This newspaper quote from Freshdirect co-founder Jason Ackerman was so amusingly cheeky that I made a note to give the online grocer a call …
This newspaper quote from Freshdirect co-founder Jason Ackerman was so amusingly cheeky that I made a note to give the online grocer a call:
“For the most part the demand has been greater than our ability to supply,” Ackerman told the Associated Press earlier this year. “When you deliver great food people love the convenience of it. If we delivered crappy food people wouldn’t be as excited.”
A bit obvious, perhaps, but it sure explains why CrappyFood.com went belly-up.
It also goes a long way toward explaining why online groceries, a market segment given up for garbage not long ago, are today enjoying a second helping of critical acclaim and investor interest. Online food stores still generate less than one-half of 1% of the total revenue in the grocery world, according to Jupiter Research, and won’t hit 1% until 2008. But we’re talking about a $2.4 billion “niche” that’s expected to grow 42% annually between now and then – no small potatoes. New York-based Freshdirect claims 100,000 active customers after a mere two years of pushing produce in the Big Apple.
“Consumers have absolutely integrated us as part of their lifestyles,” Ackerman told me. “It’s sticky, it’s working.”
It’s also simple, if somewhat counterintuitive. Freshdirect employs about 1,100 people and operates out of a single facility from which it processes and ships custom-packaged fresh food and pre-packaged items. The key is that the company buys directly from farmers and has its own employees butcher, prep and wrap, thus cutting out middlemen and costs.
“The whole premise behind the business was to take the inefficiencies in the way that food is managed and use technology to create real physical advantages on processing and controls on the food,” Ackerman says. “Almost all of our time is spent on building what is really like a Dell model, which is a just-in-time, made-to-order system. When you do that for fresh food – food that needs some level of processing and the shelf lives are short – you create a unique opportunity to reduce your waste and improve your quality.”
That orders are placed online is important in that it allows for a just-in-time production model, but being online isn’t what drives Freshdirect’s success, according to Ackerman.
“We’ve never really viewed this as an Internet business. . . . At the end of the day, the online convenience is not where we think we compete,” he says. “In New York, you’ve got four players doing online business, so it’s really about who went out there with the best food store.”
And what do customers think?
“They’re awesome,” says Johna Till Johnson, a Manhattan resident who writes Network World’s Eye on the Carriers column. “You can find what you’re looking for from practically any angle – type of food, brand name, food category. Once you find the food, you can drill down and get calorie counts, cooking tips, and lots and lots of preparation options.
“They run a pretty tight ship. They store your contact information and credit card, and you can log on [password-protected] and place standing orders for stuff. You can specify when you’d like it to be delivered – what day, what time, within a two-hour block.”
Sounds yummy.
Surprisingly enough, half of Freshdirect customers still use pokey dial-up connections to place their orders, a fact which in and of itself seems to suggest a high level of loyalty and satisfaction.
Ackerman acknowledges that Freshdirect’s model is labor-intensive and requires a highly skilled workforce, but he’s confident that it can be exported to “the top 20 cities in the country and be effective on delivery.”
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