The New York Times reports that longtime e-grocer FreshDirect continues to grapple with two headaches.
First, the continuing implications of its move in 2018 into a Bronx, New York, automated warehouse that was, to say the least, a disaster, with orders messed up, delayed, or not delivered at all. "Trust was eroded," says CEO David McInerney.
Second, there is the growth of competition in the segment, from players that include Amazon and its Whole Foods business, which is occupying much the same lane as FreshDirect.
The Times writes that "while it remains the most popular online grocery service in New York, FreshDirect’s share of the market dropped to 46 percent at the end of last year, from roughly 66 percent in 2017, according to the research firm Second Measure. Over the same period, Amazon’s share nearly tripled to around 22 percent, from a little under 8 percent. Rivals like Instacart and Stop & Shop’s Peapod brand also made up ground."
(Note that the Times defines Instacart as a competitor, not as the outside logistics/delivery contractor serving FreshDirect's competitors. Just saying.)
Some excerpts from the story:
• "On some level, FreshDirect’s struggles are a normal evolution: A start-up pioneers a new business, before well-funded imitators gradually overtake it. But the company’s future also represents a test of whether Amazon, with its deep pockets and vast logistical infrastructure, can dominate fresh food, a market in which regional companies like FreshDirect have historically thrived."
• "At the moment, FreshDirect delivers to New York, New Jersey and Washington, D.C., as well as some parts of Connecticut, Pennsylvania and Delaware. But Mr. McInerney, a loquacious and energetic former chef, has an expansive vision for the company’s future — a delivery empire stretching from Washington to Boston. 'Our goal is really to control the Northeast corridor,' he said. 'If I were to look into the future, there could be a bifurcation of shopping, where people are buying packaged goods in one place and fresh food in another'."
• "Over the last 18 months, the company has made a series of adjustments to regain the trust of customers who felt burned by the delivery issues in 2018. In the past, customers who reported missing items received store credit and an apology. Now, FreshDirect offers to deliver missing items immediately, at no extra cost. And first-time customers get their groceries in a different color bag than a regular delivery, so FreshDirect’s drivers know to be especially careful.
- KC's View:
I have a real problem with the sentiment expressed in this last excerpt - that you have to treat new customers better than existing customers. That' such a typical retail mistake to make … I know what they're trying to do, but if I were a FreshDirect customer who had done business with them in the past, I'd want them to be just as vigilant with my groceries as with the person down the street using them for the first time.
I could be wrong about this, but it just feels like some sort of merger or acquisition is in FreshDirect's future. Being a pure-play in this environment seems like it might be untenable; FreshDirect may need a bigger partner with the resources to allow it to realistically pursue that "delivery empire" goal.