Online grocery grows, with 500 items or less
Does America need another online grocer?
The field is already a clash of the titans. Internet giants like Amazon and Google, retail behemoths like Walmart, Safeway and Target, and scores of brick-and-mortar stores like Whole Foods (often partnered with delivery services like Instacart or Postmates) are pursuing Internet food sales, a market that could surge to $100 billion by 2025, according to the Food Marketing Institute and Nielsen Co.
Now a small San Francisco startup called Movebutter is jumping into the arena, offering direct-to-consumer delivery via FedEx with special boxes and dry ice to keep food fresh. It said it’s tested the concept for almost two years, initially in San Francisco (where it has a warehouse and uses couriers rather than FedEx). In recent months it’s added tests nationwide and now says it will deliver to all 50 states.
Movebutter’s proposition: Smaller is better. It offers a carefully selected lineup of organic produce, meats, dairy, packaged foods and other staples. It describes the approach as a mashup of Apple and Trader Joe’s.
“We are building the supermarket of the future,” said Chai Mishra, Movebutter CEO. “We took a reverse approach” from other online markets. Rather than offering the entire contents of a supermarket, some 40,000 to 50,000 items, Movebutter will launch with just 500. It carries just one “brand” of each: its own.
Will that fly with Americans accustomed to a plethora of choices? The average supermarket has dozens of peanut butter options, for instance, while Movebutter will offer three: creamy, chunky and honey roasted.
“I don’t think you can call this a grocery store with only 500 products,” said Kit Yarrow, a consumer psychologist at Golden Gate University.
Still, she said, fewer choices can be a positive, as people are overwhelmed with options. “It’s exhausting to consumers to constantly research what they’re buying,” she said. “Trader Joe’s and Costco are beloved because they narrow options to what they know shoppers will love and shoppers trust their pricing to be fair.” But Movebutter lacks the reputation those retailers have built up, she and others said, and offers far fewer products.
Mishra wants to make a virtue out of the minimalist vision.
“Americans are also attuned to the concept of deserving the best items,” he said. “The majority of people want to know they’re buying the best item at the fairest price. At some point, you’re just paying for a Super Bowl ad or bright packaging; that doesn’t resonate with the audience.”
Americans are also used to quick turnaround. Mishra said Movebutter orders will arrive within two days and the company will cover shipping costs, but many rivals already offer same-day delivery, and others are experimenting with it. Movebutter designed its own boxes using a material similar to Styrofoam, but “as biodegradable as possible.” Inside, dry ice and gel packs (also planned to be biodegradable by year end) keep meats and produce cold.
“When people hear about it, they think it’s crazy: Ship fresh food across the country?” Mishra said. “But we can ship anywhere and be 100 percent certain the food will get there safe and sound. We’ve tested in places like Georgia (to prove) the food can stay in the box for three to five days in the hot sun and be fine.”
Experts said that consumers might not cotton to that approach. “Overpackaging and waste is a huge problem both in terms of cost and push back for the shoppers who are concerned about sustainability of the planet — key drivers for Millennials and (Gen) Z,” said Phil Lempert, the food trends editor for NBC’s “Today” show who’s known as the Supermarket Guru.
While Movebutter’s concept is interesting, it hasn’t yet shown how well it can execute, Lempert said. “They have a glitzy website with all the right words — but little to back it up,” he said, noting that the company’s Facebook and Twitter pages are relatively inactive, odd for a Bay Area consumer startup.
Movebutter controls its whole supply chain, buying directly from suppliers, largely momand-pop concerns, and packaging food as its own brand, Mishra said. That’s why it claims its prices are about 25 percent lower than other organic grocers, even though it springs for the delivery costs, because it cuts out the middleman.
“The implication I take is that compared to a traditional quality grocer like Kroger, Wegmans (or) Publix, the price is pretty much the same,” Lempert said.
The company won’t disclose funding or staffing other than saying it has less than 100 headquarters employees. “In this age of VCs throwing money at food delivery” startups, that implies that the funding number must be small, Lempert said.
Movebutter has one warehouse in San Francisco and soon will open two more, one each in Texas and New York.
Of course, there’s already been an Internetonly grocer: Webvan, one of the biggest flameouts of the dot-com era. Mishra said Webvan’s mistake was offering too many items.
“The operational complexity goes up with the number of items,” he said. “We work with way fewer items than anyone else. We’ve spent a lot of time finding the best suppliers and figuring out what customers are actually buying.”
Mishra pitches Movebutter as a way to address the issue of “food deserts” — areas that lack stores carrying fresh food. While that’s a commendable idea, experts said, again, the company hasn’t explained how it will execute and hasn’t detailed its pricing.
“My hunch is that this will cater to a markedly upscale clientele, a la Silicon Valley,” said April Rinne, an independent adviser focused on new business models. “I would be much more excited about Movebutter if they could show how exactly they will reach middle and even lower classes, who are significantly more disadvantaged when it comes to accessing nutritious, affordable food.”