Sep 24, 2020
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In Online Groceries, This Company Does What Even Amazon Can’t: Make Money

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Open Taste s strategy for lower costs COURTESY OPEN TASTE It s an open secret in retail that the grocery business is without doubt one of the largest market yet left untapped by online retailers. Use of online shopping in grocery is growing but it really is still at a remarkably low rate probably under 7%

 

Grocery stores are visited by a member of virtually every household in America once per week or more. It s shocking that retailers have failed to plot a route to success for this sort of critical and massive industry. In a previous blog I wrote about why that s happening

 

Among the key reasons is price. Thus far it s been impossible for retailers to compete with physical grocery stores in such an intensely competitive business and still support the price of picking and delivering customer orders to consumers homes and make a profit. The second reason is perishables. Consumers like to choose their very own fruits vegetables meat and fish and don t desire to get the bruised apples from the bottom of the barrel

 

Those have been very hard obstacles for retailers to beat and beforehand no one has done it and made money. For the last several months I ve been talking to an Asian-based online grocer which could have the answer. The corporate is termed Open Taste. They started by selling only fruit and veggies and have since expanded to also offer dairy meat seafood and a few grocery items

 

Two things make Open Taste unique: Their prices are better than most supermarkets. They earn money (I can t let you know how much but I’ve got seen their financials). It really is those two factors that make Open Taste interesting valuable and one-of-a-kind. No one else including Amazon Whole Foods Kroger Walmart you name it — has been able to do this online

 

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Manuel Pastor And Amelia Ransom How does Open Taste do it? There are several components to Open Taste s low-cost strategy. The first is sourcing. Open Taste sources product direct from producers. It has direct arrangements with farms in Asia the U. S. Europe and Australia. That direct connection eliminates brokers and distributors and reduces waste

 

Open Taste estimates that in conventional supply channels about 35 cents of every produce dollar goes for those three items. Open Taste has eliminated just about all of those costs. The second component to Open Taste s strategy is delivery. Their entire philosophy is in accordance with low asset investment

 

They own no trucks or delivery vehicles. They use crowdsourced drivers (think Uber) who could make six deliveries per hour over six hours a day or 36 deliveries per driver per day. They’ve their very own thermal bags which keep cold things cold and funky things cool. The bags also incentivize repeat customers because each bag has a deposit cost

 

Open Taste also chooses its customers carefully. They don t service every potential customer they’re focused for now on consumers in high-density locations because that makes delivery more efficient. Asian cities typically have more density so starting in Singapore made sense as an area to begin. The next move for Open Taste is bulk delivery

 

The belief is to get consumers to buy more produce than one household typically needs at one time. That saves money on handling and shipping costs which makes the business much more profitable and low-cost to consumers. It causes neighbors to share orders with each other and the breaking down of the majority order shifts the labor cost from the food retailer to the patron with consumers cashing in on the price savings

 

The secret’s having neighbors who live near each other work together to maximise convenience. I will t say where this would lead except that Open Taste is clearly on to something. They’ve cracked a code that no one else has been able to do including companies with billions of times more sales and resources

 

They ve done it by rethinking how goods move and a way to leverage other people s assets without owning them. They’re maximizing efficiency with no store little or no capital concentrated focus and never a bit entrepreneurial derring-do. In case you re a huge company your orientation is often to try and figure out a way to maximize the large resources you control to construct a business

 

But in an economy where brainpower is the most valuable asset scale and creativity don t always work together. When you inspect Open Taste you may t help but think that if a bit startup can do better on the bottom line than anyone else inside the industry then it s possible to believe that penetration in online grocery is as open to entrepreneurs as it really is to the giants

 

We may be seeing among the world s biggest businesses turned on its head

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