The company’s annual sales in the six years of existence have been about $225 million, but Larry Pearl, director of business development, saw an unforeseen opportunity in the business-to-business arena.
“When we opened in 2002, our concept was to re-engineer the supply chain—to get fresher, better-quality products direct to the customer—and do that without a bricks-and-mortar retail presence,” Pearl said. “But after a while, we started seeing a bunch of orders coming in for delivery to large office buildings.
“We thought people at home were so happy with FreshDirect, that they started to see a role for us in their offices.”
That discovery—the notion that current customers were essentially cross-selling themselves by ordering FreshDirect products for both home and work—defined the company’s new b-to-b market, which it began to exploit in 2005.
Defining a market
Pearl noted that among the company’s 100,000 or so product units, many already were found in offices, things like sodas and bottled water. But with companies increasingly focused on employee health, he saw an added office opportunity in such snacks as apples, bananas, cereal, nuts and yogurt.
Further, Pearl realized FreshDirect, with its immense virtual store, represented a unique selling proposition to businesses.
“Almost every office in the city is getting milk for their coffee, but often they’re ordering from the local deli and paying very high prices,” he said. Also, he noted, office managers are usually dealing with multiple suppliers, from coffee vendors to caterers to office supply companies.
“We figured they could just buy everything from us,” he said.
To get the b-to-b ball rolling faster, the company developed for its current residential customers a series of html e-mails with the tagline, “Take FreshDirect to the office.” It was accompanied by the offer of a $100 discount on the first two orders.
Another e-mail pushed more festive food and drink, with the tag line, “Happy hour at the office,” with a 10%-off offer. E-mail was the tool of choice for existing FreshDirect customers, to educate them about the new business service and keep them apprised of new products and services. For new customers, the company relied on direct mail and telemarketing.
Meanwhile, all delivery boxes to residential customers carried the message, “Now delivering to midtown offices,” and the company’s delivery trucks sported a similar message with massive side-panel signs.
There was even a role for guerrilla marketing in FreshDirect’s new b-to-b program. The company targeted office buildings in Manhattan with likely business customers and stationed staffers outside where they could hand information sheets with discount offers to likely decision-makers—females between the ages of 25 and 49, who are considered likely to influence office food-buying decisions.
To further spur interest among this key demographic, some of FreshDirect's direct mail pieces offered special treats, including long-stemmed strawberries dipped in chocolate, and chocolate soufflé and champagne. Pearl said these offers performed much better than the “unsweetened” direct mail campaign.
Predictably, FreshDirect’s b-to-b program has spurred the development of new products. For those companies whose employees work late and rely on stocked pantries and kitchens to keep them going (in particular financial and equity firms), FreshDirect tested specially manufactured vending machines that contained easily heated complete meals.
The company now is also offering limited catering, primarily prepared platters.
FreshDirect’s b-to-b outreach has been outpacing its consumer service. Further, according to Courtney Harwood, FreshDirect director of marketing, “Our b-to-b acquisition and retention programs have significantly contributed to the double-digit sales growth we are experiencing in 2008.”
Harwood went on to cite the company’s summer 2008 b-to-b campaign, which included direct mail, telemarketing, guerrilla and e-mail marketing, resulting in “our best results for new-customer acquisition to date.”
Since the company initiated its formal b-to-b program, it’s logged 12,000 new business customers.