FreshDirect Case Study
Company Name: Fresh Direct
Industry: Online grocer
Company website: http://wwwfreshdirect.com/
FreshDirect was launched in July of 2001 by Joseph Fedele and Jason Ackerman to the newYork are as an online gocery shopping and delivery service that delivered to more than 300 zip codes. They made a bold promise to shoppers to offer “higher quality at lower prices” and that FreshDirect was “the new way to shop for food. FreshDirect allows customers to place online orders (minimum of $30, with a delivery charge), and the customers order would be delivered during a prearranged two-hour window.
* Wide selection of products
* Low prices, high quality
* Low overhead, good revenues
* High standards for health, safety and cleanliness
* Senior management turnover is high
* Limited nonperishables
* Very expensive start-up costs
* Focus is only on New York area
* Expand to other areas (go global)
* Expand internet and web use
* Start offering nonperishable food items
* Competition with brick and mortar grocery stores
* Other online grocery stores
* Truck drivers’ threats, wanting to unionize.
ANALYSIS VIA PORTER’S FIVE FORCES MODEL
Threat of New Entrants
The threat of new entrants is low because of creating a large distribution network like that of FreshDirect is expensive; a strong distribution network is required, as well as advanced technology. Entry barriers are high as well. Geographic factors would limit competition.
Bargaining Power of Buyers
For FreshDirects, their customers’ loyalty is essential for them, and for their business in order for it grow. They have a low dependency on distributors, and the products are very important to the buyer. There is limited buyer choice with FreshDirect, though, so they do end up paying more the choices that are available to them. Bargaining...