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Thrive Market uses less selection, larger orders to fight grocery inflation

Thrive Market's mission said its "profits and the purpose go hand in hand." In 2022, Thrive Market brought in nearly $500 million in revenue.

Thrive Market, an online, subscription-based marketplace for organic groceries, aims to offer healthy groceries for less. Nick Green, Thrive Market co-founder and CEO, told Yahoo Finance offering less selection on its website helps keep prices low.

"Instead of going into a grocery store and having 40,000 non-perishable SKUs [stock keeping units], we've got about 5,000 or 6,000, which gives us more purchasing power...despite the inflation, we've been able to be pretty resilient in keeping our prices low, certainly relative to competitors," Green told Yahoo Finance Live (video above).

In March, the cost of groceries went up 8.3% compared to a year prior. And although grocery inflation is down from the 13.5% peak seen in August 2022, higher grocery prices still weigh on consumer budgets and keep them looking for value.

In 2022, Thrive Market brought in nearly $500 million in revenue. Thrive Market has approximately 1.2 million paid members and a valuation of more than $1 billion, based on the company's latest funding round.

An annual $60 annual subscription fee for members helps to drive prices lower too, Green said. "By getting our margin from membership, it actually gives us a lot of flexibility to push our price as low as we possibly can."

Another strategy to keep prices low is asking members to spend at least $49 to qualify for free shipping.

Green said this minimum encourages customers to add more to their order and said the threshold is "less about cost and a lot more about our mission" to make healthy, sustainable living affordable and accessible to all.

Typically, a Thrive Market order has more than 15 items and more than $90 worth of products.

"The impact of that is good for the business. It means we can actually offer more savings because we don't have as much cost in shipping and packaging and that's really good for the environment where we can use ground shipping," Green said. "So we're able to get to more than half our members in one day or less on shipping. We're able to get to 95% in two days or less."

(Courtesy: Thrive Market)
(Courtesy: Thrive Market) (Elisha Knight | Thrive Market)

While Thrive Market competes with the growing online grocery space, which is expected reach $235.86 billion in sales by 2026, Green said the company's "profits and the purpose go hand in hand."

On Wednesday, the company converted to a Public Benefit Corporation.

Green said many outsiders assume a mission to serve people, purpose, and the planet will come at the expense of profits. "We really found the exact opposite to be the case," Green said, because the "mission resonates with people" and leads to customer loyalty, renewal rates, and referrals.

Onesies and twosies

More packages and day-of deliveries means more problems for the planet, Green said.

Once consumers learn about that impact, he said they decide to turn away from mega companies known for that like Amazon (AMZN).

"People order on Amazon for those onesy, twosies because they can," Green said. "Once you tell people what the impact of that is on the environment, a lot of them do want to change their purchasing behaviors."

In a typical day, Amazon ships approximately 1.6 million packages, per the Amazon seller software tool LandingCube. That means 66,000 orders are delivered every hour.

Green explained the impact: "If you're trying to deliver day-of, your carbon footprint is going to be a lot higher. If you're trying to do air shipping to get next-day from a geographic distance, you're going to be using an order of magnitude, more carbon footprint."

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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