HEB TO TEST E-COMMMERCE DIVISION

JON SPRINGER

SAN ANTONIO, Texas -- H. E. Butt Grocery Co. here is planning an e-commerce division that will begin testing this fall in Austin, Texas, the company said.

The service will use a central warehouse to receive and pack orders, which can be picked up at local stores, or delivered to the home, Kate Brown, HEB spokeswoman, told SN. The company is also talking with various area employers to set up delivery depots allowing on-line shoppers to pick up their orders at work, Brown said.

HEB will offer more than 20,000 items on-line, as well as prepared foods from its Central Market specialty concept, Brown said. It will be the company's first foray into home delivery, but not into e-commerce -- customers can currently shop for specialty meats for courier service delivery through the www.hebshop.com site.

Austin is an ideal market to debut the full service, said Brown, noting the area's strong economic base powered by technology firms such as Dell Computer, Motorola and IBM, and by the University of Texas.

"Austin is one of the most wired cities in the United States," Brown said. "Because it's such a wired community, people here are already used to being on-line and purchasing goods there. And that lifestyle often means working long hours, and people are pressed for time."

Peapod, the Chicago-based on-line shopping service, currently offers on-line shopping in Austin as part of an agreement with Houston-based Randall's Food Markets. However, Randall's is expected to phase out Peapod as Randall's parent Safeway, Pleasanton, Calif., expands its partnership with rival GroceryWorks.com of Dallas.

Observers told SN that HEB is in a strong position to expand its brand to the Internet in Austin.

"HEB just dominates the market here; it's their backyard," said Greg Blackburn, an Austin-based associate for real estate services firm CB Richard Ellis, Los Angeles.

Brad Hardy, a senior associate at Dallas-based real estate services firm Trammell Crow, added that while area consumers regularly use the Internet to shop, "It is not a real big concern to retailers or developers here yet."

HEB's e-commerce team, made up of company officials and outside technology firms, have been planning the launch since January. A lease for a distribution center has been signed at the site of a former Sam's Club warehouse store at North Lamar and Applegate in Austin.