Start-up Bodega learns an important branding lesson; apologizes after Internet outrage

Start-ups like to frame themselves as plucky upstarts intent on toppling bigger, entrenched rivals. This David-vs.-Goliath narrative has been used by tech firms to vilify corporate giants such as telecoms, banks, razor manufacturers and taxi companies.

But on Wednesday, a start-up called Bodega found out what happens when a tech firm appears to go after the little guy — in this case, the humble corner store.

Bodega’s business are 5-foot-wide pantry boxes loaded with household essentials that the company intends to install across the country. The cupboard automatically charges your credit card for things you remove from it.

It’s basically a fancy vending machine or hotel minibar, packed with items such as La Croix, coconut water, protein bars and instant noodles, and unlocked with a smartphone app.

But with a name nodding to New York City’s ubiquitous corner stores and a logo evoking the popular cats that inhabit them, the company quickly became the subject of social media scrutiny after a Fast Company article suggested the concept, if successful, would put traditional mom-and-pop corner stores out of business.

In an apology posted online Wednesday, co-founder Paul McDonald said his company is “definitely not� trying to do that.

“Despite our best intentions and our admiration for traditional bodegas, we clearly hit a nerve this morning. And we apologize to anyone we’ve offended,� McDonald wrote.

“Corner stores have been fixtures of their neighborhoods for generations. They stock thousands of items, far more than we could ever fit on a few shelves,� the post reads. “They’re run by people who in addition to selling everything from toilet paper to milk also offer an integral human connection to their patrons that our automated storefronts never will.�

The company, founded by two former Google employees, also responded to criticism that it was appropriating the name of a class of businesses often owned by immigrants and people of color.

“When we first came up with the idea to call the company Bodega we recognized that there was a risk of it being interpreted as misappropriation,� McDonald wrote. “We did some homework  —  speaking to New Yorkers, branding people, and even running some survey work asking about the name and any potential offense it might cause. But it’s clear that we may not have been asking the right questions of the right people. Despite our best intentions and our admiration for traditional bodegas, we clearly hit a nerve this morning.�

Short of promising a name change, McDonald wrote that the company will “commit to reviewing the feedback and understanding the reactions from today.�

McDonald and co-founder Ashwath Rajan received angel investments from executives at Facebook, Twitter, Dropbox and Google, and secured funding from a number of notable venture capital firms.

But on Twitter, at least one prominent tech investor criticized Bodega for its botched rollout. Spark Capital partner Nabeel Hyatt summed up Bodega’s issue as one of branding, saying it’s the “best example yet that framing your start-up properly matters.�

Andrea Belz, vice dean of technology innovation and entrepreneurship at the USC Viterbi School of Engineering, said it seemed like a case of a company going to market without fully understanding that market.

“I’m fairly certain that when you want to modernize an industry, you don’t want to start by offending people,� she said. In this case, launching their product with the implication that they’re going to replace the local corner store doesn’t particularly ingratiate them to their potential customers.

When a start-up is looking to solve a problem for which people already have a solution — in this case, nearby places to buy things — positioning is particularly important. Belz pointed to the Bodega co-founders’ former employer, Google, as an example of a company that displaced earlier search engines by positioning itself as sleeker and easier to use.

She said Bodega’s much-criticized rollout could dissuade people from trying out the product once it reaches their area.

But Jeff Scheinrock, who teaches entrepreneurship as faculty director of the Applied Management Research Program at the UCLA Anderson School of Management, said founders and investors must have known the name would get people talking.

“The name is controversial, and I think they got what they wanted out of that,� he said, pointing to the news coverage, including this report.

Bodega’s map of its existing locations shows it’s so far available mostly in Crossfit gyms, hotels and high-end office buildings. The name, he said, suggests a place that’s friendly, convenient and accessible. Bodega, he said, is trying to replicate that positive association in a different physical location. “They’re not in the communities where bodegas are,� Sheinrock said.

Bodega is far from the first vending machine start-up to hit the market. In the program Scheinrock runs at UCLA, two student groups have developed similar concepts, including an on-campus juice vending machine and a service similar to Bodega, but targeted at fraternities and sororities.

He said Bodega still has to contend with a lot of scaling issues, including getting people to download the app and coming up with a logistics pipeline to service all the pantries. But as for the name, “I don’t think this is the death knell for Bodega.�

Still, it will have to win over some harsh critics.

When contacted for comment, Bodega Cats of Instagram, an account that posts photos of corner store cats in their natural habitats, responded: “Hissss.�

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UPDATES:

5:30 p.m.: This article was updated to include comment from Andrea Belz, the vice dean of technology innovation and entrepreneurship at the USC Viterbi School School of Engineering, and Jeff Scheinrock, faculty director of the Applied Management Research Program at the UCLA Anderson School of Business.

This article was originally published at 2:20 p.m.