The Goods Mart founder Rachel Krupa on building a convenience store that's more than a shoppy shop

0:28Hello, everyone, and welcome to the Modern Retail Podcast. going on now that I'm sure she's thinking a lot about. Rachel, how are you doing? Thank you so much for joining. Thank you so much for having me. And I'm great. I want to chat about all of it. All right, great. We will have snacks. Oh, let's let's dive in. Well, so correct me if I'm wrong, but Goodsmart launched in 2018, right? Yeah, we opened our first stores April of 2018. All right. What were you doing before? And what led to you being like, I'm gonna open a store? So I've been doing PR now over 22 years and have had my own PR agency back then for seven years.

1:06And a lot of that was in the CPG space, in the Better For You space. So a few of our first clients were, say, McConnell's Ice Cream, Brownie Brittle, Barnana, those that were leaders within the Better For You before Better For You actually was there. and back then and I would even think it was 2016 when you went to a grocery store there wasn't necessarily this explosion of snacks and this branding and marketing that we have today you had a small organic section of better for you than everything else was just traditional grocery and to me it was more of us like what's everything else if this is better for you or organic than what is everything else in the store.

1:49And it was really looking at creating a store that you didn't have to look at labels, that it was curated based on that better for you on taste. But also through the years of talking to brands and founders that we did PR for, there was a strategy for conventional, there was a strategy for natural, whole foods, et cetera. And there was no strategy for convenience stores because convenience stores, you just went with a distributor and they put you wherever they put you. And so there wasn't this curation of shops that we have today. Got it. So pretty much what you think currently is that, you know, there is a general trajectory upward if you are in more of a very traditional supermarket sense, but especially in the convenience sense.

2:36And I would even say to this day, like there isn't really a better for you section in 7-Eleven yet. There is more innovation. And like, I think 7-Eleven is actually one that is doing it right, because they are actually incubating, but then also investing in some of them. So I think there's an appetite, but it's hard. It's much more complicated than just getting better for you snacks in places. There's a system that is much more challenging for small brands, emerging brands, than you would think. It seems like you were sort of way ahead of the curve in terms of this focus of, especially having a store that features this kind of curated products.

3:15Like that's something we've seen in the last couple of years, but 2018 was a long time ago. So just talk about what were your ambitions for how the store would evolve when you were first launching it? And then how has it evolved now in the past six years? There was no strategy at launch, to be fully honest, you know what I mean? And it literally was an idea because people would come into our PR office and just shop, you know, Brownie, Brittle, Barnana, all these brands. And they're like, create something. I'm like, oh, I'll create a better 7-Eleven. And I'm a believer if you say something long enough, you either have to do it or you can't talk about it anymore.

3:49So I got a line of credit from the bank to open up a convenience store. And there was no business plan. There was no model whatsoever. It was like, that place looks great. It was in Silver Lake. It has parking. And then through the PR contacts, I asked people for help. So McConnell's ice cream founder, Michael Palmer, was like, here's a great contractor. We did the PR for Thrive Market and helped launch Thrive Market. One of the buyers from there helped me with that operations backside. And it was pulling people together of like, let's create this store without looking at anything else on the marketplace of like, what would it be if I could create this store?

4:27It was bright, it was white, it was, you know, colorful, but instead of our colors were nutritionally back then it was like, Oh, you're natural. You're going to have green tones, or you're going to have like these like fresh and, you know, healthy. But for us, it was more, and for me, really, it was like creating better for you, but made it an experience that was also really cool and fun, um, that you went in and shopped. So it was a little bit more of like just going inside my brain and being like, what would it look like? What would it feel? And then kind of going through there, because for us, it's we're white and black for a reason, because we want the brands to stand out on the shelves because there's so much color that why give more color where us, we're the platform for the brands to build and grow and to achieve more, you know, be in more hands, be in more places.

5:19But like, let us help you with that by us being, you know, a good foundation on the backside. You said the first one was in Silver Lake, but your two locations now are in New York. So walk me through the locations and how those have changed. Yeah. So the first location was in Silver Lake in California. It was, I would say, probably around 800 square feet. And it was, you know, my dream store. It was beautiful. We could pay out a freestanding store. Six months after that, a friend in New York just said, hey, I have a lease. Do you want to take it over? I have three or four years left. It was like a longer term lease.

6:00The rate and the rent was great. And so I'm like, sure, let's do it. Again, without knowing much, it was six months after opening the first store, I had our New York store opened. And it was just not understanding all of the operations side. and it was running two businesses on two coasts, that it was really hard and challenging. Operations from a retail perspective is not the same as running a PR agency because of just the layers of operations and complexities of sewage, of making sure you are ADA compliant, making sure that you have someone there on time. So there was a lot more complexities.

6:41And I think that towards the end, and it was very fortunate for us, it was around August, September of 2019 that we decided to close or I decided to close Silver Lake because there wasn't foot traffic. There wasn't foot traffic like there is now because COVID changed a lot of how people shopped, how people worked. Silver Lake was an incredible Monday or Saturday and Sunday. So weekends were crushed it. But that Monday through Friday, it was hard because no one worked in that area. Everyone left. And so it was really like a really incredible learning experience of like retail 101. But then we saw New York did really well because New York was foot traffic.

7:25People understand and what I love is that bodega culture that has been the fabric of New York for so many decades, centuries, I don't even know how long, that it worked. And so it was like, let's prioritize our time building New York versus having two coasts and just like have that, you know, not necessarily saturation, but see what we can do here and make it easier on us. Because also the Silver Lake location, we only signed a three year lease. and that was coming up on the end of two and a half years that it was time to kind of like be like okay are we going to keep it going are we going to pause it and reopen because they were supposed to demolish and demo the entire building oh wow okay well that works it worked it was like those issues of things that people don't always realize it was sewage was not great like they rained, things came up.

8:21And so it was like, okay, let's close it, pause it. And then we can come back to Silver Lake after we have New York. Got it. I wanted to ask, because this is something I noticed. I want to say it was in 2019. I was in LA. I think I was in Echo Park. And I noticed that there were more very specialized, lower assortment stores, but none of them had foot traffic. And I was always like, how do they make it work? Might exist a little bit more today, but I'd still say there are more of those types of stores on the West Coast, they're on the East Coast. How would you say the difference between the two coasts are?

8:51Because I feel like there are different store profiles. A hundred percent. And I think a lot of the stores that you have more of what you would call the shoppy shops today, I feel in LA also have alcohol or they have more of that element of fresh. Cookbook's amazing, but Cookbook has, you can get your sandwiches, your salad. It's part of like the John and Vinny's crew. It's beautiful. So you go there for your specialty items and that would be part of, I would say, you go there once a week to get what you need for your home to cook. And so it is filled with more cooking things where LA, you cook at home.

9:28New Yorkers, you order takeout more often than anything. And then a lot of them also have spirits and alcohol. So that if you look at like wine and eggs, which is again, a beautiful shop, they have a lot of wine and spirits. And so it also has more of like the pantry items that you find that are incredible. and they do an incredible job at curation. But it's not the weirdest, like I think in New York, it's like you get food because you want to eat it immediately, where you're walking out opening up a bag versus always taking it home. You're taking it home, obviously, too, but it's a different form of how you're moving and how you are working with a shop.

10:07Parking is hard in LA. Rent is better than, And especially in more of the east side, rent is more favorable in regards of what you get. But then you also have to hinder some of no parking. And so people have to walk and you have to shop. But it's more of that experience of like, hey, we're going to go to Equipark. We're going to go to Atwater. We're going to go to Silver Lake. And you're going to spend the day there. And you're going to pop from one shop to another. Where in New York, you can just like do the same thing, but you walk. I wanted to ask you about sourcing products and just in terms of how, you know, how much does that play into, you know, your PR consulting?

10:45Like, what is the interplay between the two? Is there an interplay between the two? And just sort of how do you go about finding which brands you want to feature in the stores? Yeah, two separate companies, but they kind of complement each other just because of the category of food and wellness. Sourcing is the fun part. I believe that you have to do your homework as a buyer and look around. So we look at commissary kitchens. We talk to founders. Or I look on social. It's a combination and a complexity of how do we find these new young brands? A lot of people come to us as well. And then we try it collectively as a team of how do we like the taste?

11:25Because we also want to look at it from a standpoint of, is it that borderline of for us better for you is this line of not healthy because better for you is just the quality of the ingredients that go inside of it. It is, you know, just looking at the mission, like better for you, better for the planet, but also extremely tasty and yummy. And so we look at it from those standpoints, look at the price point, because we don't want that sticker shock for people to come in. And like the I think how we curate is very much of taste price. Also looking at the founder, how do we feel that it's going to sell?

12:03If you're ripping open a bag of$10 cookies, is that$10 cookie that best cookie you're ever going to taste and say, I'm going to spend that money because I know that I'm going to crave that and want that as a special treat or a treat that I have for myself every day. And so we look at that. So it's a layers of complexity and it's not just cool. It's great packaging and let's put it on the shelf. It's so much more than that. And we also give feedback to brands of being like, hey, we would maybe update this packaging or you have a little bit too monk fruit in Stevia. Can you maybe look at, you know, downsize that on your next run?

12:41Because I think it's going to help it be better on, you know, the shelves and sell better once people open it and try it. But that's the hardest thing is for someone to try it. So you also have to look at packaging. But our team is very much educated on taste and guiding people through our store on what they're looking for so that they can discover something new and incredible. Got it. And so how, because correct me if I'm wrong, but the two, you have two locations now. One is in Soho. Oh, you have three. Okay. So where are the three? Okay. Walk me through these three locations. Yes. Soho. So Lafayette between Broom and Grand, Rockefeller Center, and then 11 West 42nd Street, which is another office building of a Tishman Spire building.

13:23Got it. And would you, like all of those, you know, they're in Manhattan, especially Rock Center and Soho, they're very tourist centric, or at least they traditionally happen. Is it like, who would you say your target? Do you disagree with this? I disagree. They seem tourist, but Soho, where we're at is Lafayette between Broom and Grand is a little bit further south than like the tourist area. So we have a lot of locals. So we have a lot of like the Nolita, Chinatown, Soho humans that come in. Do we get, you know, tourists? Yes. But majority of the people that are those that live and work in that area, there's a lot of retail shops, too.

14:02So we get a lot of those individuals that work in retail shops to come in on a regular basis. 30 Rock, because it's an office building, we serve, we took over an existing newsstand within an office. And so within like 30 Rock. So our tenants or our customers are pretty much those that work in the area because Rock Center is a huge campus of New Yorkers. You have NBC. You have Deloitte. You have Lazard. You have all these incredible businesses, again, that are in or around, and that is our customer. You get the tourists, but majority of the tourists are coming in. They're going to grab X, Y, and Z, but majority we service the tenants in the buildings that we're in.

14:46Okay. Okay. That answers my question perfectly, which is like, it sounds like when you are sourcing these products, I was wondering if you were thinking about who it is that's buying, but it sounds like who is buying are the local people who live there. A hundred percent. I mean, it's fascinating. 30 Rock, if you ever want to work in the store for a day and just watch. It's incredible because they're completely two different demographics, Soho and Rock Center of even like the New Yorkers that shop there and asking questions where it is, you know, Uptown tends to be a little bit more Diet Coke.

15:19You know, they want like the things that they crave and we don't carry Diet Coke. So it's pushing them to, why do you like Diet Coke? Is it the caffeine? Is it the taste? Is it, you know, that chemical taste? And you get such a wide spectrum. And so that store, I would say is incredible for just market learning of what people want and why they want it to get something to create for more of like a mass appeal for better, you know, more than like the healthy eater that is coming into the shop in Soho. Do you change the assortments for each store is based on where, like, how, like, are you doing more Coke alternatives at Rock Center and doing more cookies in Soho?

16:00We, it's like similar, but there are differences. But we really ask the brands to help because we're trying to also change that behavior a little bit in that better for you. So instead of Diet Coke, asking brands to be like, hey, Brooklyn Cannery, can we have your cola and give this out to 20 people that come in and ask for Diet Coke to change their behavior? Red Bull drinkers, because they're out, they're working. It's a lot of like that corporate side. Hey, instead of Red Bull, have you tried Guayaquil? There's more caffeine. There's 100 and I think 130 milligrams of caffeine versus 90 in Red Bull.

16:33If you try this, we feel that you're going to have a consistent energy level versus that dip that you get with Red Bull, and let's give it to you free so that you can try it. And that normally, like what really helps to like have that repeat customer, because you're giving it to them because they're asking for something. And then we say, try it, don't spend it, you know, and then that's like how you get that person back in. Because you're working with new products. And it's about discovery and creating new customer behaviors. We're going to take a quick break and we'll be right back. I wanted to ask just because convenience is such an interesting space because it's usually one-off purchases.

17:10And so, A, what is the amount that someone usually spends at the store? And B, are you taking tactics? We talk about this with bigger retailers of upping the basket size and things like that, but it sounds like you probably don't want to do that. I'm sure you do, but you don't want to push it upon people. And so is it more of a retention play where you want people to know and come back? How do you think about the overall economics in terms of revenue per customer? Both. So average ticket is, it depends on the day, obviously. And so it is around like$7,$8, sometimes$10. And that's normally people get a snack and a beverage or two snacks and a beverage.

17:50We have a lot of people that, you know, from our sales team. It's more from a standpoint of talking about it's our stores are tiny. Our stores are less than 400 square feet each. So the person in the store is really that guide that's like, hey, have you tried this or you have tried this? And because we have a lot of repeat customers, you kind of understand like their taste profile. Like, oh, we know you love this bar. We just got this one. Maybe you should try this too. And so you can increase like the basket size based on us knowing our customers so well, but then also, hey, we got this in. It's chocolate.

18:24It's like the new Tony's little bits that we're one of the first to have. And, oh, we love you. Love Tony's chocolate or I love chocolate. Let me pull that in too. So we're able to increase the basket size based on making recommendations of new things that we have, plus things that we know that the shopper is looking for. And then we also do passive sampling every week in the store with particular brands because no one really knows the brands that fill our store. So it's like you want them to taste it too. So the team member is also pushing from a standpoint of not pushing, but like, hey, taste this.

18:58Here's a little bit about the founder. Here's like where it comes from. And then once they taste it, then that drives sales and trial too, because they taste it, they sampled it and they're like, okay, I'll buy a bag, box, whatever that is too. Given that the stores are so small, I imagine volume for individual brands isn't huge. Correct me if I'm wrong, when you're talking with brands who are thinking of, you know, who you want to sell in the store, do you talk about it more as, you know, placement? They get insights about what customers want. You know, we'll go into this more, but I feel like there's a lot of places, including you, that talk about curation where, you know, people seek out a store like the Good Smart because that's where they're going to find the next Epstart brands.

19:37Like there isn't an Erewhon-like place on the East Coast, like that kind of thing. So when you're talking with brands, what are you thinking about? What are you telling them? What do they think they're getting out of this? Yeah, great question. A lot of the brands that fill our store are young and emerging, and so they're just getting into retail. So they're just getting their feet wet into the traditional method of what that is. So we really help them of figuring out, okay, price point, where should you place it? I mean, our stores are small, so placement will be different when you go into a larger retailer.

20:06But it's like, who is your competitive landscape? Where should you go? what are people even talking about the products and brands? Come in and ask them. So we're really, I think, looking at it from a standpoint of like, you're getting your feet wet in retail, come to us first so that you can work out those kinks because we're really forgiving with it too. In the sense of like, our goal really is to help you build, work out what you need to ask, ask me the questions that you don't want to ask like the buyer from Whole Foods or the larger retailer buyer because you're scared to ask them that you may not understand what it is or may not seem like you know what you're doing.

20:44Ask so we can work it out together because our goal is like you're going to graduate from the goods market and that is the best thing that we can ever see. It's like you're going to get too big. We're going to have that next young emerging brand that's going to come in but get as much as you want. Customer insights, you know, what the team is saying, what the customers are saying, where to put it, what price point is actually making you move a little bit better, where should you sit? What other brands are competitive? So that's where we really look to like shine in the sense of like a brand coming in.

21:14Is volume going to crank like you would get at an airport or a larger retailer? No, but we will be seen more because our store is so small. So you actually will be seen and not be lost in the shelf of chips, you know? You were just in a New York Times story a few days ago, right? Right. Congrats. Always great to see New York Times mentions. One of the things that you mentioned sort of at the bottom, but is perfect for our audience is one of your revenue channels. And I imagine this is just exigency of the times what's happening, but you're doing a lot of B2B stuff, right? Where you're working with like hotels, corporate partners, coffee shops.

21:48Can you talk a little bit about that, how that grew, how much of the business that is? Yeah, that's really kind of where we're leaning in a little bit more now. Again, going back to the basis of the goods bar is to help build emerging brands and get them in more places and get their hands, you know, people get them in more hands. And part of that is like the stores act as like our kind of like testing area of like customers coming in. What are they like? What, you know, don't they like? What kind of feedback that is? What's the price point? And then now we've amplified more of the hospitality curation side because it's incredible just to get more customers in the sense of like landscape of a corporate office.

22:29It's this new brand is in your pantry. Here's like more about the information, the founder, hotel mini bars. That is like really growing. And I think now we have nine, 10 accounts from hotel mini bar curation perspective. We have three or four different corporate pantries and speaking with a lot more of co-working spaces, curating snacks for them too, where then we're acting as the distributor of the brands and also pseudo broker. Do you know what I mean? But corporate individuals are coming to us because we know what the customer is going to want and like the taste profile and a little bit more of like, this is really good and tasty or you like Cheetos.

23:12This one's going to be too healthy for your your customer or for your corporate or for your team, but try this one because it has that taste of like a little bit more not healthy, but it's better for you because of the ingredients. You can talk about the sustainability side of the snack. You can talk about the mission and who the founder is so that as you're talking to your team or talking to your guests that are staying in your property, the snack ethos is also matching as your brand ethos too. What's the profile of the businesses you're generally like? I can imagine this like maybe more boutique hotels that you know highlight you know sustainability focus that kind of thing but you know bigger luxury players would also be interested in this are you looking at more startups in the corporate space or like who who's interested in working with you all the above yeah great you know for us it's not it's more of i'm very fortunate to have a lot of relationships in the hospitality space for doing pr for 20 years um and so a lot of it has been testing and trying it.

24:11And this is something that we really launched, I would say, the middle of last year. And it seems to be picking up where we're working with, you know, Hotel Theta and Romer, which are Kimpton properties in New York, the Smith Hotel, which is also part of Highgate. And so they're larger, they're individual, but they're larger kind of like larger hospitality groups, but also at the same time doing things with Alford Coffee and helping them curate their snacks at Alford Coffee. and so it's really looking at it from a standpoint of there needs to be a little bit more size so it's not you know you have 20 or 30 employees like you can we're happy to help you we're not going to say no but it's going to be a different system than what we're creating for everyone else but then we also have like the Waldorf historian Beverly Hills that we're curating for and so there's a lot of incredible accounts that are coming on too that we're speaking to and hopefully going to lock them in.

25:10Because at the end of the day, the more, again, we can get these brands into places like this. Ultimately, it sounds very ethos, but you can kind of, or I don't know what that word is. It's very heady, but not heady. I don't know what I'm trying to say here. Lofty. Very lofty. Very lofty that if you can put these incredible brands that are doing it right, that have an incredible founder and mission behind them and cares about the ingredients, then technically you're kind of changing the food system because you're putting these brands that are taking care and want better ingredients for more people versus the mass brands that are looking at it from a revenue.

25:54Everyone's looking at revenue. But if you can talk about this upcycled ingredient or regenerative product, or this gives back to mental health, or this gives back to, you know, the founders who created it, it just feels like it's more equitable at the same time. Absolutely. But they need someone to help and someone to like help guide them. How much of your business is the B2B? How much is the stores or like, or do you have a goal for how, where you want that to be? We're going to lean more into like the corporate side. Again, we just started testing and are trying it like basically August, September of last year.

26:29So it's still building, but that is where a lot of our focus is. We're not going to be looking at opening up tons of stores. The stores will serve a purpose as fueling of how do we curate better and how do we get more customers' insights on that too. So it's definitely leaning more on that side. Got it. It leads to my next question, which there have been a bunch of multi-brand sort of focus on showing startup brands in an in-store environment, and some of them have not worked out. They've mostly been on the higher ticket price range. So we have show fields, we have neighborhood goods. But my question for you is, what do you think works when you are an in-store retailer that's trying to showcase new brands, but that focuses more on discovery and less on volume?