Back on May 27th, I introduced Green PolkaDot Box (OTCPK:GPDB) as my #1 special situation stock to watch, mainly due to the start-up's low overhead, healthy gross margins and initial marketing blitz with large affiliate networks.
Yesterday, Amazon.com (NASDAQ:AMZN) surprised every Green PolkaDot Box shareholder after GPDB announced that Amazon had come knocking on GPDB's door in looking for a partner in the non-GMO and organic food space. The deal not only validates GPDB's business model, but sets the stage for an eventual acquisition. Why ? Because Amazon Fresh only operates in the Seattle area, Northern California and Southern California; not to mention there's just no profit when delivering for free unless you're also the grower, which Amazon isn't. As the grower, harvester, packager and also a provider of free delivery, Green PolkaDot Box is exactly what Amazon's looking for. So much so, that exclusivity awaits GPDB's Living Produce once it's up and running. Let's also not forget that Amazon has a very long history of acquiring and investing in companies that make their life easier.
As I had mentioned in my May article, I compared many items on GPDB's site versus what those same items cost on Amazon.com, and the savings offered by Green PolkaDot Box on one $150.00 order were nearly enough to pay for their $50.00 annual membership fee, not to mention that all orders placed with GPDB over $75.00 included free shipping with the exception of a very small fee for refrigerated and frozen items.
I spoke with Rod Smith late yesterday about the new deal with Amazon.com in an attempt to learn more about the significance of the partnership. Smith, CEO of Green PolkaDot Box, told me he expects very little competition in the refrigerated and frozen space, primarily due to shipping costs and timeliness of the shipment. He also said there are many products that Amazon doesn't carry and that Amazon can't always ship everything in one box as Smith's company can.
Smith thinks yesterday's announcement is a game-changer for the start-up and will result in a rapid rise of the membership count that currently stands at 5,319 (updated in real time at the top of the company's website) along with a rapid rise in sales (updated monthly at the top of the company's website). He explained that being able to tap into Amazon's millions and millions of customers with the very lowest price in most cases, will lead to very rapid brand recognition.
In asking Smith for an example as to how GPDB will stack up against current competition in the refrigerated/frozen space on Amazon, I suggested we both bring up Amazon's website together while we were on the phone and search for grass fed beef, the first thing that came to my mind. After we were both on the same page on Amazon's site, I pointed out at random, 10 one pound packages of lean grass fed organic ground beef sold by Rocky Mountain Organic Meats for $89.00 plus $49.00 for shipping within 2 to 3 days. Smith said he could ship the same thing for $89.00 the very same day and shipping would be free. Obviously with a $49.00 shipping fee, the item was not an Amazon "Prime" item.
I then asked Smith to do a comparison on an Amazon "Prime" item and immediately found one at the top of the same page we were both looking at. I saw where 25 packages (two sticks in each package) of Nick's Sticks Grass-Fed Beef Snack Sticks were $69.99 and shipping was free, the order fulfilled directly by Amazon. Smith said that Green PolkaDot Box's price would be approximately $58.00 and shipping would be free.
Smith explained that GPDB intends to win "Buy Box" status on the items they intend to offer. I had never heard of this term before today and probably because it only applies to Amazon merchants, but after reading about "Buy Box," I realized that bidding the lowest price on a certain item means that the merchant's item is displayed with a full description and thus the merchant isn't simply listed in the "other sellers" category of the same item.
Although Green PolkaDot Box has not yet erected their first Living Produce Growing Center (pages 4,5,6 &7), the 40-acre dirt work has been finished at their first planned site in Utah, with nine other sites already strategically chosen across the USA. The deal with Amazon also calls for GPDB to be the exclusive provider of living produce once up and running and Smith says they'll be able to grow, harvest, package and ship produce at half the cost of anyone else.
It's my contention and the company's thoughts that once Living Produce gets well established on Amazon.com, Green PolkaDot Box may very well become what's now known as Amazon Fresh via an acquisition of the company. That's positive thinking, but when Amazon gives you exclusivity in a segment of a space that's not even up and running, the handwriting's on the wall. If Amazon doesn't end up acquiring GPDB, the company will still have a massive expanded footprint nationwide with virtually no competition, especially in the Living Produce space.
Read my May 27th Seeking Alpha article about Green PolkaDot Box for an in-depth look at the company from top to bottom. It's written as if Amazon.com wouldn't enter into the equation.
Disclosure: The author is long GPDB. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
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