This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.guardian.co.uk/business/2013/feb/18/morrisons-fresh-direct-online-grocery

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
Morrisons learns from New York home delivery success story Morrisons learns from New York home delivery success story
(7 months later)
US online grocer Fresh Direct is hailed as a saviour by New Yorkers starved of choice for supermarkets in their space-squeezed metropolis. However, devotees of the service include not just Upper East Side residents but also one of Britain's least web-savvy supermarket chains: WM Morrison.US online grocer Fresh Direct is hailed as a saviour by New Yorkers starved of choice for supermarkets in their space-squeezed metropolis. However, devotees of the service include not just Upper East Side residents but also one of Britain's least web-savvy supermarket chains: WM Morrison.
The Bradford-based grocer holds a 10% stake in the business and has a team embedded in the firm. As temperatures plummeted to -11C last month, the team was taking notes as Fresh Direct delivery vans worked overtime to ensure New Yorkers did not have to brave the chill winds to pick up their granola, orange juice and organic milk.The Bradford-based grocer holds a 10% stake in the business and has a team embedded in the firm. As temperatures plummeted to -11C last month, the team was taking notes as Fresh Direct delivery vans worked overtime to ensure New Yorkers did not have to brave the chill winds to pick up their granola, orange juice and organic milk.
Morrisons announced the acquisition of 49 stores from failed DVD and games rental chain Blockbuster this weekend as it seeks to increase its presence in the UK convenience store market, but the company's main problem is not a shortage of bricks and mortar. The lack of a home delivery service in Britain was singled out as a key factor in a 2.5% drop in like-for-like sales in the runup to Christmas, which means chief executive Dalton Philips is looking at Fresh Direct for inspiration.Morrisons announced the acquisition of 49 stores from failed DVD and games rental chain Blockbuster this weekend as it seeks to increase its presence in the UK convenience store market, but the company's main problem is not a shortage of bricks and mortar. The lack of a home delivery service in Britain was singled out as a key factor in a 2.5% drop in like-for-like sales in the runup to Christmas, which means chief executive Dalton Philips is looking at Fresh Direct for inspiration.
At the time of the $50m (£32m) Fresh Direct investment in 2011, Philips said: "What we learn from Fresh Direct will be invaluable as we plan our own profitable e-commerce business for the UK."At the time of the $50m (£32m) Fresh Direct investment in 2011, Philips said: "What we learn from Fresh Direct will be invaluable as we plan our own profitable e-commerce business for the UK."
Fresh Direct makes a profit and has expanded into several territories outside its New York metropolitan heartland, including a launch last month in the Greater Philadelphia area. Some experts, however, warn it will be difficult for it to grow outside densely populated areas and also question what its heavily urbanised customer base has in common with that of Morrisons.Fresh Direct makes a profit and has expanded into several territories outside its New York metropolitan heartland, including a launch last month in the Greater Philadelphia area. Some experts, however, warn it will be difficult for it to grow outside densely populated areas and also question what its heavily urbanised customer base has in common with that of Morrisons.
Fresh Direct was founded in 1999 by a former investment banker, Jason Ackerman, and grocery retailer Joe Fedele with a mission to sell farm-fresh food, time and convenience to harried New Yorkers. It operates out of a warehouse in Long Island City, New York State, and made its first delivery in 2002. It now has 250,000 customers, makes more than $400m in annual sales and claims to have been profitable for the last couple of years.Fresh Direct was founded in 1999 by a former investment banker, Jason Ackerman, and grocery retailer Joe Fedele with a mission to sell farm-fresh food, time and convenience to harried New Yorkers. It operates out of a warehouse in Long Island City, New York State, and made its first delivery in 2002. It now has 250,000 customers, makes more than $400m in annual sales and claims to have been profitable for the last couple of years.
Like the UK's Ocado, it is a purely online service. It sells about 3,000 varieties of perishable food, as well as household brands sold at, it claims, supermarket-beating prices. Its popularity has prompted a trend for luxury apartment blocks to boast refrigerated rooms for the doorman to store deliveries.Like the UK's Ocado, it is a purely online service. It sells about 3,000 varieties of perishable food, as well as household brands sold at, it claims, supermarket-beating prices. Its popularity has prompted a trend for luxury apartment blocks to boast refrigerated rooms for the doorman to store deliveries.
There is no doubt New Yorkers are evangelical about Fresh Direct. They should be, given the alternative. The city is served largely by independent stores and a few tired but expensive supermarket chains. Large chains such as Fairway, Whole Foods Market and Trader Joe's are scarce and driving to a supermarket is not an option for the majority of New Yorkers who do not own cars.There is no doubt New Yorkers are evangelical about Fresh Direct. They should be, given the alternative. The city is served largely by independent stores and a few tired but expensive supermarket chains. Large chains such as Fairway, Whole Foods Market and Trader Joe's are scarce and driving to a supermarket is not an option for the majority of New Yorkers who do not own cars.
Charlotte Carter, 32, a mother to two children, is not the only New Yorker to describe herself as "Fresh Direct's biggest customer". Living in an apartment block on Manhattan's salubrious Upper West Side and married to Joel, 33, an investment banker, she fits Fresh Direct's customer profile.Charlotte Carter, 32, a mother to two children, is not the only New Yorker to describe herself as "Fresh Direct's biggest customer". Living in an apartment block on Manhattan's salubrious Upper West Side and married to Joel, 33, an investment banker, she fits Fresh Direct's customer profile.
"Supermarkets here are quite hectic, packed full and high with narrow aisles. Everyone's in such a hurry. There's no slow browsing or you get a trolley in the ankles. I don't have a car and have to carry shopping to a taxi. It's easier for someone to bring it to my apartment which is 12 storeys up," she says."Supermarkets here are quite hectic, packed full and high with narrow aisles. Everyone's in such a hurry. There's no slow browsing or you get a trolley in the ankles. I don't have a car and have to carry shopping to a taxi. It's easier for someone to bring it to my apartment which is 12 storeys up," she says.
Fresh Direct has solved a problem for this unique customer demographic, according to Sucharita Mulpuru, an e-commerce expert at consultancy firm Forrester Research, but she questions how its model would scale up for a nationwide Morrisons service with different customer needs. "I don't know how parallel the UK is to the New York market. It's an incredibly expensive business to get right; you have to have building density," she says.Fresh Direct has solved a problem for this unique customer demographic, according to Sucharita Mulpuru, an e-commerce expert at consultancy firm Forrester Research, but she questions how its model would scale up for a nationwide Morrisons service with different customer needs. "I don't know how parallel the UK is to the New York market. It's an incredibly expensive business to get right; you have to have building density," she says.
Fresh Direct heavily markets more than 600 ready-made dishes, such as banana-leaf wrapped salmon and sea salt edamame. This marries with the Morrisons Market Street concept – an aisle in each store comprising traditional food counters such as the deli, fishmonger and butchers. In the same vein, Fresh Direct's online customers can determine the thickness of their prime boneless NY strip steak to the half inch and the thinness of the cheese slice to go on top.Fresh Direct heavily markets more than 600 ready-made dishes, such as banana-leaf wrapped salmon and sea salt edamame. This marries with the Morrisons Market Street concept – an aisle in each store comprising traditional food counters such as the deli, fishmonger and butchers. In the same vein, Fresh Direct's online customers can determine the thickness of their prime boneless NY strip steak to the half inch and the thinness of the cheese slice to go on top.
"The benefit of freshly prepared food is that it adds margin," Mulpuru says. "You charge $10 for products that cost two to three dollars.""The benefit of freshly prepared food is that it adds margin," Mulpuru says. "You charge $10 for products that cost two to three dollars."
Morrisons says: "Our team learned a lot about the economics of picking and delivery of food. They also found a very strong focus on customers with products, systems and processes built around the customer. They were struck by the unshakeable focus on quality at Fresh Direct from the top to the bottom of the organisation. Issues with product quality are fixed and produce sales grow strongly as a result. Their reputation in the New York area is second to none and we have learned a lot about how they built that reputation."Morrisons says: "Our team learned a lot about the economics of picking and delivery of food. They also found a very strong focus on customers with products, systems and processes built around the customer. They were struck by the unshakeable focus on quality at Fresh Direct from the top to the bottom of the organisation. Issues with product quality are fixed and produce sales grow strongly as a result. Their reputation in the New York area is second to none and we have learned a lot about how they built that reputation."
Fresh Direct's approach to customer service will be one of the biggest lessons for the Morrisons team, according to Anne Zybowski, a retail expert at global consultancy Kantar Retail. "Fresh Direct has understood how to have that conversation through its website and delivery system," she says. "They're always on time, product is fresh and any issues are dealt with quickly."Fresh Direct's approach to customer service will be one of the biggest lessons for the Morrisons team, according to Anne Zybowski, a retail expert at global consultancy Kantar Retail. "Fresh Direct has understood how to have that conversation through its website and delivery system," she says. "They're always on time, product is fresh and any issues are dealt with quickly."
She cites Fresh Direct's Amazon-style product rating system as an example of its attention to detail. Every morning its produce managers choose a rating for their fresh produce which is displayed on the website. If its apricots score four stars they will be ready to eat when they arrive the next day. If they are out of season, they might get one or two stars. "It's completely transparent and drives customer trust," Zybowski says.She cites Fresh Direct's Amazon-style product rating system as an example of its attention to detail. Every morning its produce managers choose a rating for their fresh produce which is displayed on the website. If its apricots score four stars they will be ready to eat when they arrive the next day. If they are out of season, they might get one or two stars. "It's completely transparent and drives customer trust," Zybowski says.
Morrisons will divulge more details of an online service when it reveals its full-year results next month. Its typical shopper may not have a doorman, but may be able to expect US-style supercharged customer service.Morrisons will divulge more details of an online service when it reveals its full-year results next month. Its typical shopper may not have a doorman, but may be able to expect US-style supercharged customer service.
Our editors' picks for the day's top news and commentary delivered to your inbox each morning.