Ambitions to be the Shopify of the Delivery Sector: Could Sky Farm become the “New Normal” in the post-Corona age?

Our lives have dramatically changed as a result of the novel Coronavirus infection. One area that has been particularly affected is eating out. With restaurants forced to temporarily close or reduce their operating hours, we are going out to eat far less than we did before. Instead, delivery services have seen big increases in user numbers. Many restaurants have quickly started offering delivery, making it easily possible for people to enjoy takeaway that was previously only available if they dined in at home.

The first companies that come to mind when people talk about food delivery are major operators like UberEats and Demae-Can, but there is another growing startup offering a new form of delivery service. That startup is Sky Farm, Inc., one of the successful candidates for the Mitsubishi Estate accelerator program and the company behind the curated Yokohama Minatomirai shop delivery service NEWPORT and the Marunouchi online temiyage delivery service TANOMO GIFT (temiyage are specially chosen gifts one person gives to another when they meet).

We spoke with Sky Farm’s Representative Director Takuya Kimura about the founding of the company and how its offering is different to its major competitors. Looking at the delivery industry and how it has changed so dramatically as a result of the Coronavirus crisis, we asked Kimura about the vision he has planned for the future?

INDEX

・Painful memories of a post-college graduation startup, and the reason for trying again
・Differentiation from platform-based deliveries through excellent customer service
・Greatest competitive advantage is understanding the difficulty of delivery
・The attraction of an accelerator program in expanding the potential for collaboration
・Key points

Takuya Kimura
Graduated from San Francisco State University, USA. Kimura worked for a foreign IT company before joining Rakuten. As a team manager, Kimura directed client strategy planning spanning a wide range of industries including automobiles, home appliance manufacturers, beauty treatments and finance. Kimura founded Sky Farm, Inc. with a strong interest in the mobile commerce business.

Painful memories of a post-college graduation startup, and the reason for trying again

Kimura’s first experience launching a company was immediately after college graduation. Together with his senior from university, he launched an online advertising production company where he worked from dawn until dusk as director. This first experience of starting a business recalls painful memories for Kimura today.

Kimura: My first startup lasted all of two years and left me completely physically and mentally drained. I stayed nights at the office and spent all my time working; when I think about it now, it’s not surprising it failed. It was such a bad experience that it made me want to never run a company again.

That lingering memory of failure had left Kimura sure that he never wanted to run a business again, yet he ended up running Sky Farm. He puts this change of heart down to the work he was doing at Rakuten before he founded Sky Farm.

Kimura: At Rakuten I had the opportunity to work in startup marketing, where I saw the company expand really rapidly. We went from having a marketing budget of ¥50,000 or ¥100,000 yen at the beginning to suddenly having ¥100 million yen to work with, which reignited my enthusiasm about starting a business.

The catalyst that led Kimura to launch Sky Farm was an inhouse business plan contest at Rakuten. At that time, Kimura had his sights fixed on mobile commerce.

Kimura: The story goes back to 2014, which was when smartphones were rapidly entering the mainstream, and society was in the process of shifting toward shopping being habitually carried out on smartphones. I thought that it would be really convenient for people for there to be an easy way to use a smartphone to buy and get hold of more everyday items like fresh vegetables and came up with the idea for a platform where people could buy vegetables from local farmers. I even spent some time at a grocery store to learn what I needed to accomplish that.

The shop that helped out Kimura sold low-pesticide and pesticide-free vegetables, and most of its customers were in their sixties. Younger people in their twenties and thirties did come to the store, but they rarely bought vegetables. One day, a chef who bought produce at the store asked me why I was going to deliver the vegetables when it would be better to deliver the food they made with those vegetables, which led me to shift into food deliveries. Young people lead busy lives, and I defined the issue as being that it’s difficult to find the time to cook in the first place.

Differentiation from platform-based deliveries through excellent customer service

The four candidate sites to be the launchpad for the food delivery service were Odaiba, Roppongi, Shibuya and Minatomirai. The winning candidate Kimura chose was ultimately Minatomirai, where there was no competition but there was a large working-age population.

Kimura: At the time, the number of food delivery operators delivering to offices was growing, and as we were also envisaging an office delivery model, we were thinking about how we could differentiate ourselves through the quality of our delivery service. We had been selected and were part of the Isetan Mitsukoshi accelerator program at the time, and someone there suggested we get sales staff to do the deliveries, and that was the turning point for our business today.

At the beginning, I had been thinking about a platform-based business like UberEats, but then I shifted to a model where we did our own deliveries to ensure good customer service. We aimed for our service to offer such a high level of customer service that delivery staff could almost be mistaken for waiters, and it is this level of customer service that has made us the preferred choice for many corporate clients. Recently, we started building a system that will make it easy for store staff to do their deliveries. To put it in simple terms, if platform-based operators like UberEats are the Rakuten or the Amazon of the food delivery world, then we and our store staff delivery model are something like Shopify.

In the past, restaurants have found doing deliveries difficult by themselves (own store), so they have used delivery platforms. But now demand for delivery has grown because of the Coronavirus crisis, which has led to increasing numbers of restaurants considering doing their own delivery. Sky Farm provides delivery-based store development solutions for those restaurants. Recently, we have been working with Yokohama Chinatown to create a delivery system on a shopping street-by-street basis.

Kimura: The system we’re creating right now is a marketplace specifically for shopping streets, in which store operators on the shopping street sort out their own delivery staff. For example, say there’s a newsstand on the shopping street. When there’s no newspaper delivery at lunchtime, the staff from the newsstand can make restaurant deliveries instead. Or maybe hotel staff can make deliveries for their own hotel. If a hotel doesn’t have its own restaurant, for example, the hotel and nearby restaurants can make a deal where the restaurants provide meal deliveries to the hotel. It would be like room service, with people able to order from their phones.

The time has come to think about delivery even for shopping streets. Kimura says that there has recently been interest from companies building new commercial facilities as well.

Kimura: These days, it is becoming the norm to design commercial facilities with delivery and takeout options as a given. People running commercial facilities have told me that all the facilities they build in the future will absolutely be designed to accommodate delivery and takeout.

Previously, the office workers ordering food delivery were the type who don’t want to waste even one minute of their lunchbreak doing anything other than maximizing the efficiency of the time they have to learn more. But now there is a sudden rise in the number of office workers using delivery, perhaps because they don’t want to be in a crowded place or because they want their purchase to be contactless. Whether it’s the people running commercial facilities or shopping streets, it seems that everyone understands the importance of delivery to keep up with the times.

Our greatest competitive advantage is knowing how hard delivery is

The market for delivery is exploding and is assuming its place in the new mainstream, but there is an issue never far from Kimura’s mind. That issue is the delivery charge.

Kimura: We’ve recently started to offer the delivery of vegetables and perishables in addition to meals, but the sticking point is the delivery charge. The delivery charge is a worry when people are buying vegetables, which have a low unit price. It’s something I am always thinking and worrying about – how much should we make the delivery charge, or whether it would be better to swallow it into the handling charge.

Consumers obviously prefer low delivery charges, but they are actually a surprisingly big cost for the company providing the delivery. The company has to devise a way to deliver the goods safely and make sure they are transported carefully, but the consumer doesn’t see any of the work that goes into that. Consumers love a low delivery charge, but it won’t be well received by the people making the deliveries.

The company previously trialed a low delivery charge. The number of orders coming in increased, but other problems arose too.

Kimura: We did a trial where we changed the delivery charge from the standard ¥500 to ¥200, but the delivery staff were unhappy about it because they saw it as us valuing the worth of their jobs at ¥200. When you see how hard they work to ensure deliveries reach their destination safely, you can absolutely understand why they feel that way. This dislike of low delivery charges is shared by our inhouse staff and affiliate delivery services alike. While it may be possible to increase the number of orders coming in by lowering the delivery charge, doing so takes away the pride of the delivery staff and also means you really have to keep delivery costs down. Deciding how much to charge for delivery is really difficult.

Although Kimura is conflicted about delivery charges, he says it is something that helps his company to stand out from other companies. Keeping delivery inhouse means he can truly understand the concerns of restaurants that are about to begin offering delivery.

Kimura: Recently the industry has been seeing companies from other sectors enter the delivery market; for example, a game company has begun offering deliveries. I think that’s great in and of itself, but there are some parts of the process on the ground that are impossible to visualize when you’re building your system. Because we do our own deliveries, we can foresee the barriers that will be encountered when a company starts offering deliveries, for starters, how much to charge for delivery, and that is reflected in our system.

As an example, think about a feature we have that allows our clients to set delivery capacity. This feature allows you to set a maximum limit for the number of orders that can be taken within a certain time period and stops any further orders from being placed if the number of orders reaches that upper limit. Having done deliveries ourselves, this feature seemed necessary, so we developed it. Other companies might imitate our features, but they won’t understand why or the extent to which such a feature is needed.

The attraction of an accelerator program in expanding the potential for collaboration

Following selection for the Mitsubishi Estate accelerator program, Sky Farm has worked with others to create TANOMO GIFT, the online temiyage delivery service. The idea for temiyage delivery is pretty unique; how did Kimura end up creating such a service?

Kimura: It actually wasn’t us who came up with the idea for TANOMO GIFT. Our original plan was to be a lunch delivery service, but we moved into gift delivery after someone from Mitsubishi Estate suggested that there might be greater demand for delivery services for temiyage. They explained that the younger employees in a company are usually given the job of arranging what temiyage to give to customers, but that because they have lots of other work to do, it’s a job they would rather not be doing, since choosing temiyage is stressful because you need to have good taste and because it takes a surprising amount of time and effort. That led to the creation of TANOMO GIFT, which allows you to order temiyage online, even for same day delivery. Before that conversation, I had never realized that buying temiyage was such an issue, and we would never have created the service without the suggestion of the people at Mitsubishi Estate.

Kimura says that coming into contact with Mitsubishi Estate through an accelerator program might be one of the reasons for the success of the collaboration. If the purpose of the encounter had been specifically to collaborate, the end result might have been different.

Kimura: When you meet with a big company with the point of the meeting being collaboration, you need to adapt your technology offering so it exactly meets the needs of that company. If you can’t adapt it the way they want, the collaboration will end there and then. On an accelerator program, however, the discussions take place on a much broader plane. The attraction of an accelerator program is that it allows for the exploration of a broad range of possibilities, instead of the restrictive process of proposing something that will either be accepted or rejected. In fact, our relationship with the people at Mitsubishi Estate continued after the end of the first service, and we successfully worked together on TANOMO GIFT.

Why can it be difficult for a startup to work together with a big company?

Kimura: Big companies are different to startups in that they have far more stakeholders, so it takes time for them to coordinate the necessary consent of various people. If the startup doesn’t understand that, it might be hard for the collaboration to work.
If I were to give advice to a startup that is thinking about collaborating with a big company, I would suggest that they should adopt a medium- to long-term perspective as far as possible. Because startups have limited funds and resources, they tend to think in the short term. However, big companies think in the medium- to long-term which means that startups and big companies are looking at different timeframes, which in the worst-case scenario can result in collaborations being aborted halfway through. Startups should do what they need to do in the short term and adopt a long-term perspective when teaming up with a big company.

Lastly, Kimura spoke with us about his vision for the future of delivery services.

Kimura: Delivery is only going to become a bigger part of our lives going forward; delivery will be the automatic option. And I think various companies will spring up to accommodate that. It won’t just be new companies; I imagine taxi firms and companies from other industries will get involved. If robotics and drone-based deliveries become a reality, the delivery market will only get bigger.

When this happens, famous stores that have previously not offered delivery will inevitably start to do so, which will make consumers happy. I think we’re going to become a society where you can order delivery even from little rural mom and pop stores.