ITP

FreshDirect.com vs. Whole Foods

By Thursday, September 22, 2005 No Comments

mohit.santram // 09.22.05
thinking about networks //
assignment #1 // compare two networks

FreshDirect.com vs. Whole Foods

Introduction
In an age of accelerated time, a growing segment of the New York City public has been raising their demand and consumption of higher quality food. Inherent to living in New York City, is the arbitrary value many New Yorkers place on the timely delivery of goods and services. Per capita, health-minded New Yorkers tend to place a larger cost value on organic and environmentally safe and responsible food. Aside from the fact that both FreshDirect and Whole Foods are in the business of selling food and groceries; they share more similarities and differences than one may think.

Background: FreshDirect.com
FreshDirect.com is a food delivery service that specializes in high quality raw ingredients, pre-packaged, prepared, vegetarian, organic, and frozen food. The business was started in 2002 in the ashes of the dot-com ventures, with an understanding of the pitfalls and mistakes of the first Internet boom. Armed with a better business plan and quality attention to the customer and their demands, FreshDirect.com opened its’ website for business in 2002. As an online food delivery service, FreshDirect.com promises to delivery higher quality food at a lower price. Since FreshDirect does not own any retail stores, it’s customers must conduct all of their business online with a credit card instead of shopping at a traditional food market. They employ several NYC area food experts and maintain their main preparation and distribution facilities in Long Island City, New York. FreshDirect.com’s customers tend to accept a perceived higher cost for all goods and services in exchange for the convenience of home delivery.

Background: Whole Foods
Founded in 1980 in Austin, Texas, Whole Foods was started within a different environment than FreshDirect. In twenty-five years, Whole Foods has grown to 176 stores within the United States and United Kingdom. Whole Foods was started to provide it’s customers with a better selection of natural and organic foods at a competitive price. Whole Foods values ethical farming and environmental practices because it believes companies and customers must be responsible members of the larger ecosystem. Customers come to Whole Foods to purchase groceries and more specifically, for their unique shopping experience. As a high end grocery store, Whole Foods specializes in the same breadth of products that FreshDirect does, but in a much larger and diverse scale. Each Whole Foods store purchases items directly from local businesses located in the immediate and metropolitan area as well as from the company headquarters and worldwide distribution channels.

Comparison & Contrast
FreshDirect customers are not only willing to forgo individual item selection for convenience, they are also willing to forgo price in exchange for convenience. These same users place their order online with sight unseen of the item and wait for them to be delivered at a specific time and address. While FreshDirect attempts to pass along the savings per item by not maintaining a physical store; customers pay for home delivery of their groceries as a convenience regardless of the price. FreshDirect also believes that their customers are more concerned with convenience than the traditional food shopping and selection experience at a bricks and mortar store. Along with stocking perishables, FreshDirect sells frozen, organic, and vegetarian food. FreshDirect operates its deliveries based upon zip codes and as a result, each FreshDirect delivery truck behaves like its own node, where each delivery location is a member of a smaller network of nodes. FreshDirect must maintain accurate inventory of its stock in it’s distribution centers, along with managing the supply chain to ensure their ability to sell goods to their customers. They employ knowledgeable personnel along with safe, yet expedient, delivery people. Since most of the items are perishable, FreshDirect must also have air-conditioned delivery trucks with drivers who know the terrain and are able to deliver the properly packaged perishable items in a timely fashion. Failure to do so, will result in higher costs and will dissuade customers from shopping online at FreshDirect.com and intead buy at a bricks and mortar market like WholeFoods.

As a traditional bricks and mortar high end food market, Whole Foods faces many of the same challenges that FreshDirect faces, yet on a larger scale. Since they must distribute their goods to a significantly larger number of stores, their distribution network; from Whole Foods’ Headquarters to their stores, must take into consideration the same concerns of air conditioned transportation of all perishable items. Customers of Whole Foods rely not only on the condition and freshness of goods that they buy, they also rely on each individual store’s ability to display and present the goods in a clear, easy to understand manner. While Whole Foods relies on the presentation and condition of each individual item within their store, this pressure and maintenance does not exist at FreshDirect. Effectively, each Whole Foods store is a node within the larger Whole Foods network. Whole Foods’ headquarters dispatches direction, procedure policies, and mandates to each store. Each “node” also behaves as it’s own hub as the local suppliers, distribution channels, customers interact within the immediate area. Since perishable and non-perishable goods may be sent from Whole Foods headquarters to each store via diverse distribution channels/network connectors such as trucks, airplanes, and ships; the ability to do so in a cost effective manner dictates the prices that Whole Foods charges its customers.

Conclusion
Both Whole Foods and FreshDirect rely on their supply chains to provide the goods they need to sell to their customers to stay in business. Each Whole Foods store relies on gathering food from its vast network of distributors and local suppliers to stock each of its stores. Each store not only acts as a local node of the greater Whole Foods network, they serve as an immediate hub for commerce and activity in their respective community. FreshDirect, on the other hand, operates on a much smaller scale in a similar, yet different distribution channel. FreshDirect’s distribution of similar perishable and non-perishable items presents its users a different delivery and interaction model, yet through some similar network behaviors. Depending on the constraints, each network of nodes presents its own unique benefits and disadvantages.

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