Attention! Online grocery-shopping is back

These days, the supermarket many folks use is in their homes. Yes, more and more people are buying groceries online. “Today” financial editor Jean Chatzky was invited on the show to discuss the pros and cons of this form of cyber-shopping.

Online groceries flamed out big in the dot-com bust of the 1990s, with one company — Webvan — blowing through a billion (yes, that's a BILLION) dollars in financing.  But over the past few years they've come back, and this time companies are taking it slow and doing it right. 

Today, these groceries are legitimate businesses fulfilling about 1 percent of the nation’s $570 billion grocery bill.  That may sound like a drop in the bucket, but business is expected to triple by 2008, according to Jupiter Research. Meanwhile, a report from the Food Marketing Institute reports that 5 percent of consumers — 3.7 million people — shopped online for groceries in the last year, up from 3 percent the year before.

You'll now see companies like Peapod in 15 markets in the Midwest and East Coast, Albertsons and Safeway in the West, Simon Delivers and Schnucks in the Midwest, and Fresh Direct in New York City.  I've been shopping online myself for the past couple of months — since Peapod came to my neighborhood — and I have to say it's a definite improvement in my life. (And I'm not someone who's ever really minded going to the grocery store.)

Q: Are the prices higher or lower?
A: We actually tested this out in Money magazine by dispatching shoppers with identical grocery lists to shop online — and in the stores — of eight cities across the country.  We found the online bills to be, overall, about the same as they were in the store. We also found that it's easier to put your fingers on the items that are on sale, because they all pop up on the same page.  And you're not as likely to give in to impulse purchases.

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Hot Tip:
Before you use an online grocer for the first time, do a search on a major engine (Google MSN, Yahoo, etc.) for the name of the grocer you're using plus the word "coupon."  I found a $10-off coupon for my first time, and then the driver gave me four additional $5-off coupons for my next four visits. Paying by direct check — .i.e. a pre-approved check — knocked another dollar off each visit.

Q: Can you still use coupons? 
A: Yes. With most companies, you give them to your driver and are credited for the difference.  And if you have a frequent-buyer card, you're eligible for those specials as well.

Q: How much time does it actually take? 
A: It takes about an hour the first time you shop.  That's because you're going to have to browse the (electronic) aisles and make out a whole list.  (There’s a possible exception to this: If you have a frequent-buyer card with the store affiliated with the online grocer, you can just type in your number and it will bring up a list of what you bought your last shopping trip. You’ll find it to be a big help!) After that first visit, though, you can call up lists of what you've purchased previously.  Then you can just click on each thing you want to buy again, which is why subsequent trips take only 20 minutes or so.

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I also like to maintain a running list.  That way, you can add items as you know you need them until you hit the minimum required for delivery.  One thing that can slow you down is a slow Internet connection. (Using a dial-up modem is not ideal; five out of six Peapod customers, for instance, have a broadband connection.)

PLUSES
Quality: Online grocers tend to offer a higher quality selection of produce because they know that one delivery of mushy strawberries is all it takes to lose you as a customer.  In this regard, damaged goods don't seem to be too much of a problem — products are generally packed in sturdy containers (some of which double as coolers, so that they can keep ice cream, for instance, frozen all along their routes).

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