FreshDirect fumbles: will sales go stale?

We’ve entered into an age where consumers are opting to spend less time in the kitchen,restaurants, and grocery stores, instead choosing convenience above all.

An analyst from UBS recently shared their prediction for the future of food: “There could be a scenario where by 2030 most meals currently cooked at home are instead ordered online and delivered from either restaurants or central kitchens. The ramifications for the food retail, food producer and restaurant industries could be material, as well as the impact on property markets, home appliances and robotics,” as quoted by Business Insider.

While the restaurant and grocery industries scramble to adjust to today’s trends, companies like Uber Eats, Waitr, and DoorDash can thrive in an era of customer convenience. Amazon’s (NASDAQ: AMZN) acquisition of Whole Foods in 2017 has even made the internet superstore a player in the grocery game—crucial considering consumers are spending less time than ever in the kitchen and in the store.

Enter: FreshDirect. The New York-based online grocery delivery service was founded in 1999 and recently opened a Bronx warehouse in hopes to double its business. “FreshDirect is by far the biggest online grocer in the New York area, controlling about 54 percent of the market, according to data from Earnest Research, which analyzes credit card transactions,” Bloomberg stated in July.

The Wall Street Journal notes that the privately-held company has hit some recent roadblocks. In early September, founder Jason Ackerman abruptly stepped down from his twenty-year role as CEO, calling on co-founder David McInerney to take his place amid the announcement of “a new chapter of continued growth, expansion, and innovation” for the company.

The Wall Street Journal also reports that “the issues came to a head in June, when some customers in Manhattan received emails telling them none of the items they had ordered were available, a problem the company later attributed to a software upgrade gone awry.”

In a message to customers, McInerney apologized for the rocky segue. The transition to the new Bronx facility “has not been as smooth as we planned,” McInerney told customers in the Friday morning email.

“I understand that the challenges we’ve faced have potentially eroded the trust and credibility we built with you over years of great service,” Mr. McInerney said in the email. “We’re focused on earning that trust back and I have aligned the entire company on making things right.”

The bump in the road could spell stale sales for the company, whose competitors include industry giants like Amazon Fresh and Instacart.

“There have been hiccups,” Ackerman said in a July interview at the new facility. “You’re ramping up $700 million of business from zero…and it’s a big haul.”

FreshDirect said in a statement Friday it has made “meaningful progress” in its service. “There are operational growing pains which are difficult to anticipate with such a complex move, but we’ve already seen massive improvements from where we started.”

At the time of publication, the company could not be reached for comment on the matter.