Cable develops a craving

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Cable tv is checking out home delivery of groceries and household goods -- a potential profit center analysts predict will boom in the next few years.

So far, companies pioneering online grocery home-delivery services are facing steep challenges. Peapod lost both its CEO and a $120 million investment last month, while Webvan Group, even with a $400 million venture capital infusion, is struggling to balance the e-ordering of milk and eggs with the real-world reality of moving merchandise from warehouse to truck to doorstep.

"All that it will take to succeed is the right model and strong execution," says Ken Cassar, a senior analyst with Jupiter Communications.


The industry researcher estimates home delivery of groceries and other household products will reach $7.5 billion by 2003. And even that estimate only accounts for about 2% of the total grocery market, says Mr. Cassar.

When large chains such as Wal-Mart Stores make their presence known in the home delivery sector, they may choose to follow the nation's cable TV lines into American households.


Cable TV industry executives are closely following reports that Safeway, the nation's third-largest grocery chain, is in discussions with AT&T Broadband Services and other cable operators to develop a new generation of interactive home shopping systems using digital set-top boxes or cable modems.

Safeway is reportedly exploring development of an electronic "tablet" designed by Hewlett-Packard Co. That tablet would be connected wirelessly to digital set-top boxes or through cable modems.

Consumers would be able to write out grocery lists on the tablet, which would then be automatically sent to Safeway through a broadband connection. Orders would be filled and delivered to consumers' homes; United Parcel Services has reportedly been approached as a partner in the venture.

Executives at all companies involved in the proposed new service declined comment.


"It is entirely conceivable that the cable model will work because television has a broader penetration than PCs, with televisions in some 90% of U.S. homes," notes Bob Smith, president of NetSmith Services, a technology-based association management company.

"What's missing from the formula is getting stuff the last mile into the home," adds Halsey Minor, chairman of Internet media company Cnet Networks, San Francisco. "Whoever does that most effectively will win, whether it's online or on cable TV, or involves UPS, [Federal Express] or some other company that has mastered the logistics of making regular deliveries to homes nationwide."

Online grocery sites such as Peapod "already can be accessed via cable modems, and people are already using this technology to link to us," says a Peapod spokeswoman.

But like other technological advances, there needs to be a "gradual shift into the new technology," says Tom Bair, recently named director of convergence technologies at SF Interactive, San Francisco.

"One of the things that's encouraging to me about the adoption of interactive television is the penetration of these set-top boxes is going to come through cable operators and satellite providers. Consumers aren't going to have to go out and buy it themselves."

"If we're saving consumers the time [of having to go to the store], that's a tremendous benefit," says Robert Montgomery, president of Prasara Technologies. Prasara's interactive systems already are deployed in 175,000 households, including to Hawaii's Oceanic Cable customers. Services currently available through interactive cable TV include fast-food delivery, video on demand and banking.

"Interactive TV, delivered over cable systems, is one platform to [simplifying day-to-day processes]," says a spokesman for AT&T Broadband Services.

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