DUAL STRATEGY FOR ALBERTSON'S

DAVID GHITELMAN

BOISE, Idaho -- Albertson's here has adopted a two-prong approach to e-commerce, and with the company saying that while both are successful, it will probably go with its newer scheme when it believes itself ready for a national rollout.

In Texas, Albertson's has for the last two years been offering customers the opportunity to shop for a limited assortment (about 5,500 stock-keeping units) of nonperishables via the Web. The items are delivered by United Parcel Service from a dedicated fulfillment center in a 108,000-square-foot warehouse in Fort Worth.

Last fall, the company debuted its second Web strategy in Bellevue, Wash. For this effort, the company took an existing store 31,000-square-foot store and remodeled it to offer 14,000 square of convention supermarket space along with a 17,000-square-foot fulfillment center for the picking and packing of Internet orders.

"Linking an on-line fulfillment site with a retail store is a true marriage of what we do as a traditional brick-and-mortar company joined with a new service -- on-line shopping," said a company spokeswoman. "It combines the best of both worlds."

The click-and-mortar setup permits customers to shop for and receive groceries in a variety of manners. They can go to the store and shop in it as they would any convention supermarket. They can order via Web from their homes or offices and either have the groceries delivered or pick them up, already packed, at the store. They can even go to the store, place their orders using store-based computers, and either return to pick the orders up or have them delivered.

In the store's first few months, the vast majority -- 95% -- of customers have opted for home delivery.

Deliveries are performed by the store's fleet of 30 trucks, with orders of more than $60 delivered free and orders of less than $60 costing $5.95.

Customers select one of eight 90-minute time frames, the earliest running from 9-10:30 a.m. and the latest from 7:30-10 p.m.

Albertsons.com delivers orders within a 35-mile radius, an area bounded by eastern Seattle; Everett, Wash.; Tacoma, Wash., and Snoqualme, Wash.

Customers who order on-line also have more extensive choices than those who go to buy goods in the Bellevue store. On-line shoppers can chose among 16,000 stockkeeping units, while in-store customers are limited to about 4,500.

Both numbers, however, represent a considerable scaling back from what the 30,000 SKUs the store used to offer when it was a conventional supermarket.

The company said it decided to retrofit a conventional supermarket to save the cost of building a new facility and opted to create a fulfillment center rather than pick items from supermarket shelves to heighten efficiency.

"Most customers know about the changes in the size of the store and the merchandise selection," said Charlie Cook, director of the dot-com store, "and those who like on-line shopping enjoy it, while those not quite ready to change miss the parts that are missing."

Cook said he steers customers who can't adjust to the store's limited selection to the nearest conventional Albertson's, an approximately four-mile trip.

Some analysts are also having trouble adjusting to the Bellevue store's approach. Barry M. Stouffer, senior analyst, J.C. Bradford & Co., Nashville, Tenn. , called the Albertson.com effort "a half-hearted attempted" to enter the world of e-commerce.

"It doesn't strike me they're make a serious effort," he said.

Andrew Wolf, equity analyst, Scott & Stringfellow/BB&T Capital Markets, Richmond, Va., strongly disagreed with the "half-hearted" label.

"It's hardly half-hearted to experiment and invest," he said. "Albertson's is learning about e-commerce by getting experience in it."

Albertsons.com

Web address: www.albertsons.com

Headquarters: Boise, Idaho.

Areas served: Fort Worth, Texas; Seattle.

Delivery options: In Texas, via United Parcel Service; in Seattle, free delivery for orders of $60 or more, otherwise a $5.95 per order charge.

Stock: ABS (NYSE)

Key executives: Gary M. Michael, chairman and chief executive officer