FreshDirect CEO Predicts Online Gains in Next Decade

MARK HAMSTRA

NEW YORK — Online supermarket shopping will grow by leaps and bounds in the next 10 years, predicted Rick Braddock, the chairman and chief executive officer of online grocer FreshDirect, based here.

“Online sales of various items are growing at more than four times faster than offline sales,” he said in an interview withSN last week. “In addition, there will be less brick-and-mortar space available, as some shopping malls disappear, so those are two broad trends that are very favorable to Internet retailing.”

He said he expects online grocery shopping could account for as much as 20% or more of total grocery sales within 10 years, a significant jump from the low-single-digit share of 2010 and the 5% FreshDirect enjoys in New York City. He cited the 10% share of grocery shopping done online in the United Kingdom.

“Most population centers can support it,” he said. “Many are going to a version where you shop at home and pick up the merchandise at the store — it's probably not as effective as our business model; people like to have the portability in the shopping experience.”

The ability of online grocers to tap into the vast repository of customer data they have from online purchases gives Internet-based food retailing a huge advantage when it comes to up-selling and cross-promotion, he pointed out.

“We have the best database of customer information that I have ever seen in my business career,” he said. “Our average sale is about $120, with 30 to 40 SKUs, and we know every item every customer has ever bought from us.”

That history enables FreshDirect to conduct highly personalized product suggestions — pairing previous product purchase combinations, for example, and suggesting “favorite” items at checkout that were not included in an order.

“We look at what you actually bought last time, not what someone else thinks you might want,” he said.

Those two things — suggesting products based on previous combinations of purchases and suggesting favorite items at checkout — together are responsible for lifting sales at FreshDirect by 10%, Braddock said.

Internet grocers also have an edge in meal preparation, he said, citing the ability of FreshDirect to assemble a huge variety of heat-and-eat meals to order, rather than having to display them in a case. Menu planning also can be streamlined using the Web, he said.

“We have about 600 recipes online, and you can either buy them by their components, or with one click you can buy all the ingredients of that recipe,” he pointed out.