June 30, 2010, 2:43 PM

FreshDirect eyes expansion beyond the New York tri-state region

FreshDirect aims to expand delivery beyond the metropolitan New York tri-state area.

Nesli Karakus

Senior Editor, Research

Lead Photo

Online grocer FreshDirect LLC, buoyed by success in its recent expansion beyond the metropolitan New York City area, is now aiming to expand services to a new region on the East Coast. The company, which declined to disclose its exact target area, since April has been offering deliveries to 21 communities in Westchester County, NY, and four suburban Connecticut towns including Greenwich and Riverside.

“Westchester and Connecticut has exceeded expectations. We have been able to acquire customers aggressively while maintaining current customers,” says Monica Woo, chief marketing and strategy officer at FreshDirect, No. 70 in the Internet Retailer Top 500 Guide. “In 2010 to date, we are experiencing a 25%-30% growth rate. We’re seeing improvements in retention, loyalty ratings and everything is working in the right direction.”

Three years ago, the company experienced disruption in operations when it lost 200 employees due to a federal audit of company and work authorization documents. The company has since made major changes to its operations and customer service.

“We rebuilt the whole infrastructure. This year we’ve earned our right to acquire our customers and earned our right to expand geographically,” says Woo. “Our focus on employees was very important, the fact that we needed to improve fundamentals of service, and breadth and depth of our merchandising. We looked at delivery and product quality. We came up with the daily produce and seafood ratings where we rate every single item and put it on the site to let the customers know what is in season, and what is the best.”

To help fund growth the company has been reportedly seeking upwards of $100 million in funding. Woo says the company is confident in being able to raise funds, given the experience and leadership history of FreshDirect chairman and CEO Rick Braddock, whose previous roles include six years as CEO of online travel site Priceline and president and chief operating officer of Citicorp, and the depth of FreshDirect’s board of directors.

“When you look at the online grocery market size which is about $20 billion, there is so huge an opportunity there. So to us, it’s strategically important to expand. The question is expand quickly with funding or slowly without it,” says Woo.


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