CLICK-AND-MORTARS DIG IN AS PURE-PLAYS VANISH

This year food retailers attempted to pick up the pieces from last year's burst Internet bubble.Two of the last remaining companies that did nothing but sell groceries online, the so-called pure-plays, vanished from the scene, with millions of investment dollars disappearing up in smoke.Meanwhile, Internet companies that succeeded in allying themselves with food retailers with actual stores to form

This year food retailers attempted to pick up the pieces from last year's burst Internet bubble.

Two of the last remaining companies that did nothing but sell groceries online, the so-called pure-plays, vanished from the scene, with millions of investment dollars disappearing up in smoke.

Meanwhile, Internet companies that succeeded in allying themselves with food retailers with actual stores to form click-and-mortar ventures managed to end the year still in business, if also largely still in search of profitability.

Meanwhile, mass marketers, who sell virtually everything except groceries online, tweaked their Web sites.

And even though no one in the United States has managed to turn a profit selling supermarket items online, at least one retail chain launched an Internet delivery service and another expanded its service to a second city.

The year's most spectacular falling star was Webvan, Foster City, Calif. In January, the company said it would need additional funding within two quarters to continue operations. Before the month was over, it presented a revised business plan that cut costs and postponed expansion; Bob Swan, Web chief operating officer, said if the plan worked as expected, the company would not have to raise additional capital in 2001.

The plan did not work. In February, Webvan suspended operations in Dallas. In April, George Shaheen, who had been chief executive officer since October 1999 and chairman for all of two months, left the company.

Later that month, Webvan suspended operations in Atlanta, announced it needed another $25 million in financing to make it through the year and named Swan to succeed Shaheen as CEO.

In July, the company ceased operations and filed for Chapter 11 bankruptcy protection, a move that left 2,000 people jobless. In October, Webvan received approval from a bankruptcy court judge to sell its technology assets to Oakland, Calif.-based health care giant Kaiser Permanente for $2.65 million.

HomeRuns.com, Burlington, Mass., was another pure-play to exit the stage last year. Founded in 1996 by Hannaford Bros. Markets, Scarborough, Maine, the Internet grocer was spun off in January 2000, while Hannaford itself was acquired later that year by the Delhaize Group, Brussels. In July, HomeRuns ceased operations in the two markets it served, Boston and the District of Columbia, because its efforts to raise additional capital were unsuccessful, the company said.

In the click-and-mortar world, former pure-player Peapod, Skokie, Ill., reported that its Chicago operations had achieved profitability and the entire company was on track to achieve its goal of overall profitability in 2003.

In 2000, Dutch retailer Ahold had acquired majority control of Peapod. In 2001, Ahold bought out the 42% of Peapod stock still outstanding for $35 million.

As a result, Peapod aligned itself more closely with Ahold's retail operations. The online grocer ended its supplier arrangement with Albertson's Jewel-Osco chain in Chicago and pulled out of the San Francisco market, where there was no Ahold division to work with.

In the interim, Peapod has kept its pledge not to enter any new markets until it has achieved profitability in at least one East Coast market.

Mass marketers have been adjusting their sites, but without adding any food offerings. Early in the year, Wal-Mart Stores, Bentonville, Ark., repositioned Walmart.com, eliminating low-cost products.

Back in the grocery world, after some initial hesitation, Publix Super Markets, Lakeland, Fla., launched this fall an online delivery service, PublixDirect.com, to serve parts of the Miami area.

In contrast, H.E. Butt Grocery Co., San Antonio, decided to delay entering the online shopping and delivery service this year.

Albertson's, Boise, Idaho, expanded one of its online programs and closed another. In 2000, the company started Albertsons.com, a combination store and online fulfillment center in Bellevue, Wash. This spring, the service switched to an entirely store-based picking system. Then, in October, the company launched the service in a second market, San Diego.

However, the company closed its online grocery service in the Dallas-Fort Worth area in May. In the Texas model, Albertson's was filling online orders -- limited to dry groceries only -- from a dedicated warehouse in Fort Worth.

Safeway, Pleasanton, Calif., also discontinued its online service in Texas. In its place, the company announced in June, it would form an alliance with Tesco, London, which runs a very profitable Internet grocery service in the United Kingdom, according to Safeway.

Gary Fernandes, chairman, GroceryWorks, Dallas, a pure-play acquired by Safeway in 2000, said he wanted to see the alliance up and running soon, but so far, much like Internet food shopping the service remains a promise unfulfilled.