Lining the hallway outside of the BuiltaMart releasing room, delivery riders wait for their numbers to appear on a large overhead screen. As usual, it’s a busy day here at the second floor of the GYY Building in Quezon City, Metro Manila. Every few minutes, the screen flashes and a handful of professionally packed grocery bags are handed off. The rider makes their way downstairs, hops on their motorcycle, and peels off. Inside, BuiltaMart staff members continue to read through order slips, ducking between tightly packed shelves and filling their baskets. To a far corner, a series of wall-mounted monitors display live camera feeds of several discreet chiller rooms, one set at the optimal temperature for fruit, another for vegetables.
At the center of this warehouse, Justin Tee sits at his desk, a crowded table wedged between crates of onions and fresh greens. In the midst of all the activity, an alarm begins to blare across the entire second floor of the building. “Oh that means we’re on fire,” Tee says. “It means we have a lot of orders coming in.”
Tee is the founder and CEO of BuiltaMart, an e-grocery startup that offers premium grocery items for same-day delivery anywhere in Metro Manila. Through their service, customers can shop online through BuiltaMart’s website—or through aggregators like GrabMart, Lazada, or Pick-a-Roo—and, depending on their location, expect their groceries to arrive in as little as an hour. Last week, BuiltaMart secured $3 million in seed funding. Led by Gentree Fund, with participation by DayOne Capital Ventures, Indonesia-based venture capital firm Alpha JWC, and a number of angel investors, the freshly-concluded fundraising round now places BuiltaMart on a growth path to upgrade and expand their services across the capital region.
BuiltaMart started their operations in May 2020, a few months into the rolling lockdowns of the early pandemic period. Along with co-founders Jan Marvin Tee, Jon Michal Tee, and Ben Alcazaren, they began with P3,000 (~$60) worth of goods stored in a chest freezer at home. It was an experiment at first, borne out of Tee’s experience running operations at Grab Philippines. Prior to working full-time on BuiltaMart, Tee spent three years with Grab, first as the head of operations for GrabFood, then leading GrabKitchens, and eventually leading GrabMart. Reflecting on those roles, he highlights a very particular pain point they grappled with as the spark that kicked off his new venture.
“The way [traditional supermarkets] are designed, they’re just not optimized for online operations. The things you see on the ground—the store layouts, the way they allocate stock, the listing fees—these things are actually quite hard to adapt.”
Tee explains that a regular supermarket is primarily optimized for the on-site retail experience. Customers need to be able to peruse well-manicured displays and navigate their carts through wide-set aisles. Not to mention, store locations need to have ample parking. Customer experience aside, all these make for incredibly inefficient use of space.
As community lockdowns continued, interest in their fledgling online grocery business continued to grow. Pretty soon, Tee says the scene at home began to get crazy. “We had converted the house into this mini-warehouse and at some point we just had too many drivers waiting outside. Eventually we needed to rent another house to store additional freezers because we couldn’t keep up with the load.”
By November 2020, the team decided it was time to find more formal accommodations. They rented out a 40 square meter space on the ground floor of a nearby office building, only to immediately outgrow it. By October 2021, they moved their operations to the building’s second floor, where they now occupy about 300 square meters, roughly 90% of the floor. Different rooms are sectioned off between specialty items, dry goods, grocery staples, non-food items, separate walk-in chillers for different types of produce and frozen foods, a staging area, and a releasing area. Riders waiting to pick up groceries line the hallways and work desks for Tee and his team are whatever tables aren’t currently being used.
“With BuiltaMart, we get to be smarter and cheaper with the way we operate,” Tee said. “Customers aren’t the ones moving through our warehouse. We have our own pickers entering the chiller rooms and taking things off stacks and shelves.”
According to 2019 data from Euromonitor, Southeast Asia trails in the global shift towards online grocery shopping. While Vietnam and Indonesia (a far second) lead the pack in e-grocery retail value growth, the region as a whole falls well behind the global average penetration rate of 2.8%. In the APAC region, only China and South Korea were found to reach the critical mass inflection point of about 5% in 2019.
But these projections have drastically changed in the last three years. Last month, Indonesian unicorn Traveloka joined the e-grocery fray with Mart, competing head on with services from other generalist e-commerce players like Blibli and Tokopedia. Meanwhile, other e-grocery providers have found massive success in partnering up with larger generalist players, as is the case with Chilibeli and Lazada, or HappyFresh and Bukalapak.
A number of factors have contributed to the rapid adoption of e-grocery solutions in Indonesia. These include a young, tech-savvy population, the need to migrate online in response to the ongoing pandemic, the entry of large B2C e-tailers in the segment, and the rapid digitalization of warungs (the Indonesian counterpart to Filipino sari-sari stores). In all, these factors contribute to an e-grocery sector that is expected to reach $6 billion in gross merchandise value by 2025. Locally in the Philippines, these same trends have led many investors to make big bets on the sector.
“I would say that while we still technically qualify under quick commerce, we don’t aim for the ultra fast delivery marks,” Tee said, referring to the gold standard most competitors in the space aspire towards.
In order to manage these lightning quick deliveries, Tee says players may either need to manage their own delivery fleet of riders ready to ship orders, or aggressively open locations in as many neighborhoods as possible—both expensive paths towards what he believes isn’t BuiltaMart’s end goal.
“Something I’ve learned in the past year or two of operations, and from past work experience, is that people we’re targeting aren’t really looking to get their orders in immediately. What they care about is they get the right items and a good selection of fresh produce. For most Filipinos, an hour is already considered fast. That’s the assumption we’ve built our model around,” he said.
“Giving ourselves a longer window for deliveries allows us more room for better selections, better quality. That’s the space we want to position ourselves in, even as we continue to scale.”
Just like in Indonesia, BuiltaMart has gained early traction through vertical partnerships with players like GrabMart, Lazada, and Pick-a-Roo. Today, the startup processes anywhere between 200 to 300 orders a day from their one Quezon City location. By regional standards, this represents a highly-optimized hub. So, in order to grow, Tee’s team is looking to invest in building new ones.
“Up until this point everything was bootstrapped,” Tee said. “We were squeezing every single peso we had to grow as sustainably as possible. When we decided we needed to raise money, we basically did cold calls. I wrote a three-sentence email and blasted it to every single VC I knew.”
Tee is thrilled to say that within 24 hours, they already managed to get a reply from Gentree, the private investment vehicle of the SM Group’s Sy family. Gentree provides companies across early and growth stages with the unique opportunity to connect with the Sy family principals who share deep consumer knowledge and operational experience across sectors such as retail, financial services, groceries, property development, and logistics. According to Tee, Gentree had been actively exploring the e-grocery space when they came across his three-sentence pitch.
Over the next month, DayOne Capital Ventures, Alpha JWC, and a number of key angel investors joined in. In total, BuiltaMart had almost $3 million in seed funding committed.
“Our goal with this new capital is to grow our business about 5-7x in terms of volume. In order for us to hit that, we’ll need to open more hubs over the next two years,” Tee said. “Ideally, we’re planning to grow slower. That way we can ensure that we perfect the model first, rather than scale a flawed one too quickly.”
With potential locations already being eyed, BuiltaMart aims to scale up evenly across Metro Manila to allow for a more consistent experience for customers, regardless of where they’re ordering from. In addition to getting closer to their customers, BuiltaMart also hopes to put their new capital to use in improving both their technology and their operations through more meaningful integrations, automation, and an improved customer-facing platform.
“For us, our tech strategy is divided into three things. First, building collaboration tools so that all channels work seamlessly with our system. And second on our priority list is improving operations with more automation,” Tee said. As for BuiltaMart’s third priority, they’re looking to invest in improving their own customer-facing platform.
Looking to the near future, Tee says his team is already busy scoping out their next hub locations. Should all go well, they’re open to exploring a potential pre-Series A round in the coming months to accelerate their growth timeline even further. “The funds we already raised can get us to our goals, just at a slower pace,” Tee said. “But the way this game works is that if you’re faster, you have the advantage in terms of securing locations and defending your turf. This will all be dependent on how successful our next few hubs will be.”