SUPERVALU GOES OUTSIDE FOR ON-LINE SHOPPING

EDEN PRAIRIE, Minn. -- Supervalu is getting into the on-line shopping business. It is offering a program to its independent customers and corporate stores, and using the services of two outside system providers, MyWebGrocer.com, New York, and Integrated Distribution Solutions LLC, Omaha, Neb., to extend its reach across the country after Jan. 1.With this move, Supervalu becomes the first major wholesaler

EDEN PRAIRIE, Minn. -- Supervalu is getting into the on-line shopping business. It is offering a program to its independent customers and corporate stores, and using the services of two outside system providers, MyWebGrocer.com, New York, and Integrated Distribution Solutions LLC, Omaha, Neb., to extend its reach across the country after Jan. 1.

With this move, Supervalu becomes the first major wholesaler to roll out an on-line shopping solution. Also, Supervalu is the biggest supermarket company yet to outsource the on-line component of a home-shopping program. Hy-Vee, West Des Moines, Iowa, and Bashas', Chandler, Ariz., also use outside companies. Meanwhile Albertson's, Boise, Idaho, has developed its own program, and Ahold USA, Chantilly, Va., and Safeway, Pleasanton, Calif., have formed partnerships with Internet grocers Peapod, Chicago, and GroceryWorks.com, Dallas, respectively.

"We see it as an integral part of our overall Internet strategy," said Bob Spelts, director of advertising and sales promotions, Supervalu, Eden Prairie. "Right now we have several key Internet elements in place that we are offering retailers. One is a program that puts them into a functional, attractive Web site at a very minimal cost. Having a Web site is no longer a novelty; it is a consumer expectation. So even if customers just use it to access the store hours and locations, and maybe some specials, you need to be out there," he said.

The program was introduced to some regions in the fall, and a few retailers are already up and running. "We expect to ramp up right after the first of the year," Spelts said.

Initially, it is Supervalu's independent retailer customers who are more aggressive about implementing the program than its corporate retail divisions.

MyWebGrocer and Integrated Distribution Solutions will split Supervalu's business and are operating on about the same timetable, Spelts said. "We didn't think there was any one company out there that could roll out across all of Supervalu's territory at the same time. It would put too much strain on these companies, because they are not that big."

For a big company with the resources of Supervalu, it is somewhat surprising to some to see them go outside for a program like this. By going through third parties, however, the cost of investment for retailers is minimal to nothing.

Industry sources say companies such as MyWebGrocer works with the retailer on a transaction fee basis and takes a percentage of each customer transaction. It is up to the retailer as to what fee and delivery cost to charge their on-line shoppers.

"In order to do it yourself, you would have to start from scratch, and there were already companies out there that had gone through the learning curve. Secondly, this whole technology is evolving rapidly, and we needed to avoid painting ourselves into a corner by having developed a solution that we may not be able to move away from if in fact it proves that something else is a better direction," Spelts said.

Supervalu does not recommend that retailers using its program offer delivery. "Our model is primarily store pickup. Some retailers may find it expedient to do delivery, but we are not saying that it takes delivery to be successful in the on-line shopping world," he said.

At least some of Supervalu's retailer customers are already committed to the program.

"We compete against many of the larger players including Wal-Mart Supercenters," said Rich Niemann, president of Niemann Foods, a 41-store supermarket chain based in Quincy, Ill. "We have always competed successfully by staying in close touch with our customers and meeting their needs better than anyone else in our markets.

"This on-line shopping approach lets us launch an important capability, which would cost millions to build if we tried it on our own," Niemann said.

"We knew we wanted to be the first real on-line offering in the Florida Panhandle area," said Mike Kelley, president, Kelley's Supermarkets, Niceville, Fla., which is using the MyWebGrocer program. "We had to strike fast with a superior product. We also knew that putting together the operations side, fulfillment, training and other infrastructure pieces of on-line shopping was just as daunting as building the site and the systems backbone.

"MyWebGrocer.com sent in an implementation team to evaluate our stores, put together operations plans unique to each store, determined the rules and policies we wanted to use in the on-line world and documented all the components in only a day."

Norman Mayne, vice president and chief executive officer, Dorothy Lane Markets, Dayton, Ohio, is another MyWebGrocer user and participated in Supervalu's decision-making process. "MyWebGrocer.com features the personality of each retailer, showcasing that retailer's variety, pricing, promotion and service levels. This distinction defines how we uniquely serve our communities.

"My stores are very different than any other stores in our area and that is quite evident when one looks at or shops our on-line store," he said.