FreshDirect takes a fresh expansion approach

FreshDirect, which ranks as No. 62 in the Internet Retailer Top 400 Guide to Retail Web Sites, has started making deliveries to certain parts of New Jersey such as Jersey City and in the coming months will roll out to more of the state, including Hoboken. The move has already added several hundred customers to its fresh food preparation and delivery service, says FreshDirect president Steve Michaelson.

FreshDirect, which had 2004 revenues of around $120 million, is expanding in ways that take advantage of existing opportunities. For instance, in 2004 FreshDirect started a corporate catering and food delivery service for companies in mid-town New York. Now FreshDirect is expanding its corporate service to include more territory from 3rd Avenue to 6th Avenue and from 42nd Street to 60th Street. For the first time, FreshDirect is also considering making morning deliveries. Customers can order from FreshDirect up until 11 p.m. and still receive their orders the next day, usually in the afternoon.

But in certain Manhattan neighborhoods FreshDirect is testing morning deliveries. Customers in those areas can still place their orders until 11 p.m., but schedule a delivery between 6:30 a.m. and 8 a.m. Whether FreshDirect will make the morning deliveries permanent depends on the success of the pilot and the response from customers, says Michaelson.

Compared to other web grocers such as Peapod Inc., which provides services to more than 12 million households in 16 regional markets, FreshDirect’s expansion moves may seem conservative. But FreshDirect is building a business model based on fresh produce, meat and other items supplied largely by a carefully selected local and regional supply chain, Michaelson says. “We will expand our territory as it makes sense based on the drive time from our central facility in Long Island City, NY,” he says.

Rather than concentrate on just geographic expansion, FreshDirect is more interested in expanding its online pantry of about 8,000 SKUs. Among the newest items FreshDirect is supplying is fresh seafood from Tobago.