Recently, we hosted Seth Goldman for an intimate conversation with founders and VPs of operations at NYC e-commerce companies. We discussed some of Seth’s unique learnings from scaling HelloFresh USA, a leading global meal delivery service. Canaan has been fortunate to invest in a number of logistically complicated companies (Instacart, The RealReal, Ollie, NatureBox, and Onefinestay), and so we were eager to chat with Seth and offer some best practices to the NYC tech community.
Seth joined HelloFresh after spending several years at Quidsi, another logistically complex business. When he joined HelloFresh, they were operating out of a 1,250 sq ft space and when he left they were managing over 500,000 sq ft across three distribution centers and delivering over 3,000,000 meals a month. Seth had a number of insights to share, but three stood out for anyone whose business is built on a foundation of distributed operations:
Bring HR in-house as soon as possible. There are real challenges to managing a large, hourly work force. It’s natural to start by leveraging temp staffing agencies, but inevitably this will lead to challenges. Agencies are expensive and their incentives do not align with yours. Often the best agency employees will get moved from one job to another as the agency manages its clients. On the other end of the spectrum, agencies sometimes don’t fully complete background checks on their employees. And finally, temp workers often view each job as temporary and thus can be less reliable than full time workers, which HelloFresh experienced firsthand. The reality is that working with an agency is likely unavoidable in the early stages. During that stage, work closely with the agency to define a very specific spec. But the ultimate goal should be to phase the staffing agencies out entirely.
Reduce operational burden by leveraging vendors: Think about ways to reduce operational complexity by compelling vendors to do some of that complex work for you. HelloFresh consciously asked their food vendors to deliver pre-portioned food, rather than in bulk. Asparagus came not in a box, but bundles of 12 spears ready to be packed directly into customer’s boxes. By pushing this portioning off to vendors, HelloFresh could significantly reduce the operational complexity within the warehouse. While it likely increased the variable cost for the food, this was offset by the reduction in complexity allowing the team to focus on solving other tasks.
Stay laser-focused on the customer: Finally, Seth talked about the importance of never losing sight of the customer, even while reaching to solve other challenges. It would have been easy to boost margins by reducing protein portions by half an ounce (6 oz. to 5.5 oz.). Customers may not immediately notice that slight reduction, but over the long-run it will catch up with you.
Many thanks to Seth for taking the time to speak with us. We will be hosting our next operations chat this summer focused on growth marketing. If you’re interested in participating please email CanaanEvents@canaan.com.