Mailpac adds price-cutter grocery e-store in busy online market
Mailpac Group, which is heavily into the e-commerce solutions business, has, through its Mailpac Local subsidiary, launched an online grocery store to grow market share, with a plan to retail products some five to 15 per cent less than traditional brick-and-mortar grocery chains and standalone shops islandwide. Mailpac appears undaunted by a market space that is getting increasingly crowded, exuding confidence that its price-cutting business model will land it ahead of the pack.
The admittedly nimble and fast-growing Mailpac is hunting a bigger share of a market where online grocery shopping is already offered by existing and emerging players, and with the chains it is seeking to undersell also ramping up their own online sales platforms over the past year in particular. Bulk goods seller PriceSmart and food manufacturing and distribution conglomerate Seprod are among the big companies already offering e-commerce services to customers. Another big food manufacturer and distributor, GraceKennedy, has said it is also planning to add a delivery component to its online service that now stops at kerbside pickup.
Mailpac Local Grocery hopes to gain competitive price advantage over large supermarket chains from its investment in technology and infrastructure, which company head Khary Robinson says allows for the online store to secure goods at a lower price reserved for large-scale distributors. Mailpac will add its own markup to the goods, but anticipates that consumers will see what Robinson describes as “meaningfully lower prices” on their monthly shopping bill, an offshoot, hopefully, of its supply arrangements and the discounts and promotions it plans to roll out.
The business, which will also provide doorstep delivery for its shoppers, is a development on the online shopping, in-store pickup and delivery service it has offered at the height of the COVID-19 pandemic, in partnership with big grocery wholesaler and retailer PriceSmart, to shoppers under government-imposed lockdown at home or wary of crowds.
Prior to the start-up of Mailpac Local Grocery Store, the company invested in the acquisition of five new vehicles, the implementation of a virtual aisle-browsing feature to its online platform, and the addition of 30 new hires to serve its delivery partnerships that also included Hi-Lo Food Stores and The Stationery Centre.
Mailpac Local has discontinued deliveries for Hi-Lo Food Stores, but will continue its relationship with PriceSmart. Robinson says Mailpac Local Grocery will stock goods additional to those sold by PriceSmart.
“PriceSmart will remain a partner to Mailpac Local as they provide our customers with unique (goods) and prices. However, we have ended the supply arrangement with Hi-Lo as we endeavour to give our customers a lower-cost grocery-shopping solution, coupled with the convenience of online shopping,” Robinson said, in response to Financial Gleaner queries.
Now, goods for sale to Mailpac customers are being procured by a company formed under the umbrella of Robinson’s investment holding company Norbrook Equity Partners Limited. Robinson declined to name the new procurement arm.
“We have one supplier, which is a separate Norbrook company, that was created to supply consolidated wholesale items to business customers/retailers. Mailpac Local is the company’s first customer,” Robinson told the Financial Gleaner.
In the first six months, the online grocery store is expected to add $600 million in revenue to Mailpac Local, Robinson projects.
For the six months to June, Mailpac Group, the Jamaica Stock Exchange junior market-listed company, which comprises Mailpac Local and courier business Mailpac International, posted $198 million in profit on revenues which grew to $896 million.
Mailpac Local became operational in February 2016 and says it has invested about $180 million in the buildout of the e-commerce delivery business. Robinson estimates that the spend on Mailpac Local Grocery Store now tallies $30 million.
The company’s decision to add an online grocery component to its courier service and delivery business comes months after Robinson, its chairman, expressed concern about Mailpac Group potentially losing some of the business it gained during the pandemic from legacy customers travelling and shopping again, following the lifting of COVID-19 restrictions.
Since the pandemic, Mailpac Local’s client base has grown from 700 at the beginning of March 2020 to just over 2,000.
Robinson has said that Mailpac has watched how American e-commerce giant Amazon dominated the space in the United States. With Amazon’s strides in mind, Mailpac says it has made strategic investments to enable the company to offer what it termed as “unparalleled value proposition to consumers”.
Norbrook Equity, the holding company, recently benefited from US$17.5 million in financial backing to fund new acquisitions and expansion plans.
Norbrook Equity’s current operations include courier service Mailpac Group, Hertz rental car franchise, and the chain of Express Fitness gyms. Its businesses and brands also include Pure National Ice Company, SNB Creative Group (Starlight Productions and Blueprint Events), Norbrook Water Company that markets the JamAgua-branded bottled water, and Norbrook Transaction Services, operating as ePay.