Ep. 735 Roi Kliper | Get US Market Ready With Italian Wine People

Thanks for tuning into my new show. Get US Market Ready with Italian wine people. I'm Steve Ray, author of the book how to get US Market Ready. And in my previous podcast, I shared some of the lessons I've learned from thirty years in the wine and spirits business helping brands enter and grow in the US market. This series will be dedicated to the personalities who have been working in the Italian wine sector in the US, their experiences, challenges, and personal stories. I'll uncover the roads that they walked shedding light on current trends, business strategies, and their unique brands. So thanks for listening in, and let's get to the interview. Hi. This is Steve Ray, and welcome to this week's edition of Get US Market Ready with Italian wine people. I made a presentation at at wine to wine a couple of weeks ago talking about e commerce, and and really that was the precursor presentation to this interview I'm about to give. And I wanna highlight it to everybody that this I think this is probably the most important session I've done so far in terms of helping listeners grow their business. Both growth of the business is profitability and long term competitive edge. So I hope this sounds interesting, to you. So strap in because we got a lot of cool things coming at you. My guess this week is Roy Clipper. Roy is the founder and CEO of city hive city hive dot net, actually. So, Roy, why don't you give us a little background on you, your history, and how you got to here. If we're gonna hear from your accent, you're not from New York. Thanks for having me, Steve. It's a it's a pleasure. I'm excited to, to share some of our thoughts about, technology in the industry. I'll start by, ensuring a brief bio of myself. So I'm Roy. I'm in Israel. Did my PhD in computer science and machine learning at the Hebrew University spent quite a few years touching all kinds of technology. Around data, software, hardware in a range of different industries. And then in twenty fourteen, came over to New York to the post doctorate at Cornell Tech. Cornell ended up being the first investor in City Hive that launched a Digital transformation platform for the wine and spirits industry in two thousand sixteen. City Hive is a digital infrastructure platform that powers today twenty five hundred over twenty five hundred retailers in over eight hundred cities, thirty nine states is in work as well with, all the top distributors in the country and all the top suppliers in the country. To create an ecosystem that is, powerful and effective for all the constituents in this. I've seen a lot here. So, to my listeners, I'm sure we all have heard that kind of a speech before, and this is the new end to end this that and the other thing, technology thing, but, frankly, for this industry, it's it's something new. So let me give you kind of an intro before we get into the details. Number one, this is probably going to be a longer than normal interview than I normally do, but I urge you to stick it out and listen closely. We're gonna go deep into e commerce, DTC, BTP, and b two b, and all of the things that hang off those, but it's gonna take a little while longer to go that deep. So strap in and settle down because you're going to understand e commerce and the future of retail wine and spirits, as well as the whole wine and spirits industry, in an entirely new and strategically driven way. So instead of tech driving, wine and spirits, it's wine and spirits driving tech, and it's that adaptation that I think set City Hyve apart. You know, one of the questions I get asked all the time, in fact, I gave a presentation on e commerce at a wine to wine in verona last month in October. How come I can't sell direct to consumers as an export brand, where domestic US wineries can? And my feeling is I think that question is misstated. It should really be how can export brands get individual consumers to buy my brand in a simple two to three click branded experience. And that's really the the environment that Royce created. The important distinction between this and, city high and third party facilitators like drizzly, Amazon, for that matter, is the who owns the data, the customer ownership and the strategy of Roy's gonna talk more about this creating equity in business through customer ownership. So it's all about trading transactions for for equity, and reflected in the customer acquisition cost versus third party facilitators. In a word or two words, he says it's the fourth tier. So can you explain the whole point about equity? The what happened in the industry over the past few years in the retail industry, at least, is a massive migration of equity from the traditional players in the retail space in the one experience business from licenses on and off premise to fourth tier. And the transaction was very simple. We give you transactions. We give you cash flow. You give us your customers. You give us your equity. So that created some massive equity for those four tiers. Notably, the, acquisition of a drizzly for over a billion dollar by Uber is a a sample of such a generation of equity And and the question is where did that equity come from and and the answer is very simple. It came from the traditional tier, and it came in in the essence of customers moving from being the, owned, quote unquote, by the traditional retailers having a direct relationship with the with the retailers and repeat, purchase, etcetera, to being owned by the fourth tier. Where the retailers take a secondary seat and are massively diluted in the value of their business and to the point of being at risk of being completely outplayed. We're seeing today a similar play at the distribution level where additional license distributors that are used to owning their customers, their customers being on and off premise institutions for the most part are engaging in a transact in a transaction where they're transferring, equity, meaning customer ownership from them in return for transactions, and they're doing it in a very similar way where, of what, Leslie and minibar and, saucy have done in the retailer. Only the players now are, would say, to a certain degree, probably, and maybe seven fifty and others. That's that's the play. Cash flow for equity, and it spells a dangerous future for retailers when we're speaking about retailers also spells this dangerous future for a for the distributors. And city hive in in that case kind of presents an alternative, and we've done extremely well. For the retailers that work with us in being able enabling them to retain the customer relationship and then consequently generate equity and value in their business. And we're doing the same today with the distributors and and the of course, the the entire ecosystem and the industry. So that's the theory. Okay. And, basically, it it it puts retailers back in control of the relationship with the customer, but that doesn't mean they're not that they're the only ones engaging in communication with that customer. And the idea here is, yeah, you wanna pay to get a customer, but you don't wanna pay to get a customer two and three and four and five times over. You wanna pay once and then remark it to that, and the system allows you to do that. On the flip side, it enables retailers to be innovative and to differentiate and add value to their stores in a profitable, measurable, and scalable way. Again, I know big words theory, all that kind of stuff. Royce says turn cash flow into equity. That's really what's going on. I'm gonna jump ahead and say, I did an interview with Gary Fish, who is Gary's wines in marketplace in New Jersey, one of the retailers that are on the system. And I asked him why he liked it. And he said, listen. Trisley's great. It helps me sell bottles. Cityhive helps me build my business. And that's the fundamental piece. So much for the theory. Let's break it into pieces. And, let's take them individually. First, we'll start with retailers and the benefits and structure, then we'll get into a supplier benefits and and how they work and then ultimately distributors because everybody participates whether they like it or not. Everybody contributes either good or bad, again, whether they like it or not. So this is not an option. The issue is you have to participate in this ecosystem because you're already in it. So Roy, talk about the the retailer benefits and structure. Sure. So CDI is not a consumer facing company. CDI is an infrastructure company. As as such, we're providing the most advanced infrastructure in the industry, two retailers, and giving them significant capabilities to engage in the digital domain. And digital domain includes e com, obviously. And has been, you know, a dramatic component a in twenty twenty with COVID, with a COVID breakout and and all that. But digital doesn't necessarily mean only e com digital means the ability to communicate over digital is fair with your customers through significant capabilities of email marketing, text marketing, the ability to offer loyalty plans, club membership, subscriptions, event management. All that, all those capabilities are significant in the ability of a retailer to build a successful business with repeat and loyal customers. So retailers on the CTI platform are not only connected to the entire ecosystem of their distributors, suppliers, and consumer through DHL domain, but they own all the data And we're giving them automation capabilities, segmentation capabilities out of the box. They don't need to hire expensive platforms and personnel to extract value. And grow their business. CDI customers have grown tremendously over the past five years, far outpacing the the retail landscape. And they've also been able to reverse a trend that has happen in industry where customers have moved to a up and coming marketplaces and have left to a certain degree the relationship with the traditional retailer were putting the ownership of the customer back in the hands of retailers. So one of the things, basically, at its heart, it's a CRM tool. But instead of it's a way for retailers to participate in e commerce right from the scratch with something that is proven market effective and works. And the setup is free. Somebody starts up, a retailer can sign up and and you provide the service of the e commerce for free. But the whole e commerce site is really predicated on their inventory, their business, their customer base, who they are, and how they shop. And it's really kind of, agnostic as to how the shopping occurs, whether it's online, whether it's in store, whether it's curbside pickup, whether it's delivery by third party app or delivery by you know, someone locally in in a car. But but it gives you and and I've had the chance to look at this firsthand. It's the ability to use the dashboard for a quick precise snapshot of their individual store data in real time, looking at real time inventory, and see what's trending and be able to react and exploit that intel. Even if you're not a computer person and you're, you know, busy doing all the other things that a store owner has to do, you can manage this. The question I'm gonna ask Roy is can you give me a sense of the scale of City Hive, number of customers, number of people that you reach the size of the total transactions, that kind of thing? So we're today serving over twenty five hundred stores in eight hundred and twenty four cities, thirty nine states, serving by reach, probably eighty five percent of the US population within, an hour. We have about four million end users, consumers, drinkers on the platform. We're also working with about, at a thousand suppliers, four thousand five hundred, brands, some, a few hundreds of distributors all over the country to create an ecosystem that feeds on itself to give you an example of kind of the scale of things that are moving in the system. The system automatically generates email engagements and texts, in the millions per day. So instead of, doing it the old way where, a retailer would, have one of the employees write me an email blast over a few days. Describing three or five items that they've, put on the shelf, the platform is able to select five items from the inventory automatically match them to the profile of the person and then send the personalized email to the person that is on the, database of the particular store. And the system does this about a million times a day So those are not just the reach out that are blessed, you know, highly personalized and not personalized in the sense of hi, Steve. Here is the same email as everybody. It's hi, Steve. Here is what you bought recently, these are some offers that we think may match you, and that's done completely automatically, which means that retailers can really scale their business, and it matches the capabilities of much larger businesses that have traditionally had access to such such capabilities like Amazon, like Walmart and others. Now at the hands of, you know, anywhere between the moment, but corner store, to a chain of four, four locations, in New Jersey or Tennessee and up to, a change with, over a hundred locations. That translates effectively over in twenty twenty and twenty twenty one to over a a half a billion dollar in sales and a tracking of a almost ten billion dollar in sales, in store that are feeding as data to our engine of recommendation and marketing and and making our customers a a power in the industry. Let me give you a, a snapshot of what that looks like in real life. I know a retailer in Los Angeles, the liquor fountain, the guy owns it is Trevor Hoffman. Single store. He's the primary guy in the store. He has a couple couple of people on the floor to help, but he's the one working the cash register and getting the products in and signing out supplies and all the things that you have to do in running a store, which prevent you from being a smart marketer. In this case, he was looking at the the dashboard of the database, and he found a customer that popped out didn't pop out of the woodwork, but was apparent to him. And the customer had bought fifty five times in a period of two years, had spent over two thousand dollars and never walked into the store. He had never seen that person. Now he would never have known that that person exists because the guy was buying e commerce, but it turns out It was all Burban's and, you know, special edition, rise, and and spirits of that sort. And he, that person, by himself, was an influencer for all other people who are really passionate about Burban's and Rise and all those things. And so the store became a specialist in that and then became known as a specialist in that to find out he's got this pearl of a of a customer who is marketing the store on behalf of the retailer at no cost of the retailer and the retailer's making money and increasing margin on in the process. That's the way it works back and forth that everybody benefits from it. And in addition to the retailer and the consumer benefiting, it also impacts the supplier and the distributor along the way. One point I would make I forgot where I saw this, but I call it a fun fact. For three consecutive years, beverage dynamics retailer of the year was a City Hive customer, and that's not a coincidence. And what I found is that the retailers that we work with that are ahead of the game, whether they're small momma pops like the liquor fountain in Los Angeles, all the way up to ABC with a hundred and twenty six stores in, Florida, the resources of, or the the abilities of the tool are really, really well designed. So let's change direction a little bit to, how the suppliers can benefit and and engage and and think if you would about a producer in Italy who's exporting. Let's say they already have an presence in the United States, one I interviewed the other day is in New York, New Jersey, Illinois, and Pennsylvania. So they're, in the US, they could upload their information into the city hive system. You have a a a simple way to do that. I believe they just need to join and, they can, upload and call I call it optimize how their brand is present there. How does a supplier leverage the strengths of the platform? We have a few ways we work with suppliers, in a few different efforts. We make for them and with them. The first one is you described, Steve, is in managing their, media assets. So the first the first step of, creating a, significant presence, online, but not only online, we'll we'll touch on how online affects, in store. Is having a a popular presentation, which includes, probably ballo shots, shot from a lifestyle images, maybe videos, recipes, medals. If you got any older, all that information, is easily digestible by city hive. It's a free port at full supplier supplier. You need to sign up. Go to our website, secure dot net, click supplier, sometimes hidden, but but there, I'm sure you'll be able to find it. Sign up, you sign up with your brands and bottles. What's happening once you do that is that we immediately make that data available for retailers automatically. So retailers on the platform immediately have the bottle shots means that the product is well represented. The product is well represented. It's forty times more likely to be sold online. And then it's also made available through API to customers on the on the retail side that are not city high customers. And That means that you're in a good, in a good position already. Now that's a first step, but it's it's it's a very strong statement. It means that you're investing in your in your brand and you're making the effort to make your retailers successful. And that in in turn, already makes your ability to put the product on the shelf of the store and actually enjoy install transactions dramatically higher. So that's the first thing. The second thing is that that we're doing with, with suppliers is we're enabling a, a new way of direct to consumer e com capability through the retail network, which means that the direct to consumer effort is three is a compliant with the three tiers and basically allow suppliers to generate demand at the consumer level that is fulfilled by the retailers. And that's not gone unnoticed with the retailers that see that effort. Stay that again because I think this is absolutely critical and answers the question retailers have. So say that again. The way that it it manifests itself is that a supplier would build a website or or a a digital venue where they would sell their product, the product would be the the complete transaction would happen on the supplier's website, but the retailer would get the transaction, but not only the transaction because spoke about it earlier, they will also get the customers. So basically, suppliers is working on behalf of the retailer on generating transactions, cash flow, as well as equity, where this gets interesting for suppliers and where it differentiates from other capabilities of doing a quote unquote three tier compliant DTCs that we are actually sharing all the information of the customer, with the supplier and allow them to engage in the holy grail of, brand marketing, which is customer persona re marketing, retargeting, to drive customer acquisition costs down and move more products through their own e owned ecom three tier compliant venue. We have today about we have today about a hundred different brands on the platform. And that that leaves huge list of of brands waiting to go online with this. And what's nice about it is that if you have good distribution or if you don't have good dis distribution, if you have good distribution, we, are operational off the bat supporting you in in delivering to over eighty five percent of the US population in probably under an hour. If you don't have good distribution, this is a huge vehicle for you to get distribution because the retailer of CA is making an effort, putting the budgets behind yourself, generating the demand we almost have a guaranteed supply. I I'd like to draw a correlation between this. It's it's an alternative way to augment sales in a in addition to and complimentary to what distributor salespeople are doing and calling on retailers. The corollary to that or the parallel in the the world that we all came from or that I came from is it's the equivalent of not just getting a bottle on the shelf. It's putting it on display in the front of the store. And so the real estate on the screen that the consumer sees, if it only shows three or four brands, those brands are gonna sell, I'm making this up at ten or a hundred times, rate of sale or velocity than products that are not that visible. So it's a way in comparison to brand ambassadors of augmenting the sales of of the distributor Salesforce without having to pay that level of support and, you know, salary and all the other things to support one brand ambassador who at best, you know, can really influence maybe forty, sixty stores, hundred, is often on their list, but they're not really working with a hundred stores. This is is not limited in terms of the kind of reach it can apply. So it becomes very cost effective. It becomes very scalable. It becomes very individualized and customized to the retailer, and it also ends up being of greater value to the consumer. Distributor jumps into, and they provide value because it it's it's freeing the system up to do let the system do the things the system does well for re for wholesalers, they're logistics people. That's what they do. Getting the product to the retailer is the primary service they provide. The value add is in selling. So instead of putting the burden on the distributor salesperson to do the selling, you give it to you take over that responsibility yourself and it's the equivalent as I said of a brand ambassador, but on a much more affordable, scalable level. Steve, I want to touch on on one point that I think kind of, like, is extremely important here. When you're when you're, operating a, your own D2C with CTI, you have complete control over what happens on your website. So think about the the point of comparison here in which many, suppliers take is putting a button that, leads to a Dursley or leads to a minibar, which if you think about it, you're investing the money dialing people to your website, then leading them to another website, and then you lose control and you lose visibility. You may be a a very prestigious brand, not naming names, driving to traffic to drizzly, then the person arrives at drizzly sees some other flashy product adviser. You basically sponsor the purchase of your competitor. You get no visibility and no control over what actually happened. When you're keeping the transaction on your website, you not only get to control the entire end to end experience potentially upsell. You also get to keep the customer information. And that means that the next time Let's say the first transaction cost you a dollar to generate the next transaction is the cases with remarketing. They're gonna cost you half and the third one is gonna cost you ten cents. And then you're building equity in your business as a supplier because you're doing what brands really like to do, you know, something struggling in a wine experience, really engage with consumers. So on a practical basis, personal one, I have a client, the brand is called In vivo X SJP, the SJP for Sarah Jessica Parker. It's a Savignon Blanc from New Zealand. We participated in this program through this year, and it's proven to be remarkably successful in helping us drive distribution to have retailers see consumers are asking for it, then they order it. And then all of a sudden, we're growing distribution without having to rely solely on the import sales structure and the distributor sales structure to push that product out. So it's a pull strategy rather than push, and that's much stronger for the long run, and it also breeds retailer loyalty because they see the brand helping their store, not just helping the brand. And we think that's really powerful. Okay. So the third leg of this stool is distributors. Now how do they benefit? Or how do they participate? So one of the strongest capabilities that CDhi has is to come to a, a, a, an existing, system and integration, which is what we basically did at the retail level. We integrate to over four hundred different POS systems, pull that information, pull the customer information, and then kind of open up a range of capabilities to engage with customers. What we did on the distribution side is very similar. We work with a range of distributors, integrate to their existing systems, no longer POS system, ERP, heavier legacy systems, integrate to their platform, see inventory availability, portfolio, and, and pricing. And at that point, we're able to create different experience anywhere between a full blown b to b experience, meaning the ability of a distributor to sell to their customers, customers being on and off premise establishments. So full blown B2B in what we call the consumerization of B2B. So the consumerization of B2B means that At the end of the day, the people that buy the wine at the store level, besides being wine buyers on a professional hat, they're also consumers once once they take that hat off and go home. So they used to being to to a, buying experience that includes digital communication and automatic invoicing and all that other stuff that has not existed at least to a great degree in the in the B2B area. We're taking all the capabilities that we've developed on the retail side, putting them plug and play on the B2B, and we're already working with some of the biggest distributors on the, in the industry, in the United States, as well as elsewhere on powering their B2B. Addition, in addition to that, the fact that we have visibility into the inventory of, distributors allows us to open up capabilities like a product that we're operating, which is called extended shelf, which basically allows retailers to sell products without carrying them on the shelf. So they would put a digital item on the shelf without actually buying it without actually putting the capital investment into having it on the shelf. But consumers can buy, and we're so deeply integrated to the distribution so that we could give an exact estimation as to when the product could be at the hands of the consumer. Estirmation being, hey, buy it now, get it by Wednesday. Afternoon. The other phrase for that I've heard it described as the endless aisle, and that's kind of the basically infinite availability of products. In this particular case, we're saying it's not infinite. It's based on the brands that are available for sale in that particular state. So the inventory is gonna be different when somebody from Kentucky is looking at it than compared to somebody from Colorado. The other way to the other phrase I've heard is virtual inventory. The bottom line on all that is it's allowing everybody to participate in a way that they're making money. They're servicing their customers better. They're being more efficient in what they're doing. And then they can focus their resources on the things that they do best, which is the customer relationship part and service part. So it's taking noise out of the system and in a way at both the consumer level we were talking before and also at the distributor level here. The interface is really wonderful, and it's very different from anything I've seen so far in the industry. So, you know, as is always the case, I work with a lot of new products. And whenever you're talking to somebody about new products, you know, they say, well, you know, if it's successful, I'll put it in. And the way they're gonna judge whether it's successful is if somebody comes in asking for it, and the owner of that store hears about somebody asking for it. And this is an interesting way to drive that home because you can drive it home not only on your branded website, which goes through the store. The transaction goes through the store, but also on the store's website as well because it pops up in their dashboard to say that, hey, this is an opportunity that Here's these people who bought Marlboro Avenue blocks, for example, and here's an opportunity or an offer from Envivo X S JP. So, the old when somebody asks for it, I'll put it in, is an addressable objective of this system. And frankly, it's one of the best I've seen in years in in in contrast to the one that most people are using now, which is brand ambassadors, which are not scalable and frankly these days of questionable effectiveness. So we're talking this week with Roy Klipper, who's the founder and CEO of, city hive city hive dot net, which I think is a groundbreaking platform that's beneficial to everybody in the industry, and that's something we really haven't seen. So what I like to finish my interviews with Roy is a what's the big takeaway? What can somebody who listen to this podcast go and do right away Most of the time, it's a lot harder to narrow down and focus on the one thing they can do. In this case, I think, it may be pretty simple. What do you think is the big takeaway? So one thing that we haven't mentioned that that CDI, the offers is a value first So we don't require any, upfront or hardly any upfront cost to try to kind of jump into digital, and that's true across all three tiers. And we live in a world where digital is no longer a, and if it's a, it's a, it's here and it's here to, to stay. And so CDI provides a very, very good option to kind of jump right to it without taking financial, or technical risks already very well established in the industry with all the the the best players, using it. So that's the first thing that I would, I would say go try and and, you know, value is is apparent immediately. The second thing that I wanna say is, and stress. And again, I've stressed a few times over this, a podcast. Custom ownership is is key, and it's key across all layers of the industry. It's key for the retailers to own their their customers, the consumers. It's key for the distributors to own their, their customers, which are the on and off premise retailers. And it's key across the suppliers where they have an interesting interaction across who their customers are, which, and, effectively, are the consumers, how they can work with consumers, in a three tier compliant compliant way. The the the last thing is that CDI is an infrastructure company, and so we are very open to using the infrastructure in very, very creative ways. That in many cases come from our clients. So we have a lot of capabilities driven by our growing network, and ecosystem, and we welcome a conversation with Anyone that is doing anything interesting in the industry. So if somebody wanted to reach you, how would they reach you? Oh, so, obviously, go to city dot net. All contact details are there. You can also reach out directly to me. My email is r o I k at city dot net I do my best to answer emails coming my way, but, have to say that current snapshot in my, inbox is fifty four thousand one hundred and twenty six unanswered email. So on social, then how can people connect and, engage with you? Feel free to connect with me on LinkedIn on Twitter. My, Twitter handle is clip, under scope, air, and follow me there. So that is not dramatically active on a on social. We kind of, like like the status of being the best kept secret in the industry. And, but again, making steps with Steve's and and with Steven and others to kind of change that and kind of get out of our, box. And to be clear, I have no vested interest in this, only because I'm a just that I'm a supporter of the concept because it helps everybody in the system basically remove noise or remove friction is kind of the tech term everybody uses from the system, and everybody benefits. And I can't think of a way that anybody gets hurt. So it's a competitive, opportunity for retailers to say, how can I compete in a world that's dominated by becoming dominated by big box retailers even in the wine and spirits market, not in every state, but in many? And when I'm dealing with a limited footprint of, real estate in the store and how many brands I can stock. Well, instead of complaining about those object objections, here's a way to solve those. In fact, solve them preempt them from being obstacles in the first place. So for everybody thinking, how do I expand my business in the United States? City Hyve is something to think about. And if you're not in the US yet, think of it as a tool as a way to test market, get your product in here, and document the rate of sale or velocity so that you can present your brand as an existing success to the people who are gonna decide your future, importers, distributors, and retailers. It's a lot easier for them to say yes when they show that the product is already successful. That's the philosophy I promoted my book. It's the philosophy that's been successful for me as a consultant, and we think, this is a really powerful tool that you can use. And the best part is Come on, guys. It's free to participate. They'll do a whole website for you customized to your store at essentially no cost to you. How can you say no to that? Which is why I think it's great. So, thank you to Roy Clipper, CEO and founder of city hive dot net. If you have any questions, you can always, reach out to me steve at bevology inc dot com. And, I look forward to getting some feedback from all of our listeners out there. Thanks again for listening, Roy. Thank you much for for being a guest today. I enjoyed it. Steve, it's been a pleasure. Thank you for having me. And tune in next week, and we'll have another fabulous interview. Thank you again for listening at Steve Ray and signing off on get US market ready with Italian wine people on the Italian wine podcast. This is Steve Ray. Thanks again for listening. On behalf of the Italian wine podcast. Hi everybody. Italian wine podcast celebrates its fourth anniversary this year, and we all love the great content they put out every day. Changing with Italian wine people has become a big part of our day, and the team in verona needs to feel our love. 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