Wholeshare cuts out the middleman
Specialty grocery delivery service Wholeshare takes what might be called a “democratic” approach to offering customers online access healthy food products.
“We let consumers buy natural and organic food as a group at wholesale prices,” said Matt Hatoun, co-founder of San Francisco-based Wholeshare. “We cut out the supermarket or natural foods store. We go to the same wholesalers they use.”
According to Hatoun, there is an average markup of 20% to 50% at a supermarket or specialty store for natural and organic foods.
“There is high overhead for the last mile,” said Hatoun. “Spoilage, electricity, rent, employees. We keep the last mile infrastructure costs extremely low.”
One way Wholeshare minimizes infrastructure costs is by avoiding operating distribution centers or even any type of delivery fleet. Wholesalers, who range in size from leading national providers to small local farms, provide delivery themselves or via third-party carriers. In some cases multiple wholesalers will batch deliveries.
Another way Wholeshare keeps costs down is by having consumers shop communally in buying groups. Groups typically have at least 10 people and must meet a minimum purchase amount before a delivery is scheduled. In addition to leveraging economies of scale, Wholeshare further minimizes cost by having deliveries made to one central location for the group. These are often public spaces such as community centers or churches, but can also be office buildings or even private homes.
“We translate consumer behavior to wholesale distributor behavior,” said Hatoun.
Each consumer shops in their own private online cart in what Hatoun described as an “Amazon-like” experience. They can see what items are waiting in their cart and also track the group’s progress toward hitting a delivery minimum. Consumers pay for their own products separately with their own credit cards, which are kept on file.
“Everything runs on custom-built software,” explained Hatoun. “Wholeshare’s founders were all computer science majors at Brown. We use proprietary systems to process credit cards and combine orders, provide the online user interface, connect to wholesalers and let them upload product information.”
Hatoun said Wholeshare earns a profit both from fees it negotiates with wholesalers as well as a small markup to the customer. Total cost to the consumer is typically around 5% above wholesale cost. Each buying group (there are currently about 160 nationwide) has a coordinator who manages the group and determines factors such as what types of products the group will buy and where they will be delivered. Groups can be open to the public or invite-only.
Coordinators receive 5% of every food order free, which is factored into the price. They have the option of adding their own small markup to member costs, although Hatoun said most do not and all costs are transparent to the customer. Coordinators are often found through referrals or also through social media outreach.
Wholeshare offers a full range of products in the Northeast and a non-perishable assortment nationally. The company is gradually increasing the geographic range of its perishable assortment. Currently, there is no mobile app, but Wholeshare plans to develop one.
“Our number one goal is to reach underserved markets for healthy food,” said Hatoun. “Due to need for volume and to support prices, natural and organic food retailers usually have to locate stores in big cities or wealthy suburbs. We try to reach interested consumers in other areas.”