Safeway goes grocery shopping
Safeway Inc. is purchasing the remaining shares of GroceryWorks and making the e-commerce unit a wholly owned subsidiary. However, it isn’t giving up many details about the timing of the transaction and what future plans it has in mind for the online grocer.
Safeway, No. 172 in the Internet Retailer Top 500 Guide to Retail Web Sites, is purchasing the remaining 43.8% of GroceryWorks from investors such as Tesco PLC, an online food retailer that serves international markets via Tesco.com. Safeway already owns 56.2% of GroceryWorks.
In recent months Safeway has made executive changes at GroceryWorks and is working to build more e-commerce microsites. In March Safeway named Matt Gutermuth as the new president of GroceryWorks. He succeeds Mitchell Rhodes, who left the company late last year. Gutermuth previously was vice president of operational initiatives at Safeway. Before that he was vice president and general manager of the company’s alcohol and tobacco products business unit in Safeway’s marketing organization.
Safeway also recently launched RanchersReserve.com, an online food store offering premium quality USDA-inspected Angus beef and specialty foods. GroceryWorks is Safeway’s exclusive provider for online grocery shopping and home delivery. The company operates Safeway.com in the San Francisco Bay area, Sacramento, Calif., Portland, Oregon, Seattle, Wash., Phoenix, Arizona, and the Washington D.C. markets. GroceryWorks also operates VONS.com throughout southern California and Las Vegas.
Safeway has the national base to make its mark as a significant player in the web grocery market, says Jim Hertel, a senior vice president at food retailing consulting firm Willard Bishop. But Safeway also must realize that the web grocery market is highly localized and specialized. “Players like FreshDirect, Peapod and Simon Delivers have figured out the regional markets and have the local and regional supply chains to gain market share,” Hertel says. “Safeway can compete nationally on price and economies of scale, but they will have to think on a local and regional basis to make a significant move in the online space.”
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