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Why British Grocer Has Enrolled in FreshDirect U

Why British Grocer Has Enrolled in FreshDirect U

You may have read that British grocer Wm Morrison Supermarkets just bought a 10% stake in U.S. online retailer FreshDirect. That investment is best viewed as college tuition.

That's because Morrison's emphasized it needs to study the online grocery game from an experienced player. In effect, it paid to enroll in classes at FreshDirect, a nine-year veteran of online retailing that operates in many parts of the greater New York City area. A team of Morrison's associates will travel to FreshDirect's headquarters in New York to learn the model.

Morrison's didn't just pick FreshDirect out of a hat. It first looked locally for an experienced, successful partner with a fresh food focus, but after interviewing a large range of consultants concluded, “Nobody in the U.K. is going to help us learn how to do online,” said Dalton Philips, CEO. So the company expanded its search to the U.S.

Is Morrison's studying the right company? Yes, but not because FreshDirect's ride has been completely smooth. It stumbled badly in customer service a few years ago before strengthening that skill set ahead of current expansion into more parts of the metro area.

More recently, an online grocery rival, Peapod, just started delivering groceries in Manhattan, challenging FreshDirect's turf.

Meanwhile, FreshDirect is now going through a management transition, with the departure of CEO Rick Braddock and a search under way for a full-time successor.

All that said, Fresh-Direct is a unique and growing company worth emulating for a number of reasons:

• It has honed a reputation around fresh foods that includes produce, meat, seafood and entrees prepared by chefs, such as quick, microwavable “4-Minute Meals” in a variety of cuisine types.

• Its website, which also offers packaged grocery items, is customer-friendly with many tools to ease shopping. These include nutrition sort, one-click recipes, and produce and seafood ratings.

• It really listens to customers. A recent survey emailed to users extensively probed preferences and even floated ideas for feedback. It sought opinions about a proposed new unattended delivery service. It also asked customers to pick their most admired food personalities from a long list of choices, and then asked which would be the best one to develop new ideas for 4-Minute Meals.

Morrison's investment brings to mind another U.K. grocer, Tesco, which took a very different approach in the U.S. It launched the Fresh & Easy chain here in late 2007, based on its image of what American consumers wanted. As it turned out, that original forecast was flawed and needed much retooling.

Kudos to Morrison's for taking a more humble approach by studying a unique U.S. company for good ideas it can bring back home.