“We could have expanded our market massively and aggressively if we said we’ll deliver anything to anyone, anywhere at any time. But we’d also have lost a lot of money,” says the president and CEO of one of the most successful online grocery platforms in the trade: Door to Door Organics .
If you want to make a return from online grocery retailing, says Chad Arnold - who joined the Colorado-based firm in 2009 and took the helm in summer 2010 - you have to be disciplined. And that means focusing on what you do best, and “not trying to be everything to everybody. It’s a philosophy and a strategy.”
And so far, the strategy is paying off. Door to Door Organics now operates in five states (CO, PA, IL, KS, MI) and serves 10. Revenues last year topped $26m, and are on course to reach $40m this year as more consumers opt to shop for their organic meat, dairy and fresh produce online. Delivery is free and customers do not have to commit to anything.
In five years, predicts Arnold, the site - which partners with organic farmers to bring seasonal organic local produce meat, dairy and groceries to customers’ doorsteps - could be generating revenues in the “hundreds of millions”.
He adds: “We’re achieving pretty aggressive growth for a small company; we’re growing faster than the competition, and we’re doing it profitably.”
We’re not trying to be everything to everybody
Echoing comments made by another successful online grocer Winder Farms , the key to success, says Arnold, is focusing on fresh local food (what you’d expect to see at a farmer’s market); building critical mass in target neighborhoods; and engaging with customers to earn their loyalty.
“We are built around the model established by farmers of delivering a weekly box of seasonal fresh produce to customers. We just add technology to the picture and hedge the risk by sourcing from lots of farmers and producers.”
Unlike established grocery retailers trying to extend their offer online, Door to Door Organics is optimized for home deliveries, fulfilling orders from warehouses designed for fast picking of individual customer orders, says Arnold.
While it seems counterintuitive in the modern age - where shoppers are used to getting exactly what they want when they want it - part of the appeal of Door to Door Organics is that you never know exactly what you’ll get in your box, that there’s not unlimited choice, and that it’s a regular thing, he says.
“People really like getting what’s in season, the element of surprise, it’s like Christmas every week. But they also like the routine of a weekly delivery. While you have options, Wednesday shoppers typically stay as Wednesday shoppers. They get into a routine.”
As for choice, he adds: “The more SKUs we have, the more people order and the average basket size goes up. But you’ve got to strike a balance. At the moment we’ll typically have around 1,200 products available at any of our given locations.”
Revenues could be in 100s of millions in five years
But the key to future growth will be the ability to harness the power of the internet to foster relationships with shoppers via things such as planning and shop-by-recipe tools that try to move the relationship with customers beyond a purely transactional one, he predicts.
“It’s about building context around food."
Take a cooking apple, he says. In a traditional store, you browse the product section and pick one up. Online, a click can take you to a recipe for an apple pie and order the ingredients you need to make it.
What Amazon taught us…
Some people still argue that shoppers will always want to touch and feel food before buying it, adds Arnold. But they used to say that about books too until Amazon came along, he points out.
“Holding and touching books [in a physical store] is still special and different and has a value, but Amazon offers you other things of value: convenience of delivery, recommendations, a broader selection, good prices, so the feeling of holding a book just moves down the priority list.”
There must be a better way
Online food stores will never totally replace physical ones, however, they just create more options, he adds.
“Maybe you still need to run to the grocery store, but your trip will take 15 minutes instead of an hour. It’s ironic when people talk about 'one stop shopping', because no one actually shops like that. Everybody goes to three or four different grocery stores. We’re just providing another one."
The only thing we can say for certain is that online grocery shopping is going to get much, much bigger, adds Arnold: “Millennials are buying pretty much everything else online. Why not food?”
And the benefits are obvious, says Arnold, who struck a chord with many delegates at the Natural Products Expo West trade show last month when he said:
“You’re a Mom with two kids, you drive to the store, try to find a parking space, search through 40,000 SKUs, when you just want to buy 30, go home, find you’ve spent $200 and still have nothing to eat. There must be a better way…”