MyWebGrocer, A Survivor of the Online Grocery World, Plots Growth Strategy with iPhone Apps

8/20/09

The online grocery business famously flamed out earlier this decade, after hundreds of millions of dollars were pumped into companies like HomeGrocer.com and Webvan. But online grocery sales and advertising have been making a comeback in recent years, and one of the industry survivors, MyWebGrocer, based in Colchester, VT, has raised a healthy $13 million this month to fuel its growth in this promising Internet market.

MyWebGrocer—which provides online commerce software and digital media services to more than 90 grocery store companies including A&P, Food Lion, and other regional and national outfits—has seen its own fortunes grow this year. New York-based Stripes Group provided the financing on August 5, according to a company statement. MyWebGrocer now plans to use the money to roll out some new iPhone apps for consumers to do their grocery shopping, and to boost its staff from about 70 today to 110 over the next year, the company’s founder and CEO Rich Tarrant tells Xconomy.

MyWebGrocer appears to be well positioned to capitalize on the growing desire among grocery retailers and consumer goods providers to attract customers on the Web. For one, the firm’s e-commerce software and other Web products are designed to enable regional and national grocery stores to gain more online customers and revenue. Secondly, its growing advertising network caters to consumer goods companies that want to put their wares in front of online shoppers. Yet the firm faces significant competition, especially in attracting ad revenue from consumer goods providers, which have a wide variety of online advertising venues to choose from.

The good news is that more online ad dollars from consumer packaged goods companies are going to firms like MyWebGrocer. Packaged goods companies spent $156.2 million on online advertising in the first quarter—up more than 50 percent over the same period two years ago, according to Nielsen NetRatings. Also, frugal shoppers are going to the Web to find online-only coupons on grocery items to save money.

For its part, MyWebGrocer wants to expand the reach of online grocery shopping to the mobile world, Tarrant says. The firm’s first iPhone app—scheduled for release next month— is designed to enable shoppers to use mobile phones to navigate grocery retailers’ online weekly circulars and make shopping lists. The second iPhone app, which he expects the firm will launch in mid-October, will let shoppers look at grocery store inventories and potentially submit an order to purchase those items. Just like the grocery store websites that use MyWebGrocer’s software and other Web tools, the mobile apps will bear the brands of the retailers, Tarrant says.

MyWebGrocer appears to have learned from the sins of previous firms in the online grocery business. Perhaps the most famous flop in the business is former California-based online grocer Webvan, which, according to CNET, went bust in 2001 after burning through $1 billion in investors’ money to build an infrastructure for delivering groceries to consumers in several markets around the U.S. Tarrant says that he launched MyWebGrocer back in those same heady days, in 1999. But MyWebGrocer never bet big on bricks and mortar. It chose instead to better enable existing grocery stores—which already had the bricks-and-mortar infrastructure for selling goods—to gain more online shoppers.

“Our view was that there are already 36,000 conveniently located warehouses across the U.S.—they’re called grocery stores—and they already have a supply chain, labor, brand recognition, and a customer base,” Tarrant says. “So our view was to bring the technology and expertise to them.”

MyWebGrocer is headquartered in Tarrant’s native Vermont, where he runs the company with his two brothers Brian and Jerry. (Tarrant previously founded Amicus Healthcare Living Centers, a Connecticut-based operator of assisted living facilities for people with Alzheimer’s disease, which he sold a few years back.) The software firm does most of its new product development in Vermont and operates sales offices in Atlanta, Minneapolis, New York, and San Francisco. The firm also uses outsourced technical staff in India and Romania.

On the advertising front, MyWebGrocer’s ad network competes for dollars with Internet giants like Yahoo and Google and other major online destinations. Google’s YouTube was the No. 1 site in terms of the number of ads for consumer packaged goods in the first quarter, according to Nielsen. Also, Quincy, MA-based startup Modiv Media operates a grocery ad network that distributes ads via its in-store handheld shopping scanners and self-service kiosks at grocery store delicatessens, commonly found at Stop & Shop. In an even more direct sense, MyWebGrocer competes with Minneapolis-based Grocery Shopping Network on both the online advertising and the grocery e-commerce software businesses.

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