ALBERTSON'S SETS ON-LINE EXPANSION STRATEGY

ELLIOT ZWIEBACH

BOISE, Idaho -- Albertson's here said last week it would pursue a two-pronged strategy as it rolls out on-line grocery shopping over the next few years.

According to Pat Steele, executive vice president, information systems and technology, the company will continue to focus on the two models it is already testing -- a dedicated fulfillment center like the one it operates in Fort Worth, Tex., and a combination fulfillment center/retail store like the Albertsons.com location in Bellevue, Wash.

"Once we expand into perishables at the Texas facility later this year, we'll have two different models that will enable us to get the feel for what's best in which marketplaces, with dot-coms possibly moving into smaller markets and dedicated fulfillment sites in larger cities," Steele said.

His comments to SN expanded on remarks made a few days earlier in Tucson, Ariz., by John Strong, Albertson's vice president of corporate brands, at the annual meeting and leadership conference of the Private Label Manufacturers Association.

In his talk Strong listed several examples of Albertson's e-commerce plans, including the following:

A national rollout of its drug store Web site, Sav-ondrugs.com, later this summer -- once the company completes installation of software that will enable the system to accommodate new prescriptions. The company has been testing an on-line drug Web site in Las Vegas and Kansas City, Mo.

Implementation of Priceline.com at all 159 units of its Acme Markets division in the Philadelphia area.

The addition of perishables to its fulfillment center in Fort Worth later this year and the possible implementation of pickup sites in the area.

The addition of pickup sites in the Seattle area outside of the dot-com store itself.

Steele declined to discuss any of Albertson's specific plans for expanding the dot-com store to additional locations. "When we opened the store last year, we said we would let the marketplace determine how fast we move in the Seattle area and outside the area," he told SN, "and we're still looking at that."

"There are some things we're working on, and we intend to talk about them in a couple of months. But right now we're happy with the one dot-com store and the way it's going."

Steele said Albertson's is considering adding pickup centers in Texas for on-line customers. In addition, once a perishables capability is added to the fulfillment center there, he said Albertson's will distribute perishables in the Dallas-Fort Worth metroplex along with the nonperishables it already distributes; however, it will distribute only nonperishables to other parts of the state, as it does now through United Parcel Service, he added.

In his talk to PLMA in Tucson, Strong said the traditional brick-and-mortar supermarket is not a dinosaur and it will not be rendered obsolete, despite the threats posed by e-commerce.

He said Albertson's approaches on-line sales as an additional customer service, adding that offering it doesn't mean the company has to give up anything it already has.

Despite the risks and vulnerabilities of an e-commerce business, he said, e-commerce endeavors are only beneficial if they help reduce costs.

But he said dot-com businesses will never replace traditional brick-and-mortar supermarkets because the shopping experience provides customers with desired human interaction and caters to the human need to be social.

Investor attraction to e-commerce companies have made them the darlings of the stock market right now, Strong said, but Wall Street is going to start to expect earnings before long.

Strong said corporate brands executives at retail chains understand the importance of private label in the value-cost equation.