by Kristen Cloud/staff writer
It’s taken more than a decade for Yummy.com to perfect its same-day online grocery delivery business. The Hollywood-based company, which also includes four brick-and-mortar stores in the Los Angeles area, is led in part by co-founder and CEO Barnaby Montgomery. He reveals it’s the “on-demand” aspect of Yummy.com that makes the business so successful.
“We started in 2002 with the vision to integrate online customers directly into the local grocery store and to fulfill online orders on demand,” Montgomery tells The Shelby Report. “That’s the key component of our fulfillment solution that makes us different. On demand means that we’ll fulfill your online order whenever you want us to, in as little as 30 minutes. So, in a practical way, that means if you order right now we’ll be at your home in about 30 minutes. And that’s important because it mimics your life offline.”
Most consumers go to the store as soon as it’s convenient for them, according to Montgomery. Yummy.com’s solution is designed to mirror that life offline in comparison to old-fashioned types of online grocery fulfillment, which might require a customer to select a delivery window sometime in the future that may be up to 90 minutes.
“We’re trying to match the experience offline where you go get it when you want it or when you need it, and you pay and you take possession immediately,” Montgomery says. “By offering the on-demand fulfillment we satisfy their needs for product now in a way that they’re used to.”
Yummy.com’s online business and its storefronts, the fourth of which opened in L.A. in late May, work together hand in hand. The company’s online component makes up 50-70 percent of sales per store.
“It’s an incredible incremental component to an already viable store,” Montgomery says.
‘Business is on the backside’
There’s no doubt Yummy.com’s website is organized and easy to use and navigate. Though that certainly is important, especially considering Yummy.com might fulfill between 50 and 60 orders within an hour at its busiest location, Montgomery says the system’s “back-end” functionality is what makes it work.
“You have to be able to fulfill your demand as you have solicited it,” he says. “So when you advertise that you’re going to deliver in about 30 minutes, you really have to do that, and that requires the software and the systems in the store to function properly at high volume. The pretty website, the clean, simple, easy-to-use website in 2013 isn’t going to get you any business, because that first order, somebody might place but, because you’re not going to fulfill your promises, there’s going to be no second order. I feel a lot of room for improvement with our website, but that’s really not where the business is. The business is on the backside.”
Yummy.com offers free delivery on orders of $100 or more. The fee on orders less than $100 is $3.99, with a minimum required order of $17.50. Most of Yummy.com’s customers spend less than $100 per order, Montgomery notes.
“In the grocery trade people are shopping more frequently, and it’s unusual to get somebody who naturally wants to spend $100 or $150,” he says. “In fact, people want to spend as little as possible. They want to satisfy just their next couple of days needs and they go to the store two or three times a week to buy fresh product and targeted meal solutions for themselves—buying dinner for tonight or breakfast and dinner for the next couple of days.”
This is why Yummy.com, Montgomery says, is a “fresh produce-driven business.”
Fifteen of Yummy.com’s top 20 (best-selling) items are fresh produce items.
“And, like any grocer, the No. 1 item is a banana,” Montgomery says. “It’s fresh product that goes bad at home and that requires you to go to the store often that drives the business.”
While Yummy.com is fresh focused, the business carries all the categories of a traditional supermarket.
“But we have a limited assortment within the category,” Montgomery says. “We’ll typically carry the best-selling brand, an organic brand, but we will not carry the off brand.”
For ketchup, as an example, Yummy.com offers Heinz in several sizes as well as an organic variety in a single size.
Targeting millennials and the ‘millennial-minded’
Like any retailer, Yummy.com has a target customer.
“There are two types,” Montgomery says. “The first one is a millennial customer, that’s somebody who lives online. They prefer to order online and they are looking for solutions online. The second type of customer is somebody I call a ‘millennial-minded’ customer. That’s somebody who, as they get older, they are willing and able to change their shopping habits. They remain aspirational as they get older. Some people, they grow roots, and they just stick to their same routine and they are unwilling to try something new.”
A millennial-minded customer is somebody who likely would embrace a Trader Joe’s, Sprouts or an AmazonFresh in their community. Additionally, this millennial-minded customer is not, as Montgomery reveals, “blindly loyal” to their conventional supermarket—such as a Ralphs, Vons or Albertsons.
“Instead,” he adds, “they’re interested in a natural category, they’re interested in what’s online and they are more likely to shop online using an Apple product, than with a PC product.”
National expansion goals
Among its four stores in the Los Angeles area, Yummy.com fulfills about 20,000 orders each month. The company wants to expand nationally, and Montgomery thinks the business has the right model to expand.
“With that focus on fresh, perishable product on demand—the customers are pulling the product out of the store,” he says. “Our solution is not an advertising-driven solution where we’re advertising or marketing to the customers to get them to…we’re not pushing the product out of store, they’re pulling it—based upon the natural cycle of their lives. And we see an advertising expense as a percentage of sales, significantly less than the industry average. So for us by focusing in on the needs and the wants of the customer, rather than on what’s convenient for us, we’ve found this holy grail of high volume, low operating cost and, by implication, profit.”
It’s a mass-market opportunity, Montgomery mentions, and “not a small niche to be addressed by regional players.”
“This something that we think the national drugstores, supermarkets and other retailers need to address in a truly integrated multi-channel way that, in our view, should be addressed on demand,” he says “We would like to partner with somebody…to address that mass market.”
How a Yummy.com order is fulfilled
• Customer submits order. Yummy.com’s proprietary order management system assures the order appears at the correct store, which Barnaby Montgomery, co-CEO of the company, likens to a Trader Joe’s in size. Each of the four Yummy.com stores carries about 3,000 SKUs.
• The order is routed to a picker based on their location within the store. The picker shops the store’s aisles for the items.
• The order is assembled at a specific site in the store’s back room, where it is double checked. Each item is scanned to match the item requested by the customer to ensure order accuracy.
• The order is packed and assigned for delivery. An order typically is on its way to the customer within 10 minutes of the order being placed to ensure the approximate 30-minute delivery promise.
• There is never any interaction between the customer and Yummy.com staff. Montgomery compares the process to that of how a restaurant operates. “If you can imagine a kitchen in the back of a very busy restaurant—the people in the kitchen are not talking to the customers in the chairs, but once the order by the waiter is inputted into their kitchen system, it appears on the screen or a receipt prints out in the kitchen. And that’s when everybody in the kitchen gets to work. It’s similar to that, it just snap appears and it’s time to make the order.”
In the featured photo at top is Barnaby Montgomery, co-founder and CEO of Yummy.com.