Thrive Market, a Los Angeles-headquartered, membership-based online grocer that focuses on healthy and sustainable products, is considering going public. The eTailer has more than one million members and thousands of products. As Bloomberg reported Thursday (July 8), citing inside sources with knowledge of the matter, the company would aim for an initial public offering (IPO) valued at over $2 billion, and Goldman Sachs is involved in these deliberations.
The online grocer follows a “buy one, give one” model whereby each paid membership, in addition to giving consumers access to member-only prices, includes a free membership for a low-income family or a member of another group in need. The company thrived, as it were, during the pandemic, as contagion-conscious consumers sought grocery-buying options that kept them out of congested stores. In September, Forbes reported, the company’s pre-pandemic 40 percent annual growth rose to 90 percent year-over-year growth.
“We are about six-years old now, and we have always been a fast-growing business,” Sasha Siddhartha, Thrive Market’s co-founder and chief technology officer, told the publication. “Since we launched, keeping up the growth and scale has been a consistent focus for us. But then starting in late February/early March, that growth accelerated dramatically, and we continue to hold that accelerated pace. It turns out Thrive Market is a sticky concept.”
While eGrocery may have surged during quarantine, occasioned by consumers’ fear for their safety, the channel is turning out to be sticky, with shoppers who have grown used to the convenience of grocery delivery continuing to order online even as contagion concerns subside. PYMNTS’ study, The Bring-It-To-Me Economy: How Online Marketplaces And Aggregators Drive Omnichannel Commerce, created in collaboration with Carat by Fiserv, finds that 57 percent of United States shoppers now buy groceries online and that 27 percent of consumers are ordering groceries online for delivery more than they did before the pandemic.
Interest in eGrocery is, of course, not limited to the United States. India-based restaurant delivery service Zomato, which will go public later this month, aiming to be valued at more than $8.6 billion, revealed Thursday (July 8) that it intends to take advantage of the growing online grocery opportunity. The company’s chief financial officer Akshant Goyal told reporters that grocery delivery is “in the nascent stage right now but growing rapidly.”
One of the ways in which eGrocery is still in its nascent stage is the economics, which are still broken.
“The current economics of shipping groceries straight to customers’ doors is a challenge – and keeping fulfillment and shipping costs down for sellers and customers is necessary for a grocer to grow,” Adrien Nussenbaum, U.S. CEO and co-founder of eCommerce software company Mirakl, told PYMNTS in an interview. “The business of online grocery delivery to customers’ doors is incredibly low-margin.”
It remains to be seen whether eGrocers such as Thrive Market will be able to make the model work long-term, though charging a flat membership fee certainly could not hurt. Additionally, as of November, the company stated that 28 percent of sales come from its private label products, which can also make a difference for its margins.
There is currently a wave of food-related companies going public or considering doing so. In addition to Thrive Market and Zomato, weight loss program Noom, Dole, and Chobani have all made headlines in the past week for their own IPO filings and deliberations, and salad chain Sweetgreen is also in the news for its upcoming public offering.