Business

With Goodies, Walmart enters the subscription box business and tries to be a tastemaker

Let’s play a word association game. When I say “Walmart,” what are the words that come to mind? Did “hip” or “gourmet” make your list? Probably not — but perhaps you’ll change your mind after seeing (and tasting) the company’s latest business venture, a monthly food subscription service called Goodies.

Launching today after a three-month private beta test, Goodies offers consumers a box service that costs $7 a month and comes with five to eight unfamiliar but delectable (in theory) gourmet food samples hand-picked for their healthy, ethnic, or artisan qualities.

Goodies is the latest machination from Walmart Labs, the corporate behemoth’s internal incubator for cutting-edge social, mobile, and retail products.

“The Goodies team charter was to create a new business model,” Walmart Labs vice president of products Ravi Raj told me in a phone conversation yesterday. The team looked at the box business and thought that the food category in particular was ripe for innovation, he said.

So where’s the innovation exactly? According to Raj the brand-name retailer is pushing the vertical forward through pricing, value, and selection. At $7 a pop, a price point that includes shipping and taxes, Goodies boxes come with an assortment of quality samples, all themed around a particular concept, and are said to be worth, in total value, more than double what customers pay. All of the food items are new or unique in some way, and a majority of them can’t be found on Walmart shelves — and that’s the point.

“We want this to be the first time you ever see them,” Raj said of snacks and treats included in each box.

In essence, Walmart is using Goodies as a way to establish itself as a tastemaker and generate goodwill with monthly subscribers who ideally will go on to share the service with friends, a trend Raj said the company witnessed during testing.

Food is Walmart’s biggest category. The mass retailer is also the largest grocer in the U.S., which means the company has a lot to gain by dreaming up creative new ways for customers to shop for food. Eventually, Goodies may be used to help the retailer determine what to stock on its more traditional shelves.

Should customers find Walmart’s picks to be mouth-watering, they can log on to the Goodies companion site to purchase full-sized versions. Box buyers are also encouraged to review each product they receive and are incentived with loyalty points good for free boxes.

Logistically speaking, Walmart has set itself up with a pretty sweet deal. The brand works directly with suppliers to secure samples free of charge in exchange for market research data. This setup allows the company to price the box at a reasonable fee, cover all shipping charges, secure surprising items that it hopes will delight customers, and still turn a profit.

Goodies, which soft-launched in August with Walmart employees only, currently has 3,000 subscribers, all of whom were attracted to the service by a friend who spread the word about the service. Beta testers seem to love their little boxes, as close to 50 percent of customers write reviews, and more than one-third of them review every single sample they get.

“The social commerce aspect of the product is really important … it’s a key differentiator,” Raj said.

Goodies remains a experimental product for the time being, which means the mothership won’t be aggressively promoting the off-shoot subscription box service in stores or on television anytime soon.


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