GrocerKey Parlays Woodman’s Success Into New Sales, Raises $700K

Jeremy Neren founded Madison, WI-based GrocerKey in 2014 to help introduce grocers to e-commerce and create online replicas of their physical stores. In mid-2015, Neren told Xconomy he was talking with dozens of supermarket chains around the country about using his startup’s software. GrocerKey has since converted a number of prospects into paying customers, and Neren says one thing that has helped the company make sales is the success it has had working with Woodman’s Markets, a chain of low-cost stores based in Janesville, WI.

“We’ve figured out a profitable model with Woodman’s,” says Neren. “It’s been favorable for both us and them, financially.”

GrocerKey will continue rolling out its digital tools to more Woodman’s stores this year and next. Since the two teamed up in 2015, the grocer has begun offering citywide delivery in Madison and Milwaukee, Neren says. Soon, people in either city will be able to place orders online and pick them up at any of the six Woodman’s stores located in and around the two cities. By 2018, GrocerKey plans to offer some combination of pickup and delivery at all 18 Woodman’s locations across Wisconsin and Illinois, two of which have yet to open, he adds.

On top of those efforts, Neren says that 11 other grocers have signed up to start using GrocerKey’s products. Some of them are still installing the software, while others have moved into a testing phase and are getting set to go live, he says.

The startup recently raised $700,000 from investors, according to a regulatory filing. Neren says that some of the proceeds from the equity funding round will help fuel his company’s growth—GrocerKey now has more than 50 employees—as it seeks to add even more supermarket chains to its client roster. The startup is also preparing to take on an additional $1 million in debt financing. Neren says his company has raised about $2.5 million in total.

GrocerKey’s white-label software is designed to help grocers create an online presence, and help get shoppers the items they need without having to walk through the aisles of a store themselves. When customers visit ShopWoodmans.com or another website underpinned by GrocerKey’s technology, they might not be aware that the startup is part of their shopping experience.

That sets it apart from other grocery delivery services, such as Instacart. With that service, users start by visiting Instacart’s website, then picking a store to shop from. Neren says that GrocerKey operates under a distinct, “retailer-branded” model in which it works directly with supermarkets.

“You are ordering directly from the retailer,” he says. “We don’t own that customer—the retailer does.”

Another key difference is that Instacart enlists independent contractors to do the actual shopping and delivery. With Woodman’s—also an investor in GrocerKey—the startup is having its own staff assemble and drop off orders. However, that’s likely to be the exception, rather than the rule, Neren says; other GrocerKey clients will be responsible for hiring people to fulfill orders. That way, the company can expand its footprint fairly quickly without having to constantly bring on new employees.

Neren says that he and others on his team do not consider Instacart a head-on competitor. But he says one company that designation is appropriate for is Winooski, VT-based MyWebGrocer, which has been in business since 1999. MyWebGrocer is “unquestionably the market leader” of the online grocery shopping sector GrocerKey operates in, he says.

Grocers that agree to license and install GrocerKey’s base software package are typically charged a setup fee, a monthly fee for each store offering pickup or delivery, and a small percentage of each transaction conducted through the online store. Pricing can vary depending on the wants and needs of a particular organization, though, Neren says. Supermarkets can in theory pass on some of these costs by requiring shoppers to pay an extra fee for pickup and delivery orders.

As more shopping trips are performed online, instead of beneath fluorescent lights to the tune of elevator music, GrocerKey and the stores it sells to will accumulate more information on users’ shopping habits. It’s likely that there will be groups interested in paying for that data, Neren says.

“We have a wealth of knowledge around customers and where they’re selecting products from,” he says. “That knowledge base can be shared with consumer packaged goods companies to serve as another revenue stream, not only for GrocerKey, but for the retailers we work with, to make e-commerce more viable.”

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