INTERNET-BASED HOME-SHOPPING, DELIVERY SERVICE SET FOR 1998

LINDA PURPURA

BELLEVUE, Wash. -- HomeGrocer.com here, a new Internet-based home-shopping and delivery company, will launch its service in early 1998.

The company plans to offer almost all the products available in a typical supermarket, including dry grocery, produce, meat and other perishables. Consumers will only be able to order via the Internet. Delivery will be free of charge for orders of more than $75.

HomeGrocer.com will obtain groceries from wholesalers and manufacturers. It plans to store them at a 70,000-square-foot leased fulfillment center here, which will employ 315 people.

The company plans an initial beta test with 200 people. James Fierro, chief executive officer of HomeGrocer.com, anticipates a quick rollout to the rest of the Seattle market.

HomeGrocer.com plans to distinguish itself in the burgeoning home-shopping field by focusing on cost efficiencies within all aspects of its operations, particularly in the area of fulfillment.

Picking, for example, will use some combination of "human and technological capabilities," said Fierro. He declined to comment further.

"We've done a great deal of modeling around the flow of product, from the manufacturer to the doorstep of the consumer," he said, noting that the principals of HomeGrocer.com bring expertise in delivery systems and fulfillment as well as the food brokerage industry.

"What our modeling has proven to us is we can remove cost from the traditional grocery chain," such as handling and real estate, among other overhead costs, he noted.

HomeGrocer.com claimed its methods are more efficient than other home-shopping companies', some of which pick products out of retail stores and use part-time third-party delivery companies.

The new company will have its own fleet of trucks for delivery, which will allow it to build a one-to-one relationship with customers, Fierro said.

The on-line shopping startup chose Bellevue, Wash., just east of Seattle, because of its concentration of target customers who are high dual-income families with children.

Consumers will log on to the company's web site, place their orders and send them to HomeGrocer.com's back-end system, where the orders will be filled. A customer service group will answer inquiries and provide on-line assistance over the phone, but not take orders.

"There's no human intervention in the transaction at all," Fierro said.

"Our transaction costs are almost zero. Any traditional operation is more. Our costs are nominal because the consumer does it all."

HomeGrocer.com can absorb delivery charges, a fee typically charged by other home-shopping services, because its product margins are closer to supermarkets' than other home-shopping services, said Fierro.

"If a home-shopping service picks from the store, it is buying the product at retail plus some nominal rebate," he explained. "We don't pick from the store. We buy on the same basis as the grocery store and sell it to the consumer so we have the full grocery margin. Consumers will be able to purchase product from us at the same price they would pay in the mainstream grocery store."

Looking toward the future, HomeGrocer.com anticipates expanding this service to other cities, on its own or through a joint venture or franchise relationship with a traditional retailer.