Fresh Direct Builds a Grocery Empire on Free Street Space


Today’s Times marked the onset of Gridlock Alert season with a paean to Fresh Direct — the dot-com that brings New Yorkers expensive, home-delivered groceries along with idling engines, double-parking and gridlock galore.

Founded five years ago, Fresh Direct is now a $240 million a year outfit that offers us "a glimpse of the next wave of Internet commerce," wrote Times business columnist David Leonhardt. Too bad Leonhardt didn’t check his paper’s City section, which a year ago depicted the impacts of Fresh Direct trucks on Upper West Side residents and merchants:

Consider the experience of Joe Peta. Earlier this month he sat in Sude, a boutique that he and his wife own, and gazed out at one such Fresh Direct truck. Since spring, according to Mr. Peta and others, this particular truck has regularly spent several hours a day parked outside Mr. Peta’s store, on Broadway near 91st Street, where it acts as a busy, messy and noisy distribution hub for deliveries to nearby blocks. When the first truck empties, it is often replenished by a second truck; when it cannot find a spot, it sometimes double-parks. Either way, it obscures Mr. Peta’s store from the view of pedestrians across the street.

Multiply that a few hundred-fold and you’ve got a sense of Fresh Direct’s hulking presence in our neighborhoods. Plus, the big trucks compound those hellish road delays between the company’s Long Island City plant and its Manhattan client base.

It’s probably no exaggeration to say that Fresh Direct has built its financial success on its ability to fob off its social and environmental costs on the city as a whole. Yet the Times — in a column called "Economix," no less — made no mention of this subsidy.

Earlier this week Streetsblog reported stirrings of a public conversation about congestion pricing in NYC. This discussion needs to culminate in a real road pricing plan, before our streets and neighborhoods are inundated by the next wave of congestion.

Photo: jonmc on Flickr

36 thoughts on Fresh Direct Builds a Grocery Empire on Free Street Space

  1. Great post Charlie

    I’d like to see the business plan Fresh Direct gives to potential investors:
    “The core of our business model is reducing costs by transferring our warehousing expenses to the general public. By externalizing our costs,we save money on occupancy and taxes. As an added bonus our warehousing operations are much closer to the customer. Additionally, because our costs are shifted to the general public, we are able to undercut our competition (who pay real estate taxes), and pass some cost savings to our customers.”

  2. Speaking as someone who (guiltily) does use FreshDirect about twice per month, I have to think hard about why it might not be such a bad thing. Most likely from an environmental standpoint it is worse to have a truck deliver to each person’s house than to have a truck deliver to a few supermarkets in each neighborhood that people walk to to shop.

    However, in 90% of America each individual family drives to and from their supermarket, often in a huge SUV. A FreshDirect truck making trip-chained deliveries to people’s houses may not necessarily burn more carbon than the net result of the suburban shopping system.

    In addition, when urban supermarkets get their deliveries, the tractor-trailer is usually double-parked just like a FreshDirect truck. It is usually on a major street where traffic congestion is likely to result from the double-parking. And the unloading operation, often including a conveyor stretched across the sidewalk, is usually an impediment to pedestrian traffic as well.

  3. Unfortunately there are some neighborhoods (like the one I live in) where Fresh Direct in combination with generally exorbitant real estate values have eliminated most small grocers, the supermarkets consequently charge 150%-200% of the Fresh Direct Prices, and greenmarket efforts have not yet filled the gap. I agree the answer lies in part with some kind of tax to transfer the cost back to Fresh Direct (which, as a Fresh Direct customer myself, I am willing to absorb).

    However that alone would not solve the problem of the merchant described in the post. There needs to be parking reform–reserve most of the parking on commercial streets for commercial traffic actually loading and unloading, and there will be enough room for Fresh Direct, UPS, Fedex, USPS, and all the other @#$*! who are always blocking the bike lanes.

  4. I recently saw a vandalized Fresh Direct advertisement that said, “Our food is fresh, our drivers our reckless”

    It is not just the impact they have on congestion, pollution, space, etc, but their very adverse impact on the best of businesses in neighborhoods that they can undersell because of their externalized costs. It is these small businesses, farmers markets and local grocery stores, that Fresh Direct undercuts, that are some of the best businesses for supporting and preserving our walkable, diverse and safe neighborhoods.

    Fresh direct may be compatible (or understandable) for the most upscale (Upper East Side or Brooklyn Heights) or fast gentrifying neighborhoods that are more food insecure and less walkable, but this is also where Fresh Direct is perpetuating these neighborhoods problems.

    We need to make our cities and our streets more like food markets, not less. The best streets in the world are market streets where food displays and food culture are allowed to spill out on to the street. Making our streets more about food, connecting to food and connecting to people around food, may actually be one of the best strategies for revitalizing and reclaiming our streets.

  5. I think they should have to have to buy/rent actual physical warehouses in the neighborhoods they operate in and only have the trucks deliver to those locations and then distribute the food from warehouse to consumer by handcart. Which is basically what every other grocery store that pays rent does. To do otherwise is simply a public subsidy that is unfair to the taxpaying grocery stores.

    Fresh direct only works because of this subsidy. Unfortunately they have lots of customers that love their stuff.

    If the city passed a law banning this type of business model, then perhaps Food Emporium, Wholefoods or whoever could enter the market in this space or Fresh Direct would have to find distribution sites in every area and use hand carts/bike carts.

    This would ease truck traffic on residential side streets and the traffic delays they cause.

  6. I think it should probably go down on record that it is also a Wal-Mart level, low wage, non-union employer of fairly talented though somewhat desperate you black and latin males. They take the brunt of whatever discipline the city exerts to control this business plan. And they take the brunt of the anger of the public at these business practices. They also get some tips. In place of wages, pensions, health care and vacations they get tips. Sort of a 21st Century prototype. Is it any wonder the French, Italian and Germans resist our economic model?

  7. Ethan wrote: “The best streets in the world are market streets where food displays and food culture are allowed to spill out on to the street. . . .” Right you are.

    Don’t forget that Fresh Direct gets another city subsidy, when we all pay to collect and dispose of the huge stacks of cardboard that Fresh Direct’s customers leave in the trash.

  8. I second MCG’s sentiments in post #7. FD must have a weight requirement per package. As a result, shipment usually arrive with 2 or 3 items per box, plus the individual packaging of many items. The amount of excess packaging generated by FD more than likely offsets any environmental benefit of their distribution practices as described in post #2.

  9. Assuming that you simply can’t feed a city of 8 million with bodegas and farmers markets, which grocery store business model would you rather have operating in your neighborhood?:

    1) A 68,000 sf Whole Foods store with a 430 space parking garage and estimates of 1,800 cars per hour rolling in and out of the lot, as planned for 3rd Avenue and 3rd Street in Brooklyn.

    2)A huge new Fairway grocery store in Red Hook that is, essentially, only accessible by motor vehicle and has already contributed to big spikes in traffic volumes and, at least, one fatality on Van Brunt Street.

    3) A limited number of Fresh Direct trucks roaming the streets delivering groceries directly to your neighbors (who don’t need cars b/c they get their groceries delivered).

    I hear and understand all of the criticisms of the FD business model but isn’t their distribution system, in many ways, a far more efficient use of the city’s street space than the WF and Fairway models currently being pursued in Brooklyn? Aren’t good, fast, cheap delivery services one of the things that make it possible for lots of New Yorkers not to own a private motor vehicles? Wouldn’t companies like FD, UPS and FedEx prefer to pay for reliable access to curbside street space rather than having to doublepark and rack up huge numbers of parking violations? Wouldn’t delivery trucks, paying for the space, be a better use of the curbside than free storage for individuals’ private motor vehicles?

    The FD model seems, in many ways, to be much better than the giant-parking-lot option. Perhaps the conversation that needs to happen is really about how to make the delivery model work better and how to make it pay for the costs that it puts upon the public. But, likewise, what about the costs of those giant-parking-lot grocers?

  10. Aaron asked which grocery store model we should want. My answer: I have no idea, and I’m not sure any of us do. What we all want is the "least-cost" model, the one for which all of the costs — traffic, emissions, fuel, noise, danger, trash — are minimized. In transport, as in energy, let’s count all the costs (via full-cost pricing) and let the chips fall where they may, no?

  11. Fresh Direct’s system is only better from a ‘car trips’ or ‘vehicle miles’ perspective if deliveries are actually replacing car trips. In other words, you might be right, but I would think that the amount of potential car trips/miles (especially in the most walkable neighborhoods that FD serves) does not nearly match the number of delivery trips or miles made by FD.

    But surely we can do away with and perhaps even out compete all of these systems. Lessons are all around us. For example, the first Whole Foods and Fairways, as well as stores like Traders Joes, did not follow the model of providing parking.

    I think our real challenge is to re-define our food systems (as they historically have been and currently offer great food security in its broadest definition) as something that can be held up by small independent grocers, co-ops (I hear that the Park Slope Food Co-op is now helping to start a co-op in East New York), and markets that can all be served by more coordinated and efficient truck distribution systems. Paris, for instance, requires smaller trucks often unloaded from larger ones at the outskirts of the city. Public Markets could actually be integrated into the tax base if NYC took the leap to build market buildings that are open every day of the week. Barcelona has 40 of these and is building its neighborhoods around new public market buildings. Each neighborhood has a “Minister of Alimentation” that is given as much importance as other local departments and municipal services. The quality of food, jobs, food education, and of the connections between customers and producers or vendors is all much better in public markets.

    I think that reforming our food systems and transportation systems are interlinked, and that just as we can make steps to localize our transportation system we can also work to localize our food systems.

    PPS and TA are actually now working with people from City’s Department of Health and other NYC groups to put together a proposal for the Kellogg Foundation who wants to fund a coordinated 5-year program to address issues of “Food and Fitness” in NYC. The strategy we are proposing will likely focus on improving the public spaces around food related destinations and enhance pedestrian and bicycle access to them. This work would be concentrated in the city’s most food insecure neighborhoods (that Fresh Direct does not serve!), where new food-related “investment” often comes only in the form of car-oriented chains, rather than businesses that add to safe, walkable and decidedly local economies and communities.

  12. I’m inclined to think that parking reform to *favor* delivery trucks over private vehicles is the way to go. After all, the subsidy being enjoyed by Fresh Direct is far smaller than the subsidy going to the, what is it, 20% of New Yorkers who own cars and (the even smaller percentage) who regularly park them on public streets, avoiding 400/month or more in parking charges.

  13. Mordecai-
    That is the situation in Paris. Even residential neighborhoods with a bar or restaurant will have a few parking lanes reserved for ‘livraisons’. I tend to agree this is a good policy- it will modestly reduce the amount of parking in each neighborhood but probably have a strong positive effect on reducing double parking.

    It’s true that changing patterns of delivery is placing a burden on the streets but this could be dealt with by the same economic incentives we are discussing here for passenger cars.

  14. If Fresh Direct truck drivers don’t stop parking their damned trucks in bike lanes, I’m going to organize a grassroots boycott of the company.

  15. I stopped using fresh direct becuase of the boxes. What a waste. The boxes are often packed with only one item in them. Why can’t they use plastic crates that could be reused?

    I never thought about the parking abuse. Just one more reson I won’t order from them any time soon. I never thought they did much to compete with any local stores– what they do have an impact on is me getting up the energy to go up to fairway for some fresh leeks or other uncommon veggie.

    You should spread the word about this. Since fresh direct has organic and locally grown options when you order I bet many people would responsive to these ideas.

  16. Not trying to be glib, but what is the idealized food delivery mechanism to the streetsblog demo? Here are the typical options and issues associated with them:

    1. Restaurant delivery — delivery bikes on sidewalks

    2. Nodal, large scale stores — increased car traffic and parking issues

    3. FD — dangerous drivers and congestion

    4. Greenmarkets and bodegas: over-priced, middling quality (though the latter is less an issue for greenmarkets).

    Aside from the few neighborhoods that sustain a decent store that does cart delivery, there are nearly no options for an average Manhattanite to have food costs that are even close to proportional with the rest of the city or country.

    I drive to Fairway in Red Hook (yes, I park my car on the street and will take advantage of this subsidy until the city makes it cost ineffective; I bought the car when I thought I was moving to a semi-urban area, and keep it because I have regular regional — meaning 300mi — commuting needs). The ‘car problem’ in RH is overstated, and there is clearly plenty of traffic measuring going on (probably in anticipation of IKEA). Red Hook was never that pedestrian or bike friendly, and a couple simply traffic calming efforts would make it no problem. What IKEA will do is probably another problem.

    And this type of store might end up being cost/environmentally neutral, since the time and cost of having a car and traveling to reasonably remote Fairway locations is offset by volume purchasing (granted, I would carry my food home if I bought locally, but I wonder about the extended effects of small inventory neighborhood locations and the associated delivery requirements — assuming the cost of the food is relative based on wholesaling, some delivery premium is likely factored in).

    I don’t do FD because of the delivery trucks and boxes. And my food costs are literally half when I shop at Fairway versus local merchants.

  17. Those are nice attempts at justifying your lifestyle choices, Aaron and Miss Representation, but I don’t buy it. Why can’t you just do some combination of the following:
    1. Walk to your nearest supermarket, with or without a grocery cart or backpack, and carry your groceries home
    2. When you need to make an especially big stocking up run, take advantage of the supermarket’s delivery service
    3. When you need an especially big quantity including specialty goods, take the bus to Fairway (or whatever) and have them deliver (free if you purchase over $100 or something like that)
    4. Make the occasional emergency run to a corner store or bodega for certain items
    5. Make the occasional trip to Whole Foods or Trader Joe’s or your local health food store if you need that kind of stuff. They may or may not have a delivery service, but you probably won’t be getting a ton of that pricey stuff anyway

    Another good option to save money AND get superior quality produce is through CSA, if there is one near you., click on CSA in the City.

    Granted, all of these options are much less feasible if you live in a poor community. In that case, you probably don’t own a car. Food justice is a larger issue.

  18. At the Park Slope Food Coop (my “lifestyle choice” during the 9 months of the year that I’m not suspended for missing work shifts) they recently started offering escorts home so that people wouldn’t have to drive to the grocery store. Basically, a Coop worker walks you home wearing an orange vest and pushing a grocery cart. The volunteer helps you unload and walks the cart back to the store.

  19. someguy:

    Wasn’t trying to justify. Called my subsidy just that. I could talk about the failings of regional transit (it takes 14 hours to take the train to my parents, 390mi away) if I really cared. I was adding some info to the argument, because economic conditions often drive commuting logic. My parking is subsidized by the city, my car is paid for. Therefore, saving 50% on groceries seems like a rational choice. I drive during off hours, and I really don’t think the Fairway in Red Hook delivers to the LES (of course, I’ve never checked).

    Why I should cater to local merchants who take advantage of real estate scarcity drive up prices, I don’t understand. Plus, as noted in my post, is the net emissions effect of shopping twice a month at Fairway via a fuel efficient car worse than the frequent restocking of small merchants who are supplied by many sources? After all, Fairway is so good on pricing because they have a more efficient distribution chain.

    Whereas Trader Joe’s isn’t as suspect, running of the glib flag of Whole Foods sounds a naive as stumping for a greenmarket as the solution to food delivery woes in Manhattan. Whole Foods is an extraordinarily vicious capitalist enterprise that may be undermine the benefits of organic food distribution worldwide.

  20. miss representation,
    I completely took it for granted that you lived in Brooklyn. You drive to Red Hook from the LES??? You have a Prius in the LES???

    Rock a bike, sister.

    Or cash out and ditch the wheels The LES is one of the few neighborhoods that still has diverse, locally-owned small stores on a scale that would make Jane Jacobs proud. All the hidden and dispersed costs of your car ownership (public expense in more ways than one) more than make up for the 50% discount.

    The East Village Community Coalition is unveiling their Get Local campaign next week, so check it out. Shop by Bike, it’s actually quite easy once you get used to it. I even put a 40 lb sack of kibbles in my pack for my mutt and ride it home the few blocks from the pet store. It can be done.

  21. Fresh Direct should purchase a fleet of work bikes to deliver groceries and stop using trucks to deliver goods. The trucks they currently use spew out a significant amount of soot, giving certain neighborhoods in NYC some of the highest rates of asthmatic children in the nation.

  22. on november 21,2006 450 fresh direct/ utf truck drivers unanimously voted by a 2 to 1 margin in favor of union representation by the united food and commercial workers union local 348-s.the local union will improve wages,and other needed working conditions for these hard working employees.

  23. What a bunch of whiners.

    Unions stink. They hold businesses hostage and pay people more than they are worth. Why do you think cars cost so much? Who pays for all that low level overpriced labor? YOU DO. They should be outlawed.
    People should get a raise because they out work others or they invest in their education or they have longevity.
    NY is in debt up to their butt, because of the jerks in Albany. I’m tired of working hard and paying high taxes to fund all of you weaklings.
    When will you stand up and give back to the economy instead of taking from it with your “sense of entitlement attitude?

    This company is great and so is walmart.

    You ungrateful ingrates don’t know what you are talking about.

  24. Greg, I respect your right to voice your opinions, but they are not likely to convince many people that unions are bad. Quite the opposite. Especially not in New York, which is the focus of this blog. By the way, the epithet “ungrateful ingrate” is redundant. and I bet you a dollar that I pay a lot more in taxes than you do.

  25. My nephew lives in New York and uses your company quite a bit. I was hoping to get a gift certificate for him for Christmas. Is this possible? If so, please email the information needed to me asap

  26. If you Google “Fresh Direct”, this entry comes up 4th.

    The numbers of people typing in Fresh Direct that then come to this page must be quite high.

    Let us know what you think?

  27. What about the time implications of Fresh Direct? I use FD in conjunction with my local greenmarkets and bodegas, and find that it saves me literally hours of time each month. I appreciate that we are concerned about the environmental implications of FD, but I think that any discussion of FD that advocates someguy’s suggested alternatives must take into account the cost in hours. I’d much rather spend my limited free time cooking, spending time with my family, seeing friends, or doing any number of things instead of grocery shopping.

  28. Gretchen brings some sanity to this discussion. No one can live their principles 100% of the time, and this is New York after all–convenience is not only a lifestyle but a defining element of status. Institute BRT and do it right, and people will take the bus. Rising rents and competition from FD in some neighborhoods has led the few remaining supermarkets to reduce empty floor space to the point where shopping is like taking a rush hour subway (and having your pocket picked)–so people are turning to Fresh Direct. I’m not very pleased with quality and selection I get from FD, but I save a significant amount of money (and time) by using it for non-fresh, non-specialty foods. I would rather shop at local markets for all my needs, even if it took a bit longer, but they have almost all been driven out by high rents. It will be interesting to see if the Mayor’s sustainability initiative includes preserving reasonably-priced, brick-and-mortar retail food shops. Fresh Direct does not take WIC/or food coupons.

  29. I think my part of Woodside’s got the best food distribution system I can imagine. I’ve got a medium-sized supermarket half a block away, with no parking and a decent selection. There’s a relatively new gourmet grocery, a health food store, multiple bakeries and specialty stores, and nine more supermarkets within a two-mile radius. The only thing we’re missing is a greenmarket, but the Hunters Point one is a short subway ride away, and there’s a CSA in Astoria. Anything you can’t get here, you can easily get in Manhattan.

    No reason to get FreshDirect that I can think of, although some of my neighbors do.

    If the supermarkets got their deliveries via smaller trucks it would be better, but other than a greenmarket, that’s the only improvement I’d make.

  30. My God, how did humanity live BEFORE Fresh Direct? Or more specifically, the UWS?
    Oh yeah, right… Dag’s and Gristedes with a Fairway thrown in. Supermarkets that just sold food, not DVDs and tires. Now no one has time to go all the way out food shopping because they’re in traffic because of the FreshDirect trucks and semis. No need for a local supermarket, better to have a Duane Reade on the corner.

  31. I see that this page no longer comes up on the first page of results for “Fresh Direct” on Google (its “pagerank” is zero).

    Dare we suspect a conspiracy?

  32. (Coming in to this very late from a recent link.)

    I find the never-ending griping about f.d. boxes, in a city where hot food delivery every other meal is some kind of norm, highly misplaced. As a regular customer I always break down, fold, and tie up my boxes. This takes one minute, and leaves my neighbors with no reason to complain or even notice the boxes. How it compares to the environmental cost of styrofoam take-out boxes or (always doubled) plastic shopping bags I have no idea, but it’s not as easy as “FreshDirect customer = wasteful box slob.”

    And you can’t really have this discussion without admitting how bad the grocery situation is in most New York neighborhoods. It is abysmal. The “bodegas” (not-unionized?) and small supermarket chains (unionized) charge fairly outrageous prices for products of average to poor quality. Their stores are dirty and cramped, and their glorious unionized employees treat us shoppers as they would animals (when they recognize our presence at all). This why no one shops at these places to cook regular meals for their families–what city do you guys live in? My family shops at the Union sq. greenmarket, and Whole Foods for some things, but it’s FreshDirect that allows us to cook and eat together.

    Recognizing the increased burden that not just f.d. but traditional package delivery services are placing on the city (in the age of online shopping), I second the above calls for scrapping free street parking and replacing it with a lane for delivery trucks with semi-expensive permits. Delivery serves the needs of the many; we should be going after the uses of automobiles that don’t.

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