How ‘Bodega’ Got It Wrong

By 
Greg Lindenberg, Editor, CSP

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BERKELEY, Calif. -- The popularity of the bodega in urban life has never been brought more sharply into focus as when two Silicon Valley entrepreneurs unveiled a new concept, Bodega, claiming to have built a better corner store that makes the existing business model obsolete. It is shaping up to be one of the biggest marketing miscalculations of recent times, if the social-media response is any indication.

The startup by two former Google employees has gotten off to a bad start, at least in terms of public relations. The concept is named after the iconic, local corner stores and convenience stores in New York and other urban markets.

A write-up in Fast Company about the concept provided some high-profile exposure for Bodega, and the story said the venture has the goal of putting mom-and-pop store owners out of business. That has led to a major backlash on social media.

This has become a story about Silicon Valley hubris vs. the livelihoods of independent mom-and-pop retailers (and the cats that populate the bodegas that have themselves become so iconic that they have inspired an Instagram account). Will this upstart startup succeed in replacing the beloved bodegas—and their furry “employees”—with a better mousetrap?

Here’s the story …

The concept

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Paul McDonald (above right), who spent 13 years as a product manager at Google, launched Berkeley, Calif.-based Bodega with co-founder Ashwath Rajan (above left), another Google veteran, with funding from investors, including First Round Capital, Forerunner Ventures and Homebrew. They also secured angel investment from senior executives at Facebook, Twitter, Dropbox and Google, according to Fast Company.

Bodega is a 5-foot-wide, 3-foot-deep “pantry box”—similar to a vending machine or hotel minibar—that the company will stock with a customizable assortment of nonperishable items commonly found in corner stores, such as snacks, candy, soup, beverages, pain relievers, toothpaste, shampoo and laundry detergent. Customers unlock the unit with a cellphone app, and cameras register what they remove, charging their credit card as necessary.

 

What a Bodega Sees from Paul McDonald on Vimeo.

The ‘last mile’

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C-stores, e-commerce providers and delivery services are all competing to capture what has come to be called the “last mile,” getting goods and services to consumers where they live, not only their homes, but in their daily lives.

“For the last decade, online retailers and brick-and-mortar stores have been in a race to get goods from a distribution hub to consumers as quickly (and cheaply) as possible,” McDonald wrote on the Bodega blog. “This is known as the last mile of retail, and the whole retail industry is currently obsessed with optimizing it. It takes online retailers several days for their delivery networks to bring packages to your home — in the best case you have to wait hours. Traditional retailers, on the other hand, rely on people getting themselves to the nearest store to purchase what they need.”

Joe DePinto, president and CEO of Irving, Texas-based 7-Eleven Inc., recently narrowed it to the “last several blocks.”

And Bodega wants to narrow it even further. It is “obsessed with the last 100 feet,” the company says on its website. “We’re combining the convenience of online ordering with the instant gratification of real-world retail," said McDonald. “We’re building hardware, software and supply-chain operations to create delightful automated stores that are only a few feet away and always stocked with what you need.”

The rollout

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The company tested 30 of the boxes in San Francisco in apartment-building lobbies, gyms, college campuses and other locations where it does not have to pay for retail space. So far, it has rolled out 50 Bodega units on the West Coast.

McDonald and Rajan are hoping to have more than 1,000 units in place by the end of next year, the entrepreneurs told Fast Company.

Business Insider tracked down a Bodega "in the wild" to see what it is like. The employees at the office where the unit was found "were very enthused about their Bodega machine and said it gets used all the time," the publication said. "They really appreciated having it since there were practically no other options for food or retail near their office."

Most of the items were cheaper or the same price as those of CVS, according to the report, but "nice as they are, the Bodega boxes don't look like they'll be putting traditional corner stores out of business anytime soon," Business Insider said.

The problem

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The problem rests with the name, which has Hispanic origins.

Fast Company asked McDonald whether he is concerned that some people might perceive the name Bodega to be culturally insensitive.

“I’m not particularly concerned about it,” he told the publication. “We did surveys in the Latin American community to understand if they felt the name was a misappropriation of that term or had negative connotations, and 97% said no. It’s a simple name, and I think it works.”

But the New York Times said, “Few things make a New Yorker defensive like an assault on bodegas.”

Frank Garcia, the chairman of the New York State Coalition of Hispanic Chamber of Commerce, who represents thousands of bodega owners, told Fast Company, “To me, it is offensive for people who are not Hispanic to use the name bodega to make a quick buck. It’s disrespecting all the mom-and-pop bodega owners that started these businesses in the ’60s and ’70s.”

A story in the Washington Post called Bodega “America’s most hated startup.”

Tweets ...

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Social media’s reaction was swift and critical. Here are just a few of the tweets:                                                                                                                

... tweets ...

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Here are more of the tweets:

... and more tweets ...

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And here are a few more tweets:

  • Read more tweets at #bodega. And check out Bodega Stories, a great Twitter page on the power of bodegas.

Response

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Acknowledging the backlash, McDonald said Bodega is “definitely not” trying to put corner stores out of business. “Challenging the urban corner store is not and has never been our goal,” he said. “Corner stores have been fixtures of their neighborhoods for generations. They stock thousands of items, far more than we could ever fit on a few shelves. Their owners know what products to carry and in many cases who buys what. And they’re run by people who in addition to selling everything from toilet paper to milk also offer an integral human connection to their patrons that our automated storefronts never will.”

He attempted to clarify Bodega’s business model. “We want to bring commerce to places where commerce currently doesn’t exist. Rather than take away jobs, we hope Bodega will help create them. We see a future where anyone can own and operate a Bodega — delivering relevant items and a great retail experience to places no corner store would ever open.”

Referring to his company's research, McDonald said, “When we first came up with the idea to call the company Bodega, we recognized that there was a risk of it being interpreted as misappropriation. We did some homework—speaking to New Yorkers, branding people, and even running some survey work asking about the name and any potential offense it might cause. But it’s clear that we may not have been asking the right questions of the right people. Despite our best intentions and our admiration for traditional bodegas, we clearly hit a nerve this morning; we apologize. Rather than disrespect to traditional corner stores—or worse yet, a threat—we intended only admiration.”

Unattended c-stores

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This is not the first time an automated unit or vending machine concept has tried to grab a foothold in the convenience-store industry.

Bodega’s business model is reminiscent of Shop24, which placed large kiosk-sized automated c-stores (above) on college campuses and apartment complexes in several states. It opened about a dozen units in Alabama, Arizona, California, Georgia, Indiana, New York, Ohio, Oklahoma, Pennsylvania and Utah.

Even without the marketing gaffe, Shop 24 does not appear to have gained any traction as a retail concept. Shop24 Global LLC’s website is gone and its Facebook page has not been updated since October 2014. Its toll-free number has been disconnected.

Other unmanned c-store ventures have included ShelfX and 24RobotMart.

Amazon Go

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And, of course, the Bodega concept brings to mind Amazon Go, the e-commerce giant’s larger-scale, cashierless c-store concept.

Opened for employee testing in December 2016, the single Amazon Go store uses “just walk out” technology that automatically detects when a customer with a cellphone takes a product off the shelf or returns the product to the shelf and keeps track via a virtual cart. When the customer is done shopping, he or she leaves the store and Amazon charges the customer’s account and sends a receipt.

As most recently reported, Seattle-based Amazon has delayed the official rollout to the public while it irons out some wrinkles in the technology, including operating less effectively when more than 20 customers are in the store at the same time.

The lessons

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Are there lessons for the convenience-store industry or for those who might try to disrupt it in the almost universal denunciation of the Bodega pantry-box concept and the passionate defense of the common corner store on social media?

Whether Bodega is, in fact, a threat to genuine bodegas or c-stores, its launch became a viral distress call to help out what many people see as a venerable—and vulnerable—retail channel in need of preservation.

The industry continues to be dominated by single-store operators, according to NACS. While the best chain c-stores clearly have their place in the hearts of consumers because of their success at delivering what their devoted fans want or their skill at service and rewards, cookie-cutter stores with standardized product mixes and menus don’t generally inspire the same level of passion and loyalty as bodegas in a big city or mom-and-pop convenience stores anywhere in America.

No matter how successful e-commerce is at capturing a certain segment of the population, it appears that most people still want and expect local community interaction and brick-and-mortar commerce as part of their daily lives.

“Real bodegas are all about human relationships within a community, having someone you know greet you and make the sandwich you like,” Garcia told Fast Company.

“Largely immigrant-owned, [bodegas] are the ultimate frills-free symbol of consumer access and gritty mini-embodiments of both the city’s diversity and its 24/7 ethos,” said the New York Times. “In addition to their convenience, what makes bodegas beloved are their personalities. It seems like every one of them is oddly curated: prayer candles sit next to jarred olives, which are sidled up next to boxes of organic mac and cheese. There is no Silicon Valley algorithm clever enough to come up with those crumbly, shrink-wrapped date bars that are inevitably piled up by the cash registers.”