Q&A   //   April 27, 2020

How Thrive Market has handled the online grocery demand spike

As a membership-based grocery retailer, Thrive Market’s strategy in fulfilling the current wave of high demand differs from grocery chains or other delivery services.

The company, founded in 2014, capitalized on a niche market in health-conscious moms. Members pay $59.95 a year for access to the Thrive’s own private label brands of organic products, as well as third party producers, at wholesale prices. This strategy has helped Thrive grow in recent years and exceed initial revenue expectations; the company has an estimated annual revenue of $120 million (the company wouldn’t comment about whether or not it’s profitable). Over the last month, specifically, sales have skyrocketed for the grocery platforms, and it’s had to hire hundreds of new warehouse workers to deal with the increased demand.

Co-founder and CEO Nick Green spoke to Modern Retail about being transparent about demand fulfillment and why “every consumer is a conscious consumer now.”

Groceries have been delayed as deliveries and supply chains get disrupted. How are handling this?
Our mission has always been to make healthy living accessible to everybody, which two months ago millions were already thinking about. We’re prioritizing helping those who need it most, such as early responders and those in rural areas who can only receive orders via Fedex and UPS. Since the national shelter in place orders, we’ve reached an estimated 20% of Americans living in food deserts.

It’s been a unique crisis, but also an opportunity for us to step up and serve more people. We’ve seen waves of demand, like the initial intense one of stocking up. Right now, we’re in the second wave of people being even more careful about leaving their home and relying on our service for food and supplies.

How have you scaled the service?
The focus to scale inventory has been helped by our direct relationships with many of our brands. This streamlines the supply chain and makes for quicker fulfillment. Right now, 30% of our sales are from our own in-house brand, which is growing quicker than third parties. Picking and packing our own boxes during spiked demand means hiring more people. In the past six weeks, we’ve brought on 250 new warehouse workers to make sure to do it in a safe way. It’s work that can’t be done remotely.

For mission-driven brands, the level of trust has to be maintained specifically during this time. If people only go to you for convenience and utility, as soon as those disappear they lose connection with you. Obviously people have more needs, so one of our concerns has been possible impatience. But we’ve found that people have been understanding when we explain the delays are due to the safety measures we put in place. 

How have your new customer acquisition costs changed, given that search for alternative services is up?
We haven’t greatly shifted ad dollars because there is a lot of organic interest coming in. We’re taking this chance to test new channels and experiment with ad spend, including marketing on driving relief awareness.

Our members commit to stay with us for a year when they sign up, which means — unlike some retailers — it’s not as easy for us to tap into this demand. Those coming in aren’t just looking for a short term delivery solution, but see themselves using the service for the next year. We retain more than 70% of annual members who join. We’re not going after the person who wants to get just any groceries, but those who may have considered us before and are now making the commitment.

This adoption also means you have a year to convince customers to stick around long term, as opposed to relying on new customer promotions.
Converting customers isn’t enough. We’re trying to build value beyond the immediate need for supplies. Chances are, those coming to us already care about sustainability and transparent supply chains. It may have been more niche a few months ago, but this trend is coming more into focus now and it’s not going to turn off anytime soon. Once Pandora’s box has been opened, these attitudes don’t change back easily.