Under the merger, announced June 8, Relay Foods and Door to Door Organics will draw on their more than 25 years of combined experience in online grocery retail to serve consumers in 63 markets across 18 states and Washington, DC.
“The best thing about this merger is both Door to Door Organics and Relay Foods come from a long history of delivering local, organic and natural food … and we are very much aligned culturally, very much aligned in terms of our mission, which is fantastic, and we will be immediately accretive geographically as we have no overlap in term of where we operate, which gives us an opportunity to introduce each other and the brands into new geographies,” Derek Mansfield, president of Relay Foods, told FoodNavigator-USA.
He explained that in the next six months, the two companies will relaunch under a new brand and will pilot joint new “best in class offerings under a new business model.”
Once the new business model and product offerings are tested and established, the new company will roll out its strategy over its existing areas of service in the subsequent 12 months before it begins expanding its geographic reach even farther, Mansfield said.
He acknowledged that the companies don’t yet know what the new business model will be, but he says it will “look and feel familiar to customers of Relay Foods and look and feel familiar to customers of Door to Door Organics, but will not be the same as either of those.”
Currently Relay Foods offers online ordering for local produce, sustainable foods and everyday groceries to consumers who can either opt for delivery or free pick up in neighborhoods around the city. Door to Door Organics also delivers fresh, natural, local and organic food directly to consumers’ homes and offices.
“In some ways we feel like one company already in terms of our ability to complement each other from a mission perspective and a business perspective in that we both want to solve the challenging problems of online grocery in a way that does not compromise the customer experience or the business,” Mansfield said.
Among those challenges facing online grocery retail are tight margins and secure supply chains, which brick and mortar retailers also face, Mansfield said. But a challenge that is unique to online grocery that must be overcome is convincing consumers to transition from physical stores to e-commerce.
“This is perhaps the most challenging obstacle,” and one that has been more stubborn in the food space than in books or electronics, he said.
He explained that consumers are slower to come around to online grocery retailing than e-commerce for other goods because buying groceries is such a sensory experience and requires a high level of trust that the company selecting the food will send quality produce, proper cuts of meat and the freshest options in other categories.
To address this issue, the new company will need to drive consumer trial and deliver an online interface that is intuitive, warm and inviting to ensure that consumers enjoy the process, feel like they are saving time and that the overall experience is convenient, Mansfield said.
Funding for the future
To help the companies address these challenges and streamline the merger, Door to Door Organics and Relay Foods also announced the closing of an additional $10 million in equity financing provided by The Arlon Group and existing Relay Foods stockholders.
The money will support the capital investment required to develop and launch the new joint business model as well as support the two brands in their current form until the merged model is complete, Mansfield said, adding the companies are very grateful to their investors for their support of the merger the future of online grocery retail.