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Retail — Online Grocery War Is Heating Up in San Diego

Retail: Three Internet

Markets Are Launched

The market for Internet grocery delivery is heating up in San Diego.

Coming on the heels of an announcement Seattle-based HomeGrocer.com would be moving into the San Diego area, two other Internet grocers are aiming for local shoppers’ pocketbooks.

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National City-based American Grocer, Inc. started its full-service online home delivery grocery business May 15 for a test run of 500 customers under the name SanDiegoGrocer.com. If the test run proves successful, the company hopes to open the service to 10,000 customers by early June.

Meanwhile, Stater Bros. Markets has inked a deal with WhyRunOut.com for online grocery service in Southern California, with a projected expansion into North County by midsummer.

All three vendors will provide a service that allows shoppers to select from the same sort of grocery products they would find in a conventional supermarket, at roughly the same price. A fleet of delivery trucks provides next-day, or even same-day service.

About 60 percent of San Diegans have Internet access, said Chuck Jones, chief executive officer and founder of American Grocer, Inc.

The most likely subscribers will be dual-income households with children , and this applies across almost all income ranges, Jones said.

SanDiegoGrocer.com has a few features setting it apart from other online grocers. Food is delivered the very same day , better than with most services. Also, trucks are equipped with ovens so that customers can have bread delivered hot, he said.

Warehouse

The SanDiegoGrocer.com warehouse can support up to 10,000 subscribers, and when it reaches half-capacity, start-up teams will begin the development of additional sites. Jones expects a second center to open in San Diego this fall, with 12 additional cities targeted for each of the next two years.

Stater Bros. , with 155 stores in Southern California, including 10 in San Diego County , has signed a partnership agreement with WhyRunOut.com, an Orange County-based online delivery service.

WhyRunOut.com provides home delivery for several brick-and-mortar proprietors in Southern California. WhyRunOut.com currently delivers from Blockbuster Video, 30 Minute Photo Lab, Healthy Gourmet Prepared Meals, Great Harvest Breads and other local retailers.

Stater Bros. began the WhyRunOut.com delivery service in southern Orange County on May 2, and the service has been going so well so far, said Susan Atkinson, spokeswoman for Stater Bros.

Based on how well the service does in Orange County, it could come to northern San Diego County. Dan Frahm, chief executive officer of WhyRunOut.com, believes that service here could start as early as mid-July, and would happen by late August.

‘One Stop Shopping’

Jack H. Brown, president of Stater Bros., called the service a great convenience. Customers can get the goods the same day, whereas most online companies offer next day delivery. Also, the other services WhyRunOut.com provides makes it “one stop shopping,” he noted.

Frahm agreed. With Stater Bros. and other retailers under its belt, WhyRunOut.com can offer customers more than 50,000 products , as opposed to the 10,000 to 15,000 products carried by other online grocers.

That’s not the only advantage, he said.

“The products arrive fresh from our retail partners’ stores, not from distant warehouses. WhyRunOut.com presents a ‘home delivery superstore’ to consumers that delivers a larger selection of products faster and more cost-effectively than our high-infrastructure, warehouse-based competitors.”

Meanwhile, Seattle-based HomeGrocer.com will be available to San Diego customers starting May 31, with delivery the following day.

Competition Encouraged

Stacy Drake, a spokeswoman for HomeGrocer.com, was unfamiliar with the other two online retailers coming into San Diego. However, most companies don’t have the service HomeGrocer.com does, she said.

HomeGrocer.com has been operating for two years, and is the largest online grocer in the country. With San Diego opening as its eighth facility, the company has already worked out the bugs by this point, Drake said.

Drake notes once HomeGrocer.com opens in San Diego, it will already be capable of fielding all the customers it gets on opening day , without having to rely on a test period.

Also, HomeGrocer.com features exclusive three-temperature-zone trucks which will deliver refrigerated and frozen products to customers’ doors at the right temperature, she said.

Drake isn’t worried about the competition HomeGrocer.com faces in San Diego. It actually helps that other online grocers are out there, since it educates customers that it’s feasible to buy groceries online.

Also, shoppers across the country buy almost a half-trillion dollars’ worth of groceries every year. There’s plenty of room for another player, she said.

“San Diego’s a big market. It can definitely handle more than one online grocer and be successful,” Drake said.

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