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FreshDirect is an online grocery delivery service operating primarily in the US. As the title implies, the company focuses on the delivery of fresh produce, aiming at making grocery shopping fast and more convenient. During the COVID-19 pandemic, the company experienced unprecedented growth due to the restrictions. However, even with the cancelation of many restrictions, the online grocery delivery market continues to expand, and the profits of the company are projected to rise. Therefore, FreshDirect has recently been acquired by the large grocery chain company Ahold, with a stake of 20 percent in the company. Despite its success, three key strategic issues remain for FreshDirect caused by the nature of its business, including on-time delivery, the rapid growth of e-commerce functionalities, and the network system.
The primary tool for the strategic analysis of FreshDirect is the SWOT analysis of the company considering the market conditions. After an extensive review of the market, this analysis presents a list of the advantages and disadvantages of conducting an online grocery delivery business. On the positive side, this type of business allows foregoing the major costs of having physical retail locations, including rent, taxes, and other expenses (Huang & Hu, 2022). However, these benefits give rise to the main challenges mentioned above.
The absence of physical locations and the delivery nature of the company causes the challenge of on-time delivery. This challenge can bear several potential risks, including the spoiling of the food, customer dissatisfaction from late deliveries, and consequently lost profits due to spoiled produce. Moreover, uncoordinated and rushed delivery routes can not only result in increased gas expenses but contribute to the carbon footprint. This goes against the companys environmental commitments and can hurt its reputation with consumers.
Another challenge related to the risk of customer satisfaction and retention is the rapid growth of e-commerce functionalities. Because of the companys online nature and absence of physical presence, all the burden of its everyday operations lies on its application and website. As demand grows, their functionality needs to be constantly updated to suit the customers needs. For example, in the past, the company faced cumulative login delays that resulted in the loss of some consumers.
Another part of the equation of online operations and fast deliveries is the network system that the company employs to achieve a smooth run. Any delays and issues in communication between suppliers, partners, operators, and couriers can cause severe disruption of services resulting in delays or stops in operations. This also, in turn, can conclude in the loss of customer base.
The recommendation to deal with the challenges mentioned above is relatively straightforward and essential for the company to employ for the proper functioning of its operations. In case of on-time delivery issues, the company needs to continue updating and rolling out its New York-based algorithm in other locations. This program predicts late deliveries, re-routes them by analyzing the best pathways amidst the traffic, and helps to plan for the rush hours accordingly. This system also needs constant attention and updates in the face of changing traffic as more people switch to remote work, altering their routes and routines.
As for e-commerce functionalities, the company can benefit from the services of specialized firms like Pythian to solve the issues and evaluate the systems efficiency. In the instance of login delays, Pythian re-wrote the user authentication code, which fastens the process significantly. This would allow the company to implement the best solution in the industry, while skipping the difficulty of technological innovation and maintaining expertise in the rapidly evolving sector. In case of a network system issue, FreshDirect needs to provide each employee with a phone plan system supported by an expert communication company like the Cisco Unified Communications System. The current system that is developed by the company is highly inefficient and results in delays. Cisco can provide all voice, data, and wireless communications on one secure network, making communication fast and simple and consequentially reducing costs from delays.
References
Huang, Q., & Hu, Y. (2022). Fresh product e-tailers optimal fresh-keeping strategy under direct sales mode. JUSTC, 52(8), 1-13. Web.
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