Did this startup make a big mistake calling itself Bodega?

Discussion
Source: Bodega
Sep 18, 2017
Tom Ryan

Two former Google employees are hoping to reinvent convenience retailing with plans to roll out thousands of automated vending machines near apartments, offices, dorms, gyms and other consumer centers.

The concept, named Bodega, makes use of unmanned, five-foot-wide pantries each filled with about 100 nonperishable items tailored to local needs. A Bodega box inside an apartment complex, for instance, may feature laundry detergent, toilet paper and pasta, but machine learning promises to constantly reassess the most-needed 100 items.

Customers unlock the box using the company’s app, linked to their credit card. Cameras track what’s taken and the customer is charged. When an item is bought, a signal is sent for it to be restocked.

Paul McDonald, a co-founder, told TechCrunch that, until now, “There’s really only been two options: you can go to the store or you can order something online. What we’re trying to do is introduce a third option, a new way of buying things. Shrink the store, bring the best parts in a smaller form factor and bring it to where you are.”

Retailer-specific vending machines are also a possibility, such as a Home Depot box near a construction site or a Staples box inside an office building.

“Eventually, centralized shopping locations won’t be necessary because there will be 100,000 Bodegas spread out, with one always 100 feet away from you,” Mr. McDonald told Fast Company.

The start-up has created controversy with its name. Bodega is a description used for the many small stores in urban areas that would be hurt most should such automated concepts prove successful. Mr. McDonald denied his company intended to put traditional bodegas out of business in a blog post.

To some, the kiosks are missing the ability to serve hot or cold items, sell items such as lottery tickets and cigarettes, and lack a human connection. Still, internet-connected vending machines are more pervasive in other countries and are expected to replace many store functions.

Michael Kasavana, a former professor at Michigan State and a researcher on automated merchandising systems, told The New York Times, “Americans have shown that they’re not afraid to do self-service, whether it be at the gas pump, replacing banking or online purchases.”

DISCUSSION QUESTIONS: What do you see as the pros and cons of the Bodega vending machine concept? How do you feel about the name? To what degree do you see internet-connected vending machines replacing traditional retail?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Bodega shot themselves in the foot with their name and logo and by trying to make their concept seem like more than a glorified vending machine."
"...many cultures already do this. If you head to Japan, they sell pretty much anything you want from a vending machine."
"Having shopped bodegas when I lived in NYC, and still today when I visit, I think it’d be impossible for Bodega to put them out of business..."

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29 Comments on "Did this startup make a big mistake calling itself Bodega?"


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Jon Polin
BrainTrust

This concept is fine — nothing particularly breakthrough and unclear why it’s worthy of several millions in VC funding. Given the speed of on-demand deliveries from stores with broad assortment, I don’t get excited about a machine with limited assortment. While the name has struck a chord with many, it’s sure launched the brand with a bang. These guys couldn’t have gotten nearly the publicity they got by paying for it.

Bob Amster
BrainTrust

Definitely. The negative public relations backlash is predictable, especially in urban areas in which both consumers and store operators are familiar with the name and the concept of a genuine bodega.

Tom Dougherty
BrainTrust

The price of clarity is the risk of offense. Bodega cuts through the crap and gets right to the heart of the brand promise. Those who criticize this type of branding are destined to go away.

Phil Masiello
BrainTrust

The on-demand vending channel has potential in specific categories. Best Buy proved that a company can add significant sales and profits with the correct product mix in the correct places. They did a great job with airport kiosks with travel-related technology for example.

CVS is testing OTC drugs in airports, colleges and other places where the need may exist. So the demand is there.

For Bodega to succeed, it will really come down to understanding the customer needs in the specific place they put the machines.

Personally, I don’t care for the name. It does not emit a positive emotion for me. I think they could have come up with a more descriptive name.

Joan Treistman
BrainTrust

The “Bodega” concept holds a lot of promise. I don’t see any serious pitfalls other than the name. But we’ve learned that insensitivity is not necessarily followed by repercussions.

It seems there was no research or even just asking friends and family about possible downsides using a name associated with an existing entity that is deeply entrenched among consumer segments that could be offended. Every name evaluation asks respondents about possible negative associations. I’m guessing that there would have been enough suggestions about backlash to warrant an alternative. But then again, I’m just guessing and haven’t done the research.

Meaghan Brophy
BrainTrust
Meaghan Brophy
Senior Retail Writer
2 years 4 months ago

Internet-connected vending machines aren’t a horrible idea. They won’t replace traditional retail stores or bodegas. However, they’ll carve out their own niche in apartment buildings and large office spaces. Bodega shot themselves in the foot with their name and logo and by trying to make their concept seem like more than a glorified vending machine. Just call it what it is.

Al McClain
Staff

I agree, Meaghan. This is a decent idea, that is insensitively named. I’m sure they could have found a punchy, cute name for this with a day of brainstorming. Even if they get PR out of the current name, it would still be a good idea to quickly rebrand.

Meaghan Brophy
BrainTrust
Meaghan Brophy
Senior Retail Writer
2 years 4 months ago

Exactly. Under a different name, there wouldn’t be much (if any) negative reaction to Bodega. It’ll be interesting to see what happens next.

Peter Fader
BrainTrust

Brilliant move on their part (or pure luck). This is a mundane business: vending machines for businesses — not very interesting. But this has been priceless PR, which they will take all the way to the bank.

Steve Montgomery
BrainTrust

The word “bodega” has been used as a brand before. One example is the BODEGA, a Boston retailer which offers a limited line of clothing and other items. This startup’s use of the word as their brand got them something they would not have gotten without it — publicity. The long-term issue is not the use of the term as a brand, but the lack of the utility of their offer.

Ben Ball
BrainTrust
First, this concept has been around for years. One of the earliest iterations was called an “honor box” and they sat in locations too small to host even a vending machine. Generally speaking, the patrons and employees or residents of such a location are quite happy to have them. So happy they actually pay for the merchandise. Immediacy is a wonderful thing when you are talking about availability. Calling the unit Bodega is simply calling it what it is. A small assortment of frequently purchased merchandise with the primary benefit being located closer to the consumer Second, a minor terminology beef. The proper term for this concept is automated merchandising — not vending machine. The difference became quite clear as we worked with the Redbox team on their rollout. You would be correct to call that difference subtle — even philosophical — but the thought process of a merchant versus that of someone filling a machine to meet demand is a huge difference. I have often drawn the distinction between Private (or Proprietary) Brands and… Read more »
Joanna Rutter
Guest
2 years 4 months ago

It’s incredibly out-of-touch — and I’m glad to see it’s a discussion topic. We’ve talked about vending machine concepts here before. However, this is not a neutral candy dispenser or a helpful kiosk for buying earplugs in an airport, because of how it’s named. This is reappropriating a type of business that is traditionally owned by or operated by people of color and/or immigrants in neighborhoods where large supermarkets or other businesses choose not to plant roots. To lift that name and slap it onto an otherwise-nondescript vending machine concept is to mock the role bodegas play in the communities they serve. The fact that these vending machines will largely be placed in wealthier neighborhoods or apartment complexes who don’t frequent actual bodegas adds to my disgust. What’s in a name? Everything, in this case. Cultural context matters. Do your homework, “Bodega.”

Ed Dunn
Guest
2 years 4 months ago
This will fail. Common sense should prevail and this startup will have to compete on volume and margins rather than established vending operations including CVS, Publix, Kroger and more. I can slide my card or tap my phone against any modern vending machine today. This is nothing but a “mobile-commerce” solution looking for a problem. The problem with the Bodega Box business model is not understanding how the “informal economy” operates. For example, in an underserved inner city housing complex, someone is selling the same products out of their apartment to the entire community and seen as the “go-to” person. A real bodega in NYC serve the same purpose in many boroughs in underserved communities. Corner stores in many urban communities serve the same purpose. No cabinet stuffed with items with a mobile-phone interface is going to replace informal economy dynamics. The cat logo struck a nerve as since the early 1900s, cats earned their “street reputation” for the number of rodents they would catch and would become personalities at bodegas with nicknames. This startup… Read more »
Doug Garnett
BrainTrust
Doug Garnett
President, Protonik
2 years 4 months ago
Fundamentally, the idea of expansion with smart vending machines is a good business idea — in that musty, dusty old way where people seek profit through operations. The problem with Bodega is they’ve approached it the Silicon Valley way. That means they can’t just be good business, they have to kill something old because they’ve appeared. It’s one of the incredible dysfunctions the VC culture has created. They also exemplify a second problem — execs make lots of money in a tech company then enter the consumer market to fail. There’s a hubris in Silicon Valley where people fantasize about what the consumer market is but remain clueless about its reality. I’ve worked with many clients suffering this disease — starting with Netpliance and their internet appliance that should have succeeded in 2000. But is the name “Bodega” a mistake? It didn’t have to be. But it sounds like their need to be a unicorn is the big mistake — their PR around the name is merely one of the bad choices that are made… Read more »
Harley Feldman
BrainTrust

The Bodega vending machine concept is not new or novel. Its placement at strategic locations for its target market will be the unknown measure of its success or not. While the Bodega name may generate some controversy, it represents the vision of a neighborhood retail location that is convenient. I don’t see internet-connected vending machines taking a big bite of the traditional retail market since they have a limited number of SKUs and no associate support or service to the consumer. They will take a small slice of the non-perishable commodity market.

Neil Saunders
BrainTrust

It’s a free market, they can call it what they like. Ultimately, the customer will determine what concepts or brands win or lose. The fuss has given them a great deal of free publicity, however!

I think it will find some success, but the idea people will abandon centralized shopping for it (as one of the founders suggests) seems quite fanciful.

Warren Thayer
BrainTrust

It’s convenience and immediate gratification and, from what I can see, it’s targeted to a different consumer demographic than the bodega shopper. Having shopped bodegas when I lived in NYC, and still today when I visit, I think it’d be impossible for Bodega to put them out of business or even have a major impact. If you know anything about the amazing merchandising mix and personality of bodegas, you know what I mean. I think the concept will work. Is it a home run? No. But a stand-up double, for sure. Not bad.

Jett McCandless
Guest

They definitely didn’t think their marketing strategy through. The name itself isn’t bad–it makes sense, and it doesn’t imply that you’re putting people out of work. The issue was in saying that they aim to replace bodegas instead of supplement them. They could have just implemented their plan and let the rest take its course. Then bodegas going out of business would simply be an unfortunate byproduct of a good idea making something more efficient.

It’s also interesting that people are acting like this is a new concept. There have been multi-purpose vending machines for years. Look at what you can purchase out of a vending machine in Japan! I think the backlash here was just the internet’s weekly viral rage session.

George Anderson
Staff

What I’m wondering about is if they’ve really done the math to determine what it would cost to keep 100,000 of these small boxes fully stocked if they achieve their growth goals? Making frequent small deliveries to thousands of locations will be expensive and tricky.

Roy White
BrainTrust

Bodega was a very unfortunate choice of words. Not only did bodega supporters – and their union, Bodega Association of the United States — unleash a firestorm of abuse on the entrepreneurs, bodegas, as retail stores, do not have a particularly favorable reputation. Quite frequently they are small unsanitary outlets carrying a limited selection of products — in many cases out-of-date — and no fresh food. Another name would have been a better idea for what is essentially a vending machine operation.

Shep Hyken
BrainTrust

Anything that makes doing business more convenient is worth exploring. The concept of merchandise in vending machines is not new. The concept that Bodega is thinking about is more of a multiple location strategy. The way the machines work is innovative, but still it is a vending machine. Another plus is that if the location isn’t working, just move the machine to another location.

As for the name, it doesn’t bother me. I like it. Any competitive issues that hurt local retailers won’t happen because they named a vending machine Bodega.

Phil Chang
BrainTrust
Phil Chang
Retail Influencer, Speaker and Consultant
2 years 4 months ago

Changing with the times impacts everybody. The classic bodega hasn’t changed in many many generations. Nothing wrong here from my perspective, many cultures already do this.

If you head to Japan, they sell pretty much anything you want from a vending machine. Bow Wow Bones is a food truck service for Pets, based in Austin, TX and they also have vending machines for pet-focused products.

I like the thought of having these new bodegas — they’ll be able to get me things I need, but I’ll still stop at a local New York City bodega to get a sandwich that nobody else makes.

Ralph Jacobson
BrainTrust

This is about survival of the fittest. The traditional brick and mortar [bodega-type] stores could also place vending machines around town. There’s no genius to this move.

Michael Rowan
Guest
“A Bodega box inside an apartment complex, for instance, may feature laundry detergent, toilet paper and pasta, but machine learning promises to constantly reassess the most-needed 100 items.” If I purchase all three items in the basket example here, the gross profit of my transaction will be less than one dollar, assuming that these are small sizes that would be appropriate for dispensing. The selection of goods is the vulnerability here. By avoiding hot, cold, and perishable items, they’ve selected some of the lowest margin items on the shelf of a neighborhood market. “Eventually, centralized shopping locations won’t be necessary because there will be 100,000 Bodegas spread out, with one always 100 feet away from you,” Mr. McDonald told Fast Company. By this standard, there will be two vending machines between my front door and the USPS Mailbox Cluster where my Amazon boxes arrive. So by urban, we really mean locales with a population density meeting the logistical needs to sustain a lot of low margin transactions — so let’s assume these 100,000 machines are… Read more »
Dan Raftery
Guest

No mistake in the name here. (Can’t help but wonder if some people would be equally cranky if they had chosen Grocery Store). Better = Your Bodega.

Real competition is home delivery, which is getting stronger.

Biggest challenge will be inventory management and replenishment. Not sure what “machine learning” is going to learn from. 100 SKUs is pretty small. And will they be able to keep the high-demand items in-stock?

Craig Sundstrom
Guest

While I wish them well, I don’t see what has changed recently that this concept would succeed. Oh, sure, you “access this from your app” and the removal of cash from the machine will reduce theft potential, but at its heart it’s still (just) a vending machine, with the attendant high cost of servicing, and limited sales potential. The name concern I see as irrelevant.

Ricardo Belmar
BrainTrust

I’d say the name reflects a lack of creativity for the product offering. At the same time, I don’t think this is a new concept. While the idea of relying heavily on machine learning to identify the top 100 products to stock has some novelty to it, why wouldn’t any retailer interested in the same idea follow exactly the same approach? Best Buy has proven this can work with the right assortment, and we’ve seen that Uniqlo is replicating the approach in airports for apparel. Maybe they want to be the Redbox of general merchandise, but I didn’t see a nod to franchising in their description. Will have to wait and see if this idea really takes off or not, or, if other retailers just copy the idea.

Min-Jee Hwang
Guest

This blunder could have been avoided with better user testing. The CEO explained in a Medium post that they did some, but clearly they did not talk to enough people from various backgrounds about the name and overall concept.

Walking through major airports you see vending machines with, say, Benefit Cosmetics, or noise canceling headphones. The companies that run these vending machines have made this concept a success, beyond the food and drink vending machines we’ve had around for years. In-store retail is still where the vast majority of consumers buy products, but if these pantries can bring commerce to a place where it didn’t previously exist, then that will benefit the retail industry overall.

William Hogben
BrainTrust

Naming it Bodega isn’t a blunder, and a startup at this early of a phase isn’t likely to have discovered it’s ideal name yet anyway.

I’d be glad for one of these boxes in my apartment building or office. Tracking items with the camera is a fun way to do it and I could see these things replacing hotel mini-bars as well.

The real questions are: Who owns the device? Who stocks it? Who sets the prices?

Mr McDonald’s vision of 100,000 bodegas replacing centralized stores will shift costs from store operations to more logistics, as these locations will need more frequent restocking. Maybe it makes sense for them to focus less on selling product out of here and more on simply tracking as items move in and out. For example, I’d gladly share 1 set of tools with all my neighbors for how infrequently I need most of them — tracking that with the camera box might be a more compelling case for us than getting quick snacks.

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Braintrust
"Bodega shot themselves in the foot with their name and logo and by trying to make their concept seem like more than a glorified vending machine."
"...many cultures already do this. If you head to Japan, they sell pretty much anything you want from a vending machine."
"Having shopped bodegas when I lived in NYC, and still today when I visit, I think it’d be impossible for Bodega to put them out of business..."

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