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Reuters reports that e-grocery companies are gaining a foothold in urban areas of the US, using focused and sensible business plans to appeal to Internet savvy professionals with the discretionary income to pay for delivery.

Online grocers and other Internet-based convenience services say they have found a foothold in big U.S. cities, where busy and affluent consumers use the Internet to ease the stresses of urban life.

“Right now the Internet is an under-rated industry,” Marc van Gelder, president and chief executive of Ahold-owned Peapod, told Reuters. He said that sales were growing 35 percent per year, with more than 120,000 regular customers. “It's much more mainstream than a lot of people think it is,” he said.

The question that analysts continue to raise is whether the niche being carved out by companies like Peapod -- as well as brick and mortar companies that are creating their own services or using outsourcing companies such as MyWebGrocer (full disclosure: MyWebGrocer is a sponsor of MNB) -- is large enough to make these companies profitable.
KC's View:
Naysayers about e-grocery continue to point to Kozmo, Streamline and Webvan as prime examples of how this channel can’t work. But we think that these business failures only prove that the channel doesn’t always work…that such businesses can’t succeed in spite of themselves.

E-grocery won’t replace mainstream brick-and-mortar supermarkets. But there’s no reason to think that it won’t be a mainstream and valued strategic alternative that will grow as the years pass.

Companies that aren’t pulling the trigger on such initiatives may be acting -- or not acting -- out of fear and timidity.

We would suggest that in a world dominated by a few retailers, fear and timidity have no place.