“There have been multiple waves, but our growth rate basically doubled during the initial wave, and has never normalized since, although there have been ebbs and flows,” he told FoodNavigator-USA.
“We saw the initial surge in immunity products, toilet paper, canned beans and cleaning supplies, but generally our existing members have been purchasing more of their essentials on Thrive, so we’re seeing broad-based multi-category purchases of all types – so average order value has gone up – it’s over $80; and order frequency has gone up as well.
“We’ve also added about 300,000 new members since the pandemic began, and they are showing the same strong engagement as our existing members."
As for retention rates on the platform, which charges an annual membership fee of $59.95 and offers a curated selection of products at 25-50% off retail prices, he said, “We see on average more than 70% of our members are renewing at the end of the year.
"Once someone has gone over two or three renewal cycles, that number rises to a little over 80%, so relative to other subscription e-commerce players our retention rates are very high, and that’s driven by engagement.”
‘Massive’ growth in frozen foods… and more products to come
While the bulk of Thrive Market’s sales are in shelf-stable goods, the company has experienced “massive” growth in frozen foods, which it introduced in 2018 (meat, poultry, seafood), with frozen meals following earlier this year, said Green.
“We believe frozen has the convenience factor, less food waste, and allows you to preserve food without using preservatives, and you can make very healthy products, so we’re expanding the assortment but also completely changing the user experience for frozen."
Historically, he said, the choices in frozen have been “mostly pre-selected bundles, with limited choice, but we’re moving to a system where you can build your bundles yourself and mix meat and seafood with meals and other frozen products, and then we’re going to couple that with a much broader selection of frozen products, everything from frozen veggies and fruits to breakfast options.”
The new assortment will combine branded and private label products, he said: “We’ll start by adding brands with great products, reputations, and strong followings, and then we’ll fill in gaps with our own brand.”
Los Angeles-based Thrive Market - which was launched in 2014 and now has almost one million members (who pay an annual fee of $59.95) - originally focused on a delivering a curated selection of top-selling shelf-stable natural and organic brands at 25-50% below traditional retail prices.
However, the platform – originally billed as ‘Whole Foods meets Costco online’ - has been steadily building its own brand over the past several years, offering everything from coffee to frozen meat and poultry, collagen peptides, ghee, olive oil and almond butter, with private label now accounting for "28% of sales and growing."
It now offers hundreds of private label food items, plus a wide range of personal care and beauty products, vitamins and dietary supplements.
Private label now accounts for 28% of sales
So what is the strategic importance of private label at Thrive Market, which started out as a place to buy shelf-stable products from trendy natural and organic brands, but now generates 28% of sales from private label products?
It’s become mission-critical, said Green, who said Thrive had recently launched its first subcategory within private label, ‘Wellmade by Thrive Market’ (click HERE and HERE for examples).
“We can fill in gaps where members are looking for things they can’t find, and we're improving the quality, sustainability or ingredients standards for staples. But private label is also a way to extend our mission, so we’ve pushed heavily into fair trade and regenerative farming under the Thrive Market brand; plus we’re offering unique products that you can’t find anywhere else.”
He added: “Most private label is copying products that exist and doing them a bit worse; we’re trying to turn the traditional private label model on its head.”
‘Our catalog has actually gotten smaller in the last year from a SKU standpoint’
When it comes to SKU counts, Thrive has been careful to stick to its hyper-curated approach, said Green. Put another way, just because the ‘endless’ virtual shelf means you can sell 30 types of almond butter doesn’t mean you should, he observed.
“One of the lessons of the pandemic has been the value of having a curated catalog. It’s allowed us to concentrate our purchasing power with a small number of brands and partners and do significant scale, and it’s also allowed us to develop really close relationships with those partners, which has helped us stay in stock a lot better than some other grocery stores.
"[A limited selection is] also valuable for our members, who want us to curate high quality products because we are removing the paradox of choice, which can make people feel overwhelmed. Our members rely on us to do that curation so they don’t have to.”
He added: “Our catalog has actually gotten smaller in the last year from a SKU standpoint; we’re now at around 5,000 SKUs.”
Improved demand forecasting, new fulfilment center: ‘Our inventory position is much stronger now than it was when COVID-19 first hit’
Asked how the team is preparing for the winter, he said Thrive is using insights gleaned from the early weeks of the pandemic to improve its demand forecasting and inventory management, and investing in improvements to its warehouse management system and communication system with vendors.
“Our inventory position is much stronger now than it was when COVID-19 first hit, so we are making sure that our supply chain is resilient to these kinds of shocks.”
Right now, for example, Thrive is doubling down on inventory for products such as toilet paper, cleaning products, immunity and supplements, pasta and ready-to-eat meals, and anticipating higher demand for cold & flu-related vitamins, supplements and herbal remedies.
It is also looking to open a third fulfilment center - likely on the east coast - in 2021 (to complement facilities in Indiana and Nevada) to keep up with demand, added Green.
Is an IPO on the cards?
So what’s the endgame for Thrive Market, which has raised more than $240m to date? Is an IPO on the cards?
Green won’t provide revenue figures, although he says they are in the “hundreds of millions."
As for the exit stratgey, he said, "Our endgame is our mission: to make healthy living easy and accessible to every American family, and we’re barely scratching the surface on the size of this market.”
He added: “We're in this for the long run, we’re not looking to exit in three years or five years, or even 10 years. We want to build this platform over the next several decades."
