Direct Eats founder: We could be a $1bn business within five years

By Elaine Watson

- Last updated on GMT

Direct Eats: We could be a $1bn business in five years

Related tags Online shopping Amazon

If you want to compete in the cut-throat world of online grocery retailing, you’ve got to find an incredible niche, or think very, very big. And David Hack, the serial entrepreneur behind online marketplace Direct Eats, is firmly in the second bracket: “This could be a billion dollar company within five years.”

So is he having delusions of grandeur, or can​ – which launched in January 2015 but didn’t really get on anyone’s radar until the fall of 2015 - succeed in a marketplace where so many others have failed​? And what about Amazon? Can any new business really come in and compete with the biggest elephant in the room?

Why not, says Hack, who has recently snapped up fellow online platforms Abe’s Market and Wholeshare and is looking for further acquisitions.

Not so long ago we had 200 products. Today we’re offering more than 20,000 and all the metrics are going in the right direction: topline growth, customer acquisition, customer retention and average basket size. Our retention rates are north of 80% and the depth and breadth of our selection of natural, organic and specialty foods is unparalleled, even on Amazon. A year ago about 50 people liked us on facebook. Now more than 560,000 people like us.”

We are really easy to work with

So how does the Wilton, Connecticut-based business make money, if there’s no annual membership fee (as per Thrive Market​ or Amazon Prime), no delivery fees and no minimum order?

Scale and efficiency​,” says Hack, who has raised significantly less money than Thrive Market ($4m to date), but operates a different business model. Typically, items are also sold in multi-packs, so you’d buy 12 nutrition bars, or six bottles of sauce, although many items are sold individually to encourage trial (you wouldn’t want to buy six bottles of garlic hot sauce if you don’t know whether you like the brand in question, for example).

“Thrive operates its own warehouses; we don’t carry inventory so we don’t need all the capital investment. Everything is drop shipped, either directly from our makers (food and beverage vendors) or from distributors ​[such as UNFI and KeHE]. We are really easy to work with. When an order comes through, the maker gets an alert and they log into their account, print out a mailing label, put their products in a box and send them out to the customer.”

While this means that you might get 10 separate boxes if you order 10 separate items, the chances are that if you order 10 items, he says, you might get four boxes, given that several may be consolidated by a vendor/distributor if the order lands up at KeHE or UNFI.  But either way, customers aren’t bothered because there is no delivery fee, so it makes no difference to them, he says.

“Generally speaking we’re about 18% less than Amazon. Now in some cases, Amazon might be cheaper but we will match the price if you do find something cheaper.”

We’re giving our makers [vendors] a national platform

Vendors, meanwhile, say uploading their product information to the site is very straightforward, while shoppers – which skew 70:30 female to male, and are typically in a slightly higher income bracket and aged 35+ – like being able to search by diet/lifestyle (dairy-free, vegan, gluten-free, lactose-free, claims Hack, who is now looking to expand the business into perishables.

We’re like a national farmer’s market and we’ve giving our makers the opportunity to reach customers they wouldn’t otherwise reach; we’re giving them a national platform. And we won't develop a private label version of your product once it starts becoming successful.”

Direct Eats has a far wider selection than Thrive Market, but is more curated than Amazon, says Hack, a serial entrepreneur that has worked on Pave Life, Portero Luxury Inc., AHA Group, and Your Revolution before going into the online grocery business.

 “I think with Amazon it’s a case of being 20-feet wide and an inch thick. There really is no definitive online leader in the natural, organic and specialty space​ [DirectEats covers baby & kids, food, specialty, pets, and health & beauty] so we make money based on scale and volume.”

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