Safeway expanding Net service again

One of the nation's largest grocery chains, Safeway will begin offering home delivery to more than 50 neighborhoods in the Sacramento area, said David Bowlby, a Safeway spokesman.

The move comes less than a month after Safeway began testing home delivery in the San Francisco Bay Area, the U.S. region with the highest per capita Internet usage. When asked when Safeway intended to launch operations in San Francisco, Bowlby replied: "Soon. Very soon."

Safeway and rival Albertson's are quickly moving their Net operations into areas once serviced by online-only supermarkets that have ceased operations, such as Webvan, or that have pulled out, such as Peapod. Albertson's branched into Los Angeles three weeks ago, after previously expanding into Seattle and San Diego.

Analysts have said that since Albertson's and Safeway have chosen to use existing stores from which to deliver groceries to customers, they have an advantage over failed Web-only companies such as Webvan.

Customers can log on to order from Safeway.com or Albertsons.com, and the grocers can pick, pack and ship goods from the supermarket nearest the customer. In comparison, Webvan and other online-only stores spent hundreds of millions of dollars to build enormous, automated warehouses in each of the cities where they operated. The huge infrastructure costs ate up much of their cash.

Matt Muta, Albertson's vice president of technology, said the supermarket chain is considering moves into a host of regions, including the San Francisco Bay Area. The area may eventually be witness to a Safeway and Albertson's home-delivery showdown.

Because of its number of Internet users, San Francisco has always been seen as an important testing ground for e-commerce companies. Once home to three home-delivery companies, the city has been without one since Webvan and Kozmo folded and Peapod moved out.