Groceries could be the next big battleground in ecommerce with online bookstores driving the interest.
Amazon.com has made a large minority investment in Homegrocer.com, a Washington based online grocer, according to US reports. Both Amazon.com and Homegrocer.com have financial backing from the Silicon Valley venture capital firm, Kleiner Perkins Caufield & Byers.
At the same time, Louis Borders, cofounder and former chairman of bricks and mortar bookstore Borders, said the company plans to launch an Internet site, called Webvan in about a month to sell $300 million worth of groceries annually from a warehouse in California. The company will also open another warehouse in Atlanta. Webvan has raised $120 million in startup funds from CBS, Knight-Ridder, Japan's Softbank and two Silicon Valley venture capital firms.
Observers are eagerly watching which ecommerce categories will be successful. Some segments, such as Hollywood-style entertainment, come on slowly, while others take off quickly, such as online stock trading. But most categories fall in between.
Sites emerge fast but decline as soon as they hit obstacles. Online grocery shopping is a good example. Full service online grocers such as Net Grocer, Peapod and Homegrocer.com aim to marry technology and home delivery to make shopping less of a hassle. You order groceries over the Web and they show up at your door, usually for a delivery fee or membership charge.
Competition for Amazon.com and Borders will come from one of the leading online grocery shopping and delivery services, Peapod, which will launch its national service, this year. The company's revenues have grown from $1.5 million in 1992 to more than $59 million in 1997. Investors in Peapod include Ameritech, Tribune Company and Evanston Business Investment.
Traditional grocers have largely preferred to let Internet only retailers such as Peapod and Net Grocer test the market. But established supermarket chains, along with venture capital firms, are taking an interest as researchers increasingly predict a rosy future for Internet shopping. The Yankee Group estimates that online grocery revenue will hit $6 billion by 2000 and Forrester Research projects the market will grow 92 per cent over the next five years.
Whether traditional grocers venture out on their own or choose a Web partner, they are increasingly using the Internet for home delivery. A study last year by the Food Marketing Institute found seven per cent of food retailers use the Internet as a home shopping tool and 63 per cent plan to implement it in the future.
Yet, Maria LaTour Kadison, an analyst at Forrester Research pointed out, "Internet grocery shopping is never going to totally supplant real world grocery shopping."
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