Internet-only grocer now making rounds in Philly

FreshDirect.com driver Cesar Soler delivering fresh-food groceries Monday to a house in Center City.
FreshDirect.com driver Cesar Soler delivering fresh-food groceries Monday to a house in Center City. (MICHAEL S. WIRTZ / Staff Photographer)
Posted: October 03, 2012

FreshDirect.com, the Internet-only grocer that has built a devoted flock of click-and-buy shoppers in the high-rises of New York and across its suburbs, rolled delivery trucks into Philadelphia on Monday to launch its first expansion beyond the Big Apple.

Although initially delivering only to households in and around Center City, the company that hawks farm-to-doorstep produce, meticulously selected seafood, and prepared dinners, along with supermarket staples, hopes to expand deeper next year into the Philadelphia region, building upon this area's reputation as a food lovers' haven.

"We are extremely excited to be in Philadelphia today," FreshDirect cofounder and chief executive Jason Ackerman said during a news conference in City Hall, surrounded by wooden baskets and crates brimming with red apples, bell peppers in four colors, petite eggplants, tomatoes, and autumnal gourds.

The move would create up to 25 jobs, possibly more depending on further expansion; FreshDirect currently has 2,400 full-time employees. It enters the Philadelphia market a year after competitor Peapod.com arrived.

Billing itself as the largest independent online fresh-food store, the privately owned company has built $500 million in annual sales since Ackerman, a onetime investment banker who worked on supermarket deals, founded FreshDirect a decade ago.

But the grocer has pursued growth slowly, Ackerman said, partly because its business model - which lacks brick-and-mortar stores - has required a lot of work to design and hone. Cofounder David McInerney reiterated a similar theme when interviewed later.

The company's "mission," though: "To be the No. 1 world-class fresh-food store," Ackerman said.

By store, he means something quite different from conventional supermarkets.

FreshDirect buys food right from farms, picking up the products with its own trucks, then storing them at a warehouse, where they do not sit waiting for delivery to neighborhood stores.

Instead, orders flow in through the Internet, are assembled at the warehouse, and are trucked to the homes of customers.

The company has a crossdock on Richmond Street, where orders will be sorted after arriving from New York. However, the company is not in talks with Mayor Nutter's office for a distribution hub to support its expansion, said chief marketing officer John Leeman.

"We met with the Nutter administration a few times just to let them know what we're doing," Leeman said in an interview. (Deputy Mayor Alan Greenberger, Nutter's commerce director, also was at the 10 a.m. news conference.)

The fact that FreshDirect eliminates the costly brick-and-mortar element helps it procure high-quality food that can be sold at prices the company considers competitive in some categories with Giant Food Stores, in others with Whole Foods, Ackerman said.

The lean approach even helps offset the cost of parking tickets, which Ackerman suggested were a considerable part of doing business in New York. (He noted that a Philadelphia parking-enforcement officer almost ticketed one of FreshDirect's trucks Monday at City Hall, before offering a preemptive pardon.)

"You don't need to be the biggest player to get the best prices," said McInerney, a onetime chef, who leads the chain's sourcing efforts by routinely visiting farms, and even the start of salmon-fishing season in Alaska, to score the best melons or fish.

FreshDirect is testing the local waters in a zone dense and vertical with households: bound by the Schuylkill and Delaware Rivers and Girard and Washington Avenues.

The city's food-renaissance vibe was one reason Philadelphia was chosen for the company's expansion. Another: The region has two-income households who eat at home a lot and fit FreshDirect's demographic, said Leeman, the marketing chief.

Also important, according to Ackerman, was the region's appeal in recent years to supermarket competitors Whole Foods and Wegmans, which have been locating more and more stores here.

"That tells us a lot," he said.

Finally, the region's proximity to FreshDirect's base of operations in Long Island City, N.Y., was a factor. Local orders will be bundled and delivered from that hub, as part of FreshDirect's next-day-delivery model.

FreshDirect delivers from 6 a.m. to 11 p.m. seven days a week and charges either a per-delivery fee of roughly $6.99, or allows customers to pay $59 for six months, or $99 for a year of unlimited deliveries.

Food Trade News publisher Jeff Metzger said the company's slow growth has been a curiosity, likely affected by its early struggles to turn a profit. Online works well for electronics and books, but is trickier with food.

"They've had at least three CEOs," Metzger noted. And there aren't a lot of markets like New York, with its residents' deep pockets and tall buildings - a natural fit for online grocers. He predicted that the company would spend bundles to spread the word about itself to Philadelphians.

Said Metzger: "It's going to cost them a lot."


Contact Maria Panaritis at 215-854-2431 or mpanaritis@phillynews.com, or follow on Twitter @panaritism.

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