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Bay Area Web Grocers Set To Compete

Two grocery chains with roots in the Silicon Valley are taking their fight to the online grocery deliver arena.

Boise, Idaho-based Albertson's and Pleasanton, Calif.-based Safeway say they are hoping to avoid the mistakes of similar services, such as the now defunct Webvan and Kozmo, by regulating their delivery areas and charging a fee for deliveries.

Safeway, which has already launched its service in Portland-metro and Vancouver, Washington communities got the jump on its rival Tuesday with its launch in the Bay Area.

On Monday, Albertson's said it would begin taking orders in five San Francisco Bay Area counties (Santa Clara, San Mateo, San Francisco, Alameda and Contra Costa) for its official roll out in the area on March 20.

The stores are offering the same products at the same prices as their stores. Albertson's is charging $9.95 for a 90-minute door-to-door delivery and $4.95 for pick up at any store. Safeway charges the same for delivery but nothing for pick up.

"We're taking advantage of four years in the online grocery sector to expand into regions that make the most sense for the service," says Mike Patton, President of Albertson's Northern California Division. "We are entering markets that have the highest number of customers using the Internet and that have specifically asked for this service. So far we're pleased with our results in Seattle, San Diego, Southern California, and Portland. Many of our Bay Area customers have asked for this service, as many of them are customers that supported online grocery service in the past."

Safeway's service comes at the assistance of GroceryWorks.com an Internet-based home shopping service, which is 50 percent owned by Safeway and 35 percent owned by Tesco plc, the number one food retailer in the UK and operator of Tesco.

Albertsons.com was originally launched in Seattle in November 1999. The company expanded its online service to 146 zip codes in San Diego County in October 2001, and added approximately 400 zip codes in Southern California in February 2002. Earlier this month, the service was expanded to 53 zip codes in the greater Portland/Vancouver area.

Any way you look at it, both companies say they are using a smart, measured approach to expanding their online services.

"The online grocery business in the U.S. has dramatically changed in a few short years. We believe the successful online grocery models will be operated by an established brick-and-mortar grocery retailer such as Safeway which has significant purchasing power, a well-established brand and distribution infrastructure, high quality perishables and premium store brands," says Vasant Prabhu, Safeway's EVP, CFO and President of E-commerce Businesses.

The plan is a very different story from the problems that Webvanencountered in its delivery model and the failings of Kozmo.

Other online delivery services such as Royal Ahold-owned Peapod as well as Giant Food also operate in the Bay Area but are not expected to cause much of a stir because of their limited delivery area and smaller client base.