Viewpoint: the decline and fall of Internet grocery retailers

Lawrence J. Ring and Douglas J. Tigert

The authors Lawrence J. Ring is Professor of Business Administration, Graduate School of Business Administration, The College of William and Mary, Williamsburg, Virginia, USA. Douglas J. Tigert is Professor of Retail Marketing, Babson College, Wellesley, Massachussetts, USA. Keywords Internet, Grocery, Retailing, USA Abstract Considers reasons for failure among pure play Internet grocery retailers. Notes that two factors seem to be significant. First, they did not achieve anything like a competitive advantage over the traditional ``bricks and mortar food retailers on those dimension s that drive the consumer store/channel choice process. Second, they did not develop a business model that reaches profitability, perhaps ever. They apparently did not foresee that total operating costs per customer were substantially higher for Internet grocery retailing than for ``bricks and mortar grocery stores, and that this new channel would have to charge consumers substantiall y more to reach breakeven operating levels. In fact, many pure play Internet grocers tried to price competitively against traditional food retailers and as a result, did not even cover variable costs. Hence, the more they sold, the more they lost. Eventually, they ran out of cash and were unable to raise additional monies in the market. Finally, there is some evidence that Internet grocers dramatically overestimate d the size of the market for grocery shopping from the home. In the final analysis, pure play Internet grocer retailers appeared sexy and were hot for a short period of time because of the romance of the Internet . In fact, they were nothing more than fancy grocery delivery companies which have never made money in the mass market and probably never will. Electronic access The research register for this journal is available at http://www.mcbup.com/research_registers The current issue and full text archive of this journal is available at http://www.emerald-library.com/ft
International Journal of Retail & Distribution Management Volume 29 . Number 6 . 2001 . pp. 264271 # MCB University Press . ISSN 0959-0552

Introduction
As the year 2000 dawned, there were at least seven, apparently healthy, pure play Internet grocery companies operating in the USA. All were growing the business and entering new cities. Buoyed by numerous forecasts of significant market demand (Andersen Consulting thought the market for the online grocer business could be as big as 10 percent of the $450 billion US grocery market), several, including Streamline, Webvan, and Peapod, had successfully completed IPOs by late 1999 and had raised millions of dollars in new capital. Webvans initial public offering in October 1999 raised $360 million alone and the company announced ambitious plans to build 26 giant warehouses, over 300,000ft2 each, in 26 different cities. Lost in the late dot.com euphoria were some ominous signs of trouble. First, none of the pure play US Internet grocers had even come close to reaching breakeven, indicating a suspect financial model. Second, there were plenty of reasons to be skeptical about the size of forecasted market demand. By December 2000, pure play Internet grocery retailers in the USA were in total chaos and a number of firms had already closed their doors or sold to other players. Here are a few headlines: May 3, 2000 (from Wired News): As recently as April, 2000, Peapod was perched on the brink of collapse . . . the picture brightened about two weeks ago, when grocery holding company Royal Ahold, which owns Stop And Shop and a host of other supermarket assets, invested $73 million in Peapod in exchange for a 52 percent stake in the online grocer. September 7, 2000 (from Wired News): Peapod Inc., an online grocery delivery service in the midst of a corporate turnaround, said it is shutting down operations in four cities and opening up shop (via acquisition) in Washington, DC. October 26, 2000 (from E-Commerce Times): Six months after being rescued from the brink of bankruptcy, online grocer Peapod continues to see increasing financial losses. Peapods earnings shortfall comes just a week after fellow online grocer Webvan reported a largerthan-expected quarterly loss, due in part to its takeover of Homegrocer.com.

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November 8, 2000 (from Net Inter@ctive Investor): Webvan drifts lower following downgrade, policy change. Webvan stock hits $1.44 (down from IPO price of $30) after positing a wider-than-expected loss in its third quarter, dropping $148 million on sales of only $54 million . . . Webvan announced that it will begin charging a fee on orders under $75, while continuing to deliver free on orders over $75.00. November 13, 2000 (from Upsidetoday ): Online Grocer Bags Operations . . . Streamline.com said today it will cease operations and discontinue service by November 22. In September, the company sold its services in Washington, DC and Chicago to Peapod . . . weeks earlier, Priceline-backed Webhouse shut down after its name-your-own price strategy failed to translate in the online grocery industry. November 22, 2000 (from CBS Market Watch): A few Net grocers have aligned themselves with traditional grocers, resuscitating their online operations with well-known anchor. Royal Ahold rescued Peapod from imminent shutdown. Safeway picked up a 50 percent stake in GroceryWorks.com. December 21, 2000 (from Yahoo Finance): Peapods stock hits 52 week low of $0.75 (down from IPO price of $15.00). For the nine months ended September 30, 2000, revenues rose to $69 million but net losses rose to $91 million. December 21, 2000 (from Yahoo Finance): Webvan stock hits 52-week low of $0.22 (down from $30 high). January 4, 2001 (from Yahoo Finance): Webvan launches national value brand program, selecting Flemings Best Yet label. The Wall Street Journal commented (April 1, 2001):
In retrospect it seems clear that loading up 10,000 consumer items in a van and trucking them to a central location (known as a store) is cheaper than sending 10,000 vans to deliver the same goods individually to 10,000 doorsteps.

Ahold. A few traditional food retailers are still experimenting with Internet grocery delivery but they are not expanding beyond one or a few markets. No company has ever made a profit in this business. What went wrong? Three key factors appear to be at the heart of the miscalculations by the pure play Internet grocery retailers. The first is the concept of competitive advantage.

Do they (Internet grocers) win?

A useful model to examine how competitive advantage is achieved in retailing (or etailing) is the pentagon and the triangle the eight ways to win and appears in Figure 1. The pentagon represents what the customer can see can see either by visiting a store or watching the advertising for a traditional bricks and mortar retailer or by visiting the Web site of an e-tailer. There are five major ways in which retailers or e-tailers can differentiate themselves from others in the marketplace. All five corners of the pentagon also have some subcategories. The customer cannot see the triangle, which represents all those activities going on behind the scenes at a retailer or an e-tailer and which are focussed around systems, logistics and supplier relationships. The pentagon is the retailers face to the public and to its customers. The corners of the pentagon hold few secrets from competitors, because they are all very visible. In order to determine whether or not an Internet grocery retailer brings to the market a superior offering to consumers, relative to a traditional food retailer, we need to answer
Figure 1 The eight ways to win in retailing the pentagon and the triangle

By the end of 2000, the only pure play Internet grocery retailers left in the USA were Webvan, which had acquired Home Grocer, and Peapod, which had been acquired by 265

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five key questions about each corner (and subcategory) of the pentagon: (1) Do they win? (2) By how much, a little or a lot? (3) Are they winning by more or less this year than last year? (Momentum of strategy). (4) Does anybody care (are we winning on the right corners, those that drive consumer store/channel choice for food shopping)? (5) Can we sustain our win into the future? We begin with the place corner and examine each in turn comparing the Internet experience with the bricks and mortar experience. Place Shopping via the Internet, the consumer gives up the physical environment of the store and therefore the ability to see, touch and smell the merchandise. For many shoppers, seeing, touching, and smelling are important in shopping for fresh foods, especially meal replacement items (ready-to-eat, ready-to-heat, and ready-to-bake). Consumers also give up the opportunity to talk with store personnel and to ask questions, or to make special requests for specific cuts of meat, deli, or fresh fish items. Most consumers also make impulse purchases by walking the aisles, and select items there were not on the pre-planned shopping list. In addition, consumers who shop the Internet face constrained times for delivery. For example, Streamline only delivered to each street once a week. Finally, many of the Internet grocers sites were simply difficult to shop and to navigate around. What does the customer gain on place by shopping via the Internet? The key benefit here is that someone else picks the order and delivers to the home. The customer saves time and transportation costs but may have to pay for these advantages via higher prices, and/or a delivery fee, and/or a monthly fee. An important issue here is whether or not the consumer perceives some economic cost for his/her time, or for the costs of operating a car on a specific shopping trip. Of course it does take the customer time to place the order via a personal computer (and if constrained to a 56k modem, the time is often long) or some other data entry device such as a palm unit attached to a scanner.

Product A consumer shopping at a large supermarket or super food/drug combo, can choose from a total assortment that may be greater than 30,000 stock keeping units (SKUs) including a huge variety of fresh foods. Companies such as Shoplink and Streamline.com offered only about 3-5,000 SKUs. Webvan may represent a breakthrough here. Their warehouse in San Francisco is massive, about 300,000ft 2 in size, providing customers with upwards of 50,000 SKUs (food and non-food) from which to choose. Webvan almost certainly offers the largest assortment of any Internet grocer. Value for the money Getting an accurate picture of how much more the consumer pays for Internet delivery of groceries is somewhat difficult. First is the issue of the actual prices charged versus the prices charged by a traditional supermarket. Only Home Runs, (formerly a division of Hannaford Brothers, now sold), had announced that they were an EDLP leader in the market. Very few price basket surveys have been published comparing Internet prices versus supermarket prices. Limited analysis by the authors suggests that Internet grocery prices are at or above the prices charged by the highest priced supermarkets in a specific city. In addition, most Internet grocers charge either a monthly fee (Streamline, $30 per month) or a picking fee, or a delivery fee, or a combination of these fees. Our own estimate is that the Internet customer pays somewhere between 10-20 percent more for home delivery, relative to the lowest priced supermarket in each city. This price differential dramatically reduces the size of the total market for the Internet service. The authors have completed numerous large-scale research tracking studies in the supermarket industry (Arnold et al., 1983). In those surveys, low prices is always the first or second most important determinant of store choice in grocery shopping. More important, many customers will switch stores for only a 3-4 percent differential in prices across leading competitors. Service Consumers give up a lot of different service dimensions if they choose to order groceries over the Internet for home delivery. As

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previously noted, they cannot talk to store personnel. They cannot ask for many specific products, or special orders, particularly in the fresh area. They cannot combine a grocery shopping trip with other trips to the same general geographic area, such as the bank, the post office, the hardware store, the dry cleaners, the pizza parlor, etc. They cannot cash a check or get a money order, or pick up a prescription, or return an item for immediate replacement or refund. One day, in the distant future, many of these cannots may be possible over the Internet, but for the foreseeable future they are not. Communication Supermarkets engage in constant communication with the customer. They advertise on television and in weekly flyers. They offer a lot of specials. They announce new items. They offer various types of loyalty programs. All of these activities have an impact on the actual and perceived prices that consumers pay, on their perceptions of assortments, service and quality, etc. Once a customer has been acquired, an Internet grocer can certainly match traditional grocers on the communications corner with even more targeted e-mail and advertising. The big problem for the pure play Internet grocers is customer acquisition in the first place. Technical problems In addition to the problems associated with the traditional areas of evaluation, new problems have surfaced specifically related to conducting business online. Companies like Streamline.com admitted that they had to work through a series of technical glitches. Occasionally products are forgotten or the wrong size is delivered. In response, the Internet grocers sent out gift certificates or performed other acts of buying forgiveness all at a steep cost. Truck scheduling has been a problem with the result that trucks do not always hit the delivery timetable at specific houses. Finally, the online business model relies on a population of Web savvy customers. While this customer base is growing, it is still small and excludes a large portion of the total population base. Regardless of the aptitude of the customer, new types of shopping errors have surfaced. For example, an erroneous entry ten frozen OJs instead of one would likely be noticed if the customer was loading

them onto the conveyor belt in a store, but when they arrive at the customers doorstep it is a different story less easily remedied. Overall, to become a pure play Internet grocery shopper, the customer gives up (trades away) something on virtually every corner of the pentagon. The two biggest disadvantages of Internet grocery shopping are price and assortment. Research on store choice in food retailing shows consistently that price and assortment rank number two and three, behind location/convenience to home. While it might be argued that Internet grocery shopping is more convenient because it is done from the home and saves time and the use of the car, the grocery trip is seldom done as a single trip, but often as part of a multi-stop trip. Unless the pure play Internet grocers can close the price and assortment gap, their appeal will be to a small percentage of total households, perhaps as small as 1-3 percent.

The killer costs of the pure play Internet grocer

Variable versus fixed costs As we examine the specific cost/revenue model employed by pure play Internet grocers, it is important to understand the difference between variable costs and fixed costs and how they affect the speed with which an online grocer might eventually approach breakeven sales levels. Below is an example of a traditional bricks and mortar grocery retailer and a pure play Internet grocery retailer (Table I). First, in the typical model for traditional supermarkets, the total operating expenses per customer are about $6.90. This figure covers all operating expenses below the gross margin line. Costs include building leases, fixtures and fittings, warehousing, transportation, wages and salaries, advertising, information systems, etc. Almost
Table I Example of traditional and Internet grocers Traditional grocer Internet grocer Average customer ticket Gross margin percentage Gross margin/customer Net profit percentage pre-tax Net profit/customer Operating expenses/customer $30 25% $7.5 2% $0.60 $6.90 $80 30% (?) $24.00 (Negative?) ? ?

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all of these costs are fixed, meaning that they remain fairly constant as the sales volume increases (and, decline on a per customer basis as volume goes up). Consequently, these high operating expenses per customer (relative to margin available) leave very little room for errors in strategy. Historically, traditional supermarkets have experienced numbers moving from black to red with as little as a 5-10 percent decline in sales. For example, as a result of negative publicity and an aborted attempt to enter new markets, Food Lion experience a 7 percent decline in sales per square foot in 1993 versus 1992. That 7 percent decline in sales per square foot resulted in a nearly 100 percent decline in profit per square foot (and Food Lion had been among the most profitable supermarkets in the country until that year.) The costs of running an online grocery with home delivery are as follows: Picking the order in a warehouse or in a store $12. Delivering the order to the home (truck and driver) $15-30. Systems cost for building and maintaining a Web site $1-2. Warehousing (building and workers)? Inventory holding costs? Advertising costs (Web sites and local media)? Head office costs (senior management, buyers, finance, MIS? The first two costs above, picking and delivery, are variable in nature. These costs continue to be present as additional orders placed. In fact, wage costs and delivery costs normally rise over time. Given the acute shortages in the labor market and the recent increases in fuel costs, these variable costs may rise even faster than expected. Consequently, unless the Internet grocer can produce gross margin dollars per customer of at least $27-42, these variable costs will not be covered and breakeven will be a receding horizon. In an industry where margins are very thin, there are only a few ways that pure play Internet grocers will be able to achieve gross margin dollars per customer in excess of $27. Clearly, the higher the average customer ticket, the more likely $27 will be achieved. In our model above, an $80 order, combined with a 30 percent gross margin percentage will result in a $27 of gross margin. Alternatively, achieving a gross

margin percentage well above the gross margin percentage attained by traditional supermarkets, or charging customers a picking fee or charging customers a monthly fee would also work. In our model above, we have shown the average customer ticket at the top of the Internet grocer column to be $80, a figure often quoted (or wished) by Internet grocers. However, Hannaford Brothers Home Runs service in Boston charged no monthly fee and no picking or delivery fee for all orders over $60 and claimed that its prices were competitive with the lowest prices at conventional grocers in the Boston area. Streamline.com, on the other hand charged a monthly fee of $30 or about $7.50 per order based on four orders per month. On the bottom line, it is clear that pure play Internet grocers need to generate gross margin dollars per customer that are equal to or greater than the sales dollars per customer for conventional supermarkets. In addition, Internet grocers lose on price by as much as 20 percent. Yet customers will switch supermarkets for as little as 3-4 percent price differentiation. Internet grocers also lose on key service dimensions, such as full service deli, fish, meat, and specialty food departments at traditional grocers. It seems likely that consumers who shop for groceries using the Internet will also visit traditional bricks and mortar supermarkets for specialty food items. Overall, the big question still remains: What percentage of households will pay substantially more for an inferior assortment (and perhaps quality) of groceries just for the convenience of having them delivered to their home?

Solving the twin killer costs problem

The two killer costs facing the pure play Internet grocer are the picking costs and the delivery costs. Both are variable, i.e. they do not come down as the customer count goes up. What are the possible alternatives for reducing these costs per delivery? Several approaches have been tried. GIB (Belgium) GIB, in Belgium, tested a new delivery system during the past year. Rather than delivering groceries to the home, GIB delivered to 18

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pickup points in the greater Brussels market. Each day at 3.30 p.m., 18 trucks would leave the GIB warehouse with orders picked for that day. Each truck could hold approximately 45 orders. The trucks were spread out in a hub and spoke design and the pickup points were designed to intercept the consumer on the way home from work. The trucks would stay on station from 4 p.m. until 9 p.m., or five hours. If all 45 customers picked up their groceries during this five-hour time period, the number of orders delivered would be nine per hour. This fulfillment ratio is about two-and-a-half times higher than the three to four deliveries made per hour by delivering directly to the home. Thus, the delivery cost comes down to less than half per household or about $6-7 per customer. GIB also worked on the design of an optimally automated warehouse, with the objective of reducing the picking time to less than 30 minutes. The new, automated warehouse design concept was at least one to two years away. If successful on both fronts, GIB had the potential of reducing the picking and delivery costs to a combined number of about $12.00. If they could have achieved a high average customer ticket in the range of $100.00 and a gross margin of $25.00 per customer, then they had a chance to achieve breakeven, if they could maintain 45 delivery/ pickups per truck per day. Unfortunately, losses were so high at the GIB operation that the business was closed down in November 2000. Something in the formula did not work out, most likely the inability to generate 45 orders per day per truck plus a still high picking cost. Disco (Buenos Aires) Disco, a division of Ahold (The Netherlands) has already solved both the picking and delivery cost problems. The chain operates a large number of small stores (5-10,000ft2 ) in the inner city areas of Argentina, including Buenos Aires. While the customer can order groceries over the Internet, most customers come to the store and pick their own orders. But after they run their groceries through the checkout lines, they leave the store without them. Their groceries are then packed into plastic crates for delivery to their homes, within 30 minutes after they leave the store. Delivery boys put the plastic crates onto little dollies and push them the one-to-five blocks

to the high-rise apartments where the consumers live. Most stores do not pay much of a salary to these delivery boys. They receive about $1.00 per hour in wages and the rest of their income comes in the form of tips from the customers. The customer does not pay for delivery, above and beyond what they wish to tip the delivery boy. Thus, Disco has no picking costs and virtually no delivery costs. Yet about 70 percent of all customers choose this delivery option. In densely populated urban areas the Disco solution seems to work. Safeway (UK)/IBM This Internet test, currently being run by Safeway, in a joint venture with IBM, has some rather interesting features. The customer uses a palm unit, hooked up to a scanner, in the home. The customer scans certain pantry items or other products as she throws away the package. Items not currently in the households inventory are manually added through a keypad, to make up the total order. The order is transmitted to a specific Safeway store near the customers home. The order is picked by store personnel and held until the customer arrives to pick it up. While in the store, the customer often buys additional items, often in the fresh area. The customer then checks out the total order. This system eliminates all delivery costs for trucks and drivers. Safeway indicates that the average customer ticket for this type of shopper is substantially higher than the average customer ticket for a regular shopper. The extra gross margin dollars per customer would help defray the picking costs. Shoplink (Boston) Shoplink worked on a variation of the GIB intercept model. This grocery e-tailer was delivering to large businesses at the end of the day. The employees of the business put in their orders the night before and then picked up their orders from the Shoplink truck after work, in the parking lot of their office building. Again, the objective here was to significantly reduce the delivery time or increase the number of deliveries per hour. Shoplink also claimed that this delivery method improved the quality of the cold chain, i.e. maintaining fresh and frozen items at the right temperature. Unfortunately, Shoplink closed its doors in Boston at the same time as Streamline, in November 2000. Most of its deliveries were to the home.

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Webvan As a pure Internet player, Webvan has one of the most aggressive distribution models in the industry. Without the advantages of a bricks and mortar storefront, Webvan is being assertive in its solution to reduce its picking costs. Webvan plans to build a hub and spoke distribution system in each market it enters. At the cost of $25 million per region, each system will consist of a highly automated distribution center feeding 10 to 12 substations situated within a 50-mile radius. Each centrally located mega-warehouse includes four-and-a-half miles of conveyor belts, and stocks 50,000 products (Himelstein, 2000). Instead of stocking shelves, Webvan employees stock rotating carousels of in-stock goods. Instead of traipsing down endless aisles, the pickers travel no more than 19ft in any one direction to reach 8,000 bins of goods that are brought to the employee on rotating carousels. When 85 percent to 90 percent of a persons time [at a traditional store] is spent traveling to locate and assemble orders, you realize why this makes sense, says Gary Dahl, formerly a senior executive at American Stores Co. and now Webvans vice-president for wholesale. This carousel system lets workers pick roughly two-and-a-half times faster than they could manually. Due to the increased efficiencies, Webvan hopes this innovation will lead to lower wage and employee benefits costs. To complete the distribution process, once a picker has finished his portion of the task, the order is then transported via conveyor belt to other areas of the facility housing different items. After an order has made the rounds, it is loaded onto trucks refrigerated at 35 Fahrenheit. The order is then transported from the mega-warehouse to one of the 10-12 sub-stations located throughout the regional area. From there, the orders are broken-down and loaded onto one of the companys 60 vans so that drivers can take the orders directly to customers homes. No van travels more than 10 miles in any one direction. (Himelstein, 1999). Let us assume that Webvans distribution model is successful and the company has achieved cost reductions in both operating expenses and picking expenses. We will even go a step further and assume that the company is earning 2-3 percent margins standard to the grocery industry. Making $25

million capital investments in each of the 26 markets it plans to serve, still means that Webvan has to sell a lot of groceries to break even. This translates into the following goals. A Webvan distribution center needs to be operating at capacity, which means it must take 8,000 orders a day, seven days a week with an average ticket of $103. This situation needs to occur for five consecutive quarters for one distribution center to be cash flow positive. So how is Webvan doing? As of December, 2000, Webvans sales for the trailing 12 months were $105 million and net losses were $329 million or approximately three times sales. The firm had $376 million in cash left, or about equal to one years losses. By January of 2001, Webvans stock closed below a dollar for 30 consecutive trading days and was in danger of being delisted by Nasdaq. Tesco (UK) The UK grocer Tesco claims to be nearing breakeven on its Internet grocery site with sales in 2,000 of over $350 million. The company has a relatively simple online model that does not require major capital investment. It relies on its existing network of stores. Once a computer system has collected orders online, they are sent to the store nearest the customer where orders are picked by employees roaming the aisles with special carts mounted with computer screens. The computer guides the picker to the items to be picked and once the order is assembled, vans carry it to the customers home. There is a $7 delivery charge regardless of order size. Why does this model seem to work in the UK? First, net margins there are much higher than in the USA 5-6 percent versus 1-2 percent here. Second, both the population and the industry are much more concentrated in the UK than in the USA. The concentrated population allows more deliveries per hour and the national nature of the UK chains make it economical to promote the service using national media (while most US chains are regional). However, Tesco recently announced that it was converting from in-store picking to warehouse picking, to improve the productivity of the picking process. One might question whether the assortment available to the Internet customer will remain the same from a warehouse compared to what is available in a large store.

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Summary Supermarket chains in most cities have developed a loyal customer base through years of service and convenient locations. Supermarkets are extremely efficient, with total cost per customer served of approximately $6-7. They are constantly advertising to maintain high levels of awareness about prices, assortments, service, quality, specialty products and loyalty programs. The new players in the Internet world are challenged with letting people know that they exist. In addition to high picking and delivery costs, Internet grocers face very high up-front marketing costs, and these costs remain high as a result of competition in both the online and traditional grocery marketplaces. Despite the significant efforts of the several pure play Internet grocers, as well as much attendant publicity, not many customers have been lured away from the local grocery stores into the virtual markets. When customers still need to visit their local grocer to purchase some of their perishable goods, it is difficult for them to see the advantage of doing the rest of their grocery shopping online. The grocery shopping trip is often combined with a trip to the bank, the dry cleaners, the hardware store, the beauty parlor, etc. In other words, customer will shop the way they want to shop, regardless of the presence high technology. If Internet use becomes more prevalent in every home (and it may, eventually); and if consumers begin to trust others to choose their perishable goods; and if the value in services can be transferred to the product price; and if the Internet grocers can solve the twin killer costs problems of picking and delivery, it may one day be possible for online grocers to see profits. Anthony Perkins, editor-in-chief of Red Herring, states that Peapod, NetGrocer, and Streamline.com (already closed) may, however, not be around to reap the benefits of the seeds they have sewn. Many argue that the traditional retailers are hovering, merely waiting for these companies to carry the industry out of its infancy, and then swoop down and win the game. To quote WholeFoods CEO, John Mackey: If you can ever prove it works,

Wal-Marts going to come in and blow you out of the water. For now, whether you measure by profits, revenue growth, or Wall Streets reaction, it is safe to say that the online grocery industry has not achieved success. Once the remaining online grocery upstarts fail, the return of home delivery will go down as one of the biggest and most expensive Internet disasters in history. Ultimately, whatever home delivery services succeed, whether groceries are ordered by Internet, phone, fax, or by carrier pigeon, will not be either a bricks or a clicks phenomenon. The line between Internet retailers and bricks and mortar retailers is likely to disappear and what will be left are retailers that serve customers however those customers want to be served, whether by store, by mail order, or by the Internet.

References
Arnold, S., Oum, T. and Tigert, D.J. (1983), ``Determinant attributes in retail patronage: seasonal, temporal, regional and international comparisons, Journal of Marketing Research, Vol. 20, May, pp. 149-57. CBS Marketwatch (2000) ,``For whom the register tolls, November 22, http://www.CBSMarketWatch.com E-Commerce Times (2000), ``More troubles for Peapod, October 26,http://www.ecommercetimes.com/news/ articles2000/001026-3.shtml Himelstein, L. (1999). ``Can You Sell Groceries Like Books?, Business Week, July 26. Upsidetoday (2000), ``Online grocer bags operations, November 13, http://www/upside.com/News/ 3a1024eell_yahoo.html Wired News (2000), ``Peapod cuts back, expands, September 7, http://www.wired.com/news/print/ 0,1294,38639.00.html The Wall Street Journal (2001), ``The dot-com meltdown, January 4. The Wall Street Journal (2001), ``Webvan launches National Value Brand Program, selecting Flemings best yet label, January 4. Wired News (2000), ``Troubled Peapods big plans, May 3, http://www.wired news.com/news.print/ 0,12194,36054,00.html Yahoo Finance (2000), ``Profile Peapod, Inc., December 21, http://biz.yahoo.com/p/p/ppod.html Yahoo Finance (2001), press release, January 4. ZD Net Inter@ctive Investor (2000), ``Webvan drifts lower following downgrade, policy change, November 8, http://www/zdii.com/industrylist.asp?mode=news& doc_id=ZE506431

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