Stopping on the way home to pick up groceries may soon feel like a NASCAR pit stop for some Chicago-area shoppers.
Online grocery startup Fresh Street is launching Friday from a 10,000-square-foot former clothing store in a West Rogers Park strip mall, hoping to carve out a new niche in the booming digital grocery industry by focusing exclusively on expedited curbside pickup, so-called click and collect.
The concept is simple: no in-store shopping, no delivery service and three times the curbside capacity of a typical bricks-and-mortar grocery store. Customers can schedule a pickup in as soon as 30 minutes, pull into a designated parking space, pop their trunk and drive off with their groceries.
“We’re focused on faster turnaround times, better availability, getting people in and out of their parking spot quicker — we should be able to do that in under a minute,” said Mike Sayles, 33, co-founder and CEO of Fresh Street, who previously headed up sales for Chicago-based Ferrara Candy. “If we’re doing our jobs well, you’re interacting with us as little as possible.”
The pandemic has fueled a major shift to online grocery shopping, with nationwide sales growing by 64% in 2020, and another 12.3% last year, topping more than $122 billion, according to research firm eMarketer. The Chicago market got more competitive last month when Farmstead, a California-based online grocer, launched its service with free delivery to the city and suburbs out of a 30,000-square foot warehouse in Franklin Park.
Fresh Street is the latest retailer to enter the fray, challenging national delivery giants such as Amazon Fresh, and local bricks-and-mortar chains such as Jewel and Mariano’s, which have also beefed up their digital capabilities amid increased demand. What sets the newcomer apart is its sole focus on one fast-growing area of the online grocery business — curbside pickup.
“Our goal is that we should be competitive with in-store grocery prices at Jewel, at Mariano’s and other local grocers,” Sayles said. “We will be more affordable than their online platforms.”
Click and collect — ordering online and picking up at the store — accounted for about 35% of digital grocery sales in the U.S. last year, or nearly $43 billion, according to eMarketer. The curbside pickup market share is expected to climb to more than 40% of online grocery sales by 2025, the research firm said.
Blake Droesch, an analyst covering retail and e-commerce at eMarketer, said curbside pickup is a “happy medium” for digital grocery services, offering the convenience of online ordering without the added expense of delivery.
“It’s an advantage for consumers as well as retailers,” Droesch said. “It’s an interesting idea for a startup, considering how costly delivery infrastructure can be.”
Tucked in next to a Famous Footwear store in the Lincoln Village shopping center on the city’s Far North Side, Fresh Street retrofitted a former Dress Barn clothing shop as a small grocery fulfillment center, with walk-in coolers, freezers and storage racks. The grocery store is the first of 10 planned for the Chicago area, with locations in Naperville and Darien on the near-term shopping list, Sayles said.
Fresh Street has 17 employees at its launch, including seven working at the inaugural store. Bootstrapped with $4 million in funding from family and friends, Sayles will be looking to venture capital firms to finance future expansion in the Chicago area and perhaps beyond.
A native of upstate New York with a University of Chicago MBA, Sayles came up with the Fresh Street concept about a year ago, in part based on his own frustration with online grocery shopping, where substitute items, higher prices and scheduling challenges made the experience less than ideal.
Droesch said traditional grocers were “caught off guard” by the spike in demand for curbside pickup during the pandemic, and many are still struggling to adapt to the growing trend.
“Curbside pickup is not as logistically difficult as deliveries obviously, but it still requires these grocers to sort of rearrange things in order to meet the demand,” Droesch said.
Sayles said traditional 60,000-square-foot bricks-and-mortar grocery stores are not built for curbside pickup, and often farm out online delivery to third-party services such as Instacart, adding a middleman, expense and delays to the process. Focusing on localized curbside pickup enables Fresh Street to keep costs down, provide more consistent product availability and a faster overall experience, he said.
Six customers can park and load up in front of the store every 15 minutes from 9 a.m. to 9 p.m., seven days a week. That gives Fresh Street an initial capacity to serve about 2,000 weekly customers, with plans to expand. Sayles expects most customers to come within a 3-mile radius of the store, which would encompass suburban Lincolnwood and several Chicago neighborhoods including Rogers Park and West Ridge.
The mobile app and desktop ordering promise no substitutions and only real-time inventory. Sayles said Fresh Street will stock both national and Chicago brands, with the ability to customize selection at the store level to suit local tastes.
Becoming a “neighborhood” online grocer will be the key to the store’s success, Sayles said. Fresh Street recently launched a targeted marketing campaign using social media and at least one old school advertising platform to reach nearby potential customers.
“We’ve even got some billboards up now around the store,” Sayles said. “That’s obviously a very traditional marketing tactic, but when you have this defined radius where you need to win, you can really focus on using every medium available in that 3-mile radius.”
