In its second-largest acquisition, Amazon buys the company for $970 million.
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Berglund says verifying each stage as the business builds is important because there are no blueprints to work from. “There is no one who has done it before, so you have to be clear every step of the way,” she says.
Orders from the web site come to a central database at the warehouse in Sommerville. The system places the orders into delivery routes, then creates lists for product picking. Once the products are picked, they are separated into orders for delivery. HomeRuns charges $5.95 per delivery, with free delivery on orders over $125. Minimum order is $50; a customer can’t check out until the order reaches $50. HomeRuns delivers from 7:30 a.m. to 11 p.m.
HomeRuns originally fulfilled orders out of a Hannaford Bros. distribution center near Boston. It outgrew that facility and built a distribution center in Brookline, then eventually moved to Sommerville.
Berglund says one of the reasons HomeRuns is succeeding is that it gets involved in its communities, just as real-world grocery stores and supermarkets do. HomeRuns sponsors amateur and semi-pro athletic teams, supports community festivals, sends executives to speak to community groups and even recruits people to have home parties where their friends can learn about HomeRuns. “We believe that community involvement is important and will continue to be important,” she says.
The market is there
Although HomeRuns is not profitable yet, Berglund says the company is heading in that direction. HomeRuns feels it has been successful enough in its original market that it is now ready to expand. Late last year it announced that it would be moving into Washington, D.C. HomeRuns believes it can succeed in Washington, Berglund says, because the market is similar to Boston. “The density of population, the level of computer use, the education level, all are similar to Boston,” Berglund says.
Online grocers who establish viable business models today will be in a good position to take advantage of the market as it develops-and many observers believe that market development is inevitable. What’s needed, they say, are pricing that consumers can accept, density of population so the number of deliveries per hour gets up and acceptable margin on products.
“Kozmo proved to the marketplace that there is demand for such a product,” says Roger McDonell, CEO of PackageQuest, which is developing package tracking software for online retailers, and former CEO of DeliverEtoday, a same-day delivery service that shut down earlier this year. “What no one has proven yet is that people will pay what it costs.”
For that reason, McDonell likes the WhyRunOut model. “They’ve separated themselves from the pack,” he says. “If they have deep enough pockets, they can get there.”