Los Angeles-based Thrive Market - which was launched in 2014 - now has more than one million paying members who pay an annual fee of $59.95, and gives a free membership to a person or family in need for every new paying customer.
Billed as ‘Whole Foods meets Costco online,' Thrive initially focused on delivering a curated selection of trendy natural and organic brands at a around 30% under than traditional retail prices.
However, the company - which recently opened a third 458,000sq ft fulfilment center in Pennsylvania, complementing facilities in Indiana and Nevada - has been steadily building its own brand over the past several years, offering everything from coffee to frozen meat and poultry, collagen peptides, ghee, olive oil and almond butter.
When it comes to total inventory, however, Thrive has been careful to stick to its hyper-curated approach (just because the ‘endless’ virtual shelf means you can sell 20 types of coconut oil doesn’t mean you should) and has slightly reduced its SKU count during the pandemic to around 5,000 SKUs.
Of these, 746 are private label products (either Thrive Market or Wellmade), with “a lot more in the pipeline to come,” said Engleman.
But Thrive Market is not looking to become an online Trader Joe’s, she stressed: “While we haven't set any specific targets [around optimal percentages of sales from private label], we’re not looking to completely shift to only own brands, and we see a huge benefit in the value and the differentiation that [other firm’s] brands bring.”
Concept to launch in two months… or years?
So how quickly can Engleman’s team move to create a new private label product from concept to launch?
“On average, we're able to get products to market in about a year,” she said. “If it's a partner we already have a working relationship with and everything goes smoothly, sometimes we're actually able to get products to market within a couple months. And then there are others that may take us years."
Take mac and cheese, she said: "It's something we've wanted to have for members for years, but finding the right partner that delivered on taste, quality, sourcing, and minimum order quantities actually took us a few years to get to.”
One advantage of running an online platform, however, is that once a product has been developed, Thrive can get it into consumers’ hands very quickly, said Engleman.
“As soon as we're able to produce it and ship it to our fulfillment centers, we can immediately turn it live on the site. Brick and mortar retailers have to get it to their stores and wait until shelf reset timing to get it actually built into the set.”
Criteria for launching private label
As for the criteria for deciding whether to introduce a private label product, there are many factors, said Engleman.
“We start with overall market and natural channel trends, and then we ask do our members have a need or want for the item we're exploring, and can we improve upon products that are already in the market? Then Non GMO is the minimum requirement for any of our products, but we really try to bring organic and regenerative products to market whenever possible as well… sometimes we might not launch a product if we can't find a certain organic ingredient.”
Margins and private label
But is Thrive just offering a better value or enhanced (organic, cleaner label, regenerative) version of products that are already in the marketplace, or creating novel products that shoppers can’t buy anywhere else?
“We aim to provide our members with a combination of affordable clean versions of core necessity products," said Engleman, "but also offer innovative items that they can't get anywhere else, so really making it truly differentiated for our company.
“So on the core necessity side, I’m talking about things like our single origin, Greek olive oil, a delicious high quality olive oil or our regenerative virgin coconut oil, where we are really leaning into the quality and the sourcing. And on the other end of the spectrum, we have our co-branded meals and plant based chilis with Beyond Meat, our grain free taco shells and gluten free baking mixes. We have also innovated on the packaging side, so our ‘canned beans’ are in pouches.”
From the perspective of profit margins, she said, “Where we're really trying to elevate quality, we may not be getting much of a margin improvement with private label over the branded offering, but the layer of marketing fees that are often built into a brand's cost is something that we don't have with private label, so we're often able to pass that saving directly through to our members.”
'A lot of people thought we were crazy to get into this business...'
Whole Foods products at wholesale prices, delivered to your door? It sounded almost too good to be true, and back in 2014, that’s certainly how many potential investors viewed Thrive Market. But as membership grew and word got around, people quickly started taking the Los Angeles-based natural and organic online marketplace more seriously.
Today, it has more than one million paying members, who can apply search filters including diet (eg. Vegan, gluten-free), health & ingredients (eg. Dairy-free, low glycemic), environmental and social factors (eg. BPA-free, made in the USA, woman-owned business, BIPOC-founded) and certifications (eg. Organic, Non GMO Project verified, Whole30 approved, Glyphosate residue-free).
It has around 5,000 SKUs, of which 700+ are private label. Shipping is free on grocery orders over $49 (or $5.95 shipping if not); free on frozen orders over $99 and on wine orders over $79 (or $13.95 if not).
Supply chain woes, inflation, longer lead times
As for managing complexity, “I'd say probably compared to other retailers, I would say we have on the higher end [in terms of the number] of vendors that we work with,” said Engleman, “although we do have some vendor partners that do produce a lot of products for us, especially in the baking category. But then we also have vendors that only produce one product for us.”
Along with everyone else, Thrive is trying to navigate inflation and supply chain meltdowns right now, facing challenges “from backups at ports and driver shortages to delayed timelines for ordering packaging, ingredient shortages, cost increases and longer lead times,” said Engleman. “So for new items, we’re definitely seeing some longer timeframes to launch than in the past.”
She added: “We don't have our whole cranberry sauce this year because the supplier only had enough capacity to make jellied cranberry sauce, and that's not something we carry.”
Recent private label launches
So what are some recent private label launches at Thrive Market, and where does Engleman see growth opportunities?
“We have a lot of plant-based members at Thrive Market," she said, "so for us, this has really been a huge area of opportunity, really from the beginning, so back in July 2018, we launched our almond and oat non-dairy beverages and then the tie up with Beyond Meat has gone really well.
“For the holidays, we’ve just launched a whole grain and a grain free stuffing mix that are unique to Thrive Market in terms of the ingredients and the flavors and lots of fun things in the chocolate space. We've also just launched six new chocolate bars featuring regeneratively grown, single-origin cacao [sourced directly from small farmers in Colombia].”
Frozen meat and seafood
While the bulk of Thrive Market’s sales are in shelf-stable goods, the company has experienced significant growth in frozen foods, which it introduced in 2018 (meat, poultry, seafood), with co-branded frozen meals with Beyond Meat following earlier this year, said Engleman.
“When we first launched meat and seafood, it was all own brand, and then when COVID hit we started to bring on some branded frozen proteins, and we’ve also expanded into frozen fruits and veggies, pizzas (Amy’s, Banza, Cappello’s) and ice creams (Oatly, Enlightened, Chloe’s etc], which is actually all branded, so we haven't really dabbled into own brand much in that space other than with our handful of Thrive Market frozen meals.
“Currently all our frozen items ship from a third party logistics provider. The 3PL receives product on our behalf from all our frozen vendors and then picks, packs and ships for us. That way all frozen items still arrive together in a single box, or occasionally two boxes if it is a large order. But we still ensure our usual standards for shipment packaging materials, and product specs."
“We have the Thrive Market brand, which is really focused on go to pantry staples and household necessities, and then we have our Wellmade brand, which is dedicated to supplements, and we're excited about this concept of using different brands to build trust, differentiation and leadership within the different categories, so we see lots of opportunity for future expansion.
“A lot of the top sellers are core staples, but one that was a runaway success year round was organic pumpkin. When we started to see that spike a couple years ago, we were like, why are people buying so much pumpkin? But a lot of people use it, not only for baking and for Fall time, but some people feed it to their dogs or use it in vegan recipes.
“Another [private label launch] that's been an exciting is our liposomal vitamin C, which with everyone having immunity top of mind is doing really well.”
Jenna Engleman, senior director, Thrive Market brands