Britain isn’t doughnut country. Or wasn’t.
Before 2014, if you wanted a doughnut in the UK, you could buy a pack of five cheap dough balls filled with jam for around 30p. If you wanted to go premium, US-import Krispy Kremes became available here from 2003 onwards for about £18 for a box of twelve. But Krispy Kremes aren’t very good. The doughnut is poor; the glaze is so sticky that it resembles a predatory mechanism on a fly-eating plant.
Britain wasn’t doughnut country; but it’s demand for good doughnuts has long been untested. In 2014, that all changed.
Enter JP Then, the man I was set to interview.
The founder of Crosstown Doughnuts was in his thirties. He was tall; lean; he wore trainers, had a shock of black hair held in place by a hairband. He seemed, for a man starting his second company, quite relaxed. (He later joked that stress was the only thing stopping him from getting fat on his own doughnuts.)
We were meeting in The Tea Building in Shoreditch – once a factory; today, a mess of coworking spaces in a part of London which still feels like anyone could start a business there: you just have to be cool enough.
He had invited me here in part to talk about the success of Crosstown. Also, to talk about his new venture, Slerp – a white-labelled e-commerce / delivery platform launched in August. His experiences in the first business had led him to the second; and he was now transitioning from a food entrepreneur to a technology entrepreneur for operators. I wanted to ask him how it was going.
“Sourdough” as a business strategy
In 2013, JP had been working as a consultant. By 2014, he was waking at dawn to serve up fresh for his market stand every day.
‘It wasn’t a hobby’ he said. ‘The plan was always to scale… we wanted to grow the Crosstown brand across town.’
Before launching Crosstown, JP said, ‘I thought that the coffee in London just wasn’t as good as the coffee available in Australia at the time,’ said JP. ‘I made a business plan for a specialty coffee shop concept…I sent it to hundreds of people. That’s how I met Adam.’
That’s Adam Wills, the founder of Gourmet Burger Kitchen, then working as the Director of Seven Restaurants. JP’s business plan had caught his attention. The two met, sounded each other out; and several months later, they had developed the plan for Crosstown Doughnuts.
‘We created the first sourdough doughnuts’, JP explained. He said that he had found that some ‘re-education about what a doughnut really is when it’s handmade with great ingredients’ was required. ‘I think it took a while for people to really understand what we were selling and why it was different’.
But while “doughnuts” might be a different language, “sourdough” has become a cipher for artisanship and quality in recent years. According to Google Trends, the UK search volume for “sourdough” today is ten times what it was in 2008 and four times the search volume in 2014.
Crosstown Doughnuts are indeed a cut above Krispy Kremes. A 12-pack favourites box will set you back £34 – for which price you could buy your giftee some 567 supermarket doughnuts, instead, although they might not react in the same way.
That’s the price of a premium office gift. And gifts require delivery. Which brought JP to his second business.
Slerp : an Introduction
‘One of the things that surprised me about running a scaling food and beverage business was the level of technology involved to keep apace with consumers,’ said JP. Which is how he came to set up “Slerp” – his new venture.
Crosstown had been using delivery platforms like Deliveroo from an early stage. ‘They’re great channels for people who are on those platforms out of choice. And they’re great for getting your brand name out there. But we also have a strong brand – and we wanted a direct-to-consumer delivery channel.’
So he set up Slerp – which creates a checkout interface which you can attach to your website; allows you to brand the experience yourself; and sell delivery of your goods directly, even if you’re still using Deliveroo.
‘Slerp is the biggest revenue channel for Crosstown online, which is a huge proof-point that you can run Slerp in parallel with marketplaces, and that can really be the driving factor behind new e-commerce propositions.’
‘Part of the proposition of Slerp is that it’s about giving control back to operators’, he said. ‘It’s their checkout journey, how they want – they’re directly interacting with the customer. The merchant owns the customer data as well.’
Slerp should ‘help operators sweat their space of their store network and create an incremental revenue stream’, said JP.
Slerp charge just 7.5%. Which is better than the platforms they’re drawing a contrast to – Deliveroo can charge as much as 40%.
‘A burger might traditionally be £10.00 if you walk in, but on a platform it might be £13 plus,’ said JP. ‘So you are still paying for that privilege to have it on-demand through a marketplace. Whereas if you’re actually buying direct from a brand powered by Slerp, they can charge the customer less. So actually the customer wins. The merchant wins. It is a win-win scenario.’
Slerp is a front-end product; a neat customer interface through which you can place an order. The fulfilment, and the last-mile delivery, is currently conducted by Stuart, a courier service which employs ‘all transport types’ depending on things like urban density.
Which is part of what I wanted to ask about.
If you’re not familiar with the term, “last-mile delivery” is a problem which has perplexed MBA graduates for years. The crux of the issue is this: because of the way supply chains work, it can cost the same amount for a shop to move a package from a warehouse in central Europe to a locker one mile from your house; as it would to take that package that ‘last mile’ to your doorstep. But who wants to pick up food from an Amazon locker?
Deliveroo and Uber Eats were remarkable because they have come close to solving this problem – with a mixture of gig labour, software, bicycles, venture capital money, and of course, charges to merchants of up to 40%. They have come close; but so far, they have only come close. Both companies lose money on nearly every order.
Slerp’s fees are smaller and don’t have access to the same VC funds as Deliveroo. They don’t “own the customer”; so their fees are set at a rather modester 7.5%. That includes the fulfilment of every order.
I asked JP how the unit economics of Slerp worked.
‘Marketplaces have huge requirements to market themselves to the end customer…. The difference with Slerp is that we’re a B2B platform… we’re more akin to Shopify, but with all the on-demand capabilities to sell your store stock.’
I asked about the way the costs of last-mile delivery are presented to users would change.
‘It’s definitely changing; and I personally think for the right reasons,’ said JP. ‘You’ll see that platform, third-party marketplaces, are increasing the delivery fees or testing non-fixed fees. In fact, recently in Australia, I know that Uber is actually testing surge pricing for Uber Eats.
‘To me this is positive because the customer should know the real costs. It’s a false economy … I think this is just part of the evolution and the growth of the sector as it matures, is that the cost of the delivery is being passed on to the customer in a real sense.
‘I still don’t think we’re quite there yet… I think there will be a point where it’s more like “this is going to cost you X because the distance is here to here, and actually there is a surge pricing now because it’s dinner time and it’s raining and everyone wants to get delivery. It will pan out similar to how taxi surge pricing applies on apps like Uber or Bolt.”
The other contrast with Deliveroo is that since your brand owns the delivery, frustration with the customers gets passed to you. ‘Part of the pro and the con is that alongside the control, you have to deal with conflict resolution,’ said JP.
‘But for us… I find that [to be] a benefit, because I’m much better at dealing at representing my brand than a third party. So if there’s an issue with an order, I would like to deal with that personally.’
What it’s possible to do with dough
‘Direct-to-consumer e-commerce is the fastest growing e-commerce in the world,’ said JP. ‘That’s something people forget. People want to buy direct from the brands.’
Slerp is betting on that – on the brands of their clients, rather than their own.
‘Take the example that someone’s on Instagram, exploring their feed… and they see something they like, and it’s the brand’s feed. Ultimately, what you want to be able to do is, tag a product, click on that product, and go to a Slerp checkout and receive it within an hour.’ This is JP’s vision for Slerp: the enablement of graceful end-to-end marketing pipelines for merchants.
That, he hopes, will enable merchants to focus on their main passion: their food.
‘People often ask me, “do you still eat your doughnuts?”’ He said. ‘And I say of course! I love the product.’
He nodded his head.
‘I do enjoy them,’ he said. ‘I’m not over them yet.’
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