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November 22, 2006

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How'd You Buy Your Turkey?

Posted by Max Chafkin at 1:49 PM

In honor of the pre-Thanksgiving grocery binge, the New York Times does something I’ve always wanted to do: it compares the prices of a typical supermarket with those of FreshDirect, the New York City-based grocery delivery company. The Times reporter finds that, for a basket of ten items—including milk, seltzer, and frozen pizza—a shopper would save $6.01, or 13 percent. Even throwing in FreshDirect’s $5 delivery fee, getting your groceries delivered in New York City is often cheaper than buying them the old fashioned way. And, according to the article, the fresh produce is reliably better.

Thanks to these selling points, FreshDirect is doing well—booking about $240 million a year—but I sometimes wonder why it isn’t doing even better. As anyone who tried to buy a turkey today knows, traditional grocery stores—even overpriced ones—still do a brisk business. But why—given low-cost alternatives like Wal-Mart and Trader Joe's, as well as new delivery options like Amazon’s new service? After all, if you offer a higher quality product and deliver it conveniently at a lower price than the competition, shouldn’t the competition be out of business?

Perhaps traditional grocery stores will be forced to confront the challenge posed by big box stores and delivery companies like FreshDirect by playing up the community aspect of the shopping experience—just as some of the most successful bookstores have become more like coffee shops and community centers in order to stay in business. Maybe the supermarket of the future will regularly call in chefs to conduct tastings and autograph prepackaged dinners. Or, what about a singles night in the frozen foods section?