FreshDirect co-founder said surge in online shopping has led to more venture capital

FreshDirect co-founder and former CEO Jason Ackerman said customers’ growing interest in online grocery shopping during the coronavirus pandemic has whet venture capital firms’ appetites.

In an interview with CNBC’s “Squawk Alley,” he said the surge of online grocery shopping has inspired more investors to look closely at the sector.

“I’m seeing more deals in online grocery … than I’ve ever seen before,” he said.

In the U.S., customers have been slow to adopt online grocery shopping. Only 3{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} or 4{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of grocery spending in the U.S. was online before the coronavirus outbreak.

During the pandemic, however, online grocery shopping has quickly gained popularity as people look for ways to avoid the grocery store. Grocers and delivery services, such as Instacart and FreshDirect, have struggled to ramp up to meet that sudden increase in demand.

Ackerman said the challenges have underscored the need for more investments in infrastructure to speed up order fulfillment, lower costs and improve the experience for customers. He said some manufacturers are limiting production to popular items and grocers are slimming down their selection of online offerings to have fewer out-of-stock items and substitutions.

“A lot of people are moving towards a place of ‘Keep in stock what you can. Offer less choice, so what you do offer, you can keep on shelf,'” he said. “That is a very big concern, particularly online where out-of-stocks result in half orders.”