FreshDirect is an online grocery store, which is specialized in delivering fresh products to the New York City and some of the areas around it. Due to the high reliance on IT in the business operations and the aggressive growth strategy, FreshDirect initiated an IT infrastructure revamp in 2004. The new infrastructure aimed to achieve high availability for the continuously expanding customer base and to improve Web site response time. These modifications were essential for supporting the current company expansion strategy and the aspiration to improve customer experience.
1. What type of technology is FreshDirect using – disruptive or sustaining?
Sustaining technologies according to Clayton M. Christensen facilitate incremental performance improvement of the existing products and services based on the preferences of the customers, who have been traditionally targeted by the company. Disruptive technologies, on the other hand, are those that bring new value to the customers or create a new market usually by displacing the more traditional or an older technology (Christensen, 1997).
The rationale behind the infrastructure improvement at FreshDirect was not to create a new market for their product or to replace old technology with a radically new one. Instead, they aim to penetrate their current market deeper and to expand by targeting new geographical areas, but not completely new customer groups. Moving to Intel-based system and introducing SAP enterprise resource planning software for their database would improve customer experience, enhance product availability and prepare the system for the expected increase in the number of customers. Therefore, the technology improvements by the FreshDirect can be only classified as sustaining and not disruptive.
However, if the business model of FreshDirect is analyzed as a whole and not solely referring to the recent IT infrastructure improvements, the technology used by the company can be considered disruptive. In a sense it disrupts the typical understanding of a brick-and-mortar grocery store concept and appeals to the new segment of people, who appreciate fresh products, however have little time to do their grocery shopping.
2. How did Fresh Direct use the Internet to improve its business?
Today almost 99% of the FreshDirect business is generated through the Web site. Therefore, Internet is indeed in the core of the company’s business and represents an important interface between FreshDirect and its customers. The convenience of “one-click” shopping attracts more and more people today, thus opening new opportunities for FreshDirect and differentiating them from the other grocery stores. Apart from the fact that Internet technology significantly simplifies the process of receiving orders, the data collected from online orders triggers a series of operations to receive products from the warehouse, package, sort and send them to the destinations in the least possible amount of time. Moreover, the use of Internet allows FreshDirect to collect more information about their customers, and to continuously improve their services based on the most recent and profound knowledge about their clients. Internet also offers vast opportunities for customization and cross-selling, thus offering FreshDirect customers exactly the products they want and recommending the others, which may seem to fit the already purchased items. Finally, FreshDirect is using Internet for advertizing their services, thus approaching exactly the customers, who are active Internet users and who are likely to use online retailers (Braddock, 2009).
3. How has the Internet’s impact on information helped FreshDirect’s business?
Firstly, the concept of online retail has become possible only with the introduction and spread of the Internet technology. Internet allows FreshDirect to display their product offering on the Web site, advertize the company and to receive customer orders. This fact is reflected in the large percentage of FreshDirect’s business being generated through the Web site. Moreover, Internet facilitates data collection and enhances the speed of order processing, thus bringing improvements along the whole supply chain.
4. What type of ethical and security concerns does FreshDirect face that a traditional grocery store does not face?
The main security and ethical concerns refer to the data handling by FreshDirect. Being an online retailer, the company collects various information regarding their customers’ preferences, as well as personal data such as credit card details, addresses, names etc. Therefore, online shops like FreshDirect always face the need to decide how far they can utilize customers’ information, and whether it is ethical to use some of this information for their marketing. Moreover, keeping the information safe represents a major security concern, which is not so relevant for traditional grocery stores (Waters).
Points of learning
FreshDirect is a perfect example of a company, which took advantage of the new technology and the rising demand for online shopping in order to find their niche in the market and to differentiate from the competition. Close customer focus and continuous improvement of the IT infrastructure, which is in the core of the FreshDirect’s business, allows the company to meet the demands of their clients and to support their current growth strategy. Moreover, it helps to improve information flow and process optimization along the whole supply chain, thus facilitating order collection, processing and product delivery from the warehouse to the customers.
Braddock, R. (2009, May 11). Lessons of internet marketing from FreshDirect. The Wall Street
Journal, Retrieved from http://online.wsj.com/article/SB124205175154206817.html
Christensen, C. M. (1997). The innovator's dilemma, when new technologies cause great firms to
fail. (p. xv). Boston, MA: Harvard Business Press.
Waters, S. (n.d.). Selling online - retailing storefront alternatives. About.com Guide, Retrieved