Albertson’s Expands Its Online Service

Supermarket giant Albertson’s Inc. said this week it has expanded its online grocery delivery service into Los Angeles, Orange and Riverside counties, using a strategy it said won’t incur the losses racked up by its dot-com predecessors.

Albertson’s becomes the first national supermarket chain to offer Web grocery shopping throughout the Southland, having already launched the service in San Diego and the Seattle area. It also is one of the few companies still remaining in online grocery delivery, after the demise of Webvan.

Traditional supermarkets, analysts say, have the best chance of making the service work, because they can use clerks to pick groceries and don’t need to build a network of expensive warehouses.

“They have finally found a model that isn’t going to cost them so much money it will kill them,” said Ken Cassar, senior analyst with Jupiter Media Metrix.

A string of dot-coms went belly up last year, leaving a handful of small regional companies still delivering food. One of them is Aliso Viejo-based WhyRunOut.com, which delivers food from Stater Bros. Markets to customers in Orange County and liquor and sandwiches through its sister Pink Dot company in Los Angeles.

Albertson’s, Cassar said, has taken the smart move of contracting with WhyRunOut to deliver its groceries rather than investing millions in trucks and drivers.

Online grocers have said before that delivering in Southern California is a risky proposition because affluent customers who use the service are spread over a wider geographic area than other markets. There are also more supermarkets per capita here, and the region’s mild weather makes shoppers more willing to leave home for groceries.

Still, Albertson’s executives said, their lower overhead can make this market work. Time-strapped customers, they said, will pay a fee just to avoid walking crowded grocery aisles and standing in line.

Customers can order from the Albertsons.com Web site and pay with a credit card. Special clerks, or “personal shoppers,” at participating local stores pick out groceries and store them in totes at the back of the store. The prices are the same as those found in circulars and at their local store.

They can either pick up the groceries, or have them delivered. Orders placed before 10 a.m. can be picked up or delivered after 5 p.m. Orders placed after that time are available the next day. Fees for the service range from $5.95 for pick-up to $9.99 for delivery.

Although these fees will sound expensive to all but the most affluent customers, Cassar said, they don’t come close to covering Albertson’s’ costs, including the labor and cost of contracting out delivery. Albertson’s executives said they can make up the difference by selling more items, and selling more of higher-margin items such as produce, meat and gourmet foods.

Generally, the executives said, Internet purchases are larger than those in stores. “In San Diego it’s been very successful,” said Dave Simonson, president of Albertson’s Southern California division

Rival Safeway Inc. only offers the service in Oregon and has not yet disclosed any new target markets. Kroger Co. said it is still struggling to come up with a profitable model.

Albertson’s shares were up 31 cents at $29.09 on the New York Stock Exchange.