Do Fewer SKUs Add Up to Better Prices at Thrive Market?

As prices at the grocery shelf remain high nationwide, one e-grocer says that its method for managing inventory has allowed it to keep its prices relatively low while maintaining its margins.

Thrive Market, a subscription-based online grocery store, told Yahoo! Finance that it only carries between 5,000 and 6,000 SKUs compared to the 40,000 one might expect at a traditional grocer.

This strategy, the grocer said, gives the business more “purchasing power” and has allowed it to keep prices low compared to its competitors throughout inflation.

Thrive further chalked up its ability to keep its prices low to its $60 membership fee, which allows it to make money from subscriptions while pushing its prices lower, and its $49 threshold on free shipping eligibility as key factors driving profitability. The e-grocer, which has 1.2 million members, rang up nearly $500 million in revenue in 2022 and had a valuation of more than $1 billion based on its last funding round.

Thrive has been described as a combination of Costco and Whole Foods since its founding in 2014. It promises its members low-priced natural and organic foods sometimes up to 50 percent cheaper than what a customer would find at a competitor. It made its first foray into perishables with an organic meat and seafood assortment in 2018.

The niche grocer rolled out its first national televised ad campaign last year to expand its visibility, Ad Age reported. Previously the company had only engaged in digital marketing. The ad campaign touted low-price organics as a major value proposition.

In a review of Thrive Market’s service, however, a blog called Cheapism recently argued that Thrive’s claim to offer cheaper organics than its main competition does not always hold up. While the blog only looks at a handful of SKUs, it concludes that competitors like Whole Foods and Sprouts tend to offer better deals item-for-item than Thrive Market. The blog also points out different, higher shipping costs and thresholds for frozen products ($20 per shipment, free shipping on orders over $120) and wine ($14 per shipment, free shipping on orders over $79).