Progressive Grocer: As a pure-play ecommerce operation, how are you competing against all of these supermarkets who now have jumped into ecommerce? In many cases, they’ve been in their communities for years and years, and shoppers are familiar with them. So how does FreshDirect, as a pure-play operator, compete with that?
DM: The first point is, it’s an enormous market. There’s a lot of room for people to play [in] it. Secondly, our thoughts of differentiation, and our competitive advantage, were always around the quality.
We’ve recently expanded our thinking past just quality. Quality is sort of the table stakes. And how do you enhance the experience even more? And we think about it through the promises that we make to customers. Some are obvious to the consumer, and some are not. But we have to have the right food available for sale. The food that you’re looking for, we have to give you good accessibility, meaning we have to be able to get it to you when you want it. We have to deliver it on time, and you have to be able to count on us that it will consistently be there when we say it will.
And probably the most important piece is, when you receive that bag of food, everything is there. The quality of everything is good, everything’s in great condition, and there’s a couple items – and it won’t be everything – but there are a few items within that bag that are really going to knock your socks off. Now, it could be a piece of harpooned swordfish. It could be some Icelandic cod that we flew in that morning. It could be some really great blueberries. It could be some great local apples. But there has to be a couple items in every person’s bag, where they eat them and they say, “I love FreshDirect. I have to keep coming to them for this.”
And then finally, when we do fall down, we really, really make it right. And as I said, a credit simply just isn’t enough. We have to make it easy for people to connect with us, and we’re doing things like … autocredits where we allow people to, in essence, credit themselves if they have a problem. And real-time remediation and access to people that can help them fix the problem right away. We believe if you do all of those [things] consistently, the only competition that we really need to worry about is ourselves.
Progressive Grocer: So do you feel that being a pure-play operator gives you more agility then?
DM: I don’t think we would ever knock anybody who’s an omnichannel [business]. I do think that we have a lot of years of experience learning, which I think has given us an advantage, [as has] our staying true to the core of just really focusing on those basic promises.
Progressive Grocer: How does FreshDirect decide where it’s going to go next? What goes into when you decide to go into a new market, and do you have any plans that you can actually disclose about future expansion plans?
PJO: We are really methodical. We know who our target customer is, and we are constantly looking at where is there opportunity. There’s still massive opportunity in our existing [Northeast] footprint, and especially with the trends of online grocery, and we’re going to push harder now that we’re settled into our new home.
We’re good at knowing where’s our target demographic and which geo should we really be going after. We are so excited to be expanding into the [D.C., Maryland, Virginia] area. When we launched [in] Washington, D.C., we did a very small foothold because we were running up against the planning of this building. So we’re expanding there, which we’ve already released. Boston is absolutely a city that we are focused on, and we are actively working towards that expansion, and we hope to be there within the next year.
And when I think about FoodKick, there will be multiple geos that we’re entering for sure. We’ll be entering New Jersey over the next year. So we’re excited about that as well. When we think about the Northeastern Seaboard, there’s still just so much opportunity. And one of the things that I think is really important to say is the suburbs are really great for this business, too. We do very well in both suburbs and urban environments, which I think is probably something that people didn’t expect from online grocery. It’s been a great success for us.
Progressive Grocer: What do you think is the reason for that particular success in the suburbs?
PJO: I think it’s a combination of two things. One, I think there’s a different competitive landscape. But then also, just bigger families and their need for that convenience in their lifestyle, as well as the opportunity to really win in fresh. Because I think there’s even a broader differentiation [of] our high-quality product.
DM: There’s a high level of appreciation from consumers within the suburbs, particularly around the fresh side, because … there may be less access to very, very high-quality food in all of the suburbs. And us being able to provide that affords almost a new luxury to folks there.
Progressive Grocer: Do you envision the company as an exclusively East Coast thing, or would you ever consider expanding beyond the Eastern Seaboard?
DM: Again, the new Fresh Direct headquarters is really the structural base that is now complete. Our relatively short-term goals are to make a strong move along the Northeast Corridor. Once that’s complete, there are multiple other target areas that we see as very attractive where we would be building out additional facilities.
PJO: This is definitely a concept that lives beyond the Northeast.
Note: Interview has been condensed and edited for clarity. In part 2, McInerney and Oleksak discuss delivery challenges, food sourcing and what their future vision of ecommerce is.