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Crain’s New York Business reports that FreshDirect, the New York City-based pure play online grocer, has undergone a financial turnaround, spending “the past year honing its technology and developing loyalty programs that have helped it become solidly profitable for the first time in its six-year history. The company even plans to hand out year-end bonuses to salaried employees.”

CNYB notes that “the grocer's journey from a wobbly startup launched after the dot-com bust to an established business employing 1,800 was nearly derailed last year. Fifteen months ago, the federal government launched an investigation into FreshDirect's hiring practices, looking at whether it employed undocumented workers. At the same time, the company was being targeted by unions, which tried to organize its 925 warehouse workers, claiming that they were underpaid.”

CEO Richard Braddock, according to the story, “has focused on cultivating stronger relationships with FreshDirect's core customers. This group, which totals just 35,000, uses the service about once a week and spends as much as $160 each time. FreshDirect now generates 60% of its revenues from its ardent fans, up from 25% a year ago … He also homed in on reducing the number of complaints about everything from late deliveries to missing or broken items. A year ago, 30% of orders had problems. Today that number is 15%.”

Profitability, efficiency and effectiveness have combined to give FreshDirect the ambition to grow beyond the New York metropolitan area, perhaps to a major city on the east coast such as Boston or Philadelphia.

“This will be a lessons-learned expansion,” Braddock tells Crain’s.
KC's View:
There’s no doubt that FreshDirect also has benefitted from a recession that has gotten more people to think about eating at home. And, it has a pretty nifty online interface that strikes me as pretty intuitive.

I love stories like this one. Online grocery shopping lives! Retailers who believe that this isn’t a growing segment simply aren’t paying attention to shifting demographics and a young customer base that doesn’t remember a world before iPods and Amazon.com.