Exclusive: Grove Collaborative is pulling out of brick-and-mortar stores

And though it’s been in brick-and-mortar stores like Target since April 2021, the physical channel never became profitable as customers shied away from the company’s higher price points. Overall, brick-and-mortar sales made up less than 4% of the company’s business, and CEO Jeff Yurcisin told Modern Retail the company had lost at least $20 million on the channel.  

“Once profitability became a key priority for us going forward, it just begged the question: how does this fit into our long-term plans?” Yurcisin said. “We are taking ownership of the responsibility of how to build a sustainable, profitable and growing business. And we saw that path being much larger and easier with a greater right to win on online shelves.”

Grove’s decision to focus on DTC is part of a turnaround strategy that’s been implemented since Yurcisin took over as CEO last year. Founded in 2012, Grove Collaborative runs an online marketplace that focuses on eco-friendly and natural products alongside its own branded line of refillable and plastic-free items. The company went public in June 2022, riding the wave of the SPAC boom, but its valuation dropped swiftly — from $1.5 billion at its IPO to a market cap of $73.4 million by December 2022.

The company reported during its third-quarter earnings on Tuesday that it saw $48.3 million in revenue compared to $52.1 million in the second quarter of 2024 and $61.8 million in the third quarter of 2023. Part of the drop was attributed to fewer repeat orders. But the quarter also saw a $15 million investment from Volition Capital, meant to pay down debt and reduce interest expenses.

Susan Anderson, a managing director with Canaccord Genuity LLC who covers Grove, said Grove’s decision to focus on direct-to-consumer by getting rid of the subscription requirement might renew shoppers’ interest in the brand. “The subscription and the red tape around ordering from their site was a hindrance in getting new consumers to their site,” she said. Moving forward, she sees the focus on clean ingredients as a way to continue to drive penetration with an online shopper. “Sometimes on Amazon, you don’t know what you’re getting, and I think that’s really what their benefit is right now.”

Currently, Grove counts about 700,000 active customers through its website — but Yurcisin sees a bigger total addressable market. Grove’s research shows there are around 57 million U.S. customers who bought an environmentally sustainable product online in the last 12 months. “They’re being underserved, and we feel we have the most right to win online.” Grove will continue to sell products on Amazon for the time being, and has yet to decide about Target’s online marketplace, Yurcisin said.

Yurcisin said some of the challenges Grove faced on the physical shelves of Target, CVS and other stores came down to price point. Grove’s products — which come in packaging like aluminum — cost more than traditional household cleaners. Its 16-ounce dish soap costs around $5.49 at Target, while a 28-ounce bottle of Dawn goes for about $4.89. But this is less of a concern with its online shopper, Yurcisin said.

“When I think about household income and who our customer is online, it a bit more of an intentional affluent shopper,” who has a six-figure income, Yurcisin said. “What we end up realizing is to win on Target or anyone else’s shelf, we would have to build a slightly different product.”

Greg Carlucci, senior director analyst at Gartner, said that, according to his firm’s research, the share of consumers looking to buy from DTC websites is going up — from 17% in 2019 to 26% in 2024. “They’re not just going to the DTC site for information or research, but they’re using it for purchase,” he said. When it comes to sustainable and eco-friendly products, Gartner research shows about 60% of consumers interested in buying sustainable products may look for information on the product website. 

But higher price points from brands like Grove can be a barrier to entry in the current economic climate, when people are concerned about inflation and watching household products. Carlucci said the cost of living is still the top concern for consumers. “Justifying 30% to 40% more for a similar product just because it’s eco-friendly is going to be a more difficult sell in the current state,” he said.

But pulling out of physical retail means the company will have to recoup up to 4% of business elsewhere. Yurcisin sees pushing more health-related products as a growth strategy. It’s added 60% more products in the vitamins, supplements and wellness category in the last year, like daily vitamins, cough products and menopause support. While Yurcisin didn’t share exactly how the category is performing, he said customers are showing a lot of interest in Grove as a health destination. Six months ago, a survey revealed that about nine in 10 of Grove customers trust them more than other retailers to sell them vitamins, minerals and supplements, Yurcisin said.

“This is about providing products that support human health as much as environmental health,” Yurcisin said.

Grove will also continue to invest in marketing efforts to drive site traffic and re-engage customers. That includes heavy social media ads, potential connected TV spots and continuing to push more search optimization. Back when Grove was a subscription-only company, its products weren’t necessarily shown high in Google search results because the closed-gated experience kept it from being promoted. Since Grove made changes to its checkout experience earlier this year, the brand is now “back in the Google system” in a way that allows for more product ads and search ads, Yurcisin said.

Yurcisin said these ads will focus on showing how eco-friendly ingredients are important for both human and planetary health — thus positioning Grove as a destination for shoppers who are ingredient-conscious for any reason. “Often, things that are good for the planet are good for you and good for your family,” Yurcisin said. “We have to tell stories to explain that.”