we could get them out doing shops, without sacrificing the quality of the shopper or the onboarding.

PG: Initially, Shipt was all about food shopping, right?

KC: For the most part, we were mostly known for food, but one of the things we started to really focus on when I joined is what’s going to make a metro area successful? We know a metro is good when it is anchored by a strong general merchandiser think Meijer, Costco, Target. On top of that, we layer the most regionally relevant grocery retailer think Publix, H-E-B, to name a couple. And then on top of that are where we put verticals: Petco, CVS, Bed Bath & Beyond, to name a few. We’re able to have that diversity in our product catalog because of our shoppers, because how good our shoppers are at shopping and really being connected to the customers they’re shopping for.

PG: Talk more about what the Shipt model is and how it’s different.

KC: It is a curated marketplace based on the most relevant retailers for our customers. We want to ensure that we can be a one-stop shop, built to be the most trusted brand in delivery, and a retailer’s secret weapon to fulfill that last-mile capability. So, while we want to enhance the in-store experience, we want to be a strong brand ambassador and partner to the retailers. We don’t want to be a retailer. We are working on how to better serve retailers. We don’t have to worry about series funding, raising cash or what our exit plan will be. We’re focused on the business, and we share insights with our retailers. If we’ve got a piece of data, or we know an insight about their customer, we share it with them. We want to make sure that they know everything about their customers that we know. 

We believe that Shipt is uniquely positioned to really be a third ecosystem in the U.S. by inviting many retailers to come and work with us on our marketplace. We can help them more effectively compete against big, amazing retailers such as Amazon and Walmart, because those are two retailers we won’t work with.

PG: Shipt changed its membership approach recently.

KC: We wanted to ensure Shipt was accessible to all. We did not want to position ourselves as a luxury, but rather a convenience. So, earlier this year, we launched a new pay-per-order model in addition to membership. We want to ensure that we have both opportunities for consumers so that they can access Shipt in whatever way makes the most sense for them.

PG: Talk about the long-term strategy and how you’re thinking about the diversification of retailers on your marketplace platform.

KC: We will continue to add retailers that make sense for our customers, and you’ll hear more about some of those new partners joining in 2021. As I think about the long-term strategy at Shipt, one of the things we have been heavily focused on is elevating brand awareness. And to that end, we have pivoted from a tech-facing brand to one that is consumer-facing. And you saw it in the redesign of our logo and how we are showing up in advertising and marketing these days. We are also focused on lowering the costs to serve. How do we leverage technology and operational process to drive productivity and efficiency while keeping the experience really high and very strong? And the last part of it is continuing to build out this third-generation ecosystem and ensuring that, as we look at our 2021 product offering and different capabilities, we create the strong ecosystem throughout the U.S.

PG: What does the pathway to profitability look like? When might that be? Any sort of metrics around the gross merchandise value that is facilitated in the ecosystem?

KC: Like many companies in this space, we find ourselves three to five years ahead of where we thought we would be on top-line growth. You also know from this space that the unit economics of point-to-point delivery are tough. And while we do have a pathway to profitability laid out, it is still a few years down the line. For us, it is not about top-line growth or profitability, it is about top-line growth and profitability. I believe that there is a way to achieve both of those things.

PG: One of the ways is adding more retailers and then enhancing the ability of shoppers to shop with technological innovations.

KC: Certainly the network effects help any company scale, and that scale helps lower the cost to serve, along with technological innovations.

 

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