Discounts on groceries coming here via Web

Savings: Super Fresh supermarkets this week becomes the first of two local chains to offer the Internet shopper something new: a service that provides steep discounts on everything, from diapers to milk.

January 04, 2000|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

At Priceline.com, the online shopping site, consumers name their own price on airline tickets, hotel rooms, new cars and home loans.

But starting this week, shoppers in metropolitan Baltimore can also haggle over milk, diapers and strip steak.

Priceline WebHouse Club, which gives shoppers as much as 50 percent off the retail price of name-brand grocery items, is coming to the Baltimore and Washington area.

Web consumers can pick up their groceries at participating supermarkets -- which include Metro Food Markets' 20 Baltimore-area stores and about 50 Super Fresh stores throughout the region.

"We want to ideally be in every major supermarket chain in the area," said Robert Padgett, spokesman for the WebHouse Club, which is a separate company from Priceline.com. "Everyone needs to go to the grocery store, so we see this as something that's just going to expand."

Through Priceline's WebHouse Club site, consumers will be able to choose from more than 600 national brands, naming their own price or a suggested price. Consumers also must bid on two or more brands in the same category.

In about a minute, Priceline sends back a list of the items it is willing to sell at the buyer's price. (Buyers are given the odds in advance on the likelihood of various discounts.)

The customer then goes to a participating store, picks out the merchandise and pays with a WebHouse Club card, essentially a debit card.

Since its Nov. 1 debut in metropolitan New York, the club has signed more than 80,000 members and sold more than 2 million items through 13 supermarket chains, Padgett said. Shoppers' savings average $12.75 on an average online purchase of $32. The biggest sellers: diapers, chicken, cola, steaks and orange juice.

Because growth exceeded expectations, the company has accelerated plans to expand nationally, starting with the Philadelphia area in mid-November and launching earlier than planned in Baltimore.

Super Fresh, owned by A&P, has been participating since the initial launch and will start this week in the Baltimore area.

Metro Food, of Catonsville, the first locally based chain to sign on, plans to start the service the last week of this month.

"It's offering our customers another unique way to save on groceries," said Michael J. Flanagan, executive vice president of administration for Metro. "We want to participate in any program offered as a benefit to our custom- ers."

Participating chains prefer the program because manufacturers, not the retailers, absorb the cost of the discounts, just as they do for coupons.

Metro hopes the online program will give it an edge over non-traditional competitors such as drugstores and mass discount stores, which have been expanding into the traditional turf of supermarkets, said Rick Rodgers, Metro's vice president of marketing and procurement.

The concept behind Priceline's grocery component is similar to its travel service discounts.

Manufacturers offer excess inventory at a discount, rather than taking a loss. They also use such discounts as a way to build customer loyalty to their brands.

"By going on the Web site, [consumers] are saying they're brand neutral," because they're willing to change brands to get a better price, Padgett said.

"Manufacturers would love to get their products in those people's hands. Those are the people they target with coupons."

New concepts

Priceline has been trying to expand existing services and apply its concept to new ones. The company reported a $102.2 million loss in the third quarter that ended Sept. 30 and expects to incur losses for at least two years.

Priceline.com hopes that the grocery club will generate interest in its more conventional site. If all goes well, it also hopes to eventually exercise its option to buy the WebHouse Club, analysts say.

Zona Research Inc. predicts the online grocery market will grow to $50 billion in five years and represent about 10 percent of food retailing.

"This is what has led a tremendous amount of competitors to get into the market," including more than two dozen online grocers and traditional supermarket chains such as Safeway Inc., said Jack Staff, chief Internet economist for Zona.

"There's big money at stake, and there's big competition," he said. "In terms of the economics of online groceries, however, online businesses tend to make money by doing things better, faster, cheaper than people can do without an online presence. The question is whether online groceries will be able to [compete] in a way that provides a profit. At this point we don't see that happening."

Is it worth it?

Staff also questions whether the Priceline model will work.

"Are people going to go and spend the time needed to enter their information to get milk at 2 cents less a gallon?" he said. "Nobody knows the answer to that."

Some analysts remain skeptical.

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