Great article from the NY Times about those online grocers that CAN make it - unlike that spectacular disaster at webvan....

Whipping Up Supper, Mouse in Hand

My husband is not known for his tact.

Recently he sent this e-mail message to a friend: "Dear Jessica, We are in New York this week and are sick of eating in restaurants. Can we come to dinner tomorrow?"

Jessica, who is used to us, said yes. Come at 7. And bring wine.

Although very hungry, my husband felt it would be rude to arrive early. At 6:59 p.m., we ambled down Bank Street. We loitered in front of her house. We moseyed up the stairs. Then we counted to 30 before ringing the bell.

No one answered.

"Do you think she was being sarcastic when she said yes?" my husband asked.

"No," I said. "She wants the wine."

"She did mention she just got home yesterday, after a month of traveling with two children through multiple time zones," he said.

As I stared at him in horror, Jessica suddenly swept down the hallway, looking perfectly relaxed as she threw open the front door. She said she was thrilled to see us.

Music was playing inside. Candles were lighted. An ice bucket beaded with sweat. Dinner was delicious.

I was suspicious. She didn't even look haggard. So I pulled her aside, clutched her sleeve and hissed, "How did you possibly pull this off?"

She laughed - the charming, tinkly laugh of a woman wholly in control of her destiny - and said two words: "Online groceries."

I was shocked. Like a lot of people, I had pretty much written off online groceries after the spectacular failures of big companies like Webvan and Homegrocer. But that night at Jessica's, as I fought my husband for the last slice of pizza, I couldn't ignore the facts.

Jessica had airily outmaneuvered us with a few points and clicks. The whole dinner - grilled thin-crust kalamata-and-picholine olive pizzas, fresh corn, salad and ice cream - came from, the online grocer that touts gourmet ingredients, low prices and door-to-door convenience (Jessica specified a two-hour delivery window).

Instead of trying to conquer the world, for now FreshDirect limits service to Manhattan (with plans to expand gradually into other boroughs and the New York suburbs). With 3,000 orders a week, the upscale products (the picholine-packed pizzas also feature aged parmesan reggiano, fresh mozzarella and slow-cooked tomato sauce) clearly appeal to time-stressed food sophisticates who have rude friends and no off-street parking (or even cars) available for unloading their own grocery bags.

And if that turns out to be a niche market in the end, so what? It's still a market.

The niche-market approach, in fact, has been quietly fueling the growth of plenty of online grocery sites over the last few years. In North Carolina, at, customers pick up their online orders at any one of three dozen drive-through locations. In Seattle and New York, organic-produce sellers like and deliver weekly boxes of seasonal fruits and vegetables to customers. Then there's, whose customers in 13 states don't have to do anything more sophisticated online than type out an old-fashioned grocery list ("2 cans peas, 1 tuna in water, 3 peaches").

"The typical customer is a senior citizen, but not necessarily one who spends time on the Internet, so we will take phone orders, too," said Jason Linton, the company's owner.

Even, which has been selling groceries online since 1990, has significantly narrowed its strategy since being acquired by the Netherlands-based food provider Royal Ahold in 2000.

Peapod, which delivers groceries in densely populated areas like Long Island, Chicago, Boston, Westchester, southern Connecticut and Washington, appeals online to the same customers who shop in Royal Ahold's stores, including the Stop & Shop and Giant chains. They tend to fall into three categories, said Marc van Gelder, the company's chief executive.

"They're busy families with kids, they're busy professional families with two incomes, and they're small companies like law firms," he said. "They're customers whose average purchase is 60 items, with an average order size of $143."

And just as catalog retailers have learned to value their online sites as one more channel for reaching their customers, these days more independent grocers and small chains - like in Traverse City, Mich., and in the Houston area - are offering online shopping for the convenience of their longtime shoppers.

The local approach appeals to shoppers who were wary of big, impersonal companies like Webvan or Homegrocer. "It's a big leap from saying, 'Hi, Marvin,' to the guy behind the meat counter to trusting a grocer to pick the food for you that you're going to feed your kids," said Mike Spindler, president of, which has created Internet sites for more than 40 independent and small-chain grocers nationwide. "It can help if it's someone you already have a relationship with."

Choosing your fruit and your meat is, after all, highly personal. Take me, for example. I recently purchased a house largely on the basis of its proximity to local cheeses. A good family-owned market is a two-block walk from here.

And from shopping intermittently at Peapod during the years I lived on Long Island, I know it would have been easier to make a long-term commitment to online groceries if I had a butcher or produce picker I trusted.

"It comes down to service, quality, time-saving and convenience, but those things may mean different things to different people," said Kenneth Boyer, an associate professor of marketing and supply chain management at Michigan State University who is conducting a three-year study of the online grocery industry.

This could explain why Fresh-Direct's chief executive, Joe Fedele, expresses confidence that his company could eventually prosper in diverse geographic regions.

"Our premise is better quality at better prices, and that will work in New York, Boston, Chicago, Atlanta, Washington, D.C.," Mr. Fedele said. "It would probably work in Los Angeles."

"Dense coastal urban centers where it's hard to park and unload groceries," I said. "What about the rest of the country? What about Kansas?"

"I can't answer for Kansas because I don't know the customer in Kansas, but I know everybody wants a better product at a better price," Mr. Fedele said. "You, for instance, you live near San Francisco. You moved in consideration of how close you'll be to cheese. You'd love FreshDirect."

"How soon can you get those pizzas out here?" I demanded. "We're very hungry."

Mr. Fedele sighed. Perhaps he felt sorry for Jessica.


Popular posts from this blog

Parking Lots Help Predict Earnings