Dive Brief:
- FreshDirect is looking for a buyer, retail consultant Burt Flickinger told the New York Post. According to Flickinger, the sale stems from the company’s recent transition to its new distribution facility in the Bronx, which he described as a "poorly planned and executed move." Several other anonymous sources close to the company interviewed by the Post confirmed the e-grocer is looking for a buyer. Grocery Dive has reached out to FreshDirect for comment but did not hear back by press time.
- Flickinger noted that JPMorgan, FreshDirect's largest investor, is casting around for buyers. The firm led the company's $189 million funding round in 2016 and contributed an undisclosed amount earlier this year, but now wants to exit its investment, according to the Post's report.
- A former FreshDirect executive told the Post that Walmart and Amazon are interested in acquiring the company, but are waiting for its valuation to drop further. Both retailers have tried to buy the company — including a $2.3 billion offer from Amazon and $2.6 billion from Walmart in 2010 — but have been rebuffed.
Dive Insight:
When FreshDirect opened its new state-of-the-art, 400,000-square-foot fulfillment center and headquarters in the Bronx in 2018, it bolstered the online grocer's ability to expand its same-day service, push into new markets and fulfill more orders.
While it delivered on its promise to expand, FreshDirect's move to the new facility came with a slew of problems including customer complaints of out-of-stocks and botched deliveries. When asked about these problems back in March, CEO David McInerney told Grocery Dive the company spent months learning how to run the technology.
"Now that we understand [the facility], we're turning up the throttle and we're seeing good results come out of it," he said. The retailer also said it was emphasizing customer service by adding more time slots based on customer requests or find ways to get products to customers immediately if it was missing from their order.
But according to the Post's report, the online retailer's plan has fallen short in one of the most competitive grocery cities in the country. New York is now a hotbed for multiple grocery delivery services including Peapod, Instacart, Amazon and Walmart. When previously asked about how the online grocer feels about this increased competition, McInerney didn’t seem worried.
"The reality is, we see ourselves as our own biggest competitor because we're constantly making promises to customers," McInerney told Grocery Dive.
If Walmart were to get a hold of FreshDirect’s business, it would be the retailer's key to grocery delivery in the Big Apple. The retailer isn’t allowed to operate in the city, so it acquired Jet.com as its way in, according to reports. Acquiring FreshDirect, a New Yorker favorite since 2001, would finally give the retail behemoth the source it needs to have ownership of the city's competitive grocery landscape.
