The grocery delivery arena is getting crowded – as crowded as the aisles, one might say, of a local supermarket ahead of a big storm.
Amazon has had and still has its impact, of course, having bought Whole Foods and helping to send companies such as Kroger and Walmart into the meal kit market and to their own online delivery models, scrambling to get clicks and online sales. Shipt is joining Peapod and Instacart. Some smaller firms are partnering with more traditional retailers in a sense of cross-pollination – Blue Apron has partnered with Costco, for example, so the latter can sell the former’s meal kits.
One might think the standalone model – whether meal kits or traditional grocers – may be pressured to the point of, well, no return. After all, it costs a lot to pack and deliver food within increasingly smaller delivery windows. The consumer is a fickle one, while stickiness is elusive and price is but one differentiator.
For at least one firm, there’s a niche to fill, one that focuses on freshness. As in farm fresh, and as in (almost) direct from the ground to the end customer’s table. Milk and Eggs, operating regionally in the Los Angeles area, partners with local farms and artisanal food makers to help bring food to consumers that is sourced from their own communities, spanning milk, eggs, dairy meats and vegetables.
Refreshing the Delivery Model – Literally
In an interview with CEO Kenneth Wu, the executive told PYMNTS that the model is one where orders are placed online, and the farms and artisanal food makers deliver goods to Milk & Eggs’ sorting and aggregation warehouse.
The company’s drivers head to that warehouse each morning, gather up deliveries and drop them off to consumers. One might liken it to the daily deliveries of decades past, where milk and eggs were dropped by the door.
In reference to payment, Milk and Eggs offers free delivery, and subscription plans can be done on a weekly, biweekly or monthly basis. In addition, the firm can accommodate one-off orders, said Wu. He added that the payments themselves are rather fundamental, charged to credit cards when deliveries are made.
Wu noted, “our short logistics cycle enables food to be brought from the farm to your door within 48 hours. The goal is to have the shortest distance” to the consumer. “We feel like what we’re offering is significantly different than what is currently in the marketplace.” And in a nod to what is in the marketplace, Wu was quick to point out that the majority of players large and small operate in what Milk and Eggs views as “store delivery.”
In that model, firms like Kroger and others deliver from brick-and-mortar locations, packing items on site (many of which have already been packaged) and delivering them along the last mile to the customer’s door.
The traditional grocery delivery model works with several farms or food producers and aggregates them into warehouses; the warehouses then feed into multiple distribution centers, which in turn send wares to the grocers. Once in store, items as far-flung as bread and milk and meat are unloaded onto shelves.
“And everything sits there anywhere from a day to several weeks until the customer picks it up” or places an order online.
Looking at the supermarket format a bit more granularly, Wu said there are “center aisle products, which are salt, sugar, flour … those kinds of dry goods, and then we have what we call ‘perimeter products,’ which is all the dairy, meats, seafood … and the bakery.” Milk and Eggs focuses on the perimeter, he said, also in contrast to traditional grocery delivery offerings, which may revolve around those center aisle staples.
The difference in his own firm’s approach, Wu said, is that when consumers order, for example, a bunch of carrots or apples, they are essentially “getting it in raw form,” with a turnaround time – from end to end – of about 30 hours. Milk and Eggs will hand off an order to a farmer or artisanal food maker who harvests or bakes or prepares – and, as Wu said, they turn over the items to the company by midnight. Then the items arrive to the customer by about 5:00 a.m. the next day.
“So that bagel at your door was baked just hours ago at a bakery,” he said, “or that apple or those carrots were in the ground essentially about 24 hours ago … We’re working with a completely different supply chain.”
With no warehouses, no distribution center and a just-in-time system, Wu said, Milk and Eggs operates with a “flattened” marketplace and delivery model. The infrastructure is enough to support growth within the LA market and its surroundings, and the approach is simple enough to replicate. To expand, all they need is that SAW – “it’s a simple, non-warehouse facility. It is in and out that day,” Wu said of the constant flow of perishable items.
The Demographics – and a Sea Change
Asked by PYMNTS about the company’s consumer profile, Wu ticked off some prevailing attributes thus far in his key market: Female, aged 25 to 45, with families, where more food is prepared at home than might be seen among other demographics.
The move toward locally sourced food also has its challenges, he said. PYMNTS noted the costs of packaging, which have bedeviled other firms in terms of keeping food fresh.
“The packaging aspect is something we’re definitely aware of,” Wu told PYMNTS. “If you look at Blue Apron or other services, for a 20-pound box, about 10 pounds of it is just insulation and ice packs.” His own company has opted for insulated bags that can be returned to the firm and reused, along with icepacks. The speed of delivery and local reach mean delivery windows are short, and single drivers make multiple stops.
Looking ahead, Wu said, it is the firm’s viewpoint that the traditional model will be challenged, and the current supermarket or large-scale formats may be rare in a decade’s time. “They have such high overhead in real estate, as well as merchandising, that when you take away maybe even 10 percent of their gross revenue, they become a non-sustainable, non-profitable business model.”