CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

Food.com prepares a new course

The company is looking for the magic ingredient to reinvent itself after quietly scrapping a deal to acquire a national takeout-food delivery service.

Food.com is looking for the magic ingredient to reinvent itself after quietly scrapping a deal to acquire Takeout Taxi, which would have positioned the company to build a national delivery service for takeout food.

Now the company that accepts online orders for more than 18,000 restaurants has hired a consulting firm to help redefine its business, according to Food.com CEO John Laing.

"Food.com is like a lot of e-tailers," said Gomez retail analyst Matt Stamski. "They put the cart before the horse and built out their systems before properly assessing whether the demand is going to be there."

San Francisco-based Food.com is in the same position as many online merchants that tried to answer investors' hunger for market share and rapid growth when e-commerce first emerged. Now, investors are demanding profits.

"Like everybody, April hit and the rules changed," Laing said. "Everybody out there is looking for a path to profitability."

With the demise of the Takeout Taxi deal--negotiations turned out to be "like herding cats" because of the many partners involved, Laing said--Food.com is grappling with what direction it should take.

Laing declined to say what options Food.com is considering.

Food.com is just one of many e-businesses that have considered revamping their business models. Beyond.com, an online software retailer, began selling to consumers but switched to servicing other businesses. Now-defunct Toysmart.com, before shutting its doors in May, was contemplating re-creating itself as a business-to-business play, the company said.

But perhaps the most important question is whether a company's products and services are right for the Web, Stamski said. Big-ticket items such as furniture, automobiles, and household appliances like washers and refrigerators have proven difficult to sell online, he said.

Prepared meals may be another. Restaurants already do a pretty good job of delivering their food to customers' homes, Stamski said.

"Food.com's biggest competitor right now is the telephone," he said. "In terms of ordering food online, the Net is not clearly a better solution than picking up the phone and ordering it from a local pizza joint."

In addition, the online home-delivery market is already dominated by companies such as Kozmo.com and online grocer Webvan, which are making forays into providing customers with hot meals.

Laing gave no timetable for Food.com's second try at e-commerce but said he believes the company is on track to see its first profits by the end of 2001.

Food.com can afford to take its time, as it has powerful backers including McDonald's, Kraft Foods, Blockbuster Entertainment and TV Guide. Food.com received $80 million in equity financing last March.

Click here to Play
Delivery strategies
The money should last for the next two years, Laing said. And while there have been no layoffs at Food.com so far, he isn't ruling them out.

"As we evaluate our business, you take a look at the pieces," Laing said. "Some go and others stay."

In the meantime, Food.com is taking in money from advertising on its site by charging restaurants an $89 monthly fee and a small percentage of each order made on its site.

The company maintains strong ties to its heavy-hitting backers and has struck co-marketing deals with Kraft Foods and others, Laing said.

Players in the home-delivery market must still prove that people will pay higher prices to have goods hand-delivered to their doors, Stamski said. Until recently, Kozmo, rival Urbanfetch.com and Webvan offered free or nearly free delivery, but they are increasingly requiring a minimum order.

"The days of free delivery are coming to a close," Stamski said. "This is where we will see whether demand will sustain all of these services."