GreatMeals.com plans to re-launch Dec. 1 with a new fulfillment partner after terminating its relationship with Richmond Cold Storage, Richmond, VA, which had prepared and packed GreatMeals' orders.
“Our overhead costs were about three times the sales we were taking in,” said Steven Krane, president of GreatMeals, Washington. “We thought we could afford those expenses because we thought we were going to be huge overnight and that didn't happen.”
GreatMeals had been paying RCS $40,000 a month for fulfillment until temporarily halting business in July to restructure.
Krane would not disclose the new distribution provider, but said it was a charge-per-shipment deal that will allow GreatMeals a profit of $10 per purchase based on an average order size of $100.
While the prepared meals marketer plans to produce most of its revenue online when it reopens, it also intends to increase sales by launching 100 outlet stores inside supermarkets of an undisclosed chain along the East Coast.
The 200-square-foot stores will play a role similar to traditional grocery delis where patrons can order meals to go or sample food. The first store is scheduled to open during first quarter 2002 and will sell the Web site's top 50 dishes. GreatMeals would not divulge a location or a timetable for the rollout of other outlets. The company estimates that the outlets will cost $75,000 apiece to build and will generate minimum sales of $4,000 a week.
Krane said the stores will beat the 10 percent profit margin his company believes will be established by its relaunched Web site.
“We get to leverage the in-store foot traffic, which costs less customer acquisitionwise than prospecting in e-commerce or cataloging,” he said. “We believe people will be attracted to our stores because we all know what it's like to go to the grocery store, spend $100, go home and find out that we have nothing to eat.”
Krane said it is unlikely his firm will continue the catalog it launched in 2001, when it spent about $250,000 on four mailings to 400,000 households. Materials from past catalogs will be used as sales aids at the stores, as well as menus that customers can bring home with them for phone or online orders.
“We might send a catalog to existing customers, but we feel it is too expensive as a prospecting tool,” he said.
Krane co-founded the company and recently bought a majority share of it from Carlton Capital Group, Washington. GreatMeals' chief competitor is A La Zing, which is owned by entrenched direct marketing food company Omaha Steaks.
