Tortoise, a startup that began in 2019 with a mission to rebalance scooters for shared operators like Spin and shifted last year to robotic last-mile sidewalk delivery, is pivoting yet again in a new direction: mobile smart stores.
Over the next few months, Tortoise will launch up to 30 smart stores, which will function like vending machines placed on top of what used to be Tortoise’s delivery robots, with 17 retailers across the U.S. and one European launch partner. Rather than charging customers on a hardware-as-a-service model, Tortoise is using a take-rate model, wherein it will provide the robot and software for free and take 10% of gross sales.
At worst, Tortoise’s rather rapid pivots might be viewed as the lurchings of a company that can’t deliver on its stated business goals. At best, however, they demonstrate the agility of startups to explore new spaces quickly and as the market demands.
“You have to know what hyper-growth tastes like, and you have to have the humility to know what the fake version of it tastes like,” Dmitry Shevelenko, Tortoise’s co-founder, told TechCrunch. “It’s hard and it’s painful to make these pivots, and you look like an idiot when six months ago you were telling the world last-mile is the next great thing, and now you’re saying something else, but it’s better to suffer some of the indignation of that than to keep doing the same thing and expect a different result.”
Tortoise was underway with a variety of last-mile delivery partnerships with companies like Albertsons, the grocery giant that owns Safeway and Jewel-Osco, when a trend started to emerge. Whenever the robots were parked in front of a store or at a corner, passersby on the street would try to interact with them and even try to purchase goods from them. After collecting feedback from the potential customers, a lightbulb appeared over Tortoise’s head, one that illuminated the potential for serious growth in a way that last-mile delivery simply couldn’t, according to Shevelenko.
“In last-mile, you have to go from a store to any destination within a three-mile radius of that store, and the brutal reality is you’re playing whack-a-mole on various edge cases that come up when you’re going places you haven’t been before, even when it’s remote-controlled at a low speed,” said Shevelenko, noting that at least four of Tortoise’s smart store launch partners are converts from the startup’s previous last-mile delivery business.
Offering customers incremental top-line revenue makes it far easier to scale up than promising them the theoretical bottom-line delivery savings that are being sold by robotic delivery companies, the co-founder continued. One of Tortoise’s customers, Bake Sum, a bakery in Oakland, California, has been putting its smart store in front of its retail store when it closes for the day at 1 p.m. until around 4 p.m. Within those three hours, Bake Sum has been able to generate an extra $400 just from people passing by, said Shevelenko.
Implementing mobile smart stores is also much easier to pull off from a regulatory standpoint than sidewalk delivery, and it allows Tortoise to enter markets that are unfriendly to sidewalk robots, like New York and Chicago. With this model, Tortoise is able to launch with companies like Edith’s, a Jewish comfort food brand in Brooklyn, and Go Grocer, a chain of Chicago-area corner stores.
To get Tortoise’s existing setup prepared for this new model, all the startup had to do was integrate NFC credit or debit card readers on the inside of the container lids, allowing customers to walk up and tap to pay for anything from a box of pastries to a new pair of headphones, according to Shevelenko, who said the company has already processed over 800 transactions for its initial soft launch customers, like the dining provider at the University of Marysville.
A successful payment triggers the unlock of the container lid so the customer can pull out their goods, and all the while, the robot is playing audio messages to direct the customer to the next step. If someone happens to try to take more than their fair share, the cameras and remote operators clock it and charge the person for whatever they took.
The remote operators are one of the main connecting threads between Tortoise’s different business lines. With the smart stores, the person who was previously doing the remote driving for delivery will now be a remote store clerk. One remote operator can monitor up to 16 robots, said Shevelenko, and they only really need to get involved in case of any issues or if the robot needs to move – most retailers leave the robots outside their storefronts, but some have taken them to parks and public spaces, as well. Tortoise also provides joysticks to the businesses to remotely move the bots themselves if they’d prefer.
The other connecting thread is the design of the robots. Tortoise’s original robot was designed to be modular so that it could support a variety of container types. Similarly, the startup’s software was designed to be flexible enough to power both a scooter and a delivery robot, and now, mobile vending.
“We were smart enough to know that we weren’t going to be smart enough to figure it out on the first try,” said Shevelenko.
While Tortoise is pausing all last-mile deployments, including its national expansion with logistics provider AxleHire, which was announced last September, the startup still sees delivery as the long-term goal.
“We’re betting the farm on the mobile smart store, but you can think of it like a Trojan horse strategy,” said Shevelenko. “We want to get into as many retailers as possible with a use case that just works on day one. Once they have the robot, we can send them a container which is the same as the last-mile container. For us, right now, the strategy is land and expand. Then as our technology gets better and we get more miles under our belt, we certainly think last mile is part of the long-term opportunity.”
Tortoise expects deployments to go live in the second quarter, after which the startup will raise more funds. So far the company has publicly raised around $8 million, which includes a venture round last April of $5 million.
Correction: A previous version of this article stated Tortoise had raised $11 million.