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When new media technologies start out, their programming tends to be aimed at the mass market. It’s only when these technologies mature and their audiences grow that it becomes feasible to go beyond general interests and target segments of the audience with specialized content or commerce.

This evolution happened in the magazine industry, which exploded in the 1920s with new general-interest magazines like Reader’s Digest and Time but later targeted more specific interests with magazines like Jet, Sports Illustrated, and WIRED. This evolution also happened in television: As new technologies like UHF, cable, and then satellite emerged, programmers responded by developing channels like BET, Nickelodeon, and Zee TV targeted at specific segments of the population. Similarly, on the Internet, the early winners were “portals” that carried a broad range of programming. Next came e-commerce companies like Amazon and eBay that could address a long tail of interests—and now we’re seeing ever-more-targeted e-commerce companies such as Zulily, Warby Parker, and Julep.

What’s happening throughout all of these examples is a shift from broadcasting to “narrowcasting”, a term first coined by computing pioneer J.C.R. Licklider in 1967 about the “multiplicity of television networks aimed at serving the needs of smaller, specialized audiences”. Today, the Internet (and social media) enables us to target these segments more precisely. There’s an important nuance here, however: This targeting is not about narrowing per se, but about reaching and including segments that weren’t addressed before.

That’s why our newest investment is e-commerce company Walker & Company, which was founded by Tristan Walker to build a modern personal care brand for people of color. Globally, this is not a narrow audience given that a giant percentage of the world’s populations are people of color. But we believe Tristan is on to a big idea, because in the U.S., this segment appears woefully underserved—even though it is growing.

Brands catering to this segment are badly dated, and customer needs aren’t being met

clyde1
I’m a huge basketball fan, and one of my favorite players when I was a kid was Walter “Clyde” Frazier in spite of the fact that he played for the hated Knicks (I grew up in Philadelphia and Washington, D.C.). Clyde epitomized cool, and he helped lead the Knicks to NBA championships in 1970 and 1973.

No offense to Clyde, but I think it’s a symbol of how neglected these markets are that one of the leading selling brands in the category hasn’t updated its spokesperson or its packaging in multiple decades…

People of color also have specialized personal care needs that are often not served by the global CPG (consumer packaged goods) brands.

For example, 80% of black and Afro-Latino men—and 30% of other races—suffer from Pseudofolliculitis Barbae (PFB) or “barber’s itch” due to curly hair follicles. The resulting razor bumps are not only annoying, but also can be unsightly and painful. Current leading selling shaving products tend to exacerbate this condition.

The market is large and growing

The population of people of color is growing in the U.S. and “over-indexes” significantly on beauty and personal care CPG products. For example, black consumers spend 2x the general population on cosmetics and 1.8x on skincare (Essence Communications, Inc.). And black women represent approximately 7% of the population but 30% of hair care spend.

We believe Walker & Company is extremely well positioned to build a big business catering to this market:

• Their first product, the Bevel shaving system for men (which they designed and manufactured), is impressively designed and executed — but more importantly it works. Clinical tests show that shaving with Bevel reduces razor bumps among men of color. More importantly, customers perceive that difference too: “Last razor I used had my face looking like nestle crunch. Been using @Bevel for some days now and my face still feels like a baby’s bottom”. “You guys did it! The first shaving system I’ve used that actually works as advertised. I will be a life long customer… Thank you…”

• The Internet enables efficient marketing to previously difficult-to-reach segments, and Tristan is quite adept at social marketing. He was the first business development person at Foursquare, and personally has 280,000 Twitter followers. Walker & Company takes customer satisfaction and feedback so seriously that he and his employees personally reply to and engage with every customer on Twitter.

• Results are early, but Bevel is off to a great start. They have gone to market with a five-part shaving system sold through a subscription format—and sales as well as customer retention have been strong out of the gate.

• There are numerous other huge segments in this market with under-served needs, and Tristan already has an extensive product roadmap for adjacent markets.

Yet it’s important to note that Tristan’s mission goes beyond profits. For the consumer, it’s hard to feel like a first-class citizen when you’re only able to buy second-class products. That’s why Walker & Company focuses on developing brands that solve acute physical problems (beginning with PFB) in the community—they won’t be making shampoo just to make shampoo.

Tristan feels he has found his life’s work at Walker & Company, and he is hell-bent on building the modern health and beauty brand for people of color. We’ve known Tristan for years, and consider him to be a charismatic, talented, and passionate leader. We look forward to joining him on this journey.

Photo: Getjustin

 

E-commerce has disrupted a number of large categories, including media, electronics, apparel, and home furnishings. If you’re shopping in these categories, there’s a strong and rapidly growing chance that you’re going to buy them online. But that’s not the case for the largest retail category: grocery. For the vast majority of people, filling the fridge still means rolling a cart down the aisles at the local grocery store.

As I outlined in a previous post, groceries are among the last huge e-commerce opportunities. Online penetration of groceries is extremely low. It’s not that innovators haven’t tried—it’s that they haven’t enjoyed significant success. To date, virtually all of the digital efforts to attack the grocery vertical—i.e., the brick and mortar franchises—have followed a very similar model: by building out e-commerce grocery businesses end-to-end, including warehouses, inventory, and trucks. They’ve essentially replicated the grocery store supply chain at great cost and complexity. During the first wave of Internet startups, we saw this centralized approach most famously with Webvan, but also at Peapod, FreshDirect, and more recently Amazon Fresh.

But now a new wave of digital companies is going after the grocery business with a very different approach. That’s why we’re thrilled to announce we’re backing Instacart.

The proliferation of mobile devices is enabling what I call “People Marketplaces”: two-sided marketplaces that connect consumers with people providing specific services.From finding a ride with Lyft, to getting your house cleaned with HomeJoy, home-delivered restaurant meals from DoorDash and Caviar, and instant pet-sitting from DogVacay, the variety and usage of People Marketplaces are exploding. It’s really becoming a thing!

People Marketplaces couldn’t really exist before the smartphone; the efforts of all these people couldn’t be efficiently managed or optimized without that supercomputer-with-GPS that’s now in everyone’s pocket. Today these devices can run sophisticated software that orchestrates tasks like order placement, driver location and logistics, delivery timing, and payment.

Instacart offers same-day delivery from your favorite grocery store via an army of local contractors, often within the hour. The service is expanding rapidly and is already available in the San Francisco Bay Area, New York City, Chicago, Boston, Washington D.C., Philadelphia, Los Angeles, Seattle, and Austin. Instacart is doing this by taking what I’d term a “virtual” approach that requires negligible infrastructure investment relative to other more centralized models; they leverage the existing grocery store infrastructure with a workforce enabled by digital tools.

I know what you’re thinking; I’ve written extensively on how brick-and-mortar retailers will be disrupted by e-commerce companies, and how they’re at risk of becoming dinosaurs in many retail categories. Yet Instacart is partnering with these same brick-and-mortar grocery stores in the delivery of their service. Have we cast our lot with the dinosaurs?

Not. Traditional brick-and-mortar retailers have a large advantage relative to e-commerce companies (if they can figure out how to harness it): Each of their stores is essentially a mini-warehouse with inventory widely distributed throughout the country. So we’re making a bet that Instacart’s partnerships with brick-and-mortar grocery stores will be the winning play in grocery delivery to the home, with the ability to fend off competition from e-commerce companies that build out their own infrastructure.

Here’s why we think the virtual model wins in this case:

  • It’s capital efficient – Instacart’s virtual approach to delivering groceries is extremely capital efficient relative to the approach of e-commerce grocery players like Amazon Fresh, Fresh Direct, and Pea Pod. Instacart’s leveraging of existing infrastructure obviates the need for physical capital investment. To put a point on it, Webvan raised $1.2 BILLION  largely for cap ex in their unsuccessful attempt to build a centralized grocery e-commerce business back in the day.
  • Faster to market – Instacart’s virtual model lets them expand to new cities quickly; their market entry strategy requires them to digitize local grocers’ inventory, hire drivers, and acquire consumers. Contrast this with the centralized e-commerce players and their need to build warehouses, buy trucks, buy and receive inventory, hire both warehouse workers and drivers… For these same reasons, Instacart should also be able to service smaller cities more efficiently.
  • Offers potentially superior operations – Instacart’s model is much more simple operationally; an order on Instacart results in a shopper going to the grocery store you selected, picking the items on your list, and delivering them immediately to your door. This should enable them to provide service that’s both high quality and FAST (remember that Instacart is often able to deliver groceries within an hour). By contrast, centralized e-commerce approaches have significant operational complexity. They need to buy, store, and pick inventory that’s often fragile and/or perishable (e.g., fruits, vegetables, meat, dairy) and keep it fresh and undamaged inside their trucks that run around the city all day making multiple deliveries.
  • Capitalizes on well-known brands – Instacart leverages the brands of the physical grocery chains, which typically are well known to the neighborhoods they serve. These chains know and carry the SKUs that people in their community want to buy. In the Bay Area, this already includes national chains like Whole Foods and Safeway as well as iconic local brands like Rainbow Foods and Berkeley Bowl. Centralized e-commerce businesses, on the other hand, need to build a brand from scratch and optimize for the tastes of an entire city.

We’re not alone in thinking that grocery will develop differently than other e-commerce verticals.  Fred Smith ,the founder of FedEx — which re-invented the delivery business — had this to say about the delivery of groceries (as part of a 1999 InternetWeek interview):

 “A lot of retailers are coming to the conclusion that well, maybe the best thing is not a total inventory-less environment but maybe what we do is use the Internet in concert with our bricks and mortars. And that’s what I think will happen, because you have a lot of things that have very low value, and they don’t lend themselves to e-commerce and fast-cycle distribution.

Groceries are the best example of that. Now, maybe there’s an example where you have an e-commerce interface and home delivery of groceries, but those groceries are not going to be delivered from across the country, and they’re not going to be built on demand for your order.”

FedEx was the pioneer of the centralized approach to delivery,jet planes and all. And even back in 1999, he thought the virtual approach in partnership with brick-and-mortar grocery stores was the future of online grocery distribution. Fast-forward 15 years and throw in the smartphone — and we think he just might be right.

I see lots of analogies between Instacart and OpenTable, the business I ran for four years before joining a16z. They are both local, requiring city-by-city rollouts. They both provide convenience to consumers. They both drive incremental business for their retail partners, providing those retail partners with an incentive to promote the service. They both have the potential for network effects. And FWIW, they both involve food!

In addition to these strategic advantages, we as always are making a bet on the founder. In this case, it’s Apoorva Mehta, a former Amazon programmer who is the founder and CEO of Instacart. Apoorva and the team have made extremely impressive progress, leading Instacart to strong early results on very modest resources. This round will give them a deeper war chest to rapidly bring the convenience of Instacart to cities across the country. We look forward to supporting their efforts to revolutionize grocery shopping. Your fridge awaits!