Door to Door Organics eyes $500m prize as Millennials integrate online grocery shopping into their lifestyles

By Elaine Watson

- Last updated on GMT

Door to Door Organics online grocery shopping update

Related tags Online grocery shopping Grocery store

You can make money out of online grocery shopping if you have a scalable business model, a targeted range of high quality fresh foods, and the tools to help you build meaningful relationships with consumers, says Door to Door Organics, which has proved that you don’t need to be the size of Amazon to succeed.

The Colorado-based company, which began delivering organic produce 10 years ago out of a garage in Boulder, now services 12 US states and 30 markets from warehouses in Colorado, Pennsylvania, Illinois, Kansas and Michigan, CEO Chad Arnold told FoodNavigator-USA.

Arnold - who joined the firm in 2009 and took the helm in summer 2010 - was speaking to us two months after securing $25.5m in Series B financing from New York based food and agriculture investment firm The Arlon Group​ and Boulder-based Greenmont Capital Partners II​.

I’d expect us to be doing well over $100m in fairly short order

He added: “I’d expect us to be doing well over $100m in fairly short order, and I don’t see any reason why $500m is notattainable in a handful of years​. In the US you’ve got a $650bn market in grocery, and if online gets 15% or 20% of that, you get a sense of the size of the prize we are going after.

“People are starting to integrate the online experience into their life, once a week or once every other week. We’re also getting a mixture of multi-member households with kids and young dual income households with no kids.

Chad Arnold CEO Door2Door Organics
Chad Arnold: 'In the US you’ve got a $650bn market in grocery, and if online gets 15% or 20% of that, you get a sense of the size of the prize we are going after.'

“We don’t ask people for a lot of information up front, but we survey our customers a lot and while we do well in more affluent areas, education is usually more of an indicator than income ​[when assessing potential customers].” 

From a business perspective, one thing that has been critical to its success is the company's “highly scalable business model​”, said Arnold, who has invested in sophisticated warehouse management systems and IT tools enabling closer engagement with customers, but keeps costs down by used a leased fleet of delivery vehicles that go on “hyper-efficient​” delivery routes, and using leased warehousing facilities with low-cost racking and equipment.

Customer engagement

Unlike some established grocery retailers trying to extend their offer online, Door to Door Organics is also optimized for home deliveries, fulfilling orders from warehouses designed for fast picking of individual customer orders, rather than stores, said Arnold.

Another key part of its success has been a focus on fresh and high-quality 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 through features such as ‘shop by recipe’ and ‘simple meal planning’, said Arnold.

We’ll never have 40 different kinds of pasta sauce

Suppliers meanwhile, like the way that Door to Door Organics can give them greater insight into who is buying their products and enable them to deliver targeted offers.

Michelle Brooks, managing principal, Arlon Group: "We've been studying the online grocery industry since 2010 and Door to Door Organics is one of the few companies in the industry that has a proven model for growth and a demonstrated record of profitability.”

The company - which doesn’t charge for delivery - has also tried to emulate a model established by farmers of delivering a weekly box of high-value seasonal fresh organic produce to relatively affluent rather than trying to replicate a grocery store full of low ticket items with unlimited choice (it’s not Amazon, and doesn’t want to be), he added.

“On SKUs, it varies by market, but we’ve recently expanded our selection to around 2,500 in the Chicago area and I could see us maybe getting up to 4,000 but we’ll never have 40 different kinds of pasta sauce.”

Door to Door Organics categories

A targeted set of SKUs with high-value differentiated products and a real focus on fresh

As for what motivates his customers, a large percentage cite supporting small farmers and artisan food producers as a key reason for choosing the online grocery shopping service, in addition to eating more healthily and increasing the amount of fruits and vegetables they consume each week, he said.

Packaged Facts forecasts that online grocery shopping sales will grow from about $23bn in 2014 (c. 3.5% of total online and offline grocery spending) to approach $100bn by 2019 (capturing 12% of total grocery spending).

“Our goal is to be a kind of online Trader Joe’s with a targeted SKU set with high value differentiated products but unlike Trader Joe’s, with a real focus on fresh.

"Local is an aspect of that, but it’s not like we wouldn’t stock bananas because they are not grown locally; people like to support suppliers with a great story and a focus on quality.”

Click HERE​ for more information. 

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