NetGrocer now open for business

Discount Store News, August 18, 1997 by Laura Liebeck

NEW YORK - A new player in the on-line grocery business is offering a unique calling card to cyber shoppers: the only nationwide on-line source for direct-purchase non-perishables.

NetGrocer, the nation's first retail cyber grocer, went on line July 21 after a three-month test period. Based in New York, NetGrocer offers 2,500 skus of only non-perishable groceries for a delivery cost of $2.99 for the first 10 lbs. and 99 cents per every additional 10 lbs. There are no immediate plans to offer perishables.

The idea for NetGrocer was conceived two years ago by Uri Evan, ceo of USA Detergents, who along with Fred Adler, a USA Detergents board member, approached Dan Nissan, senior vice president of Vocaltec (the creator of Internet Phone), which enables people to have free phone service over the Net, and Rich Falcone, chief financial officer of Bed Bath & Beyond. Nissan is NetGrocer's president and ceo, and Falcone is the company's cfo, Nissan told DSN.

The group then partnered with Federal Express. which handles the delivery. aspect of NetGrocer, and American Airlines, which manages the distribution center under subsidiary American Airlines Distribution Services.

NetGrocer was formed with the ultimate goal of developing a new type of distribution channel for the consumer direct market.

"We wanted to create a long-term relationship with consumers and to be the first national retailer to the home," Nissan said. "The whole concept is to provide solutions and systems for consumer direct initiatives," he added, noting that NetGrocer is unique in the marketplace. It is unlike Peapod and Streamline, which are shopping services. "This is a nationwide retailing operation. We have re-engineered the efficiencies in the food supply business."

NetGrocer aims to be an everyday low price retailer, saving consumers 5% to 10% on their typical grocery bills. Nissan explained that NetGrocer is able to keep prices low via its vendor relationships, unique character of its product mix and the services provided by its FedEx and American Airlines partnerships, each of which provide a level of expertise not previously available in the market.

Unlike most supermarkets that offer 30,000 to 40,000 skus of perishable and non-perishable products aimed at local markets, NetGrocer offers just the fastest moving goods that appeal to a nationwide customer base, Nissan explained.

The founders worked with IRI and Nielsen for an analyzed movement of products in the stores, the target customer and how that consumer buys before determining which products to offer. The list of available goods was determined internally based on that data and on the needs of NetGrocer's target customer: young households (30- to 45-year-olds with kids) with incomes of $45,000 to $50,000 -- fairly typical Internet users.

The target customer also includes senior citizens and office environments. NetGrocer offers a specific shopping list of products aimed at its corporate clientele called Corporate Cupboard. This service, identified with a icon on the company's home page, features such items as coffee, creamer, toilet paper and cleaning supplies, goods typically purchased for an office.

All of NetGrocer's products are reviewed frequently, almost daily, to be sure they are in demand and priced right. Nissan said. The program is flexible, he noted. meaning if a product is not selling, it can easily and quickly be replaced.

After the items were selected for inclusion in its cyber store, NetGrocer then approached the manufacturers to develop a working relationship.

Electronically, NetGrocer can be accessed under its name: www.NetGrocer.com. Shoppers need not establish an account with NetGrocer. All that is needed to shop is a major credit card.

When shopping, customers max choose from 17 different merchandise categories, such as Baby, Baking, Snacks or Net Specials. All orders are delivered through FedEx. A special limited-time offer of free delivery is now in place for customers who order more than $25 worth of goods.

Special services are being developed, which so far include weekly awards of $100 on groceries to shoppers -- four winners are chosen weekly and then their e-mail identifications are listed on site. NetGrocer also offers shoppers the ability to earn "Net" currency by earning "free ride points."

They get this by ordering featured products. During July, free ride points were doubled.

Shopping NetGrocer is much like other on-line food services; shoppers click on the product aisle they want, review the selection (there are 21 different alternatives in diapers, for example) and select the one they want to place in their shopping cart. Specials of the week flash on the left. Most of the items available on NetGrocer are popular name brands. However, there are some private label goods offered to NetGrocer by its supplier, White Rose.

NetGrocer is also attempting to make the shopping experience entertaining. Little sayings such as "Stop Pushing Your Shopping Cart, Start Pushing Your Mouse" and "Go Ahead Shop Naked, No One is Looking" were created in-house specifically to make on-line shopping fun.