Online Grocery Shopping Survives

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Online Grocery Shopping Survives

CHICAGO -- Online grocery shopping, a dot-com fad that never produced a profit, has survived, but in the hands of its original competitors, the bricks-and-mortar grocers. Every one of the top grocery retailers now has an online presence. Wal-Mart Stores Inc., Kroger Co., Albertsons Inc. and Safeway Inc. take online orders in at least some markets.

In 1998, online grocery sales were a meager $85 million. They jumped to $668 million in 2001 and to reach $5.4 billion by 2007, according to Jupiter Research, an industry tracker. While large, that's nothing compared to one-time forecasts of $33.6 billion by 2002. The grocery industry's sales were $431.8 billion in 2002, according to the Chicago Daily Herald.

While still small, the online segment is one that few top retailers want to miss out on, even though it's still not reliably profitable. Every independent online grocer start-up failed. California-based Webvan Group Inc., for instance, couldn't sell enough online to pay for huge warehouses it built, and ended in bankruptcy.

In the Chicago area, Skokie-based Peapod Inc. was saved from oblivion only by a last-minute injection of $73 million from giant Dutch grocer Royal Ahold.

Ahold paired Peapod's eastern operations with major brick-and-mortar grocery chains it owned: Stop & Shop and Giant. Peapod still runs its own operation in Chicago, where it is not affiliated with any grocery chain, and "warerooms" used to fill orders in Washington, D.C., and Hartford, Conn. The Hartford wareroom opened April 28 adjacent to an Ahold store. Other places, it gets its groceries from Ahold's stores, the report said.

Annette McMillan, director of marketing and corporate relations for Peapod, told the Chicago newspaper that being part of a bricks-and-mortar retailer is the way to survive in the industry.

In 2001, its sales rose to $100 million and McMillan said sales growth has been about 25 percent in the last year. Peapod says it is profitable in four of its five markets, but won't say which.

Neither Safeway nor Albertsons is making a profit, but they say they expect to soon.

Mike Spindler, president of, a company that assists smaller grocery stores with online ordering systems, said customers shop online for convenience. A saved grocery list can be updated online in 10 minutes, he said. Online grocery shopping involves going to a Web site, selecting items and designating a delivery or pick-up time.

The cost is not convenient. Peapod delivers to the home for anywhere from $5 to $10, depending on the size of the order. Safeway charges $10 for delivery. Albertson's offers a choice: pick-up for $5 or delivery for $10. Spindler said that most of the grocery stores he works with have customers pick up their pre-packed orders at the store. The service is usually free.

Prices of items typically are the same as store prices. Discount coupons and cut-rate delivery in off-peak times are common. The selection is broad. In Chicago, Peapod offers 9,000 items, while retailers associated with specific stores can offer up to 30,000 items.