THE INC. LIFE

Two Ex-Googlers Compete for the Worst Silicon Valley Business Idea

Other than misunderstanding history, retail, and social attitudes, the idea is still bad.

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BY Erik Sherman - 14 Sep 2017

PHOTO CREDIT: Getty Images

Some entrepreneurs have brilliant ideas that could remake industries. Some ideas seem downright silly when you consider how much they charge for what they do. Then there's Bodega, a company that seems like a rehash of an old idea combined with branding that has caused the Internet to explode with outrage as people became aware of its existence this week.

The company, started by two people who previously worked at Google, just received $2.5 million dollars in a first investment round from First Round Capital, Homebrew, and Forerunner Ventures. The company is "building hardware, software and supply chain operations to create delightful automated stores that are only a few feet away and always stocked with what you need." Kiosks as some media outlets are calling them. I will stick with vending machines, because that is exactly what they are.

New school vending machines

Vending machines are far less glamorous than delightful automated stores and get to the point of the business model: get machines placed in well-trafficked areas, stock them with what you think people will want, make sure you have people running around refilling the machines, operate distribution centers to send out the goods, perfect purchasing processes to keep costs low, and remember that the location is going to want a cut. Oh, and keep prices reasonable enough that people are willing to buy form you and not get what they need at lower prices in stores.

There's nothing wrong with vending machines. You'll find them at companies, hotels, gyms, and laundromats. They can offer things right when people want and need them. Calling yourself "obsessed with the last hundred feet," apparently the distance some distressed folk dread covering by foot to get what they need, doesn't make the underlying business any different. Neither will Bluetooth, Wi-Fi connectivity, or any other technical embellishment.

Former Google group product manager Paul McDonald told TechCrunch, "What we're trying to do is introduce a third option, a new way of buying things." Data analysis will show what people buy, what they don't, and then suggest what should be stocked.

Uh, right, vending machines with the people who service them. Which have been around for a long time. But the vision of Bodega, as expressed by McDonald to Fast Company, is grand -- and destructive: "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."

Tick off the world

Bodega wants to eliminate bodegas, otherwise known as corner stores, convenience stores, or even spas, if you're of a certain age and from the right parts of New England. That set people on social media fuming.

That's a lot of negative reaction. But the blind assumption that convenience is all forgets the need of a business to fit into a social structure. When you try to cut out the social and economic opportunities and ties, you undermine what allows businesses to succeed in the first place.

Then there are the business model problems

All that aside, the notion that automated boxes might replace centralized stores completely misreads how retail works (and ignores that vending machines haven't been able to pull that off).

People want certain things, yes, and maybe you cut prices to catch that business, but a shop of any kind needs the opportunity of selling this, that, and the other thing when people remember they need it. I've personally seen businesses that tried to shrink themselves to only what was most popular fall to the wayside. Can you imagine what supposed store-killer Amazon would be if you could only get a small selection of goods? Nothing is what it would be. No one would talk about it because it would no longer exist.

Bodega, or whatever they change the name to after they realized what a hornet's next they've kicked (to say nothing of how frequently the word bodega is used in businesses -- at least five other companies in Crunchbase's startup list include it in their names), will need to learn a lot more about retail and buyer psychology than they apparently know. Folks, if you want to great a great business, you have to get out of your narrow piece of the world. That goes triple if you're in Silicon Valley. Unless you want something like a hugely overpriced juicer or a counter-top convection oven that costs as much as a higher-end laptop.