Moveable Feast

It’s getting easier to shop from home these days. At least two online grocers have aggressive expansion plans for ’99 as they establish national brand names in retail niches. It’s hardly a threat to bricks-and-mortar stores, but traditional grocers better pay attention to these formats. This isn’t Omaha Steaks.com – we’re talking about Procter & Gamble, Nestle, and Unilever products delivered to your door. Traditional chains that don’t become colleagues with online retailers will end up being competitors.

The biggest online shopping service, Peapod, will launch Peapod Packages next month to deliver food and household items bundled for specific occasions, like new baby packages, college care packages, or meal solutions in a box. Peapod Packages will offer gourmet foods too, and eventually will add menu and recipe fulfillment, gift services, and food-related information. Shoppers order via www.peapod.com, and packages are drop-shipped to their homes from a Peapod warehouse or third-party supplier, including grocers and other online retailers. Peapod opened a New York warehouse in December and a Chicago warehouse in January; a third is set to open by April.

Skokie, IL-based Peapod will use Packages to develop a national brand name as it expands its flagship delivery service beyond the seven cities where it’s now serving 104,000 subscribers. Shoppers order their regular groceries at www.peapod.com, and orders are filled by local supermarkets, most of which will be replaced by warehouse fulfillment as Peapod expands. That puts Peapod in competition with grocers – and in direct contact with packaged goods marketers.

“Now manufacturers see us as a company to talk to directly about promotional allowances and the like, as they would with a traditional retailer,” says chief operating officer John Walden. Local delivery service, not Packages, will drive Peapod’s business. But the national online service “is our best branding opportun-ity,” Walden says.

Packages will set up a network of online retailers like specialty food marketer GreatFood.com (www.greatfood.com) as suppliers who maintain their own sites while selling through peapod.com.

“Peapod will promote Packages aggressively, so being part of it is certainly good for us,” says GreatFood.com president Ben Nourse, who started the business in his basement three years ago. GreatFood.com is also launching its own wholesale service for gourmet shops too small or remote to be served by traditional wholesalers.

Peapod spent a long time mulling over the best way to launch a national service. “We’ve been reluctant to put a grocery store online and drop-ship products – it’s not a very interesting proposition for consumers, and it’s not profitable. The best we could ever do nationally is to be a niche service,” Walden explains. The Packagesniche serves shoppers’ penchant for convenient solutions, and puts Peapod’s warehouses to good use. It also puts Peapod in the $40 billion specialty foods business with little risk.

Bulk for any bandwidth Fledgling YourGrocer.com is taking the opposite tack, selling bulk orders to consumers and small businesses. Like an online warehouse club, YourGrocer.com boasts prices 15 to 30 percent below supermarkets, with no delivery fee. The service launched in metropolitan New York in November, and will begin adding new markets by fall. YourGrocer.com bought NYCGrocery.com’s database of 200 subscribers in December, and kicked off grassroots and Web marketing last month.

Shoppers don’t have to subscribe to order, but there’s a $50 minimum. Orders average $150, says Gregory Bender, president of BD Interactive, the Port Chester, NY agency managing YourGrocer.com’s site. Local wholesalers fill orders, but the plan is to eventually work directly with packaged goods companies. “Everyone is calling – P&G, Nestle, Unilever,” Bender says.

The first online drugstore went live last month when Soma Corp., Seattle, launched www.soma.com to sell prescription and over-the-counter drugs and health and beauty care products with next-day delivery and prices comparable to major chains. Customers can request e-mail reminders to take their medication and refill prescriptions, and talk with pharmacists 24 hours a day via Soma’s toll-free line. The business “will be a return to the neighborhood pharmacy of old, where personalized, knowledgeable service will be the top priority,” says Soma president-ceo Tom Pigott in a statement announcing the service.

Okay, neighborhood druggists and grocers, the ball is in your court. Can you provide better service than a computer? Your future may depend on it.