How Rohlik Group Achieves Profitability In Online Grocery With Veloq CEO Richard McKenzie | 5IM

Foreigning us today for five insightful minutes is a guest we have been really excited to get on the show since we first met him at Grocery Shop last year.

Richard McKenzie, the chief executive officer at Volok, a division of the Roelik Group.

Richard, welcome to omnitalk.

And let's get right to it.

For listeners who may not know Roelik, give us a quick overview of who you are, how the lock fits into them, and how your model differs from typical online grocers.

Thank you, Chris.

I think Roelik, for me, is a bit of a.

Is a bit of a hidden gem.

So we do about $2 billion, give or take in revenue in five countries in Europe, but we're growing at 30% a year, which, when you just add up what that means in terms of putting on growth every year, is, frankly, quite remarkable.

And our proposition for the customer is just great.

So we're offering a really full basket, and that's the full complexity of grocery, fresh bakery, fresh food, and everything you would find in a shop.

And we're delivering it fast.

So it's done in standard.

Delivery time is three hours.

We're doing that out of 12 distribution centers, which we're now automated.

And those distributions, as they kind of vary in size, but they're typically kind of 50,000 square feet to 100,000 square feet.

So they're really quite compact in terms of what they do.

Because we're centralized, it means that we can deliver really excellent customer service.

We're getting customer NPS scores.

Our weighted average across our markets is something like 88, which, again, is just better than anything I've seen elsewhere.

Then what we're doing with Veloc, we're taking that technology, making, making it available and so that we can work, or our technology can work with other grocers and they can start to offer a similar type of service that we're offering to our customers and has been so successful for us.

Well, Richard, you mentioned it a couple of times.

Everyone's talking about how unprofitable online grocery can be, but you mentioned twice you are doing this profitably.

How has Roelik managed to do this?

I'd say there's a few things.

The first, actually, I already mentioned one, is it's full basket.

And actually, if you do full basket, you get a big basket.

So, you know, if you're doing, I don't know, $120 baskets, you've got the margin there to pay for some of the picking and the packing and even the delivery.

The important thing is to get that Range, So you get the full.

You get that basket in there.

The second thing we run, then we just make sure the fulfillment centers are efficient, they're automated.

We get a really good uph of the labor costs in those stay down.

I'd say the third thing I'd also highlight is they've got to be the right size.

So if you build them too big, they're not utilized, and you just end up with the kind of, what's been called monuments.

So for us, build them the right size and then you can get.

Also you can get them closer into the town.

So you're managing the last mile, you know, so you're keeping that.

So we.

We build them really compact and try and keep them as close into the town as possible.

And the last thing, and I think we'll come on to this a bit more, is the system, you know, it's got to be the joining all this up between the last mile, the fulfillment center.

Orchestrating all of this is difficult.

And you've got to do that to keep the waste down, to keep the kind of the unused labor down.

So just kind of.

That one system, I think, is also really important.

Right.

And you've been building this technology for over the course of the last decade, so you've worked a lot of those things out.

As you offer this to other operators, what would you say makes your technology, the underlying technology, unique?

Look, I think I was going to start with a philosophical point that we.

We started here kind of with the customer proposition.

So, you know, we started by saying, what do you have to do to win?

You need a full basket, you need.

You need fast delivery.

And then we kind of work backwards from the proposition to say, how do you make the technology work for that?

So we've kind of gone backwards to say actually how do we create the software stack that enables the orchestration of the bakery, getting it.

Getting everything out of the door really quick.

And that's kind of.

I think just what's different is actually our technology has come kind of customer backwards, rather than saying, what can we now do with this technology?

I'd say the second point is we're grocers.

We're fundamentally grocers.

And we built it kind of with that operator mindset.

So we've got one software brain, for want of a better word, that makes this kind of easy to operate.

And you'll know that these centers.

A grocer is good at running a shop, it's good at running a distribution center.

Running fulfillment centers are a little bit different.

So We've had to kind of build this software that really kind of enables that to happen in this kind of joined up way.

Which just to give you an idea of the complexity, we run seven picking zones in most our fulfillment centers.

This software will orchestrate simultaneous picking of all of those zones.

So it's then brought together and consolidated in the back of the van about 30 minutes after the fulfillment centers receive the order.

And that's just a complicated set of operations to run.

And I think that's, to me what we kind of, what makes it different.

You know, we've seen a lot of grocers, particularly here in the United States, of recent, that have hit the recent headlines that have struggled with automation or even paused major automation projects.

Why do you think Rolex approach works when those haven't worked in the past?

Yeah, it's a, it's a very good question.

And let's, let's be totally honest.

It's been a journey for us.

Now we start this automation journey kind of four or five years ago.

And I think one of the first things we learned is it is not just about the automation.

You've got to actually think about this in a really joined up way.

So being candid, when you take the standard software off the shelf, you get with it.

It is just not built for grocery.

It doesn't do the orchestration, it doesn't do the speed.

It doesn't really think about what's perishable, what the shelf life is, what the temperature zones are.

It doesn't manage that complexity of grocery.

So we've gone through that journey over five years of taking the software, progressively rewriting it and making it grocery first.

And I think that to me has kind of been the key for us.

It's taking the technology and making it grocery first.

Because frankly, most people haven't thought grocery in the scheme of warehousing is relatively small.

We wanted to make that thing that worked for grocery and then, you know, we eat our own lunch.

We're the operators here and we have to make it work.

Let's be honest, we wouldn't have had a business if we didn't, if we didn't have this working.

And I think that's kind of part of the reason we're here.

And now as CEO of A lock, I mean, you're trying to make this technology available to others.

So let's get you out of here on this.

Like why, why are you doing that?

Because you said you eat what you cook, but why are you trying to make this available to others?

Now, look, I think for us, the problems we've solved with Roelic are actually genuinely the same problems as a lot of grocers around the world have.

How do you deliver an excellent customer proposition efficiently?

Make it profitable?

E Commerce is that thing that grocers have tried to ignore, but actually, as the customer wants it, the customer's driving this.

And you're seeing growth everywhere around the world, and particularly in the US So we will create more value, and our platform will create more value if we can get more people operating it.

So from our point of view, this is now a new growth lever for the ROELIT group.

We can now use this to actually enhance our growth.

But from a point of view of our partners, they get a provider who's got skin in the game because this is something.

This is our technology that we make work, and we have to make work.

So for us, it's a kind of.

It's a perfect fit.

And frankly, we also just want to prove we have a strong belief that E Commerce Grocery can be successful, profitable, and we just want to prove that works.

All right, well, we are anxious to see how it goes for you, Richard.

So thank you very much for appearing on today's program.

My pleasure.

Thank you.