FreshDirect accelerates expansion plans

Date : 16 January 2013

FreshDirect is to expand its service from Centre City Philadelphia to the Greater Philadelphia area suburbs ahead of schedule, following the successful launch of its service in the city last year.

Attracted 50% more customers than planned

Having been focused on the New York Metro area for the last ten years, FreshDirect launched in Philadelphia last October. Originally the online retailer had planned to begin its suburban launch in next month, however the demand for its offering, and the customer base it has already developed, will see it bring its plans forward; after three months, the online retailer has attracted 50% more customers than originally planned.

Pace of expansion restricted by online-only model

FreshDirect is relatively unique in the US grocery sector in that it does not operate any stores of its own. While this model can offer significant advantages, it does mean that the pace of expansion to new cities in the US is likely to be held back by the need to develop the logistics infrastructure, its supplier base, particularly in fresh foods where it sources directly from farmers and build brand awareness. Existing store-based grocery retailers can leverage their existing assets and introduce ‘click and collect’ type models to evaluate the demand for online shopping before committing to developing a full delivery service.

Online grocery retailing under-developed in US

FreshDirect’s success demonstrates the strong demand which exists for online grocery retailing in the US. In its core New York area, customer growth in suburban areas is now outpacing customer growth in urban areas as the retailer develops its model for less dense neighborhoods. Overall, online grocery retailing is relatively under-developed in the US, with most propositions focused on specific cities and dense catchments within those cities, as the operating model becomes less viable economically in more rural areas.