ELMSFORD, N.Y., July 18, 2001 (PRIMEZONE) -- When he heard that Webvan had filed for bankruptcy, Max Enock knew the question would come again: Would YourGrocer (www.YourGrocer.com) eventually join the swelling ranks of failed Internet grocers which now includes Webvan, Streamline.com, ShopLink, HomeRuns.com and WebHouse? These failed companies collectively raised and then lost more than $1 billion.
"No way," said Enock, President of the New York-based online grocer. "We are succeeding because we give customers what they really want: savings. Our customers save time, effort and money -- as much as 60% on some products compared to supermarket chains. And, we deliver right to their doors."
Enock points out that YourGrocer is already profitable in the New York metro market: "Our secret is our strategy. Our business is modeled on the warehouse clubs." Rather than trying to meet customers' everyday shopping needs, YourGrocer focuses on "stock-up" shopping for the basic necessities that consumers and businesses like to buy in bulk quantities. Instead of carrying 20,000 items, YourGrocer focuses on the large, economy sizes of the 1,000 leading products that most customers use on a regular basis. For example, Bounty paper towels, Charmin toilet paper, Huggies diapers, Coke, Poland Spring water, Tide laundry detergent and Energizer batteries. YourGrocer also carries highly demanded specialty products that New Yorkers love like Starbucks coffee beans, Omaha Steaks, San Pellegrino water and Iams dog food.
As a result, YourGrocer's customers order once a month rather than once a week, and their order sizes are large -- on average more than $150. Since the key to making a profit is to deliver a big order on each customer trip, a large order size is vital.
YourGrocer has achieved this success by raising only $5 million from Brand Equity Ventures of Stamford, Conn. Chris Kirchen, a Managing General Partner at Brand Equity Ventures, was impressed by what he saw: "We looked at the business plans for all of the companies in this category and found that YourGrocer had the only strategy that made customer and economic sense."
When Enock, a former marketing executive with Nabisco and Arnolds Bakeries, took over YourGrocer from the founders in late 1999, the company's basic strategy had already been set. Enock and Brand Equity Ventures immediately recognized that the founders had "cracked the code" for developing a winning strategy in the grocer-delivery space. With Enock's marketing experience and Brand Equity Ventures' capital, YourGrocer immediately began to test new business development methods and invested in a more efficient distribution facility located in Elmsford, NY. YourGrocer initially targeted high-potential ZIP codes, using newspaper inserts and direct mail distributed only in these areas. Its delivery area has gradually expanded to include Manhattan, Brooklyn, Queens, Westchester County and Nassau County in New York; Fairfield County, Conn.; and parts of Northern New Jersey.
By contrast, flush with almost $700 million raised in initial public offerings of their stock, Webvan, Streamline.com and HomeGrocer.com expanded wildly. WebHouse, an affiliate of Priceline.com, raised $390 million from private investors for its grocery service. All were convinced that consumer demand alone would carry them to profitability. All have since gone out of business.
"Webvan epitomized the `if you build it they will come' mentality that defined the Internet retail sector through 2000," said Jupiter analyst Ken Cassar.
Enock, with less money to work with, had little choice but to follow a more conservative path. So, while Webvan spent between $30 million and $40 million for each of its massive, high-tech warehouses, YourGrocer spent only $250,000 for a modest, but efficient facility. Webvan's specially designed trucks cost $60,000, while YourGrocer leases off-the-rack models that cost about $30,000. Webvan spent millions in mass television advertising, while YourGrocer spent thousands on highly targeted direct marketing.
Instead of getting big quickly and potentially disappointing new customers, Enock expanded slowly, adding customers only after YourGrocer had the software, facilities and employees to handle the new business. That software and its limited product line, allow YourGrocer to turn its inventory much faster than traditional grocery stores, so its merchandise is newer and fresher.
"The software also tells our employees how to pick the orders most efficiently and how to load the trucks in delivery sequence. It also gives our drivers directions on the most efficient driving route, along with a printed-out map," said Kurt Koenig, YourGrocer's VP of Operations and Finance.
Customers love YourGrocer's service as exhibited by its ability to build loyalty unmatched by any of its formerly well-funded competitors. About 60 percent of the people who try YourGrocer become repeat customers, compared with about 30 percent of Webvan's. YourGrocer's customers shop an average of once per month and spend almost $2,000 per year, while Webvan's customers shopped less than two times per quarter and spent about $900 per year.
According to Enock, his fastest-growing customer group is families with children: "They start off buying baby products like formula, diapers and wipes. Then as the kids grow, they buy juice boxes, cereals and Kraft macaroni and cheese. Families with older kids stock-up on Gatorade, granola bars and sodas. And, they all need staples like paper towels, toilet paper, laundry detergent and water."
Another rapidly growing category of customers are small- to medium-sized businesses, who use YourGrocer to stock their "company kitchens" with sodas, water, coffee and snacks for employees. Business customers spend an average of $4,000 per year and save up to 50% versus other beverage and snack delivery companies.
"We recognized that the way to crack this market was to focus on stock-up shopping just like the warehouse clubs -- BJ's, Costco and Sam's Club. Warehouse clubs are growing much faster than supermarkets. While people enjoy warehouse clubs' savings, many cannot afford to spend the time it takes to shop at them -- especially when they have young kids," Enock said. YourGrocer's customers also appreciate the fact that YourGrocer does not charge a club membership fee.
You can order online at www.yourgrocer.com or by phone toll-free at 1-888-968-7476 (1-888-YourGrocer). As a special incentive to encourage people to try its service, YourGrocer is currently offering FREE Groceries to first-time customers (15% of first-time orders are free). To get the FREE groceries, enter coupon code PR2 as you check-out on the Web site, or give the code to the telephone order taker.
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-0- CONTACT: Maxwell Enock President 914-345-0717 ext. 3022 max@yourgrocer.com