Like a lot of people, Gregg Dorazio signed up for a community-supported agriculture (CSA) share last year during COVID. With the subscription, he received a weekly box of fresh produce from a local farm.
That got him thinking — would that work for a grocery store? Dorazio is the e-commerce lead at Giant Food and is always looking at new ways to provide value to customers. Giant is carving out a niche in the grocery industry by supporting local agriculture and food products, and Dorazio thought customers might want local produce delivered right to their doors.
“(My CSA) was a bit of the spark,” Dorazio said. “I wondered if it also makes sense for a lot of our customers. So we did some research. That was last fall, and we tried to validate how many of our core users were interested. We wanted to know, what would be the ideal size and price point and does it need to be organic? Does it need to be a subscription model? And so, we kind of ripped it out through that research really quickly with existing customers, and remarkably, we had a lot of interest, especially from our younger demographic.”
Putting the boxes together
While many CSAs focus on organic produce, Giant’s research showed customers were price-sensitive and mainly interested in supporting local farms. They were less concerned whether the fruits and vegetables were certified organic. With the data, the company moved forward with a box of commercial produce from regional farms as an e-commerce product.
Giant is based in Washington, D.C., part of the Ahold Delhaize family of companies. It limited farms to a three-state region, and eventually struck deals with 22 farms, some of which were existing suppliers.
“(Customers) were all about helping local farmers and wanting to support their community and feeling like small business was the way to go,” Dorazio said. “And they also, anecdotally, would associate a lot of other positive things. It’s fresher produce. So that meant more to them than necessarily organic.”
Like a farm CSA, the local boxes contain only in-season produce. That means greens in the spring, tomatoes, zucchini and corn in the summer, and pumpkins and apples in the fall. In June, the company launched the boxes on its e-commerce site, and Dorazio has been pleased with the response. The boxes have been one of the top-selling new items on the site.
“One of the metrics that we use on the website is revenue per click,” Dorazio said. “So, in other words, not just as someone seeing that content, but are they actually putting items into their cart. (The boxes have) a very strong click-through conversion rate — people putting it into the cart, which is great to see.”
The boxes retail for around $20, compared to $60 or $70 a week for a small farm’s CSA. Each box has six to eight items, somewhat smaller than some CSA boxes, which often have enough produce for a family of four for the week.
Giant had thought about a subscription model but decided to let customers add the boxes to their weekly orders. So, along with milk, eggs, bread and other items, customers can order a box of fresh produce. The order reaches their doorstep a few days later as part of the regular delivery process.
Giant is still in the testing phase. It has promoted the produce boxes through its email list and banner ads on the site. Dorazio is unsure what will happen at the end of the growing season. Most CSAs run from spring into fall depending on the region of the country. He said some greenhouses in the region grow produce year-round, but he is still discussing what direction the boxes will take when the growing season ends. They are not going to add produce from Florida or other locations because the boxes are meant to support local agriculture.
“We’ll see how it goes and then if we have to, sort of take a hiatus and then come back in the spring when things are back up again,” Dorazio said.
Optimistic about the future
Dorazio said a lot of e-commerce in the grocery industry right now is about experimentation and learning. While there is huge demand, the grocery industry is complicated. A store must deliver hot, cold and packaged goods together.
“It’s really hard because not a lot of folks are making any money in e-commerce right now, and that presents a huge challenge,” he said. “You can’t just go out and say, ‘I’m going to grab the demand’ without understanding how to fulfill it. How much does it cost me to fulfill it? Or maintain great service. I mean, there aren’t a whole lot of other companies out there that have to transport three temperature states, and 40 items, to a customer’s front door.”
Giant’s goal is to build a profitable e-commerce operation, Dorazio said. While it has an agreement with Instacart, the company is really focusing on providing delivery in-house. The company has a fleet of delivery trucks that work out of a centralized warehouse. Each day drivers make multiple deliveries within the Washington, D.C., region.
A key advantage for Giant was acquiring the online grocery company Peapod, which has operated in the Washington, D.C., area for 20 years. Giant learned from one of the early pioneers in online retail and is positioned to take advantage of the growth in the online grocery business.
A key differentiator for Giant is the focus on local. The company wants to be known as an organization that supports local agriculture and small businesses.
“You don’t see Amazon or Walmart trying to go down that same path in our market,” Dorazio said. “So I think it’s an important reason to have folks want to understand, shop and love us.”
