Door to Door Organics, a web-only retailer of organic products and groceries, raised $25.7 million in new funding, it announced this past week. The e-retailer says it plans to use the funds to expand geographically, offer more personalized shopping capabilities and beef up its mobile commerce capabilities.
The retailer currently delivers fresh food via its own fleet of 75 delivery trucks to consumers in 11 states and around 30 medium to large cities, says its founder Chad Arnold. It operates five warehouses in Colorado, Missouri, Illinois, Michigan and Pennsylvania, each ranging in size from 10,000 to 25,000 square feet.
With the new funds, Door to Door Organics, which is poised to grow web sales 34.6% this year to around $35 million, will expand into new markets and also roll out a mobile-optimized site in early 2015, followed by a tablet site.
It’s also working to offer more personalized recommendations based on a customer’s interest in particular foods and her order history. For example, if Door to Door Organics knows that Jane Customer purchased a big batch of heirloom eggplants last year, when they come back in season this year the merchant can let her know via e-mail or other ways. It can also show her eggplant parmesan recipes and recommend to her other ingredients she might need to create the dish.
Door to Door Organics is the latest in a slew of funding announcements from online retailers in the food sector in recent months.
High-end food ingredient merchant Plated.com, for example, raised $15 million in August, and its closest competitor, Blue Apron, secured $50 million in funds in April. Snack food subscription service NatureBox raised $18 million in April.
Venture capitalists are likely attracted by the opportunity for growth in online food sales. Of the $650 billion Americans spent last year at food and beverage stores last year according to the U.S. Commerce Department, only around 1% of that, or $6 billion, by some estimates, was transacted online.
That makes for a giant opportunity for e-retailers to capitalize on consumers’ growing fondness for shopping online, and it’s likely a large reason why some of the world’s largest retailers, including Amazon.com Inc. and Wal-Mart Stores Inc., are moving quickly to expand their ability to deliver fresh food to more consumers.
What separates Door to Door Organics from its competitors, however, is its focus on the customer shopping experience and a measured approach to growth and profitability, Arnold says.
It’s not growing at 300% or 600% like Plated.com or othere-retailers in the food category, but Door to Door Organics has been around much longer than its competitors—it launched in 1997—and has learned how to deliver fresh groceries in a way that works financially and a way that is sustainable, he says.
For example, the merchant will only deliver to certain geographical areas on certain days of the week—that way its drivers can fulfill a large set of orders in one area in one day. The retailer says on average it delivers to 65 customers in one route.
It has very little packaging needs, as it’s able to keep food cold in refrigerated vehicles and simply drop off items in standard boxes at consumers’ doorsteps. Door to Door Organics even encourages customers to give back the boxes so they can be reused.
By contrast, Plated.com and Blue Apron.com rely on shipping carriers like UPS or FedEx and require packaging materials that keep food fresh.
“There’s plenty of room for a lot of companies to be successful in this category the large, consolidated, slower-to-move parts of the industry are not innovating at the rate that some of the smaller companies are,” Arnold says. “We understand at a deep level the core experience of the customer in ways that other people might not. We may grow at a slower rate, but we will continue to grow because we understand the core economics of our business model. We understand how to make online grocery work.”
Door to Door Organics is ranked No. 457 in the Internet Retailer Top 500 Guide.
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