Another Grocery Delivery App?

A local food delivery startup uses software to move towards profitability.

There’s an app to get groceries delivered from Whole Foods, another one for delivering meal kits to your door, and dozens to get meals from your nearby restaurants. But what if you care most about fresh ingredients and supporting your local growers and producers? With the mission to “help grow and sustain food systems, worldwide,” Good Eggs was founded in San Francisco in 2011. [1]

[2]

Supply Chain as a Service

Spiro explains that farmers receive email notifications by midnight of what orders they’ll need to fill by morning. By 9 a.m., most deliveries have hit the Good Eggs headquarters, and are promptly filed into a series of plastic bins that in turn await delivery in either refrigerated or open-air sections of the warehouse. [3]

At its core, Good Eggs is a software-enabled delivery company for local food; by handling the logistics and supply chain, they allow consumers to conveniently receive food from local producers and boost sales for local producers. Krumville Bakeshop, a Brooklyn gluten-free baked good business, “has boomed by 40% since selling through the Good Eggs.” [4]

To deliver fresh local foods and goods by the next business day, Good Eggs has built out a connected system that forecasts consumer demand for items, registers actual orders, notifies producers so that they make those items available in time, and then determines the logistics for delivering the food to consumers. [5][6][7] From a mobile app for consumers, to a platform for producers to “manage inventory and to optimize the sales of their goods”, and another app for managing their operations within fulfillment centers, Good Eggs has software that spans every step in the chain. [8]

 

Profitability at Scale

While technology enables it to accept customer orders, streamline fulfillment and optimize delivery routing, technology is not a silver bullet. [9]

Despite delivering one hundred million pounds of food to date, Good Eggs announced in 2016 that it was shutting down operations in Los Angeles, New Orleans, and Brooklyn. [10][11] Even though Good Eggs has built out some impressive technology solutions, they neglected the economics of their supply chain and business.

To help ensure profitability for the company moving forward, Good Eggs is leveraging their technical capabilities to improve key operational issues, such as order fill rates and inventory management. [12] They are adding real-time availability of items for consumers, which they believe will move fill rates as closer to 100% and reduce the frequency of item substitutions or customer refunds. [13] In analyzing the contribution margin per order, Good Eggs also realized that they were losing money on every order. [14] To reduce variable costs, they are using software to overhaul their picking and packing processes, improving from “100 orders a day [per person], all of it pen and paper, to comfortably fitting 1000 orders per day.” [15] In addition, they are moving from a forecasting system based on manual predictions for produce to a “system that can give us more real-time data… can look many days or weeks out to the future.” [16]

In the medium term, Good Eggs is focused on more effectively curating their inventory and utilizing manual labor [17]. Proprietary software enables them to determine which products sell the most and when, which helps them ensure sufficient supply for consumers [18]. In addition, by continuing to invest in software to manage internal operations, they can more efficiently use human labor, further driving costs down.

[19]

Other Recommendations

First, I think Good Eggs should go beyond understanding their most popular items and double down on building a recommendation engine that tracks customer preferences. Such information can help determine what SKUs to add, ensure that producers are making the right items at the right times, and increasingly add value to consumers.

Second, given how important freshness is to their value proposition, they should consider adding connected sensors to monitor the freshness of foods in their fulfillment centers and in transit. If certain foods can maintain acceptable levels of freshness for even an additional day, it drastically reduces the operational complexity of their supply chain.

Last, as their profitability increases I think they should consider opening a Good Eggs store in San Francisco. It will attract additional consumers with a simplified supply chain (since they would deliver to a single location), benefit the producers by providing increased revenue opportunities, and help Good Eggs evaluate the popularity of various items.

 

Open Questions

How can Good Eggs replicate their successes in San Francisco in other locations across the US?

Good Eggs is both a startup trying to scale and a registered benefit corp. How does that seeming dichotomy affect their decisions moving forward that may reduce their reliance on human labor?

 

(779 words)

 

Footnotes

[1] Good Eggs, “Our Story,” http://corporate.disney.go.com/corporate/overview.html, accessed November 2017.

[2] Yuka Yoneda, “Good Eggs: New Home Food Delivery Service Offers Local and Sustainable Fare at Fair Prices,” Inhabitat, https://inhabitat.com/nyc/good-eggs-new-home-food-delivery-service-offers-local-and-sustainable-fare-at-fair-prices/, accessed November 2017.

[3] Marco della Cava, “Good Eggs scrambling to bring fresh food home,” USA Today, https://www.usatoday.com/story/tech/2014/09/08/good-eggs-farm-fresh-food-home-delivery/15100431/, accessed November 2017.

[4] Ibid.

[5] Joe Fassler, “How to put Good Eggs together again,” New Food Economy, https://newfoodeconomy.org/putting-good-eggs-together-again/, accessed November 2017.

[6] Stephanie M. Lee, “The Inside Story Of How A Food Startup Cracked,” Buzzfeed, https://www.buzzfeed.com/stephaniemlee/why-good-eggs-cracked?utm_term=.coDgKMgpE#.mkm5Lj58e, accessed November 2017.

[7] Ryan Lawler, “Good Eggs Raises $21 Million From Index Ventures To Deliver The Farmer’s Market To Your Door,” TechCrunch, https://techcrunch.com/2014/09/08/good-eggs-21m-index/?ncid=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29, accessed November 2017.

[8] Ibid.

[9] Danielle Gould, “Why $53M Wasn’t Enough to Scale Good Eggs,” Food + Tech Connect, https://foodtechconnect.com/2015/08/10/why-53m-wasnt-enough-to-scale-good-eggs/, accessed November 2017.

[10] Lawler, “Good Eggs Raises $21 Million From Index Ventures To Deliver The Farmer’s Market To Your Door.”

[11] Gould, “Why $53M Wasn’t Enough to Scale Good Eggs.”

[12] Danielle Gould, “Meet the Man Who’s Making Good Eggs Profitable,” Food + Tech Connect, https://foodtechconnect.com/2016/08/29/bentley-hall-good-eggs-profitable/, accessed November 2017.

[13] Ibid.

[14] Ibid.

[15] Author’s interview with Good Eggs Operations employee, Boston, Massachusetts, November 14, 2017.

[16] Ibid.

[17] Gould, “Meet the Man Who’s Making Good Eggs Profitable.”

[18] Ibid.

[19] della Cava, “Good Eggs scrambling to bring fresh food home.”

 

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4 thoughts on “Another Grocery Delivery App?

  1. The first question posed by the author is the biggest challenge that I see facing Good Eggs. I believe this model works well in San Francisco for two reasons.

    First, San Francisco has a generally temperate climate (US Climate Data shows that the average temperature fall between 50 and 70 degrees Fahrenheit) and as a result local farmers are able to produce their crop / product more consistently throughout the year. In other parts of the country where weather swings are more extreme, there may be a degree of seasonality that affects supply. Consumers in these zones may be frustrated to find an item in stock one week but unavailable the next.

    Second, consumers in San Francisco are typically more accustomed to shopping at farmers markets. In other geographies, consumers rely much more heavily on national grocery chains and as a result are more comfortable with brand labels than unfamiliar producers. Additionally, the range of products offered at a grocery store is presumably much broader than that offered by Good Eggs, making Good Eggs a supplement rather than a one-stop-shop.

    Thus, I anticipate that Good Eggs will again face significant difficulty as it tries to expand because it is inherently a niche service. If I were to advise the company, I would suggest digging deep roots in San Francisco rather than shallow roots across the country.

    1. Totally agree with your points about groceries and farmers markets. While not their original intent, they are increasingly adding local bakers, including those who already have their own storefront, to their platform. Do you think that aspect could scale better across the country or do you think it’s still subject to the same limitations you mentioned above?

  2. Great article. I’m familiar with the grocery industry, and I can attest to the difficult of ensuring produce quality. The biggest issue with quality is that while produce item might look fresh when you package it, there is no guarantee that the quality will remain optimal when it gets to the customers, even worse when the customer is about to use it. While you could make the argument that because the produce does not have to travel a long distance (given the local nature of the supplier) quality issues will not be as drastic, it will very difficult to replicate such a business model for all locations simply because not every city have enough farmland to support that population. I don’t think this is scalable outside the west coast, which has an abundance of farmlands (https://www.insidermonkey.com/blog/10-largest-farming-states-in-the-us-343286/2/).

  3. Very interesting article and insightful questions. As mentioned above Amazon fresh is a major player in this grocery delivery space and there are also other services like Instacart that enable deliveries from stores in close proximity to the customer. With this in mind, I wonder what the real competitive differentiation is for a company like Good Eggs, and also how valuable is this local focus in the eyes of the customer; Is it enough to command a premium and provide a solid foundation on which to build this company? As others mentioned above it may vary by geography or other demographics, but ultimately it seems that only time will tell.

    Another interesting point I saw was around forecasting of customer demand. While great in theory, it seems that developing accurate models would likely require a significant customer base. How can Good Eggs scale up in order to generate this data, and what are the implications for Good Eggs if the numbers are significantly off? Especially since the goods are perishable, being forced to hold/dispose of excess inventory, or pushing it back onto the producer, could cause further operational and profitability concerns.

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