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Bloomberg reports that Ahold-owned Peapod is working to reduce FreshDirect's e-grocery advantage in New York City, "offering free delivery and cheaper prices on everyday goods like coffee and milk."

FreshDirect reportedly has an 80 percent market share in NYC's e-grocery market; Peapod only started serving the city in 2011.

Here's how Bloomberg frames the battle:

"For years Peapod avoided Manhattan, due in part to the snarling traffic and strict parking regulations. FreshDirect’s drivers accumulate tens of thousands of dollars a year in parking tickets.

"Despite the challenges, Manhattan is an alluring market for online grocers, thanks to its densely-packed, Web-savvy and time-starved population. FreshDirect’s sales hit $100 million after just two years, fueled by an Amazon.com-esque recommendations engine and a custom-built ordering system that promised delivery inside a two-hour window ... Today, the company serves 100,000 active customers from a distribution center in Long Island City, just across the East River from Manhattan, and it’s moving to a bigger facility in the South Bronx soon. Having taken New York City and surrounding suburbs, FreshDirect invaded Philadelphia in October.

"Peapod’s plan to win over Manhattan residents hinges on lower prices. A 12-ounce bag of Dunkin’ Donuts original blend ground coffee sells for $6.99, 30 percent cheaper than from FreshDirect. A pint of Farmland fat-free milk is $3.29 on Peapod’s website, a buck cheaper than FreshDirect. Evian water, Skippy peanut butter, and Frosted Flakes: all also less expensive."
KC's View:
To me, FreshDirect and Peapod are totally different companies offering radically different services. It strikes me that there is plenty of room for both companies in NYC, and that the e-commerce business is healthier for having two viable, robust entries. (Wait for Amazon Local to come to NYC. And maybe a Walmart grocery delivery business. The city will make a fortune just on all the parking tickets it writes...)