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But Stop & Shop has something the others don't: retail bricks along with clicks. Its parent company, Royal Ahold, the $50 billion Dutch food giant, gave Stop & Shop an online partner in April when it bought a 51% controlling interest in Peapod Inc. The Skokie (Ill.) delivery service has been selling groceries online since 1990. While critics say Peapod's money-losing operation was no bargain, Royal Ahold executives argue that the mix of real-world supermarkets and e-commerce will deliver a winning combination. SPEEDIER SHOPPING. Stop & Shop's biggest rivals are Webvan and HomeGrocer, which recently merged. The combined company, Webvan Group Inc., is pursuing a strategy of online-only sales, fulfilled through enormous distribution facilities. Stop & Shop, which operates more than 200 stores on the East Coast, acknowledges that centralized facilities are more efficient. It has begun building 7,000-square-foot distribution "warerooms" adjacent to its larger stores and is phasing out its current method of having employees pull groceries from stores' shelves to fill online orders. Royal Ahold now offers Web shopping and home delivery from Boston and Connecticut, but plans to expand to an area stretching from Buffalo, N.Y., to Augusta, Ga. The supermarket chain believes consumers want to stroll down both physical and virtual aisles. "One of the things we're finding is that consumers who go online continue to shop in the stores," says Curt Avallone, vice-president for business development at Ahold USA, an operating unit of Royal Ahold. Why would Stop & Shop customers go online? Speed and convenience mainly. Once they get the hang of it, most of Stop & Shop's customers can cruise its online aisles in 15 minutes, about half the time required in the physical world, Avallone says. With just a click of the mouse, health-conscious consumers can sort products by nutritional value -- keeping track of saturated fat or carbohydrates, for example. And for those on a budget, there are electronic coupons, whose value is deducted from the bill at the virtual checkout line. After opening an online account with a credit card, consumers browse the virtual aisles for produce, fish, pet products, and other grocery needs. When shoppers head to the checkout line, they're asked to choose a two-hour delivery period, no sooner than the next day. When the driver arrives at their doorstep, buyers can either leave the bill on their credit card or pay by check or debit card. (Ahold USA is even testing "unattended delivery service" in which groceries are left in climate-controlled boxes in front of the customer's door.) THE PRICE IS RIGHT. On the downside, shoppers won't find many bargains on Stop & Shop's Web site. In fact, the retailer's newspaper circulars often beat its online prices hands-down. And some customers must pay for delivery. Boston residents who buy less than $60 worth of goods pay $7.50 -- otherwise, delivery is free. Connecticut residents must order at least $50 worth of goods, though delivery is always free. Still, for some the price is right. "It's worth it not to lug five bags of groceries up three flights," said Kelley Damore of Brookline, Mass., after shopping on the site. Nonetheless, the battle for grocery dominance online is still young, and the outcome is far from certain. While Royal Ahold's U.S. grocery sales total $30 billion, online transactions account for less than 1% of that figure. For the first six months of 2000, Peapod posted a $22.2 million net loss on sales of $47.6 million, though Avallone says the company is "close in a couple of [geographic] locations" to showing a profit. Others sites aren't faring any better. HomeGrocer posted a net loss of $101.9 million on net sales of $51 million, and Webvan, a $132.2 million net loss on net sales of $44.6 million. Hannarod Brothers Co. of Scarborough, Me., sold the money-losing HomeRuns.com last February to Cypress Group, an equity investor based in New York. "CRITICAL MASS." Still, the prospects overall are bright, says Victor Orler, an Andersen Consulting partner who follows the online-grocery sector. "A lot of consumers have shown a proclivity to shop this way," he says. "The key is getting to critical mass to make it viable." Eventually, online grocery shopping will thrive, reaching $60 billion to $85 billion by 2007, according to Andersen. Orler hesitates to say who will be manning the virtual checkout lines then, but notes that the winners will have both large, centralized distribution facilities, like Webvan (whose newest facility, in Carol Stream, Ill., is 370,000 square feet), and strong ties to stores, like Stop & Shop. "I think what will happen is Webvan and the others will draft the land-based businesses into working with them," Orler says. In the meantime, Stop & Shop's aggressive e-commerce strategy includes speeding up the online-purchase process and providing in-store Internet access so consumers can review previous purchases. And that's not all. By 2002, the grocer even plans to offer special wireless Net content for mobile-computer users who want to shop but not stop. Kevin Ferguson is a freelance writer based in Boston |
