If you live in New York, chances are that you have seen advertisements for FreshDirect. FreshDirect is a relatively new compay started by an ex-investment banker and one of the founders of Fairway Uptown, one of the largest and most successful groceries in New York. There's a great article in Strategy + Business magazine (free registration required) on FreshDirect that discusses how they are applying the Dell Business Model to online grocery deliveries.

The thing that struck me about FreshDirect is that their strategy and business model is based on rational business principles. The founders decided to use the internet, not because it was a paradigm shift for the world of grocery stores, but because it offered the lowest transaction costs. The founders also had significant domain expertise and operating experience running or tracking grocery stores, and were able to develop a business model based on maximizing margins in an industry with notoriously low margins. It's funny how a business model for PC manufacturing and distribution can be applied to online groceries. It's a pity Michael Dell can't patent his business model. Compare this to WebVan, which didn't even think of itself as an online grocery. Apparently, the business plan for WebVan was built around it dominating the "last mile" of e-commerce. I don't think Louis Borders or George Shaheen really had much experience in grocery stores or the last mile distribution of physical goods.

It's too early to say whether FreshDirect will succeed or not (others have failed in New York), but I think it has a good chance. Given the hassle of pulling carts through narrow aisles in Manhattan grocery stores and trying to catch a taxi with bags of groceries in the rain, the idea of sitting in my apartment and ordering groceries seems very appealing. I'm sure it's appealing to other New Yorkers since everyone in New York gets things delivered, whether it's laundry or chinese food. Now, if only I could convince them to start deliveries to the Upper West Side...