Internet Grocers Delivering the Goods

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Internet Grocers Delivering the Goods

WASHINGTON -- Online grocers and other Internet-based convenience services say they have found a foothold in big U.S. cities, where busy and affluent consumers use the Internet to ease the stresses of urban life.

The latest signs of life among Web grocers are more focused and more sensible than business plans during the Internet heyday of the 1990s, when now-defunct companies like Kozmo and Urban Fetch tried to deliver everything to everybody. Companies that survived the dot-com bust and some that rose from the ashes say an increasing number of Web-savvy professionals are willing to pay service fees to avoid routine trips to the grocery store, pharmacy and dry cleaners.

"Right now the Internet is an under-rated industry," said Marc van Gelder, president and chief executive of the Peapod online grocery chain, told Reuters. The company's sales are growing 35 percent per year, the report said.

A subsidiary of Royal Ahold NV, Peapod partners with Ahold's brick-and-mortar grocery chains like Stop & Shop to let customers "browse the aisles" online then have their orders delivered at home. Peapod has more than 120,000 regular customers, van Gelder said, mostly "busy families with kids" in cities like Chicago, Boston and Washington. "It's much more mainstream than a lot of people think it is," he said.

Many local online delivery ventures came to a crashing halt two years ago when the dot-com bubble burst, pulling the rug out from under Internet start-ups that had taken on enormous debt in anticipation of future profits.

At their height, companies like Kozmo, Webvan and employed thousands of workers and promised on-demand deliveries of products like ice cream and video rentals in cities across the United States. Pundits said the businesses failed because they tried to do too much, too quickly, in too many places.

Internet delivery firms had to scrap aspirations of a large-scale operation, aiming instead for localized services geared for a narrow target market, according to Hal Varian, economist and dean of the School of Information Management at the University of California at Berkeley. "Webvan had one warehouse in the San Francisco Bay area. That was a problem," he said. "If you have your local supermarket delivering groceries as a service, that can be quite convenient. But you pay more for that service."

As people become more familiar with computers, Varian said, savvy Internet retailers could carve a viable, if small, niche out of the once-vast online market.