LL Cool Chea's Profile

Thanks Theresa.

While some of the other competitors may be able to improve their quality they will not be able to match FD’s quality because of FD’s JIT supply chain management. Companies like Instacart simply get the groceries from a traditional grocer and deliver them to the customer. At the end of the day, FD’s products will always be better than those of traditional grocers due to FD’s JIT supply chain management and combined retail/wholesale function.

The seafood department in the post is a great example – with FD, in many cases the seafood that customers receive was literally still on the docks 24 hrs prior to delivery. One example that is not in the post is that every morning, FD has employees that sample and rate each of the ~600 different types of fruits and vegetables available for sale that day. Whole Foods and Costco (suppliers of Instacart groceries) can’t and don’t come close to this type of quality control. While I’m sure Whole Foods and Costco do QC their products, I doubt the QC step happens just before the products go out to customer as it does with FD.

On the brand equity point, I think FD maintains its brand equity by providing a quality product and also presenting grocery sourcing as their core competency. Said another way, FD feels, looks and smells more like a grocery store than Instacart or AmazonFresh. As a result, people are more likely to buy groceries from FD.

Thanks again for the comment.

-LL Cool Chea

Awesome post AJB. Danaher basically reminds me of Berkshire Hathaway except Danaher is a portfolio of numerous small companies while BKH is a portfolio of a few large companies. Do you know if Danaher has faced a lot of competition from middle-market PE shops when acquiring new assets?

-LL Cool Chea

Great post Lily.

In a way, do you think it is easy for MoMA to maintain its competitive advantage? As one of NYC’s big five (MoMA, Met, Whitney, Guggenheim & American Museum of Natural History) you know who your main competitors are and there are very high barriers to entry. Moreover, most of your customers will visit more than one (if not all) of the big 5 in a given year.

-LL Cool Chea

Lily,

Thanks for the comment. I think ~75% of their competitive advantage comes from the operating model (not only the JIT but also the supplier relationships) while ~25% comes from their brand equity. As it stands now, they have already invested in warehouses and internalized the distribution/operational costs. The company has yet to state plans for after it captures most of the sales in its market because it is still so far away from doing so. To put it into perspective, the grocery business is a $700 billion business nationally, of which less than $28 billion (4%) is done online. While the penetration of online grocery shopping is no doubt higher in FD’s markets than other markets across the country, there is still a significant number of customers to convert from in-store shopping to online shopping.

-LL Cool Chea

Great work Rex. I really enjoyed reading your post.

The video seemed like something straight out of Tony Stark’s lab!!!!! You’ve made me a fan of Corning but one of the few weaknesses I see is product diffusion. It seems like Corning has a number of really good innovations on the horizon but I just wonder how quickly some of these innovations would be adopted in the market. While most of their future innovations seem really cool, in the back of my mind I kept asking myself (1) how expensive will this be when it finally comes to market and (2) how long will it be before people really catch on and the product becomes mainstream. For example, the 3D TV Corning showed looked awesome, but regular 3D TVs have been around for years now and they still haven’t even caught on yet.

-LL Cool Chea

AJB,

Thanks for the comment. I’m not sure if FD is here in Boston though. I haven’t seen their trucks here and the website doesn’t list Boston as one of the cities they operate in. Here in Boston, I use Peapod which is affiliated with Stop & Shop. The operating model isn’t quite the same since Peapod is affiliated with a traditional grocer but it is the most convenient option that I have found in Boston so far.

-LL Cool Chea

Rex,

Thanks for the comment. Expansion is not something that is key in their mind. They will expand only if it makes sense. FreshDirect really wants to avoid the whole “grow for the sake of growing”. In regards to Amazon, FreshDirect is relying on their brand equity and superior supply chain to protect against the cash-rich competitors. Personally, I think FD can withstand the competition. While I like Amazon as much as the next guy, I want my grocer to focus only on groceries – this way I know I’m getting the best and freshest products.

-LL Cool Chea

Good review Ally. It seems like the company is franchising just for the sake of franchising. They really do not have much of a competitive advantage at all. I looked at the pictures you referenced and figured I could get a better workout in my living room with P90x or Insanity.