Klodien/Depositphotos.com
June 2, 2025
Would FreshDirect Benefit From Physical Stores?
FreshDirect, the online grocer serving the New York tri-state area since 2002, over Memorial Day weekend opened a pop-up on Main Street in Southampton, New York, marking its first physical retail location.
The location, which will be open until the end of December, plays up FreshDirect’s local approach. Working directly with farmers and growers, FreshDirect offers more than 12,000 SKUs, with about 60% of its mix being fresh foods.
“Designed to evoke the charm of a classic farmers market, the space features wooden pallets, crates, and natural textures that set the stage for an abundant selection of local produce, prepared foods, wine, and beer,” FreshDirect said in a press release. “Guests can shop a curated selection of local favorites, including farm-fresh produce, small-batch cheeses, olive oils, and seasonal items from regional farms like Wells Homestead Acres and Deer Run Farms.”
The location also includes a Jack’s Stir Brew Coffee counter, and a limited-edition Hamptons-inspired FreshDirect tote is available. In-store experiences will include ice cream socials and wine and cheese tastings.
FreshDirect will also take over a house in East Hampton to host pizza-making classes, meetings with local farmers and artisans, and other events that require more space than the store, according to the release. FreshDirect, acquired by Turkey-based ultrafast grocery delivery company Getir in 2023, is also exploring opportunities for same-day delivery for the Hamptons region directly from FreshDirect on Main.
With a fleet of 400 trucks and a 640,000-square-foot production and distribution center in the Bronx, FreshDirect’s business model is based on the scheduled delivery of orders to homes or offices at certain times of the day.
A New York Post article from January painted a bleak future for FreshDirect, with multiple sources indicating to the publication that the online grocer was “losing at least several million dollars a month on about $600 million in annual sales.”
The article noted that FreshDirect was already struggling under its former owner Ahold Delhaize, which acquired the business in 2021 only to see demand for grocery delivery crash after the pandemic. Under Ahold, FreshDirect pulled out of Washington, D.C., and Philadelphia as well as some communities in Virginia and Maryland to focus solely on the New York metro region.
FreshDirect also faces heightened competition in online grocery from Walmart and Amazon, as well as from third-party delivery apps such as Instacart, DoorDash, and Uber Eats.
The pop-up shows some commitment to FreshDirect from Getir, which itself is undergoing a retrenchment and restructuring. In March, FreshDirect joined the Uber Eats platform, marking the first time that the grocer’s offerings became available for on-demand delivery on a third-party app.
“This collaboration with Uber Eats marks a significant step forward for FreshDirect,” said Metin Hacioglu, deputy CEO of FreshDirect, at the time. “Our customers rely on us for the freshest, highest-quality food and groceries, and now, with Uber’s technology and delivery expertise, we can offer them the same exceptional products they love — faster and more conveniently than ever.”
Discussion Questions
Will FreshDirect benefit much from the Hamptons’ pop-up or adding permanent locations?
Will partnerships with Uber Eats and possibly other delivery apps increase its relevance in online grocery?
How should FreshDirect be repositioning itself?
Poll
Loading …BrainTrust
Shep Hyken
Chief Amazement Officer, Shepard Presentations, LLC
Georganne Bender
Principal, KIZER & BENDER Speaking
Neil Saunders
Managing Director, GlobalData
Recent Discussions
More Discussions
How Can Retailers Crack the Gen Z ‘Riddle’?
Gen Z is becoming an increasingly important consumer demographic, but an elusive one to map. How…Does Bath & Body Works’ Scented Holiday Campaign Pass the Sniff Test?
Bath & Body Works is kicking off a new campaign with scent being at the fore…Which Tech Will Solve In-Store Inventory Woes?
Three major tech lineups are looking to solve retail inventory problems. Which is most suited?
A physical store is probably a good way of drawing attention to the brand and driving some business – basically, it’s a marketing effort. However, having one physical store doesn’t cut the mustard as far as the economics of the low-margin grocery industry are concerned.
Maybe they’d benefit from all physical stores. But should anyone be suprised by any of this…that a business whose very existence is predicated on short (field-to-table) delivery windows – and thus has to use the fastest ….read: “costliest” shipping possible – struggles. (And as the deficit is inherent to the model, there’s no way the usual excuse of unprofitable concepts – that they’ll “grow into profits” – can apply.)
Craig makes a good point, but the fastest route to profitability for this retailer is not investing 10s of millions of dollars into new stores, building out a distribution network, etc. It’s to improve their existing operations and delivery model.
Shopping online for fresh vegetables – unless they come from a local grocer – does not give the perception of fresh, but a pop up where you can squeeze your own tomatoes does.
It’s been proven time and time again that online retailers need a physical presence. FreshDirect is smart to design its pop up to “evoke the charm of a classic farmers market” because an authentic experience is what people want.
In today’s world every DTC business is trying to have a retail presence and every retail company is trying to grow an ecomm business. Retail is a great way for Fresh Direct to build a loyal customer base and create experiences to differentiate themselves from the competition. A pop up allows them to test the market and experiment. The question will be, what will they do next?
Isn’t it all about meeting customer where they are?
100%. Customers aren’t channels and will give business to whoever takes care of them on the terms that is easiest or better. And each shopping event is different.
The physical store contradicts what FreshDirect is known for, delivering groceries to its customers. However, the visibility of a physical location could introduce new customers to FreshDirect. If this strategy breaks even but builds FreshDirect’s online customer list, then it’s a victory. Ideally, the strategy makes a profit. Furthermore, the new strategy of a physical store could be successful enough to consider it as a viable channel. Think back to the day that Jeff Bezos decided to sell something other than books. That changed the online bookstore model. And how many other decisions has Amazon and Bezos made that have taken the company far beyond its original model? FreshDirect should experiment with ways to stay viable for its customers by exploring new opportunities for growth and expansion.
Always need to leave the door open to shifting strategies if the data suggests they could boost customer growth by having a physical location.
A great marketing spend to boost growth and break past digital and social media noise would be to… yes… build a few small stores in markets with high foot traffic. Yes, it goes against the grain of what the business is about. But having a stream of casual shoppers, day workers and tourists experience your store full of fresh food is a chance to remind them why they need it. The key is testing marketing opportunities in-store to convince customers to sign up for service. Find a way to break even with these few locations, get ample sign-up traffic, and its a winner.
A pop-up like this is a smart way to remind people who FreshDirect is, connect with the community, and make the brand feel more local and personal. While it may go against their original concept, I still think it’s a smart marketing move – one that could help them stay relevant in a crowded market.