Dive Brief:

• Startup e-grocer Pantry Perks says shoppers that use its layered cashback program will “never pay for groceries again,” according to a news release.   
• The specialty retailer, which offers a range of packaged grocery, personal care items and supplements, offers shoppers 7% cash back on each order, then 6% back on purchases by friends, and 5% for purchases made by friends of those friends. In order to qualify, shoppers have to sign up with the company and purchase a minimum of $60 per month. 
• "We are seeing a lot of adoption across the age spectrum – from students to millennial moms to baby boomers,” CEO Rishi Padhi said in a statement.

Dive Insight:

With the online grocery market growing increasingly crowded, startups know they need to do something to stand out from the pack. Offering “free” groceries certainly fits the bill.

In order to actually get free orders from Pantry Perks, though — or rather, earn enough cash back to cancel out the orders — shoppers will have to do some work. They’ll need to convince friends to buy products from Pantry Perks, who will in turn need to convince their friends, and so on. The system could be a real draw for enterprising shoppers, but with a $60 monthly order minimum to qualify, they’ll have to keep branching out, or hope all those friends and acquaintances become regular Pantry Perks customers.

Pantry Perks’ model harnesses the vast interconnectedness of social media. It also game-ifies the shopping experience similar to rewards programs like Ibotta, which offers cash back to consumers for completing simple tasks and making purchases with their favorite retailers.  

The model could be a serious money-saver, too. One of the biggest expenses e-grocery startups face is marketing costs. By deputizing its shoppers to promote the program, Pantry Perks can cut spending while effectively raising brand awareness.  

Grocers are looking for ways to boost loyalty through promotions, loyalty programs and by selling their products online. Pantry Perks combines all of those capabilities into one package. Will it succeed? It’s hard to say for certain, though safe to assume the company will need to deliver on basic execution — on-time delivery, compelling assortment and strong customer support — in addition to its main promotion if it hopes to gain loyal customers.