In this episode of the GrowthTLDR, we talk to Abhi Ramesh, the CEO, and founder of Misfits Market.
Misfits Market is direct to consumer grocery business where they resell grocery items via a subscription box at a substantial discount. They've also grown to over 700 employees in 20 months and raised over $100 million in funding.
We talk to Abhi about the Misfits Market business model. We get into how they make money, how Abhi thinks about the long-term defensibility of the business, the critical things that have gone into their success, and what's it like to hire more than 700 people in less than two years.
Time Stamped Notes
[2:25] - Misfits Market resell grocery items via a subscription box at a substantial discount. They're able to offer that discount as the items aren't sold via supermarkets due to things like their looks, mislabeling.
[3:20] - About one third to 40% of the food we produce goes to waste
[5:55] - Misfits Market is two years old, and have grown to 700 people. They service 26 states in the US. They're venture-backed and have just raised a Series B $85 million round.
[7:30] - Abhi talks about how Misfits Market makes money. They lose money on their base box but make a profit when orders rise above a certain monetary threshold.
[8:50] - Two critical reasons for the success of Misfits Market were operational excellence, how they set up their supply and delivery chain, and understanding what their consumers wanted. Customers of Misfits Market wanted groceries delivered sustainably, and for them to be affordable.
[12:10] - We talk about customer acquisition with Abhi. Most of their customer demand is coming from organic channels. The best customers, those with the best LTV, come from referrals. To lean into that, Misfits Market has created a referral program to incentivize people to share with their friends. They both get discounts on the next box they order.
[16:25] - Abhi doesn't see Misfits Market as a subscription business; he sees it as a repeat purchase platform. He doesn't think the subscription has a big impact on churn or LTV; they want to be a grocery platform. One of their goals is to continue increasing the average order value of their customers. To do that, they'll continue to increase the number of available products through their platform.
[21:00] - Common predictors of churn from the Misfits Market platform are - customers who have delivery issues, customers submitting more support tickets than average, the average order value of customers.
[23:40] - Abhi feels Misfits Market defensibility comes from its supply chain. It would be incredibly difficult for anyone to replicate it. He also feels their fulfillment model, which helps create a superior customer experience, helps make the business defensible.
[26:30] - The reason Abhi feels Misfits Market was able to raise such a big round ($85 million), is because the TAM for their business is enormous, 900 billion spent on groceries in 2018 alone. It's also a market that's under-penetrated in terms of eCommerce, with no one competitor having more than single-digit market share.
[29:10] - Most of the companies in the direct to the consumer market for food are companies selling kits. Abhi doesn't see Misfits Market competing for these customers; they solve a different use case for consumers.
[32:10] - We talk about how challenging it's been for Abhi and Misfits Market to hire and scale to 700 employees in 20 months. The reason it's worked is because of the leadership team Abhi has hired.
[34:00] - Abhi has been positively surprised by how fast Misfits Market has grown.