FreshDirect Drives Profit Gains

MARK HAMSTRA

NEW YORK — Online grocer FreshDirect here is leveraging technological improvements and customer-service initiatives to grow sales and drive more of those revenues to the bottom line, the company said.

“For the last couple of quarters, we have been very profitable,” said Jim Moore, senior vice president of business development at the privately owned company, told SN last week.

FreshDirect, which distributes to a limited area here from a warehouse in Queens, posted revenues of $215 million in calendar 2008, and is projecting an increase of nearly 12% for 2009, to about $240 million, Moore said.

“We are really bringing a lot of that down to the bottom line at a good clip, which gives us confidence that we are going to be a lot more profitable going forward,” he said.

The company's chairman and chief executive officer, Richard Braddock, announced the revenue figures last week in an interview with Crain's New York Business. Braddock had previously told SN that the company had achieved positive EBITDA, but FreshDirect was not thought to be consistently profitable.

Among the initiatives that are driving revenue gains, FreshDirect has made improvements in its suggestive selling techniques on its website, Moore explained. Customers are now prompted with purchase ideas during searches and at checkout, he said. The technology, mostly developed in-house, serves up both items that the customer has purchased in the past and recommended purchases that other customers buying similar items have made.

“We think we are the first company to be doing this level of personalization,” he said.

In addition, FreshDirect has made some big strides in improving customer service, he said.

For example, the company is now able to tell in real time if a delivery might be late, and can send additional trucks out to assist a truck that is running behind. While late deliveries used to account for as much as 7% of all orders, that figure has been cut to about 2% week in and week out, Moore explained.

In addition, FreshDirect has deployed trucks with extra eggs into the field so that customers who complain of broken eggs in their deliveries can receive a replacement immediately rather than get a credit toward the next order.

“That's creating a positive customer experience,” Moore explained. Credits and returns now total about half of what they used to be, he said.

The company is also considering expanding the service into a new geographic market eventually, Moore said, while continuing to expand incrementally in the local New York market.

Separately, Seattle-based Amazon.com said at its annual meeting last month that it had no plans to expand its 2-year-old perishables-delivery service beyond the Seattle area anytime soon.

“For the foreseeable future we're going to keep doing those experiments only in Seattle,” Jeff Bezos, the company's CEO, said.