Dive Brief:
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Grove Collaborative on Thursday reported that Q2 net revenue fell 21.2% year over year to $52.1 million. Direct-to-consumer orders fell nearly 25% to 0.7 million; DTC active customers fell 34% to 0.7 million; and DTC net revenue per order rose almost 5% to $67.73.
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Gross margin expanded by 200 basis points year over year to 53.9%, and net loss narrowed by 7.4% to $10.1 million, according to a company press release.
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The consumer products retailer also announced that it is switching from its custom DTC website to Shopify, part of an effort “to create opportunities for new customer enhancements, drive down costs for ongoing site maintenance, and better leverage industry best practices and innovations for future growth,” per the release.
Dive Insight:
In the year since CEO Jeff Yurcisin took the helm from co-founder Stuart Landesberg, Grove has chased profitability by shaking up its model, most notably abandoning its subscription requirement. The company also revamped its core Grove Co. private label in order to boost visibility on retail shelves; the brand is found at mass merchants like Walmart, Target and Costco, drugstores like CVS and grocers like Kroger and Hannaford, among others.
Its transition to Shopify reflects a realization that maintaining a custom platform is less efficient, according to Rick Watson, founder and CEO of RMW Commerce Consulting, who noted that Glossier similarly made the switch last year. At Grove, the move will take a while: It started in July and is expected to be complete in Q1 next year, per the company’s release.
“Meanwhile, Overstock switched to Shopify in like an afternoon,” Watson said by phone.
Inching toward profitability isn’t Grove’s only challenge. While its differentiation is the sustainability of its products and packaging, with an emphasis on reducing the use of plastic, it faces a lot of competition in that niche, according to Watson. Moreover, its online DTC operation is likely to remain under pressure, he said.
“I think ecom-only for most players is just not profitable,” he said. “That's just the reality. You can't point to too many who have achieved pure profitability on their own, without stores, without full scale. I don't think that story has changed.”
