Direct Eats takes specialty food shopping online
Serial entrepreneur David Hack of Weston is taking on the $120-billion organic and specialty foods industry along with top-tier companies such as Amazon and Whole Foods Market in a bid to become the go-to national online food marketplace with his latest venture.
“We are already the largest aggregator of natural, specialty and organic food online by far and we are only getting bigger by the day,” said Hack, CEO and founder of Direct Eats Inc. in Wilton.
Working out of a small office with a staff of 10, Hack is the literal David going toe-to-toe with the Goliaths of the specialty food industry. He comes bearing his often-repeated value proposition and backed by an army of specialty food makers.
“We have the opportunity to make local national,” said Hack. “Anybody, no matter their lifestyle, can find essentially the best food, the best selection of it, at the best prices and get it shipped to their door for free. It”™s a very straightforward, high-value proposition for consumers.”
Partnering with hundreds of individual specialty makers around the country in addition to major specialty food suppliers like United National Foods Inc., Hack’s company is an online avenue linking consumers nationwide with more than 20,000 products catering to customers’ specialty food preferences, from non-genetically modified meats and produce to organic to unbleached flour and gluten-free products and more.
Consumers can browse the virtual aisles of Direct Eats for nonperishable items grouped by 17 different dietary preferences. Expanding into the perishable food items is on the horizon, Hack said, but shipping constraints are a massive cost barrier.
In addition to offering the wide selection and convenience of online shopping, Hack said, his company has the edge on some major competitors, with prices on his site 40 percent less than Whole Foods prices and 18 percent less than Amazon’s.
“The prices are pretty significant,” he said. “(For) a box of Quest Bars, which you have to buy individually at Whole Foods, we are about $2 less per bar on our site than if you bought the same thing at a Whole Foods ”” shipped to your door for free.”
The key to competing is his company”™s low overhead, he said. Direct Eats holds no inventory, drop-shipping items directly from the manufacturer to the consumer in three to five business days.
“Every time online has competed against brick and mortar, online won ”” tell that to Barnes & Noble and Best Buy or whomever,” Hack said. “Online wins overtime and will win every time.”
His business model is working, according to Hack. Founded in 2015 and marketing to consumers for less than a year, Direct Eats is on a growth tear, adding 1,000 products every month and one dozen to two dozen makers each week.
Now in an across-the-board hiring phase, Hack said the company is growing its revenue by 20 to 25 percent quarterly.
Could Direct Eats could become the Amazon of online food shopping?
“Sure, why the hell not,” Hack replied.
Eliminating obstacles for suppliers is a key part of the company”™s strategy. Makers can list their products for free and pay no credit card fees, taxes and shipping costs, all of which are covered by Direct Eats.
Purchases are similarly made easy for consumers with no membership fees or minimum purchase requirements and free shipping.
“Our mission is healthy eats for all,” said Lisa Tambini, senior director of marketing at Direct Eats. “We obviously know what consumers need and want and have been asking for is healthier and better good-for-you foods that are available to them no matter the location.”
Hack, a seasoned entrepreneur who started four ventures prior to Direct Eats, moved into the food industry after three years running Pavé Life in Darien, an event ticket seller that jumped on the daily- deals trend working with companies like Groupon and Living Social.
Initially self-funding Direct Eats, Hack has since raised $1.6 million in a Series A investment round. Fortress Investment Group of Manhattan “ready to write the whole check” in a Series B funding round underway, said Hack.
The company is also poised to acquire  Abe”™s Market, Chicago-based natural products and organic goods online marketplace operating on a similar model to Direct Eats. “This is a huge acquisition for us ”” a monster play,” Hack said of the pending deal.
More acquisitions are in the works along an 18- to 20-month trajectory that could end with Direct Eats being acquired as major retailers enter the online specialty food marketplace, said Hack.
Meanwhile Direct Eats continues to expand its product line and services. It could eventually compete in the same market space occupied by other cutting-edge food companies like Blue Apron, which allows consumers to shop by recipe and then delivers all the necessary ingredients in proper proportions to their doors.
“Eventually on the site you will be able to shop by recipe,” said Hack. “If you want red velvet cake, all the ingredients you want for that can be shipped to your door.”
While food shoppers still prefer in-store shopping by a large margin, online retail and the specialty food industry in particular are on the rise.
Sales of natural and organic products, both online and in stores, grew 9.1 percent to reach $120 billion in 2014, according to Natural Foods Merchandiser”™s 2015 market overview. Hack estimated that sales number now has reached $130 billion and said it is growing by 10 to 15 percent year-over-year.
And online shopping in general is on the rise.
The U.S. Department of Commerce estimated total e-commerce sales in 2015 at $341.7 billion, an increase of 14.6 percent from 2014. E-commerce sales last year accounted for 7.3 percent of total sales, compared with 6.4 percent of total sales in 2014.
“Everyone is getting more into what they are eating more and more every day,” said Hack. “We are going to be the hub online for this space.”