Freshdirect Case

FreshDirect was founded by Jason Ackerman and Joseph Fedele in the face of

bankruptcies of the first major online grocery companies, Web Wam and Home Grocer.

FreshDirect took notice of those failures, attributing them to overemphasis on rapid growth and

weak attention to customer input. The two founders originally segregated duties based on their

expertise, with Fedele concentrating on supplying the warehouses and Ackerman responsible

for delivery of orders to customers.

The secret to FreshDirect's success, as Ackerman put it, is that it eliminates

intermediaries and wasteful processes. Orders are placed online and delivery of those orders

directly to the customer occur the following day.

The company's tag line and basic premise, "higher quality at lower prices", is a self-

prescribed objective that FreshDirect delivers on through the combination of world-class

production centers and an online medium which is far less expensive to operate than renting

retail space. FreshDirect has also improved quality management through use of a centralized

manufacturing software system.

Unlike typical grocery stores, FreshDirect's perishable products accounted for 75% of

the company's sales, as opposed to the traditional 50%. This resulted in faster turnover of

produce thereby improving freshness, but limited the variety of package goods.

The company also innovated different delivery models depending on the location of the

customer. Customers within the city would receive their groceries directly at their home or office

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at a prearranged timeframe, whereas suburban customers would pick up their orders at a truck

stationed in their employer's parking lot.