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Consumers have gotten used to restaurant food from pizza to sushi showing up at their doors within an hour, especially as COVID-19 has provided a lift to food delivery.
One startup is trying to do the same thing with grocery, making an even more ambitious promise: Order almost anything you can find in a traditional supermarket, and you’ll have it 15 minutes after you put your phone down.
New York-based Fridge No More said Tuesday it raised $15.4 million in a Series A funding round led by private equity firm Insight Partners. While the grocer just serves the Brooklyn neighborhoods of Gowanus, Park Slope, and Williamsburg, it has big plans for expansion, including opening 40 stores in Manhattan, Queens, and other densely populated areas of New York City, Pavel Danilov, the cofounder, said.
Danilov and his cofounder Anton Gladkoborodov currently operate a few spaces in Brooklyn that they call stores. In practice, though, they are warehouses: During a recent video tour, Gladkoborodov led Insider past shelves stocked with pantry staples like bottled water, coolers filled with fresh produce, as well as stacks of pre-made salads and soups that Fridge No More’s staff draw from to fill orders.
“It’s usually two, three, or up to five minutes for packing” once an order comes in, he said. After that, the startup’s couriers — who are regular employees, not gig workers — grab a scooter and zip off to their destination. Danilov said he opted to hire full employees since he needs people to stock shelves and perform other tasks at the shop in between filling orders. That’s in contrast with services like Instacart, DoorDash, and Uber Eats, which rely on gig workers to get food to customers.
“Our core idea is instant grocery delivery,” Danilov told Insider. Most of Fridge No More’s customers start out on the app by ordering just a few items to test the service. It’s not unheard of for customers to order a quick snack or a single apple, he added.
But therein lies the proposition: Once customers see that their order arrives within the promised 15 minutes, they tend to come back. “A few hours after that order, they buy something bigger, and they say ‘Wow, it works, let’s try it once again,'” Gladkoborodov told Insider. “It becomes a fun thing for them.”
Once they move beyond the trial phase, Fridge No More’s customers tend to settle on orders of around $50, and many place multiple orders a week, Danilov said.
The startup landscape is littered with companies promising on-demand delivery. Shoppers in New York and other major US cities already have tons of choices for grocery delivery, from decades-old services like FreshDirect to Amazon’s Prime Now to third-party delivery through Instacart. DoorDash has also expanded into convenience store delivery. And while many experts expect delivery to get a long-term boost from the pandemic, it’s still unclear how many grocery trips will stay online after society opens up — and how many delivery options that will leave room for.
Getting Fridge No More customers to stick around is key for investors. Rebecca Liu-Doyle, principal at Insight Partners, said that the startup’s ability to win repeat customers stood out among other players Insight looked at within what she called the “ultra-fast grocery” space. While most of Insight’s past investments have been in software and technology, Fridge No More isn’t its first grocery target: In January, the firm led a $95 million funding round for Imperfect Foods, one of several online grocery marketplaces jostling for market share.
“This is something that once customers discover it, they’re using it sometimes multiple times a week,” she said, adding that she believes New York alone could be a billion-dollar market for Fridge No More. That opportunity doesn’t mean competing directly with established players like FreshDirect, she said. “Think your bodega run, where you’re missing milk or eggs,” she said.
Fridge No More’s model will take money to expand, Liu-Doyle said, but its quick-delivery focus means it’s not easy to save money by using contract workers or filling orders using established grocers’ shelves. “This model is really hard to cheat at,” she said. “You actually have to start from the ground up, own those warehouses, build it up yourself.”
Long-term, Danilov thinks the model could be stretched to fit less-dense areas, including suburbs. That would involve expanding delivery zones from the startup’s stores to a few miles from the current single-mile radius it uses in Brooklyn, he said.
Increasing product selection is also a goal. Danilov said he and Gladkoborodov are exploring adding more meat and seafood, as well as getting local licenses to sell beer.
Tailoring selections at individual stores is also a priority, Danilov added. Since each store serves customers within a one-mile radius, the company decides how to stock each using order data and information about the types of consumers who live in a given area. “If you put in a Park Slope address, you will see a little different selection, because it’s a little bit of a different market with more families and more family packs compared to Williamsburg,” he said.