The return of the online grocery

Webvan, a grocery delivery service, was one of the most colossal and expensive failures of the dot-com boom.

But quietly, in the last few years, there have been some interesting success stories in local delivery of groceries ordered online.

Carrie and I are enthusiastic and frequent customers of FreshDirect, the NYC-metro online grocery service, and there's a very good article in today's New York Times about the business (and the business model):

[T]he idea behind Webvan is finally starting to look good. Since its demise, smaller players have been slowly and quietly building online groceries into a legitimate business. The most intriguing of the group is a little New York company called FreshDirect that may well be offering us a glimpse of the next wave of Internet commerce.

It has already become something of a cult in New York, thanks to produce, fish and meats that put most supermarkets to shame, usually at lower prices. A handful of new apartment buildings have installed refrigerators in their lobbies, built to FreshDirect specifications, to lure residents who want their groceries delivered during the day. Real estate agents selling home buyers on up-and-coming neighborhoods like Inwood have taken to emphasizing that FreshDirect delivers there. When a friend of mine saw a delivery man walking on her Brooklyn street, she chased him down to confirm that, indeed, the company had begun delivering to her part of Park Slope.

Today, which is FreshDirect’s busiest day of the year, it will deliver many of the 2,000 fully cooked Thanksgiving dinners and 6,000 uncooked turkeys that it has sold in recent weeks. Operating out of a single warehouse in Queens, the company brings in about $240 million a year, up from nothing in 2001. Its executives talk as if they’re planning someday to expand to other cities, where they would compete with services like Peapod run by existing supermarkets. In all, online groceries are still only a $2 billion business, but they are growing quickly.

FreshDirect doesn't sell us everything that we need, but they don't want to, either. They are delighted to sell and deliver relatively high-margin items, and we continue to shop at our local grocery store (or the Greenmarket) for staples and locally grown produce, respectively.

...FreshDirect stocks less than a complete selection of certain staples, like cereal, giving customers a reason to shop elsewhere for them. When the tennis partner of the company’s chief executive, Dean Furbush, sheepishly confided that he shopped at both FreshDirect and Costco, Mr. Furbush replied that he loved hearing that.

Very interesting read about something that may be coming to your town soon, if the demographics and population density are right.

Filling Pantries Without A Middleman (David Leonhardt, New York Times, November 22, 2006)