Fast-growing online natural products retailer Thrive Market has raised $111 million that co-founders say will help it to scale growth.
New York City-based venture capital firm Invus led this latest funding round. It brings the total raised by Thrive Market to $141 million across three rounds of funding since launching in November 2014, according to CrunchBase.
Thrive is looking to emulate the Costco Wholesale Corp. membership model but for organic health-focused products. The retailer charges $59.95 a year to shop its site. Shoppers are able to buy food, personal care products and accessories for what the company says is up to 50% off what they’d pay elsewhere.
Co-founder and co-CEO Nick Green says Thrive Market, No. 547 in the 2016 Internet Retailer Second 500 Guide, did a little over $50 million in sales in 2015, its first year in business. This year, he says the company is on pace to more than double that to about $130 million.
“The growth has been really intense,” he says. “The biggest challenge for us has been meeting that demand. We’re an operationally complex business. The business has over 500 full-time employees two years in.”
Next month, Thrive Market will open a 300,000-square-foot fulfillment warehouse in Reno, Nev., replacing its current West Coast warehouse in Commerce, Calif., a 40,000-square-foot facility that co-founder and co-CEO Gunnar Lovelace says the company has outgrown. In October, Thrive Market opened a fulfillment center in southeast Indiana, a location Green says puts it within 600 miles of 60% of the U.S. population.
“We’ll be getting two-day shipping to about 85% of our membership base with those two centers,” Lovelace says. “Our membership base is not Los Angeles, San Francisco or New York by any means. 45% is in the Midwest or the Southeast.”
Thrive Market has more than 300,000 paid members, which means the company earns at least $18 million in subscription revenue alone, and has more than 5 million registered users. The company carries fewer than 5,000 products online.
Thrive Market is hardly alone when it comes to competing for shoppers looking to buy healthy products at a lower cost. Rivals in the 2016 Internet Retailer Top 1000 include Door to Door Organics (No. 409), My Natural Market LLC (No. 770) and Green Chef Corp. (No. 831), which was a finalist for Emerging E-Retailer of the Year at the 2016 Internet Retailer Excellence Awards.
Data shows consumers are more willing to buy groceries online now than ever before. Investment banking firm Morgan Stanley estimates 34% of online shoppers globally will buy groceries online this year, up from 21% in 2015. In the U.S., where Green says Thrive Market will continue to focus for now, Morgan Stanley estimates consumers could spend more than $42 billion on groceries online this year, up from $16 billion last year.
Green says the new funding will go toward infrastructure improvements and helping the company scale its business.
“This capital is going to be deployed for accelerating our growth in the U.S. and potentially building more fulfillment centers depending on member preferences, but 2-3 day shipping seems to be in the sweet spot for most of our members,” Green says.Favorite