Buymie proposes grocery-delivery plan
After various false starts, Buymie’s Devan Hughes has landed in the right space at the right time, writes Fearghal O’Connor
ONLINE grocery delivery firm Buymie has submitted a partnership proposal to the Government to greatly increase its service to cocooning shoppers.
The firm’s chief executive, Devan Hughes, told the Sunday Independent it had experienced a week’s demand in one day when the Government announced the school closures. This has continued to accelerate ever since.
Buymie, in which Enterprise Ireland is an investor, is waiting to hear back from the Department of Business about the formal proposal.
“Our proposal to Minister [Heather] Humphreys’ office was for the Government to help us ramp up a scalable food distribution model that would allow us to put thousands of people back to work and get food distributed to the most vulnerable in society,” said Hughes.
Currently, Buymie uses hundreds of shoppers to complete orders that customers make for groceries via its app, but the plan would see it grow to 2,000 shoppers across seven urban and suburban zones in a matter of weeks. “We’re keen to develop this,” he said.
Last week Buymie announced that it had raised €2.2m from investors to scale up and help it increase revenues by 500pc year-on-year by the end of the year. Further fundraising was likely to help Buymie cope with accelerating growth, he said.
The proposal was submitted by Buymie after Enterprise Ireland included it on a list of tech companies that could provide useful services to help the country deal with the pandemic. “This would be with Government support. We’re a small business and as we ramp up we have to make sure we don’t starve the business of cash,” he said.
WHEN Devan Hughes checked his phone at London City Airport he knew the world had changed.
For three days he had been at investor meetings in London cajoling, selling and explaining his online grocery delivery business, Buymie.
For years he had spent his free time analysing sector reports to try to dream up a successful business idea after failing numerous times before.
By the time he headed to London to talk to investors in early March his choice of the grocery sector already looked a smart move. But then Hughes (31) checked his phone at the airport. The Taoiseach had just announced the school shutdown and the country was heading for lockdown.
“I’d been at investor meetings all day and hadn’t seen the news. I opened my phone and saw our order volume for that day. I couldn’t believe it. We had done an entire week’s worth of volume.”
Buymie’s time, it seemed, had come. Before he even got on the flight, long-time investor Enterprise Ireland called: “Can we put Buymie on a list for Government of technology companies that could potentially help with Covid?”
“On the flight I wrote a white paper outlining an action plan to support Government by onboarding 2,000 shoppers across seven major urban and suburban zones in a matter of weeks,” he says.
The main challenge was to keep up with demand. Last week, Buymie, which delivers groceries from Lidl and Tesco across Dublin, announced it had raised €2.2m from investors. It expects to increase revenues by 500pc year-on-year by the end of the year. Further fundraising is likely.
It’s all part of a plan that Hughes hopes will see it eventually become a PLC and the biggest shared infrastructure player in a European online grocery market that by 2023 is set to be worth €56bn.
Before Buymie, Hughes had tried everything to start a business: from turning his Temple Bar student pad into a pay-at-the-door pre-drinks venue, to developing a Longford wind farm, to building a biometric payments app.
“I imported a 40-foot container of electric golf trolleys from China in the middle of a recession. It didn’t go well. I had 40 golf trolleys stacked up in my parents’ living room for over a year.”
He was tired of failure. “I decided to take a break and get a real job with a real company to see what a real business looked like on the inside,” he says. “It was a chance to recover mentally, emotionally and spiritually. I had started four businesses in a row and failed.”
For more than two years he worked at energy firm Vayu, analysing the impact on energy markets of macro events such as Russia’s annexation of Crimea. But the itch came back.
“I wanted to move from energy to tech because I knew it would be easier to build and scale something out of my living room.”
He began using annual leave to take “innovation days” to read industry reports to spot market trends and “get the creative juices flowing”. But, eventually, the idea for Buymie came over a pint in The Ginger Man pub when a friend mentioned that the Irish and UK online grocery market in 2014 was worth £9bn (€10.25m) but was losing £300m.
“To hear it was so big but so dysfunctional was really interesting. I took another day off and pulled a bunch of reports that got me really excited. The long-term demand curve for online grocery was expected to double to £20bn in just 10 years.”
Hughes could hear his final year economics lecturer in his head: “If you have a rapidly expanding market, with heavily compounding losses, and a short window of time, you’re very likely going to experience a correction. Because free markets don’t allow that type of inefficiency to scale. Markets will always seek a better mousetrap.”
As he read the reports it struck him that commodity markets like gas and electricity use one shared infrastructure for distribution, making the whole market scalable and commercially viable.
“But grocers were vertically integrating, building distribution centres, buying vans. There were nine separate distribution networks in Ireland and the UK alone. I couldn’t see how it wasn’t going to experience disruption. The baseline concept I arrived at was that online grocery needed a shared infrastructure.”
That shared infrastructure would be a team of shoppers with their own transport connected via an app who could take orders for various stores. But Hughes knew that with no real tech experience he would struggle to be taken seriously.
“So I left Vayu and joined Salesforce.com. It was like doing a Masters in technology.”
While there he spent his spare time studying the grocery sector and working on a prototype app with Buymie co-founder Artavazd Sokhikyan.
He managed to raise €100,000 from friends and family, as well as from Enterprise Ireland. He quit Salesforce a year to the day after starting to become Buymie’s first grocery delivery person. In the months to come he would do more than 1,800 shopping trips himself. “I was running around like a headless chicken delivering groceries. We had no processes, no technology, no infrastructure but there was very clearly demand.”
He was certain that retailers would welcome the new service with open arms. He was wrong.
Within weeks, one retailer’s head of marketing, who had previously declined to help, was on the phone to him: “Looks like things are going really well, Devan. You want to come and have a chat?”
Hughes went eagerly and shared in detail everything he had learned over his first few weeks. Then, after an hour, the real reason for the meeting emerged: “Actually,” said the retailer, “our legal team is very upset. You’ve used our logo without permission and they are going to send you a cease and desist letter. Thanks for coming in.” Hughes was stunned. And the legal letters kept coming.
“I realised I was going to spend more time and money on responses to legal letters than building the business. I was trying to tell investors that retailers would see value but this retailer was trying to kill us. It was a hard sell.”
He hatched a plan. At a branch of the problematic retailer he bought 2,500 products.
“I bought one of everything off their shelf and brought it back to my apartment. I filled the bathtub with ice and put all the fresh fish and fresh chicken in to keep it fresh. I built a product tent out of a dog house and installed LED lights to photograph 2,500 items, catalogued them and photoshopped out all brands and logos. We completely circumnavigated the whole branding discussion and I just got back to what mattered.”
Publicity around the spat caught the attention of Unilever, which had already recognised similar trends. Dialogue began between the giant consumer goods company and the tiny startup but, by June 2017, time was running out for Buymie.
“I was staring failure in the face and running out of money. I remember sitting in Starbucks in Stillorgan having done payroll for the one other shopper I had at the time. I had €1,200 left in the bank account. I sat there the whole day waiting for a cheque to land.”
It wasn’t just any cheque. Unilever had promised €100,000 to keep the business alive. All day Hughes sat refreshing his banking app. At 4.30pm the money appeared. Buymie had a future.
Within weeks online giant Amazon had bought upscale American grocer Whole Foods for $13.4bn. Suddenly e-commerce was a hot topic in the sector. Buymie was in the right space at the right time and by 2018 had found a powerful retail partner — Lidl.
“It was a real turning point. We went from three employees to over 20 and we now have hundreds of shoppers in our network. We grew our monthly sales from 20 grand a month to seven figures in the space of about a year and a half.”
By January 2020, Buymie was growing at a rate of 18pc week on week: “We were already gearing up for a hell of a year. And then Covid came along.”
Suddenly, people were being told to stay at home and Buymie could — for an average fee of about 12pc — link them to an army of shoppers.
“Our platform turns every grocery store into a distribution centre and connects thousands of shoppers to thousands of customers. We don’t need vans, we don’t need warehouses.
“At least three to four years’ worth of consumers tried online within a week. We have had to readapt our entire business plan to bring in more capital to invest more aggressively into the Irish market. But our overall mission hasn’t changed.”
But will new customers still pay 12pc extra to have groceries delivered once lockdown ends?
“Price,” says Hughes, “is only an issue in the absence of value. Consumers will pay for convenience and 70pc are willing to pay for same day delivery. I am the blue dot on the map. Everything comes to me. Taxis, hot food. I don’t even have to go to the DVD store anymore.”
But he does not buy into notions that the days of bricks-and-mortar retail are numbered.
“Retail is becoming more experiential. It’s about in store experience, buying the really nice blue cheese to go with a particular wine. That’s where grocery retail really wins. But as our cities become more dense and our time more scarce, customers will use a range of different channels.”
Hughes has built the business he always longed for but as Buymie became an essential service overnight he has learned that business is not just an end in itself.
“For the grocery sector as a whole, business has become far more missionary than mercenary.”