Five things retailers can learn from Gousto

Gousto delivers weekly boxes of fresh and organic ingredients to a customer's front door. Users choose from an ever-changing menu of 12 recipes online, which result in zero food waste, as well as the modern shopper's holy grail – convenience.

Essential Retail catches up with Gousto to understand what retailers can learn from this agile start-up company.

1. Keeping ahead of the grocery industry

The grocery industry has arguably witnessed the most drastic change in the retail industry in recent years, with the demand for online, convenience and discounting continuing to increase. And with such tight margins from eCommerce, it is unsurprising hardly any grocers are making a profit from this channel.

"The £200 billion grocery market is very unsexy and for ten years the only company who has invested into building capabilities has been Ocado," says Boldt, who describes how the rest of the industry delayed investment in infrastructure, believing leveraging stores was the answer to eCommerce.

"The infrastructure Gousto is building up right now in terms of food production and highly automated operations is all driven by data, no food waste, combined with ever more personalised user experience – we'll be hard-core on trend in a couple of years."

Boldt says the subscription economy – made popular by the likes of Netflix and Graze – will only continue to grow as customers are introduced to Internet of Things products, like Amazon's Dash buttons or smart fridges. But in the meantime, there is an opportunity for Gousto to capitalise on the need to buy ambient and fresh products, such as tea or milk, even if a week's worth of meals are waiting on a customer's doorstep on a Monday evening.

"I personally, don't want to think about whether I need to buy milk or not, I want to opt-in, and click, click, click," he says. "I strongly believe there is a massive opportunity for businesses which make lives easier for customers, and subscription is a big element about that."

Gousto has already begun to offer wine, desserts and cocktail kits as upsells at the checkout, but Boldt says this could easily expand to offer everyday essentials.

"We'll deliver anything to the customer as long as the customer wants it," he says, noting how it takes on average 48 seconds to order a box of meals from the Gousto platform, compared to customers spending up to 40 minutes using a traditional grocer's website. "It's a much slicker experience."

He adds: "We're doing the hardest thing possible – selling fresh food in portions across all of the UK. For us to do what Graze, Naked Wines or Pact Coffee does, is actually really easy, but for them to do what we do is freakingly difficult."

Boldt says he can imagine acquiring different online food brands or subscription services in the future to expand the Gousto proposition. "We're building the capabilities on the technology, data warehouse and acquisition side, so at some point it really makes sense."

2. Piggyback fulfilment

Food box deliveries are no longer a unique concept, from farm-fresh veg boxes to other meal kit competitors, but Gousto's proposition provides the fastest fulfilment in this space, delivering boxes within 2-3 days of ordering. And Boldt wants to make this even faster. While the start-up can turn around a box within a day from its warehouse in Spalding, it relies on third parties for last-mile fulfilment and because of its biodegradable cooling packaging it can keep costs down by using ambient parcel services.

"We don't depend on density," explains Boldt. "Ocado has to have 1,000 customers living in one area to send a truck and make it cost efficient, we just leverage an existing parcel company and our boxes sit next to Net-a-Boldtorders and Naked Wines."

"I hate not owning last mile, but I also hate the idea of owning last mile from the sense of a cost and logistics point," he admits.

But with the skyrocketing of convenience and even one-hour fulfilment methods, such as Amazon Now, Uber Eats and Deliveroo, the fulfilment market is on the verge of drastically changing.

"In five year's time people will want to buy whatever they want and get it really really fast, which probably means people won't order once a week, but five times, so average baskets will fall, which turns Ocado's van into the Tesco store of today."

Piggybacking on other less-traditional fulfilment companies will be the answer to this need for immediacy. "My strong belief with eCommerce rising and Deliveroo, Uber, Amazon all of those guys rushing into logistics, I think this market will get commoditised and someone will figure it out for us," explains Boldt. "Deliveroo for example, its fleet is popular between 5-9pm, but is completely vacant 2-5pm."

3. Data

As a soft-subscription business, Gousto is completely driven by data, and the start-up even has former CEO of LoveFilm, Simon Calver, on its board.

A recent update to the Gousto app revolves around in-app cooking, which not only saves paper from printing recipes, but stores the recipe for customers forever online. While this is a nice addition for cooks, from a business perspective the data derived from this app upgrade can be very powerful.

"No one in the world knows when a shopper is consuming food," says Boldt. "Tesco knows when it sells food and Unilever then finds out once a quarter when the grocer tells them how many tubs of Ben & Jerry's it has sold."

He points to how this information is lagging, making companies very blind. "But if you sell on the Monday and then on the Tuesday you see the customer is opening the app, she's spent 30 minutes on it and gives some feedback at the end, it's pretty obvious they're cooking, so you really get under the skin of the customer."

This allows Gousto to be much more agile than the big grocers and FMCGs. "We know you eat pork and we also know what time you cook and think about cooking. It's usually on a Friday at the very same time that you're in the right mindset, so we can then send you a text message or push notification."

Boldt says this information could be used to personalise food, or help with dietary requirements or convenience and meal planning. The data possibilities are endless.

4. Personalisation

And using this data, Gousto's website changes based on customer preferences or whether it has sold out of a particular meal. Meanwhile customers coming to the site from social media will be presented with different meal options than others, because it is more likely they are of a younger demographic.

"Menu planning is moving out of the product team and into the data team," explains Boldt. "And they optimise for conversion, retention, cost and taste, depending on whether you are a new or old customer and then the product team obviously puts a seasonal theme on top."

Gousto also takes in weather forecasts so it can drive certain meals, such as summer salads when the sun is shining, which will change if it starts to rain.

Shaun Pearce, VP of engineering at Gousto, says: "We really understand every button you've clicked, even if you've read the nutritional panel. That's the first step for every retailer and most are still relying on third-party systems like Google Analytics, places where the data is actually walled off and they can't access it in any way they want."

Gousto has been working with Amazon Web Services (AWS) since upgrading from its initial platform with its first physical server which used to sit in a basement on a chair, as a defence against flooding.

Using Amazon's cloud, the e-tailer can now scale radically and make changes much quicker than traditional infrastructure. "It wasn't that long ago when retailers would buy physical hardware and they would be burning time and effort on something that wasn't needed."

Pearce says before migrating to the cloud, Gousto would have to predict serious business decisions and outcomes upfront, which was not ideal for a start-up company.

"As a young business like Gousto we'd have to predict how much we were going to grow, how much traffic we were going to get on our site. We would try to have a 12-month roadmap for what projects we wanted to do and how big our team was going to be, so we'd know how much testing infrastructure we'd need. So for a small company we were definitely going to get that wrong and what you end up doing is massively over provisioning to provide a safety net and spending a lot of money."

With AWS, Pearce says Gousto has the "ultimate flexibility" and is never restricted by hardware. This allows the start-up to quickly experiment and conduct A/B testing.

"It allows us to be more risky. A project with 12 weeks lead time might have turned out to be a dud and you've spent all this upfront costs. You can turn it on really quickly, but also turn it off really quickly and walk away without a huge amount of investment. In terms of a company which has lots of ideas and wants to experiment, you need that flexibility from the infrastructure as well. 

5. Culture

Demonstrated by the half days set aside every week for developers to work on projects of their choice, Gousto is keen to hold on to its start-up culture. The company now employs almost 200 people, who are equally split between creating boxes in the company's warehouse, as well as marketing, recipe development and IT in its HQ in West London. 

Boldt truly believes technology must sit on the board. "I see most tech departments report into the CFO and it's seen as a cost centre, but technology has to sit at the leadership table and has to drive the business forward from a passive function to a very active one."

He describes if Gousto's website speed is improved by 10%, there is an immediate uplift in conversion and thereby cost saving on marketing.

Gousto also operates using a testing culture. "I don't rely on my gut feeling for a recipe title, I shoot out five and test to see which comes back depending on customer area and demographic – that's really important and a massive difference than a one-year plan."

Instead of looking at business plans annually, the company looks at its KPIs daily and reacts.

Boldt says: "The combination of having data on everything in real time, and hiring extremely driven and intelligent people creates true meritocracy and we are empowering very bright talent to achieve stretch goals, helping them all the way to success." He describes how Gousto fast tracks employee development so that they progress faster than at any other company.

"Nothing is more exciting to me than seeing the tremendous personal growth talent is achieving here," adds Boldt. "The common denominator for working at Gousto is probably it's a much more analytical organisation than anywhere else."