Kojo and Tom Sherwood chat with D.C. Council Member Elissa Silverman (I-At Large)
Many of us still push a cart up and down the aisles of a supermarket to buy our groceries. But some people are opting for a virtual cart that lets them tap in items while sitting at a soccer game, then pick them up curb-side or have them delivered. Tech Tuesday explores how online grocery shopping creates new relationships between consumers and farmers, and why it’s been slow to penetrate underserved “food deserts” where it could change the way people eat.
- Peg Merzbacher East Coast Marketing Director, Peapod
- Arnie Katz Co-Founder and President, Relay Foods
- Jeremy Brosowsky Founder, Compost Cab
MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world on Tech Tuesday. You've probably bought clothes or office supplies or birthday presents online and had them shipped to your home, but what about online shopping for something as personal as the food you feed your family every day? Do you trust someone else to choose the spinach or zucchini you put on the table for dinner or to pick out the apple that goes in your child's lunch bag?
MR. KOJO NNAMDIMost of us still push a metal cart up and down the grocery store aisles, but some shoppers have switched to a virtual cart, loading it and checking out with a tap of their phone and then choosing either home delivery for a ten dollar fee or free curb side pickup. So far, online grocery shopping is largely an upper middle class practice, great for the busy soccer mom who can fill her cart on her cell phone at the game or the elderly shut in who cannot drive to the store.
MR. KOJO NNAMDIBut some experts say it's only a matter of time before brick and mortar grocery stores go the way of video stores, and we're all doing our food shopping on a digital device. As we said, it's a Tech Tuesday conversation, and joining us in studio to have it is Arnie Katz. He is Co-Founder and President of Relay Foods. Arnie Katz, thank you so much for joining us.
MR. ARNIE KATZThank you. It's great to be here.
NNAMDIAlso with us in studio is Jeremy Brosowsky. He is Founder of Compost Cab. Jeremy, good to see you again.
MR. JEREMY BROSOWSKYGood to see you, Kojo.
NNAMDIIt's a conversation you can join by calling 800-433-8850. You can send email to firstname.lastname@example.org. Joining us from the studios of WGBH in Boston is Peg Merzbacher, East Coast Marketing Director for Peapod. Peg Merzbacher, thank you for joining us.
MS. PEG MERZBACHERNice to be here.
NNAMDIAnd I'll start with you, Peg. Peapod is part of the Ahold Company that owns the giant grocery stores. Could you explain the basics of your online shopping service? How do customers fill their cart and how many choose delivery versus pickup?
MERZBACHERCertainly. Well, customers would go to peapod.com and probably the easiest way, for example, in the Washington market would be to enter their giant loyalty number and pull up all the items that they had bought with their giant card in a store. And they could shop right from that list, putting things in their online cart. And then they would go over to the delivery or pickups time tab and select either delivery option, which is typically a two hour window. Or they could pick a one hour pick up option.
MERZBACHERPickup, we have about 21 in the Washington D.C./Virginia/Maryland area. So, there might not be as many convenient pickups yet, so delivery might be a more, an easier option for lots of people, but we're rolling out the pickup pretty quickly down there, so hopefully, pretty soon, most people will have the option of either pickup or delivery.
NNAMDIPeg, when someone in the Washington area places an online order, Peapod fills it by shopping in its own warehouse in Landover, Maryland, not in a local giant store. Why do you do it that way, and how does automation help to make it work?
MERZBACHEROkay, well, actually, we're not in the Landover warehouse. We're in our own Peapod warehouse in Hanover, Maryland.
MERZBACHERAnd what happens is that all the orders, once we have a cutoff period, and once all the orders are pulled in, then everything is very automated. And shoppers, professional shoppers, grocery shoppers, use hand held units on their wrist where they scan different barcodes that are on the shelving, and they're directed to pick up the product based on sort of the most efficient way to sort of navigate the warehouse.
MERZBACHERSo, there's a lot of technology that's designed to make the shopping process really quick and very accurate.
NNAMDIYou can join the conversation by calling 800-433-8850. Do you buy groceries online? What's your experience? How much time do you spend each week on your grocery shopping? 800-433-8850. You can send email to email@example.com or send us a tweet at kojoshow using the hashtag techtuesday. Arnie Katz, Relay Foods is new on the scene and you use a different model. It's all pickup or delivery.
NNAMDIThere's no relationship with a grocery store company or with brick and mortar stores. How does your online food shopping service work?
KATZSo, similar to Peapod, we deliver food to people, either by home delivery or through pickup locations. As you noted, the pickup locations are for free. We penetrated the D.C. market a year ago, more than a year ago, by buying a company that operated here called Organica. We've been growing very, very quickly since. Yeah, our premise is, as you said, that the brick and mortar stores will be the things of the past within a decade or a decade and a half, max. And people will buy their groceries online.
KATZWe are, we own our own warehouses, and we rely on relationships through over 300 local vendors. So, one of our biggest value positions to the consumer is that we have direct relationships with farmers and artisans in the D.C. area. We get items sometimes the day they were picked from the farm, and transfer them immediately to the consumer. And allow the freshness of the items and the quality and the nutritional value of the items to be at its peak.
KATZBecause, as you know, the farther away from picking the item, the more nutritional value the produce loses.
NNAMDISo you specialize in local and regional...
KATZYeah. 40 percent of our sales are local and regional. We have relationships with many local farmers. And we sustain now a whole ecosystem of mom and pop producers, both farmers and artisans that rely on Relay's customers to their living.
NNAMDIJeremy Brosowsky, you're in a different type of delivery business, Related to food. Your company, Compost Cab, picks up food scraps from homes and businesses and sells them to urban farmers. How has technology developed just in the last few years made your delivery based business possible? I'll also address that to our other panelists.
BROSOWSKYSure. I mean, we view technology as a great enabler. It is not an end in and of itself. It's a means to an end. And so, if you think about how technology has been applied across sector after sector of the economy, it's only a matter of time before it starts to really penetrate in the area of physical goods. And we are seeing that now across the board. We're seeing it with innovative startup companies like Relay, we're seeing it from bigger, traditional companies like Peapod.
BROSOWSKYWe're seeing entrepreneurs activated all across all sorts of sectors. And what we identified was a fundamental problem, that if you want to grow food efficiently and intensively in and around a city, there are two ways to do it. You can build vertical greenhouses, which are very capital intensive, or you can have really fertile soil, which lets you plant your spinach four inches apart instead of eight inches apart. So you can maximize per square foot production. We know how to make great soil. It's called composting.
BROSOWSKYBut it turns out that creating a clean stream on nitrogen for composting purposes is hard. And so, we set out to do that. And, if in the process, we've built back end technology that enables us to manage our roots efficiently, that enables us to keep our subscribers happy. And that really creates a terrific customer experience so that people continue to do it. And so our overarching thesis is that all things being equal, people wanna do the right thing, and our job is to make them as equal as possible.
BROSOWSKYAnd that's what technology enables.
NNAMDIHow has technology, over the past decade or so, enabled your business, Arnie Katz?
KATZSo, in many ways. One, of course, a decade ago, not many people used the internet, and, of those people, not many actually enjoyed placing their credit card numbers on the internet. So even the act of ordering food online is now something that is -- people feel like they can do it way more than a decade ago. More than that, technology today allows to start companies way cheaper. So things that in the past you needed, dozens of developers, today you need only one.
KATZRelay had one developer up until nine months ago in charge of our entire back end systems and front end systems. One person, and that, of course, allows to start more companies and start companies faster. But I think, most of all, technology today allows to give the right information to the consumers. For them to be able to make the right choices. So, if you ask me one core tenant of Relay, what it is, I would answer transparency. We will tell you where the food is coming from, what the practice that it's grown by, what the route that it's taking from field to plate.
KATZAll of that information, all of that, a lot of information, you're talking about terabytes of information, you couldn't have manipulated and presented to the consumer in a way that is digestible without all the technology that exists today.
NNAMDIPeg, how does your software help streamline the grocery shopping process by letting people quickly call up the foods they buy most often? And even the ingredients of the recipes they make most often?
MERZBACHERYeah, that's a really good question. I think one of the wonderful things about technology that has really revolutionized the online grocery shopping experience is the ability to really use personalization. For example, to be able to pull up all your previous orders and shop really quickly from items that you frequently re-purchase. So, instead of having to, you know, go through an online database of 12 or 14 thousand items, you can go to 500 items that you typically buy.
MERZBACHERIt makes the shopping process much faster. I think just things like the expansion of broadband has made the experience much much more comfortable for customers. Our average order size is about 55 items, so you can imagine when we used to have dial up, it was kind of a painful experience. So, broadband and quick internet speeds make the shopping process for something like online grocery shopping much nicer.
MERZBACHERThe other thing, I think, that's been really helpful to customers is that they really have a lot of control over their decision making. They can, for example, if they're a bargain shopper, they can sort by unit price, they can keep track of a running total of their purchases. If they're a nutrition focused shopper, they have somebody in the family that has an allergy or a dietary need, they can sort by cholesterol or salt or something like that. So, I think there's, one of the wonderful things about technology for the grocery, online grocery shopper, is that they really have control over their own data.
MERZBACHERAnd they also can really use a lot of the database functionality to get to -- to look at what they're thinking about, and really make very informed decisions.
NNAMDIHow does it work for you, Arnie?
KATZCould you repeat the question?
NNAMDIHow does the -- I asked her about the software that she used that allows people to let them quickly buy or call up the foods they buy most often, and even the ingredients of the recipes that they make most often.
KATZYeah. Yeah. So, all of the things you said and more. So, for example, one capability that we're working on on our corn side is the ability to say I'm gluten free, and, you know, with one button click, you'll only be able to see gluten free items until you see otherwise. Technology allows for people much more control on what they do. You know, the days of going to the grocery store and on the checkout aisle, having all those snacks and all of the things that are not necessarily healthy for you, but are very tempting.
KATZWhen you're online, you can actually control yourself way better with information that is presented to you. And yeah, you can have meals ideas that help you cook better. And use the food on our website in a way that is more, more in tune to getting your family around the table and just eating good food. So you can see, it's around -- we're talking about technology, and like Jeremy said, technology enables almost going back to the start, like the ad that Chipotle had in the (word?) not long ago.
KATZBasically, the technology is allowing us, again, to bring back the local farmer, to bring the farmer's market in D.C. To bring back those mom and pops, this person that is really good at making sausages and, you know, really, really good at making sausages, but they wouldn't survive creating a retail location in today's competitive environment. They can do sausages, almost from their home, and all of a sudden, food networks that a company like Relay is creating, they can get to a huge customer base and be a sustained business.
NNAMDI800-433-8850. Are you in the food delivery business? How has technology changed the way you do business? 800-433-8850. Jeremy, talk about the software that you use to track your drivers. Why did you end up creating your own?
BROSOWSKYWell, it's interesting. We assumed, when we started this business, that we would be able to just pluck some of the rack software off the shelf and just start using. But it turns out that to really make it work, you need something that is built around your business. So, if you're delivering flowers or you're delivering pies or whatever it might be, on a small scale, there are plenty -- I mean, you're doing five or ten or fifteen deliveries a day, there are plenty of software packages out there that you can buy off the rack.
BROSOWSKYIf you're picking up hundreds and hundreds of homes a week, you start running into what computer scientists refer to as the traveling salesman problem. It's a chestnut of computer science, and it's basically the premise of -- the premise is very straightforward. Maximizing efficiently along a route with multiple nodes turns out to be really, really hard. And getting it perfect is something that's almost impossible.
BROSOWSKYAnd so we built a system on our back end that takes advantage of other peoples', they're called API's, it basically lets us plug into existing systems that are doing similar work and customize their use, the use of the data for our own personal needs. And so what we built for Compost Cab was an app for our drivers so that we could send somebody out. The whole idea is that anybody with a truck should be able to do this. And so we built an app that enables that.
BROSOWSKYSo, our subscribers and when they join, or they quit, which doesn't happen very often, fortunately, but they all get lined up in the system. Our driver carries an app and it doesn't require specialized hardware or anything like that. It's on their personal iPhone. They get a login. And all they do is they log in in the morning when they go to start the route, and up comes their first stop. And they just go through it. And if they don't know where they're going, or if it's a new stop, all they have to do is click on it. And the address pops up with the location where their bin is located with how often they need replacement and so forth and so on.
BROSOWSKYAll the data you need to actually run the system. And it's extraordinarily, it's extraordinarily powerful to have the right tools at your disposal.
NNAMDITraveling salesmen could have used that half a century ago. Here is Carol in Baltimore, Maryland. Carol, you're on the air. Go ahead, please.
CAROLKojo, I listen to your show, even though I'm in Baltimore. I love it.
CAROLI want to thank you. Thank you. Okay, I'm in my seventies, and I -- a year ago, or more, I got one thing from Peapod, because I love the Giant Food and I was so glad when they started delivering to our zip code. Anyway, the driver was, I mean, he brought all the stuff, he didn't want to bring it in. He just wanted to put it on the porch and not -- and I was not -- I argued and I begged and he finally did. Then what happened was, I switched to a different company that does deliver, a smaller place.
CAROLBut, they were personal. The guy brought it in happily. He put things -- sometimes on a higher shelf I couldn't reach. And they stopped being in business now, so I'm trying Peapod again. Because I love the Giant, I love the products, and I'm hoping that the drivers now are taught to be kinder to seniors and to carry things in the house. I'm not saying putting them all shelves, but you know, you know what my question is, and that's what I was asking.
NNAMDIPeg Merzbacher, what can you say to Carol?
MERZBACHERWell, I apologize if the driver last year wasn't very friendly. And I'm very glad to hear that she's giving us another chance. I guess one of the things, if we're talking about technology, the kind of input that she gives us, you know, the expansion of social has been tremendously helpful to us in having people, you know, feel comfortable sharing that kind of stuff with us so that we always have a kind of an online report cared every single day as to the things that really make people happy or not so happy with our experience.
MERZBACHERAnd we find it to be tremendously helpful. So, I would encourage her, if she's on Facebook, to let us know if it happens again. Hopefully, it's gonna be a good experience.
NNAMDICarol, thank you very much for your call. Arnie, as you mentioned, a lot of Relay's sales, 40 percent are locally produced foods including produce and artisan items like bread. You talked about who you got the food from, but how has technology allowed the company to forge relationships with farmers so consumers can have fresh, local produce delivered the same day that it's picked?
KATZThat's a great question. Farmers are people that work very, very hard. They, many times, wake up at four a.m. or before. In the past decades, or two, the only way many of them could make money was to start their own C.S.A., or to go to Farmer's Markets where many farmers don't actually like that activity. You'll be surprised. Some people go into farming because they don't like interacting with people as much. They actually like growing food. And when we tried thinking about how we will solve their problem, what we thought about is that a lot of it is basically bringing the demand to them.
KATZJust bring the customers to the farmers in a way that is sustainable for the farmer. Where they can focus on food and the rest will work well.
BROSOWSKYKojo, if I could actually just jump in...
BROSOWSKYIf I can jump in a minute. One of the things that makes what Relay is doing so powerful is this is not just about grocery delivery and making it easy and pleasant for the consumer, though that is a fundamental piece of the puzzle, making it a pleasant and terrific customer experience. But what their fundamentally doing, and Peapod is part of this equation, Relay is part of this equation. There are lots of different companies playing in the space, generally.
BROSOWSKYBut fundamentally, we're taking technology and applying it in a way that allows to fundamentally remake local food systems. So, the whole way, the whole reason that industrial scale food production, and industrial scale food distribution came to be in this country, is because it was the easiest and cheapest way to make things go. And so, again, pointing to the enabling abilities of technology, the cost of creating systems that rely on local food, that enable local farmers, that enable local consumers to connect, those costs are lower now than they've ever been.
BROSOWSKYAnd the great news is they keep getting even cheaper. And so, as we look out over the course of the next 10 or 15 years, we are looking a fundamentally different landscape for how food gets distributed. Not just from, not just in the sense of what does a supermarket look like, but delivery points, Farmer's Markets, community supported agriculture. All of these different pieces of the puzzle are all intertwined and one of things that I'm most excited about, and we kind of are spending a lot of our time and energy on is, how do we take this technology and make sure that it goes through a similar cycle to all technology?
BROSOWSKYRemember, there was a time not too long ago where if you wanted a 42 inch plasma screen TV, it was eight thousand dollars. And it was the kind of thing that your crazy, early adopter friends bought and mounted above their mantle piece, because it was something they were so super proud of. Turn around 15 years later, and you can get a 40 inch LCD television at Best Buy for like 350 bucks. Which puts it in the realm of everybody. So, if you believe that this is still the province of early adopters and the upper middle class, that may be true today, but it's not gonna be true forever.
NNAMDIYou wanna talk a little bit more about that later. Arnie?
KATZYeah, and to Jeremy's point, you can see that in how Uber, for example, disrupting the taxi business, right? You used to have huge taxi companies in order to facilitate that connection between consumers and taxi drivers. Technology is now allowing you to connect directly with a taxi driver. But back to the Relay's technology. What we build for the farmers is that consumer now place the orders through the day, up until midnight, the day before they want their order. At midnight, we have a system that lights out.
KATZComputer by itself, on the servers, sending emails to all of the farmers and artisans just in time. They will need to provide those items the next morning. And, at midnight, the bakers start baking their bread, basically with your name on it, if you place an order. They start, farmers wake up at four and goes to the field and pick up your carrots, or your potatoes, or you onion. Again, specifically for you, and then they take those lists and they bring all those items that are now sometimes pallets and bushels of items to Relay to be distributed that way.
NNAMDISo that by three o'clock in the afternoon, you can have carrots that were picked that very morning.
NNAMDIGotta take a short break. When we come back, we'll continue this conversation on high-tech grocery shopping. It's a Tech Tuesday conversation. You can join it by calling 800-433-8850. Do you live in a community without a supermarket? Would online grocery shopping and home delivery, or pickup location, make your life easier? Give us a call. 800-433-8850. I'm Kojo Nnamdi.
NNAMDIWelcome back to our "Tech Tuesday" conversation on high-tech grocery shopping. We're talking with Jeremy Brosowsky. He is the Founder of Compost Cab. Arnie Katz is co-founder and President of Relay Foods. And Peg Merzbacher is East Coast Marketing Director with Peapod. We are inviting your calls at 800-433-8850. If you've shopped online for groceries, what's your favorite feature of the software? Do you set up a regular shopping list and then tweak it each week?
NNAMDI800-433-8850. Peg, what are the biggest challenges of running an online grocery business? Customers buy a large quantity of individual items, some of which are both fragile and perishable. And shoppers want each one delivered in perfect condition. Is that one of the bigger challenges?
MERZBACHERIt is. It is. Delivering food, you know, it's a high trust industry. It's the stuff you feed the people that you love. So, you wanna make sure that you get it right. You're right. Just being able to do that consistently is our number one objective. You know, the right kind of product in good shape, on time.
NNAMDIArnie, how hard is it to persuade people to trust that that apple or that head of lettuce that they click on will be as fresh and appealing as the one they would pick themselves if they were in a store?
KATZIt's incredibly hard. Yeah, it's -- I, myself, in the past, used to enjoy squeezing the tomato in the grocery store, and by the way, wrecking half of them, while doing it. And choosing them themselves. And sometimes, when you get your delivery, just the mere fact that you didn't select the items, you have expectations that are higher of those you have in the store. Because someone else picked it for you, and you need to have that trust with them, as Peg said.
KATZIt's an industry with a lot of details, like there are 10,000 details that can go wrong every day when you're delivering groceries to people. So, mastering these details is what's hard about the online grocery space and why this is one of the last industries to be disrupted by the internet. That said, when you build that relationship between the farmer and the consumer directly, when they're buying tomato from Downbranch Farm, or Planet Earth Diversified Farm, or they are buying beef from Wolfcreek Farm or from Polyface.
KATZAll of a sudden, if the tomato has a small stain on it, you know? It's not a perfect tomato. That tomato was grown in organic ways, and may have been bruised on the plant, that relationship helps the consumer to understand more that they're eating real food and not just tomatoes that are from an unknown source.
KATZSo, that's one of the techniques we use in order to solve that issue, is building that direct connection between the farmer and the consumer.
NNAMDIJeremy, you talked earlier about the socio-economics of online grocery shopping now, that it has a mostly upper-middle class clientele. You also indicated that that's likely to change significantly over the course of the next decade or so. It could have a big impact in poorer neighborhoods that don't have a grocery store nearby.
BROSOWSKYWell, one of the biggest challenges in alleviating food deserts, neighborhoods where there isn't access to quality produce on a regular basis, is that convincing the large retailers that have historically built supermarkets in an urban environment, to put a store in a given neighborhood can be very, very hard. There's an enormous amount of expense associated with setting up a store from scratch.
BROSOWSKYAnd all things being equal, your typical retailer is looking for as much certainty around that store as possible. And so, as a result, you have neighborhoods that are woefully underserved and continue to be, decade after decade after decade. Now, along comes this enabling technology, and in the same way that we've seen pop up Farmer's Markets and the like, it is invariable, as far as I'm concerned, that you are going to see pop up food distribution networks in these neighborhoods. So, all of a sudden, it may be that today you need a fancy phone to access it.
BROSOWSKYBut it's not hard -- eventually, everyone has a fancy phone, because the phones get less and less fancy and cheaper and cheaper. That digital divide gets bridged to some degree or another as mobile technology becomes more and more reasonably priced. And what you end up with is everybody having access to the same sort of systems. So it's not hard to imagine a Relay Foods setting up a delivery point in an underserved neighborhood and enabling people to snap their fingers and get the food that they're looking for.
KATZAnd to Jeremy's point, to build a giant store in a neighborhood could cost as much as $15 million -- and Peg might have a more accurate number than me. To put up -- and you need a lot of customers to cover that investment. You need sales of upwards of $20 million in that specific store to break even. If you take your Relay pickup location, which is a Relay track that looks a little bit more like a farmer's market stand, you put it in a location like a food desert. All we need is 20 orders to break even on that location once a week.
KATZSo that's suddenly the solution for food deserts is those kind of pop-up farmer's markets or Relay pickup location.
MERZBACHERAnd, Kojo, I was just wondering if I could interject. I would sort of take issue with the idea that online grocery shopping is an upper-middle class enclave. I mean, our drivers would tell you that that's not the case. I mean, and the fastest growing areas for Peapod are the cities, I think, exactly because people have such limited options for grocery shopping.
MERZBACHERAnd so when we're able to provide, you know, pretty nice pricing and deliver it to your door, it's a very appealing option for people. And we deliver to a wide diversity of socioeconomic groups. And I think technology has really helped foster that because, I think, it was Jeremy mentioned everybody has a phone. We have a mobile app. It's very easy to order your groceries online with just a simple phone.
NNAMDI800-433-8850 is the number to call. You can also send us email to firstname.lastname@example.org. Let's go to Patricia in Reston, Va. Patricia, you're on the air. Go ahead, please.
PATRICIAHi, Kojo. This is the first time I'm calling you.
PATRICIAAnd I love your show. I've been listening for years. I am one of your listeners who is a young at heart senior citizen.
PATRICIAAnd what I've heard in the comment part of the show is a lot of positive comments about the Peapod model and a lot of negative comments about the bricks and mortar model. So I would like to just even things out a little bit. One of the things that I like about going to the bricks and mortar type of store is just the whole experience of getting to talk to the employees there, getting their advice, seeing all the different products that are there. I don't have a problem controlling myself about buying this or that. And I wouldn't see things if I wasn't there. The...
NNAMDIYou know, I'm glad you brought that up because I'd like both Peg Merzbacher and Jeremy Brosowsky to respond to this. Peg, for some people, shopping is a social experience.
MERZBACHERYeah. And I totally agree, and that's why we like to call what we offer omni-channel so you can either go into the giant store if you do want to squeeze the melons and talk to the meat cutter about the roast that you want to buy. But on the days or the occasions or when it's snowy and cold and you can't get to the store, it's nice to have the option of delivery. So we really just are in the business of offering more options and making it easy for you to choose the one that works best for you.
PATRICIAYes, I agree.
NNAMDIBrick and mortar's not going anywhere.
BROSOWSKYI think that it is a fundamental piece of the puzzle. There is no single channel. There is no right answer. There's no magic pixie dust. There are different things for different people at different times. And making sure that all of those options are available is where local food systems are headed, and technology enables that.
KATZYeah. I love to take my daughter once a month to Whole Foods to see all the colors, the red in the meat department, the seafood, all the smells. I think it's -- I sincerely hope it doesn't go away. I think the solution for the brick and mortar stores is to become smaller and smaller and become more and more specialized. The bottom line, Patricia, is that online grocery is just a better way to provide food to families. It's going to be cheaper.
KATZSo brick and mortar stores are going to have almost, like, to take an admission fee to allow you to get in to experience what they are offering. Our prices are going to be significantly better. Both Peapod and Relay are going to be significantly better than their brick and mortar counterparts. And that will cause a swing, which will happen very shortly, within years, of the vast majority of consumers from the brick and mortar space to the online grocery one.
NNAMDIHere is Ryan in Herndon, Va. Ryan, you're on the air. Go ahead, please.
RYANHi, everyone. I'm Ryan Walter. I'm actually co-founder of Compost Crew, so we're doing a lot of the similar stuff that Jeremy is doing, but we serve predominantly Montgomery County. I pick up people's food scraps and deliver finished compost back to them. And so this conversation's been very interesting to me.
RYANWhat I wanted to -- what is that just the general -- the broader impact that technology has had on not just our businesses but small business in general allowing us to be more competitive without the need for capital infrastructure to be in business, we've been able to offer our innovative service to people and to the wider audience.
RYANIt's been easier for us. And that's allowed more innovative products and services to come into the market. So it's been a great boon for Compost Crew. I'm sure Jeremy, as he's being saying, for Compost Cab. And Relay Foods, it's been allowing, again, a more local connection with our food -- going away from the industrial commercial.
NNAMDIJeremy, care to comment?
BROSOWSKYSure. I mean, Compost Crew actually came directly out of Compost Cab in the sense that one of my employees stole virtually everything we were working on and then started his own business. We also serve Montgomery County. But we're -- one of the challenges, when you're building a business that is trying to create scalable change, is that you want to make it as easy as possible.
BROSOWSKYAnd so we deliberately created a model that is easily replicable. And we've seen other compost collection services similar to ours spring up -- not just here in D.C., but all over the country. And when we started this thing a little over 3 years ago, we were the only ones doing it. And now we've seen literally dozens pop up, in Atlanta, in Charlotte, in Boston, here in D.C., all over the place, Chicago, Detroit. And we are extraordinarily proud to see that sort of growth coming around. And the technology certainly enables it.
NNAMDIPeg, here in Washington, Giant is operating a former Sunoco station on Connecticut Avenue in Chevy Chase, Md. as both a gas station and a grocery pickup location. Will we be seeing more of those?
MERZBACHERWell, those are a little trickier to do. I think that it's a very convenient location, and I think it's really appealing. What we've actually decided to do because so much energy was spent selecting good locations for Giant stores based on, you know, ease of access for customers that we're really going to be leveraging that existing real estate to put most of our pickup locations at Giant stores.
NNAMDIOn to Phyllis in Gaithersburg, Md. Phyllis, you're on the air. Go ahead, please.
PHYLLISHello. What a pleasure. One of our staff members -- I'm with Top Banana Home Delivered Groceries, a small nonprofit located in Brandywine, Md. that serves the D.C., Prince Georges, and significant part of Montgomery County. And we've been at this for 31 years. We're real pioneers coming out of a real need that older people often have for an extra hand that they either -- this generation that are currently seniors, many don't even have computers and don't use them.
PHYLLISAnd I foresee also that, among even the Baby Boomer generation, that sometimes by the time individuals get to be 75, 80, 85 and they're still wanting to live independently, the Internet isn't going to be a viable vehicle. They're going to want that personal interaction and need it to really communicate and feel part of something. And Top Banana has been providing that for 31 years...
NNAMDIWhat leads you to believe, however, that, if people who are now digital natives get to be senior citizens, all of a sudden, they won't want to participate in the digital environment anymore?
PHYLLISOh, I think they will. I think that, you know, there will be a whole variety of people. And, you know, we want people to get groceries however they can. But there are going to be those who, due to frailty, vision problems, hearing problems, even though technology, I'm sure, will advance tremendously, with the ability for an individual with disabilities to link to the system, I think there will be those that like the conversation, that like the connection, that like the personal relationship that you get when you place an order with an individual.
PHYLLISSo Top Banana is definitely looking to grow and digitalize and place our grocery ordering process online, but we would never want to do away with telephone ordering as well.
NNAMDIOkay. Thank you very much for your call. As Jeremy indicated earlier, there's just greater diversity in the ways in which people are able to access their food. How will online shopping ultimately affect the price we pay for groceries? If you don't have to support a brick and mortar store and its employees, will that, in your view, Arnie, make the price of food go down?
KATZYeah, definitely. So when you go to a store such as Whole Foods, many people don't know that the merchandise margin is actually pretty high. It's over 50 percent. But then a lot of that money goes to cover the cost of the real estate, to cover over 150 people, the repair store, mopping spills, and swiping credit cards. That's a lot of labor per store.
KATZAnd then you have the fact that the inventory is distributed in many stores across the city. A city like D.C. has hundreds and hundreds of different locations for grocery stores. That's expensive, all of those infrastructure. For an online grocery to be successful, you need to have one warehouse, one big fulfillment center per metro market. You can have one location for the entire metro D.C. area, with the Northern Virginia city, the Southern Maryland areas.
NNAMDISo that ultimately cuts down on cost, and that ultimately cuts down on prices. The only reason I say that is because we're just about out of time. Arnie Katz is co-founder and president of Relay Foods. Arnie, thank you for joining us.
KATZThank you, Kojo.
NNAMDIJeremy Brosowsky is founder of Compost Cab. Jeremy, good to see you again.
BROSOWSKYGood to see you, Kojo. Thank you.
NNAMDIAnd Peg Merzbacher is East Coast Marketing Director of Peapod. Peg, thank you for joining us.
MERZBACHERThanks a lot, Kojo.
NNAMDIAnd thank you all for listening. I'm Kojo Nnamdi.
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