Market Maker

Fresh Direct Still Growing In NYC

By Matt Hampton

The culture of shopping changed with the advent of the internet. It took several years to catch on, but once it did, online shopping revolutionized the way the economy works. With sites like Amazon.com and eBay, people all over the world only needed access to the internet to become members of the global community, plugged into the greater economy of the world at large.

It didn’t take long for the sites that were largely successful to branch into uncharted territory. Amazon.com went from being an online bookseller to a commercial wonderland, where e-shoppers can buy anything they can imagine under the sun. Around the same time, eBay became a community built around exchanging goods and services that no one anticipated would happen online. Entire businesses were built, and thrived, around the virtual swap-meet that eBay created.

In New York in particular, Web sites thrived because of the immediacy of product availability. Shoppers in Middle America had to wait days and weeks for items to be shipped snail-mail across the country, but Manhattanites could have items in a matter of hours. People in the outer boroughs could have books the next day, all thanks to warehouses in New Jersey.

A Ripe Market

It was only a matter of time, of course, before internet commerce entered the grocery market. New Yorkers don’t like to leave the house if they don’t have to. It’s noisy, it’s crowded and without a car getting things home from the market becomes a hassle. With home delivery, shopping is not only easy, it can be a leisurely activity. Making the difficult things easy and fun is what the advent of the internet is all about.

That’s where Fresh Direct comes in. In a world where shopping went electric, Fresh Direct is the gold standard of e-grocers. Anything you can get at the corner deli, or at the major supermarkets, pharmacies, bakeries, it’s all at your door in a box in a matter of hours; all it takes is a few keystrokes and a couple of clicks on the mouse.

From packaging to delivery, Fresh Direct gets groceries to the doors of customers in New York City.

It all harkens back to the halcyon days of the milkman and grocery delivery. The idea is that a local company can provide necessary goods cheaply and quickly, and the customer shouldn’t have to even leave the comfort of home for these necessities. Ultimately, in the internet age, it was an idea that was almost guaranteed to succeed in a big way.

“When we launched the business, it was more about quality, fresh foods, and we’ve slowly evolved it into meals, because that’s really the thing that our customers are looking for,” said Steve Druckman, Chief Marketing Officer of Fresh Direct. “Our interest is in helping our customer put a high quality meal on the table.”

According to Druckman, Fresh Direct started delivering groceries and meals in a few select markets, like Roosevelt Island and Battery Park, in 2002. Those pilot markets, essentially a test of the Fresh Direct model, operated fundamentally the same way that Fresh Direct does today, on a much smaller scale. Serving neighborhoods with online ordering through an intuitive interface made going to the grocery as easy as surfing the internet.

Quick Growth

It became obvious very quickly, Druckman said, that Fresh Direct was onto something, and the business grew quickly on the strength of satisfied customers who were thrilled to have an entire fresh market right at their fingertips.

“We’re growing at high double digit growth every year, growing extremely quickly,” Druckman said. “We went out to certain markets to start; word of mouth on the business was huge in Manhattan, the Upper West Side, the Upper East Side. Word of mouth was the most powerful thing in favor of the business.”

From there, online ordering for the company expanded to other areas in Brooklyn, Queens and parts of New Jersey and counties north of the city. Fresh Direct even delivers to the Hamptons during the summer months.

Everything that is Fresh Direct is based in the company’s Long Island City facilities – giant yellow warehouses just a few blocks from the Midtown Tunnel and the Long Island Expressway.

It’s easy to see Manhattan from the warehouse, the skyline towers overhead. It is this area, and the boroughs to the east and southeast, that Fresh Direct has tried to serve for four years.

Small, Simple Steps

Inside the warehouses, the system that drives an order from the customers’ computers to their doors is all about breaking everything down into its most basic parts.

Any one who has ever ordered from the company knows that sometimes a bag of nuts or a stick of butter will come in a large corrugated cardboard box all by its lonesome.

That’s because each order is broken down by department, from deli to meat, seafood and dry goods, like cereals and bread.

A Meal Fresh Direct provides for customers.

The team in any given department, such as the meat department, sees an order, a cut and a preparation style. They prepare it just so, pack it up on their own, and label it electronically. The order then plops onto a conveyer belt where it is electronically matched with other boxes from other departments that are in the same order for one customer.

All of these come together at the end of the assembly line and are grouped according to location. After this process is completed, every order is piled into the appropriate truck and delivered to the customer’s door.

One of the large machines that helps package food and prepares it for delivery.

As an internet company, Fresh Direct also prides itself on its flexibility. The ability to adjust based on whatever a customer wants, to bend itself into pretzel-like shapes for the benefit of the customer, looking at a whole new range of services, and discovering what’s expected of it, is the real key to evolving in a business model in the internet age.

“We’re still a young company, and we’re still trying to give [customers] what they want,” Druckman said. “People are putting their trust in us, so we’ve got to get it right.”

Customer Comments

Druckman said that the company takes mostly internet feedback from customers, though it also uses more traditional focus groups. It uses the internet as a resource for that kind of information because it knows that the customer it’s serving is comfortable with it. Tech-savvy, internet friendly people are the kind of shoppers who use Fresh Direct, and the company has used that knowledge to it advantage.

Boxes of groceries are assembled at the Fresh Direct factory.

“We want to just have the right set of products for our customer base. We want to make sure that the mix is right, so we work to talk to people, to make sure we know what our customers want,” Druckman said. “We’re introducing some new product lines our customers are very surprised about, and they’re excited about lots of them. That’s something we pride ourselves on, that [customers are] surprised, they’re excited.”

The ability to anticipate that kind of change is also crucial to an internet-based company. As technology grows faster and faster, businesses have to become more agile to broaden their customer base. Without this ability, companies risk stagnation, which is a death sentence in a world where other internet based grocery alternatives are just a click away for customers.

Where’s Next?

It’s this area that Fresh Direct is most concerned with for the present. Fresh Direct knows that every large city across the country would have the same essential market as New York, but it is more concerned about getting the formula “just right” than it is about expanding to other markets. Concern for the customers here trumps any desire to move beyond the New York City area.

“At this point, we want to maximize our potential here in the New York City area,” Druckman admitted. “For us it’s really about getting it right in New York first, proving out the business model here. That’s really been the philosophy and the idea is, ‘Well if we don’t get it right in New York first then we’re not going to be as successful as we could be.’”

So with the addition of Fresh Direct, the New York delivery market could almost consider itself complete. There are few things now that can’t be delivered directly to the shoppers’ door, and even the grocery store will fully prepare the meals. Now New Yorkers just need to answer the door and turn on the oven.

With any luck, it won’t be long before there’s an internet service for both of those as well. Even then, New Yorkers might just hire a chauffeur just to put the food in the oven.