When Fresh Direct began in 2002, it was a bit ahead of its time. Internet grocery shopping was still a novelty, and Fresh Direct’s customer service model had not completely gelled. But as they say, timing is everything. Today, Internet-savvy customers ready to grocery shop online abound—and not just in New York City—and Fresh Direct has worked out virtually all of its kinks. 
Indeed, Chairman and CEO Rick Braddock says the company is substantially profitable, knows how to attract and keep loyal customers, and is ready to expand. Braddock, who joined the company four years ago, goes so far as to say that traditional grocers should be concerned.“An online grocer can do a much better job for customers than an off-line version, for very fundamental reasons,” he said.
Braddock is referring to shopping cart pages that remind you of items you might have forgotten, the ability to remove items to lower your spend right before you complete your order, and perishable items that are considerably fresher than those in the grocery store.
“We have no intermediate warehouses into our facility or out of it. We buy in direct and ship out direct. That means we cut a week to two weeks off the supply chain an operation like Peapod would use, and we can innovate with some offerings they can’t,” said Braddock.
One example is four-minute microwavable meals that Braddock said are extremely popular. By combining recipes from well-known New York City restaurants and entities like Eating Well with fresh ingredients prepared as orders come in, Fresh Direct has found an offering offline grocers can’t compete with.
“We have 85 SKUs of these meals. If you had to put 85 SKUs of two- to three-day perishable product in 50 stores, you’d wind up throwing most of it away,” said Braddock, who began his career at General Foods and ran PriceLine for six years. “For us, it’s a just-in-time product—we have the order in hand before we assemble the meal.”Timely information
Timing is critical to the customer service side of the business as well. Every two weeks, customers are asked to rate 30 areas of Fresh Direct’s service so Braddock’s team knows which areas are working and which need improvement.
“The verbatims that come with the research are a fount of good information. When we read through them, we can find our customers telling us things we need to do better,” said Braddock. The data can be easily sorted into core and non-core customers so the team doesn’t get distracted meeting the needs of occasional users.
Loyal customers have grown substantially thanks to efforts by Braddock and his team. In early 2008, they made up 25% of volume; today, they make up more than 60%.
Those efforts include using a customer’s own information to improve his/her shopping experience. “We have the richest customer database I’ve ever seen in my career,” said Braddock. “When a customer returns to do business with us, we know every SKU they’ve bought in every order they’ve ever placed with us. Our loyal customers buy $120 worth of product ever week, so that’s 30 to 40 SKUs an order.”
When customers go to their cart, underneath the checkout total is a list of five items they bought frequently in the past that they did not buy on that visit. And if a customer is buying, say, a two-inch steak, the system looks to see what items s/he bought the last time a two-inch steak was purchased and offers it up (Braddock calls it a smart cross-sell).
“Those two features have increased our revenue by almost 12%, for all our customers,” said Braddock. “We’re doing extremely well today, largely because of elements like this where we dramatically improve customers’ experience in ways that are germane to them because we’re using their own information to help them.” Time to expand
Now, the time has come for the 2,000-employee company to expand, said Braddock. It’s preparing to extend delivery into nearby Connecticut suburbs and those in Westchester County in the next few months and is on the verge of releasing an iPhone app. Later this year, it will announce further expansion in the US, with exact locations.
The company will have to make some adjustments when it opens in new cities, Braddock acknowledges. “We’d expect to deal with more suburban markets than urban, wherever we expand,” he said. Still, having worked through the customer service issues that caused slow growth when the company started, implemented several successful online programs, and introduced products like four-minute meals, Fresh Direct will be able to hit the ground running in any new geography.
And the timing is right, Braddock believes. “Only 23% of the people who shop in a store walk in with a shopping list. So it’s easy to imagine how the wealth of information we have to help our customers with allows us to give them a dramatically better experience,” he said.
