Mammoth U.S. grocery chain The Kroger Co. announced Thursday that it will join forces with name-your-own-price service Priceline WebHouse Club, Inc., a privately-held licensee of Priceline.com. The WebHouse Club allows online shoppers to name their own price for groceries, up to half-off.
The Cincinnati, Ohio-based Kroger, which operates supermarkets and multi-department stores under more than a dozen names, will initially launch the Priceline service in Michigan, with plans to add the service to its more than 2,300 stores in 31 states by the end of October.
Receipt First, Then Food
While such chains as Safeway, Albertson’s, Inc. and Ahold USA have previously teamed with Priceline, Kroger is the largest of the group.
When using Priceline WebHouse Club, customers are offered the option to shop online from about 1,000 national brands in 240 product categories, complete the transaction and print their own receipt, which they take to a participating store.
The Stamford, Connecticut-based Priceline reports that it is currently pricing about two million grocery store items each week, and has stated the ambitious goal of increasing that number to 100 million items by the end of this year. According to Priceline, more than 30 supermarket chains participate in the service.
Safeway Goes with GroceryWorks.com
In related news, Safeway has finalized its plans to invest $30 million (US$) in online grocery retailer GroceryWorks.com, in return for a 50 percent stake in the company.
First reported in April, the deal gives Safeway an e-commerce presence that has been market-tested in Houston, Dallas and Fort Worth, Texas, according to a Safeway spokesperson. GroceryWorks stands to benefit from the established name of Safeway, as well as lower customer acquisition costs.
Safeway may be well-positioned for a successful Internet transition, as a number of recent e-commerce studies have indicated that companies with a brick-and-mortar presence are more likely to succeed online.
Ordering Perishables Online
The concept of selling perishable goods on the Internet has had its ups and downs already, but according to Jupiter Communications, the online grocery market will generate $7.5 billion in three years. Similarly, International Data Corporation (IDC) expects the $200 million in online grocery sales last year to swell to $8.8 billion by 2004.
“For everyone who gets involved, it will not be an easy process, and the road to a profitable online grocery market will be littered with bankrupt companies and broken hearts,” IDC researcher Jim Williamson said.
To date, the quest to inspire consumers to do the family shopping via their keyboards has not had impressive results. Those who have shopped online are generally from affluent, well-educated, two-income suburban families.
While such consumers buy higher priced items with stronger profit margins, analysts agree the key to the e-commerce grocery business is to attract the masses. The adoption of e-tailing strategies by heavyweight grocers such as Kroger and Safeway is likely to widen the appeal of online grocery shopping.