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Online grocers expand their offerings with a merger

June 27, 2016 02:45 PM
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Two online-only grocery retailers have joined forces with an eye on expansion.

Organic grocer Door to Door Organics, No. 409 in the Internet Retailer 2016 Top 500 Guide, has merged with Relay Foods to create a company that will be rebranded later this year with a still-to-be-determined name, Door to Door Organics CEO Chad Arnold says. Arnold will become CEO of the newly merged company and Relay Foods CEO Zach Buckner the company’s chief technology officer.

“It’s not an acquisition,” Arnold said during a phone interview. “We really are putting the companies together. This is not a cash deal. This is a stock relationship that we’re both investing in, in a future business model.”

A Door to Door Organics spokeswoman declined to give further details about the merger, only saying “it’s a combining of forces.”

The combined company will have a presence in 63 markets in 18 states. Arnold says the companies’ business models complement each other. “The subscription-based, simple experience that Door to Door provides is part of the business model we will continue to focus on,” he says. Door to Door’s produce boxes start at $19.99. Delivery is free on orders $75 or higher and $5 for orders below that threshold. Relay, which offers meal planning that allows shoppers to shop by meals that have all the ingredients included with its grocery delivery, charges $12 for a single home delivery or a one-time payment of $19 for unlimited deliveries with its Relay Doorstep service.

According to Top500Guide.com, Door to Door Organics, based in Louisville, Colo., generated $43 million in sales last year, up 26.5% from $34 million in 2014. Relay Foods is based in Charlottesville, Va.

According to the 2016 Internet Retailer Top 500 Guide, food/drug e-retailers in the 2016 Top 500 did $6.312 billion in sales in the U.S. last year, up 10.8% from $5.696 billion in 2014. That $6.312 billion figure accounted for 0.7% of all retail sales in the 2016 Top 500, compared to 0.6% in 2014. Online grocery sales are expected to increase 21.1% annually through 2018, according to BI Intelligence research, compared to 3.1% for physical supermarkets. For more on the strategies e-retailers and retail chains are using to sell groceries online, read “The e-grocery explosion” from Internet Retailer magazine.

There also is fast growth among such subscription menu services as Blue Apron and Plated.com. Among the top five fastest-growing e-retailers in the Internet Retailer 2016 Top 500 Guide and Second 500 Guide, three are in the food category and two are part of the rapidly expanding list of subscription meal-kit delivery services.

 

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