Josh Hix, co-founder of Plated, discussed this subject at the Interactive Advertising Bureau’s (IAB) 2019 Annual Leadership Meeting (ALM).
And the decision made by Albertsons to acquire Plated for $300m in late 2017, he reported, was supported by a very clear underlying logic.
“Plated has a direct relationship with the consumer,” said Hix. (For more, read WARC’s in-depth report: How Plated brought home the groceries and found a $300-million meal ticket.)
Albertsons, on the other hand, “certainly has a healthy white-label business but, by and large, they are a reseller – [a] retailer of other brands and products,” he continued.
“Given the nature and age of their business, they are not particularly well set up to have those direct-to-consumer relationships.”
Albertsons thus gained access to the nimbleness, innovative spirit and technology chops of Plated, while the direct-to-consumer brand could start tapping the muscle and knowledge of a retailer boasting 35 million customers, as well as building a presence in its stores.
“That DNA – and all the platforming infrastructure and technology and everything else that come with it – was a big part” of Albertson’s interest in Plated, he said.
“And vice versa. It’s easy from this side of the fence to throw stones at the retailers, but they have huge audiences and very expensive infrastructure … There’s a lot of value there that we hope to unlock.”
One case in point involves fusing Plated’s focus on convenience with Albertsons’ impressive infrastructure. “There’s a lot of supply-chain construction on the back end of Plated that’s essential to the value proposition,” Hix said.
For consumers, the benefits of direct brands are very real. “What I’m probably most excited about is the dynamic of all of brands being responsible to consumers, rather than to the retailers, which has been the sort of historical pattern,” said Hix.
“In some way, the retailers [have started to] respond to the consumer, but that has been a very winding road.”
Because there are so many different brands now competing for premium online exposure, however, the costs of entry “have gotten a lot more expensive” over time, he continued.
“Every quarter, it becomes harder, and more expensive, to build a new audience online,” conceded Hix. “That further locks in the brands that are already out there … Maybe it’s recreating the same old problems in a different way.”
Sourced from WARC