E-GROCERS MODIFY PROMOTIONS TO ENCOURAGE TRIAL

MARK HAMSTRA

NEW YORK -- Some of the nation's largest Internet grocery companies are experimenting with different offers in order to encourage trial among consumers.

FreshDirect here, which began operations about a year ago and has been slowly expanding within New York City, recently modified its offer so that first-time customers must now place a minimum order of $100 in order to receive $50 off. Previously, no minimum order was required to obtain the $50 discount.

"We don't want the singles. We want couples and families," said Joe Fedele, co-chairman and chief executive officer, FreshDirect.

The initial promotion was never envisioned as a permanent offer, he said.

The company also changed another component of the offer. It previously waived the $3.95 delivery fee for the first three orders, but now only waives it for the first order. The fee is $4.95 for delivery to Brooklyn, where FreshDirect recently began delivery to a limited area. The company, which delivers from a dedicated warehouse in Queens, is projecting that it will attain profitability in about two months.

In the West, Safeway recently launched a new program to encourage trial in which it is offering 10 shopping sprees of $100 each to customers whose names are selected at random.

"We just wanted to get out there and test a new wrinkle," said Mark Marymee, spokesman, GroceryWorks.com, the Pleasanton, Calif.-based joint venture between Safeway and British retailer Tesco. "We wanted to test a new way to get customers to register."

The offer was launched in mid-September, and runs through Oct. 14. Marymee said the number of customers who had registered for the $100 prizes was not available as of last week.

Using e-mail addresses of customers who have registered but not yet ordered, Safeway offers $10 off on the first shopping trip, "so in a customer's mind, it's free delivery," Marymee said. The company charges $9.95 for orders of less than $150, and $4.95 for orders of $150 or more. After a customer places the first order, Safeway typically follows up with an e-mail promotion touting a $5 discount on the next visit.

Albertsons, which recently rolled out its online grocery service to its headquarters market of Boise, Idaho, is running a rolling series of week-long promotions in which it is offering free products -- a case of bottled water one week, a gallon of ice cream the next -- to encourage trial.

"We always run some type of promotion whenever we enter a new market," said Danielle Killpack, a spokeswoman for Albertsons' Northwest and Intermountain regions. In addition, she said the chain conducts a lot of cross-promotions between the stores and the Internet service to encourage trial.

At Rice Epicurean Markets, a five-store chain in Houston that launched its online service about a year ago, the company is experimenting with a referral offer in which customers get $7 off their order for referring another customer to the e-grocery site.

Phil Cohen, vice president, said the offer has "not been very strong." It was developed jointly with the software provider for the Internet shopping service, MyWebGrocer, New York, which provides Internet-shopping technology for several supermarket chains around the country.

Typically, Rice offers free delivery for the first order to promote trial -- a savings of $15. The cost is $7 to pick up the order at the store.

In addition, Rice offers quarterly promotions, such as the current offer of a reduced charge of $9.95 for delivery on orders of $150 or more.

Despite lackluster results from the company's referral promotion, Cohen said the business "has been on a positive growth trend since the launch."

Peapod, the Skokie, Ill.-based Internet-grocery arm of Ahold USA, Chantilly, Va., traditionally offers either free delivery for the first order or sometimes conducts a dollar discount -- usually $15, according to Annette McMillan, a spokeswoman for Peapod.

Peapod has a three-tiered delivery schedule. Orders over $100 cost $4.95, orders between $75 and $100 cost $7.95, and orders from $50 to $75 cost $9.95.

The company is planning to expand into a new market soon, she said, although she declined to identify the market other than to say it was an area now served by Ahold's brick-and-mortar stores. Peapod by Giant is currently available in Washington, D.C., and Peapod by Stop & Shop is available in certain parts of Connecticut, New York and the Boston area.

Last week, Peapod said it was adding Sunday delivery and packaged items from local restaurants to its warehouse-based offering in Chicago. The new restaurant offerings, under the Chicago's Best banner, include Carson's Ribs, Lou Malnati's deep-dish pizza, Mike Ditka's pork chops, Frontera Grill's sauces and chips, and several other products.

Fresh Direct

Headquarters: New York

Markets Served: New York City

Delivery Fee: $3.95

Avg. Order: $95

# of Customers: 3,000 per day

Peapod

Headquarters: Skokie, Ill.

Markets Served: Chicago; Washington, D.C.; Boston; Parts of Connecticut; New York

Delivery Fee: $4.95-$9.95

Avg. Order: $143

# of Customers: 130,000 (annualized)

Safeway

Headquarters: Pleasanton, Calif.

Markets Served: San Francisco; Seattle; Sacramento; Vancouver, Wash.; Portland, Ore.; Los Angeles; Orange County, Calif.; San Diego; Las Vegas

Delivery Fee: $4.95-$9.95

Avg. Order: $125

# of Customers: 350,000 registered

Albertsons

Headquarters: Boise, Idaho

Markets Served: Boise; Seattle; Portland, Ore.; Oakland, Calif.; San Francisco; Los Angeles; Orange County, Calif.; Las Vegas; San Diego

Delivery Fee: $9.98

Avg. Order: NA

# of Customers: NA