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COMPANY NAME:

Fresh Direct
WEBSITE:

www.freshdirect.com
INDUSTRY

Fresh Direct is in the online grocery store industry.


BACKGROUND/HISTORY

Fresh Direct is an online grocer that delivers to residences and offices in the New York City metropolitan area. Fresh Direct offers online grocery shopping and delivery service to more than 300 zip codes in Manhattan, Queens, Brooklyn, Nassau County, Riverdale, Westchester, select areas of Staten Island, New Jersey, and parts of Connecticut. Fresh Direct also offers pickup service at its Long Island City facility, as well as corporate service to selected delivery zones in Manhattan and summer delivery service to the Hamptons on Long Island. Joseph Fedele and Jason Ackerman found Fresh Direct in July 2001. Fresh Direct has had some problems through the years by local grocery stores offering the same type of service and parking problems among a few. Jason Ackerman is the current CEO of Fresh Direct. The Private Company Database (Fresh Direct Holdings, LLC, 2012) listed the following financial information for Fresh Direct:

* In 2003 the company generated $88,000,000 in revenues and had operating loss of $6,000,000.

* In 2003 the company generated $124,000,000 in revenues and had operating loss of $1,500,000.

* In 2003 the company generated $147,000,000 in revenues and had operating loss of $3,500,000.

Fresh Direct was slowly increasing its revenues while reducing its losses until it finally became profitable in 2008. The companys profit continued to increase until it reached an estimated $300 million in 2009; however, it seems as if it is difficult for the company to operate without outside help. In 2003, Fresh Direct received $31 million in series A funding. Also, the Bronx Overall Economic Development Corporation gave approximately $3.5 million in grants and loans. Also, New York and New Jersey are competing over the company with subsidies (Powell, 2012). British supermarket retailer Wm Morrision purchased a $50 million stake in Fresh Direct (Hamstra, 2011).

SWOT ANALYSIS Strengths High quality products with low prices They have good revenues that coupled with low overhead due to not having the costs associated with retail locations. Fresh Direct state of the art warehouse with 12 separate temperature zones, ensuring each piece of food it kept at its optimal temperature. They have expert staffs that provides excellent customer service. They offer efficient supply chain with the elimination of the middleman. They have unique industry business model. They have a superior website. They have 5 star food quality rating system. They emphasize cleanliness, health & safety.

Weaknesses The constant changes they do in senior management. They have limited number of brands and sizes of packaged goods. Expensive start-up costs. They focus on only certain New York zip codes, with no market expansion strategy. They depend on only one main competitive advantage in the sale of perishables. They use multiple non-environmentally safe cardboard boxes in the packaging of delivered foods. Opportunities They can use their reputable brand name expansion of their business to other places locally and nationally. They can do international expansion. They can enhance movement into the delivery of a variety of un-perishable items. They can improve their environmentally safe packaging and delivery methods. They can merge with other global grocery retailers. Threats They have strong competitors such as Whole Foods and Trader Joe. Rivals adopting Fresh Direct advanced food technology software system.

ANALYSIS VIA PORTERS FIVE FORCES MODEL Exhibit 1.1 Porters Five Forces Model Threat of new entrants: Low: Startup costs would be very expensive for new entrants to enter into the marketplace. They would have to be highly skilled and with a lot of

existing experience with online grocery services, as well as already having a large amount of capital. Power of buyers: Medium: With technological advancements it has become easy for people to purchase foods online, but they can also buy products in stores as well which would increase the competitive market. Power of suppliers: Medium: Fresh Direct is known by their brand and by how loyal their customers are to their products. If suppliers have their own liked brand inside the market that is that is easily accessible in supermarkets or local marts and this wont be an issue because they already have good relationships. Power of substitutes: Low: People who purchase from Fresh Direct are familiar with the brand and are loyal, though there are only products out there that are like it people choose Fresh Direct over the competition. Rivalry among competitors: High: Though they are advancing with their use of food technology and are knowledgeable within their management, they are weak on the delivery methods, especially without the offerings of nonperishable food products. STRATEGY USED Fresh Direct are innovative regarding advance food technology. Through this they acquire the loyalty of their customers. The prices they have are also low and the quality they provide is better than their rivals. Employees also perform their jobs very well. They target direct, local store and restaurants as their main customers.

COURSE OF ACTION RECOMMENDED 4

Short-term Recommendations: Research and strategize new areas locally and nationally to begin expansion. Find and implement new environmentally safe packaging methods for deliveries. Start the research and development of more environmentally safe ways to make deliveries that will reduce fumes being outputted from the large trucks as well as addressing parking and other charges the delivery trucks are causing.

Long-term Recommendations: To carry out an analysis that will determine the changing forces in the marketplace. To formulate a new market strategies. To expand into highly populated and high-income areas. To invest in advertisement so they can acquire a larger customer base. To purchase more fuel-efficient vehicles and to cut back on pollution and rising gas prices. To implement the delivery of non-perishable food products along with keeping its popular perishable products. To invest in an advanced technological systems that will help with competitors already having these systems. REFERENCE:

Bruno, K. 2010. Inside FreshDirects expansion. Forbes, June 29. www.forbes.com/2010/06/29/freshdirect-online-grocery-braddock-cmo-networkgrocery.html.

www.freshdirect.com/site_access/site_access.jsp. http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId =4553231

InternetRetailer.com. 2008. FreshDirects chairman hopes to deliver the goods in bigger role. July 14.

Laseter, T., et al. What FreshDirect learned from Dell. Strategy Business, 30 (Spring). www.strategy-business.com/press/16635507/8202.