Membo: Europe-Wide Grocery Delivery & Local Food Network

Membo: Reimagining Grocery Shopping in Europe

Based in Estonia, Membo – a Y Combinator-backed company preparing for the incubator’s Summer 2021 Demo Day – is focused on capturing a portion of the premium grocery market within Europe. The startup aims to challenge the established dominance of large supermarket chains in the traditional weekly food shopping experience.

The Competitive Landscape of Food Delivery

The European on-demand food delivery sector is notably competitive, characterized by rapid changes and frequent consolidation among app developers. This creates a dynamic, fast-paced environment. However, online grocery delivery generally progresses at a more measured pace, though developments like dark stores are introducing some overlap.

Consumer interest in app-based grocery shopping experienced a significant surge during the pandemic. This increased demand has spurred greater startup activity and prompted supermarket giants to expand their online delivery capabilities.

Membo’s Approach: A Local Marketplace

Membo is entering this market by establishing an app-based marketplace, initially in Estonia. This platform connects local food producers directly with consumers, eliminating intermediaries while Membo manages delivery and billing.

Currently, the service is available in Tallinn and Tartu, Estonia. Wider access to Membo’s offerings is anticipated as the company expands.

A Virtual Farmers’ Market

Membo’s app functions as a virtual farmers’ market, allowing shoppers to browse and purchase high-quality, fresh food from multiple local producers in a single transaction. The company’s revenue model is based on commissions earned from orders placed through its platform.

Efficient Logistics and Delivery

Orders placed through Membo are delivered to customers within one of three weekly time slots. The startup consolidates customer orders and sends them to producers, who then deliver a single bulk order to Membo’s central warehouse. Membo’s staff then handle packing and distribution to fulfill individual customer orders.

Growth and Customer Base

Launched in December, Membo has experienced 30% month-over-month growth over the past eight months. To date, the platform has processed over 4,000 orders and has a customer base exceeding 1,400.

Balancing Local and Wider Sourcing

While prioritizing local produce and the associated environmental benefits of reduced “food miles,” Membo also offers products from further afield. For example, Spanish oranges are available to Estonian customers, enabling a broader grocery selection and seasonal availability.

Offering a comprehensive inventory is crucial for Membo to compete with traditional supermarkets in terms of convenience for the “single weekly shop.”

Current Product Range

Membo’s platform currently lists over 800 items from approximately 65 producers. The company remains open to expanding its offerings, recently adding a local pet food producer to its inventory.

Prioritizing Local Sourcing and Freshness

The core principle guiding Membo is to source food as locally as possible, maximizing freshness and overall grocery quality.

Focus on Quality Over Speed

“People ordering their weekly groceries care more about the freshness and quality of their food than they do about 15-minute deliveries,” explains Vahur Hansen, co-founder and CEO. He previously worked as an early engineer at TransferWise (now Wise).

“We built a model that guarantees that every item in your cart arrives as fresh as possible. For instance, trout ordered through us is often caught the day before, dairy products are specifically prepared for your delivery, and oranges are picked from the tree within 24 hours. That’s our focus.”

A European-Centric Approach

Hansen emphasizes that the product is designed with European consumers in mind. “Europeans understand the importance of supporting local producers and recognize the superior quality of their products. Our goal is to create a cross-European network of high-quality producers, coupled with efficient logistics, to deliver local produce across Europe.”

Logistics and Delivery Partnerships

The team initially experimented with different delivery approaches but currently outsources last-mile delivery to partners. Hansen believes focusing on core logistics is the most effective strategy.

“We realized we’re more of a logistics company than a store. Our efforts are centered on organizing the fastest possible delivery from producer to customer.”

Premium Groceries and Basket Value

Given its focus on premium groceries, Membo shoppers tend to have larger order values compared to typical food delivery app users, who often make impulse purchases or seek quick convenience items.

While there is some overlap with on-demand food delivery apps, Membo’s value proposition is distinct, even from dark store operators like Spain’s Glovo.

The Challenge of Fresh Produce Delivery

Hyper-speedy delivery services struggle to handle fresh produce effectively, ensuring it arrives intact and in date. Non-perishable items, processed foods, and restaurant meal deliveries are easier to manage for such platforms. Grocery freshness, therefore, represents a significant competitive advantage.

Market Potential

The central question is the size of the market for freshness and quality in grocery shopping versus the demand for hyper-quick convenience.

Membo believes that delivering quality groceries is a more sustainable business model, particularly in affluent regions like Northern Europe.

Unit Economics and Scalability

“Our model differs from dark stores, which require mini-warehouses in multiple cities. Our unit economics are strong because we can achieve savings through scale,” says Hansen. “Needing one large warehouse instead of ten smaller ones positively impacts our costs.”

“We capture planned weekly grocery baskets, while dark stores cater to impulse buys. Our average grocery basket is at least 50% higher, currently around $50. Customers come to us to order all their fresh produce, not just a few items.”

A Lean and Efficient Model

Membo’s business model avoids the need to predict customer demand in advance, resulting in greater efficiency and reduced food waste – a factor likely appreciated by its target customers. The typical Membo customer is a 27 to 55-year-old suburban mother who enjoys cooking for her family and preparing weekly meals, valuing high-quality, eco-friendly ingredients.

“We avoid having food sit in our warehouse. Fresh produce arriving in the morning is based on orders and is delivered to customers the same evening. As a result, there’s minimal food waste. Everything arriving at our warehouse has already been ordered, and it’s essentially empty by the end of the day.”

Expansion Plans

While still in its early stages, Membo has ambitious expansion plans within the region.

Estonia has served as a “playground” for refining its model and operations before scaling into other European markets, with potential launches in Switzerland, Germany, or France. Markets with strong networks of local food producers will be prioritized, alongside consideration of the local competitive landscape.

(Europe-based competitors include the U.K.’s Farmdrop, which targets a similar discerning grocery shopper who values food provenance and is willing to pay a premium for quality.)

Learning from Y Combinator

“We’ve been using Estonia to determine the exact operating model that guarantees freshness for every item. We’re fine-tuning our product and ensuring it’s a sustainable business before expanding, which is something YC has emphasized.

“Build a working business and don’t scale too quickly. We’re now mapping larger Western European countries and evaluating the best combination of factors for expansion.”

Early Funding and Team

Prior to Y Combinator investment, Membo raised a small pre-seed round. The team remains small and operates with lean expenses. Pre-seed backers included the CEO and VP of growth at Estonian ride-hailing startup Bolt, as well as former colleagues of Hansen at (Transfer)Wise.