FreshDirect Takes To The Road In A Move To Washington D.C.
FreshDirect joins another prominent New Yorker (insert your own political commentary here) in moving to the nation’s capital as the online grocery wars heat up. Earlier this month, Fresh Direct built a distribution center in Prince Georges County to serve residents living in D.C., Arlington and McLean, Virginia, and Bethesda, Maryland. This adds to their existing footprints in the New York City and Philadelphia metropolitan areas.
The D.C. metro area is becoming a battleground of sorts, as Fresh Direct joins Amazon Fresh, which moved in last year as well as long time incumbents Peapod and Safeway.com, which is now a division of Albertsons. And, of course, there are a plethora of options from third party delivery services like Instacart.
FreshDirect has always sought to differentiate themselves by being less focused on the means of delivery and more focused on pushing their competitive advantage of sourcing and curating the freshest, highest quality foods. By going directly from farm to consumer, they can justifiably tout the superiority of their supply chain and the slightly more premium nature of their offerings, which emphasizes local, organic and directly sourced produce. FreshDirect will deliver around 12,000 items. In keeping with the trends, they will also offer no-subscription meal kits in addition to an extensive range of prepared foods. They will also have an “At the Office” service program, which includes chef-prepared breakfasts, luncheon platters, and catering services for events. Amazon Fresh has similarly partnered with Martha Stewart for meal delivery as they battle fast growing options like Blue Apron and Plated.
FreshDirect customers can order next day delivery with a two-hour window. Customers can either pay per order for a service cost of $7.99 with a $40 minimum spend per order or pay an annual fee of $129.00 for unlimited free delivery through DeliveryPass. Key to any online delivery service is figuring out a delivery plan that works for customers and is profitable for the provider. Amazon Fresh, by contrast, has been all over the map, with an initial fee of $299/year, which has been lowered to $14.99 per month with a Prime subscription.
All of this is a preamble to the economics of online grocery delivery. While the consumer demand is undoubtedly there, and the services now mature to a point of delivering a high-quality customer experience, processing, picking and delivering fresh grocery items is expensive and margins in grocery remain slim. Providers are experimenting in a multitude of ways, from pick in-store to automated warehouses, in-store or dedicated pick-up facilities and direct to third-party delivery.
It does feel that critical mass is fast approaching in solving the last mile of grocery, potentially unlocking a sizable e-commerce opportunity in the $600 billion-plus grocery space.