CEO Tech Talk: GrubMarket Acquires FarmBox, Plans Nationwide Expansion

Despite a tough year for online grocery delivery startups like Instacart or Good Eggs - both have announced layoffs and cost-cuttings in 2015 - GrubMarket, also based in the San Francisco Bay Area, decided to start the new year with a bang.

The venture capital-backed GrubMarket announced today that it acquired FarmBox, a Los Angeles-based competitor with also a presence in San Francisco through its organic groceries delivery service Spud.com.

I sat down with GrubMarket CEO Mike Xu to discuss the recent announcement, as well as the overall grocery market - Americans spent about $638 billion at supermarkets in 2014, according to the Food Marketing Institute - and GrubMarket's plans for 2016. Below is an excerpt from our telephone conversation.

Jean-Baptiste Su: What was behind the decision to acquire FarmBox?

Mike Xu: Since we started, less than 2-years ago, we grew incredibly fast from just $40K of monthly sales to over $1 million today and in the San Francisco Bay Area alone. FarmBox is based in LA and is giving us the opportunity to scale beyond our local market - passing the $1.5 million sales on our way to multi-million dollars sales in 2016 -  but also position GrubMarket as the leading consolidator in this huge online grocery market.

JBS: How is GrubMarket different from the other online grocery delivery startups like Instacart, Good Eggs, Google Shopping Express or even Amazon Fresh?

MX: We are very different from all of them as we're not "just" a delivery service but a true online marketplace where anyone - from your local farmers' markets producers and farmers, restaurants or even small kitchens - can open their own shop on our platform for free and start selling their products immediately. Our business model is also radically different. It's totally free for sellers and we only take a small commission (20-25%) to handle the delivery. That was made possible through operation efficiencies: we don't have a huge warehouse or storage facility as we deliver all the products within 24-hours from the time we receive them from sellers. Another major differentiator from our competitors is our B2B activity- which is actually profitable - where we deal directly with restaurants, schools and companies, instead of individual consumers.

JBS: Do you fear the competition from traditional grocery retailers like WholeFoods or Safeway ?

MX: They're the unnecessary middlemen that we're trying to cut with better quality "farm-to-table" products, a larger selection and much lower price. Their whole business model is in jeopardy and 2016 is going to be an interesting year to see how and if they can turn it around!

JBS: What are your New Year resolutions for 2016?

MX: We have lots of things under our sleeves. FarmBox is really our first step in our nationwide expansion as it makes sense to partner with local players rather than try to build everything ourselves, especially if they're profitable. With FarmBox we will reach a total of 60 employees and plan to double our headcount, to 100-140 employees by the year's end. We've also got a lot of interest from investors so we're planning to raise another round of funding sometimes this year which will help us accelerate even more our nationwide expansion and our goal to double or even triple our revenue!