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FreshDirect Shows How Valuable Effective Fresh Food Management Can Be

Food e-commerce giant FreshDirect recently raised $189 million in an investment round led by J.P. Morgan Asset Management, in large part due to the company’s ability to manage its inventory right and to deliver on consumer demand for fresh food. “As demand for fresh ingredients delivered to your door continues to rise, high quality food, produce and packaged goods providers are drawing significant attention from the investment community,” said Mr. Unrein, Head of J.P. Morgan Asset Management’s Private Equity Group and now a member of its board of directors. “FreshDirect is one of the first to connect its customers with farmers and artisans at the click of a button.” Success with food delivery has led FreshDirect to profitability and more than $600 million in annual revenue. And they aren’t the only company succeeding in the food e-commerce space. Instacart, backed by Whole Foods, is valued at $2 billion, and AmazonFresh continues to expand its service to new cities internationally. These companies are growing in response to consumer demand for food that is fresh and this applies to food e-commerce and in stores. A recent Nielsen survey found that 64% of Americans, “are trying to eat healthier,” with 60% saying, “quality trumps price,” and 55% backing that sentiment up by paying more for healthier choices. [Tweet "64% of Americans, “are trying to eat healthier,” with 60% saying, “quality trumps price."] These opinions can be seen in sales. Fresh food sales in U.S. grocery stores topped $146 billion in the year ended May 28, 2016, according to Nielsen. Fresh food accounts for 50% of total food sales at top-performing retailers and it helps them grow overall sales. Top performing grocery retailers, where fresh food sales account for 50% of total food sales, saw overall food sales grow by 10% from 2014-2015. Low-performing retailers, where fresh food sales only make up 30% of total food sales saw overall food sales decline by 6% in 2015.

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The secret of the top-performer appears to be that they stock more fresh items. According to Nielsen, “top-fresh retailers carry 57% more fresh products than the lowest-performing fresh stores.” And to get fresh right, grocers need to get inventory management right. For many grocers making sure you will have the products consumers want tomorrow starts by tracking what you are selling them today. A point-of-sale (POS) barcode solution is the first step to effective inventory management. POS barcode systems use a product’s existing barcode to quickly call up price information at the cash register while also registering important information about inventory levels to a central database. This helps monitor the flow of specific items and can be used to set up automatic ordering instructions when inventory gets low. While a POS barcode system is critical to getting food inventory right, tracking your food supplies shouldn’t start at checkout. Barcodes are an industry standard that can help grocers, and not just food giants like FreshDirect, better connect with the farmers that supply them. Increasingly, fresh food is barcoded and tracked from the farm to the table, with many farmers using inventory management tools to track and schedule food shipments and deliveries. Small business grocers and supermarkets can implement a complete barcode-based inventory tracking system from warehouse check-in to storefront check-out, expanding a POS system to a complete inventory solution. A barcode system can begin to monitor inventory from the moment it enters the stockroom and before. By using a barcode system which many farmers are also using, it becomes easy for food retailers to connect the information from their system to the farmers. This makes it easy to schedule shipments so food is always in stock. It also allows you to reduce the lead time needed for an order so you are getting fresh food in and selling it quickly before it gets old. Barcode tracking doesn’t just increase efficiency for fresh food, it also helps you forecast future needs and identify item sales cycles and trends. Over time this data will ensure you know when to order extra apples or stock up on holiday snack ingredients. Ultimately, understanding what customers want is the key to any businesses success. FreshDirect uses data analytics to understand shoppers behavior and preferences and to make inventory decisions based on that. As FreshDirect CEO Jason Ackerman explains, “Food is the largest single retail category that exists.” So getting it right is worth it. Barcode inventory tracking can help small business owners understand what shoppers are buying, what items they buy together, and can use data analysis to understand how those preferences should influence inventory and stocking. With fresh food in particular a deep understanding of how it moves from the earth to the oven is necessary to keep it moving quick and to keep inventory fresh. And increasingly getting fresh right can be the key to getting your overall food sales right.