Supermarket market

National | Bidding for groceries, building a better Net, giving AOL a run for its money, and taking classifieds online

Issue: "Gunpoint evangelist," Oct. 9, 1999

Point-and-click produce
Would you spend a few minutes online in order to save a few cents at the checkout counter? The online shopping service Priceline.com hopes you will. Priceline is about to add everyday products like ground beef and paper towels to the big-ticket items like airline travel and home mortgages the company currently sells. The service, which launches Nov. 1 in New York under the name WebHouse Club, is like a reverse auction. You pick a price for your coffee beans or cold cuts or ibuprofen. Participating supermarkets try to match the offer. If they can, your credit card is charged and you pick up your goods at a local store. Priceline (the company with the William Shatner ads) hopes bargain hunters will dive in and try this new way to shop. A Food Marketing Institute survey reports that over 45 percent of shoppers use coupons often when they go to the supermarket. Whether those people will pay the $3 monthly fee to push a mouse instead of a shopping cart is uncertain. WebHouse Club won't sell generic and store brands. Shoppers pick from a directory of major names. Coffee buyers, for instance, must pick at least two brands of the four available (Chock Full of Nuts, Folgers, Hills Brothers, and Maxwell House). Someone who bids $2.29 for a can of coffee has an 80 percent chance of getting the price. Once the price is matched, however, the deal is done-even if another store can beat the price. Such a venture sounds strange, but it's an important experiment into whether people will buy everyday items on the Net. Online stores like Pepod, Webvan, and Netgrocer already sell and deliver online (minus brick and mortar neighborhood stores) with varying degrees of success. All aboard
Is your Internet connection lousy? Do websites download like an oncoming snail? The problem isn't always on your end. The Internet works like a big railroad yard, with routers and switches around the world pointing data to its destination. But some work better than others do; a logjam in Virginia might slow down your download in Idaho. Yet those problems can't keep going if the Net is to reach its potential. So there's a race between companies to build the better routers and switches that will kill the cliché about the "World Wide Wait." Nortel Networks, Cisco Systems, and Lucent Technologies are competing head-to-head to develop and deploy a new generation of fiber-optic gear. These companies are building networks so the Net can reliably send phone calls and TV shows as well as the usual crunch of email, chat, and Web traffic. Nortel is touting a new fiber-optic technology called OPTera and comparing its deployment to putting a race car driver in a car with a hot new motor. "You're going to take his existing Formula One engine out, you're going to put a new one in, and he's going to have speed and reliability going around the corners that he's never had before," Nortel's Clarence Chandran told Reuters. Lucent, a former AT&T division, gobbled up two rivals this year: Ascend Communications and Nexabit Networks. Cisco agreed last August to pay a combined $7.4 billion to acquire Cerent and Monterey Networks, two companies developing ways to use fiber-optics to send phone calls and TV signals over data networks. Building a new Internet infrastructure is a little like building new transcontinental railroad lines: It's a lot of work and there's lots of money to be made. The Lucent/ Ascend deal alone was worth $20 billion in stock, but the trains won't get very far unless somebody lays some new track. You've got competition
Get ready for another online giant: EarthLink and MindSpring are merging to become one giant Internet service provider. The combined company will bear the EarthLink name and boast 3 million customers, significantly smaller than AOL's 20 million but far bigger than thousands of competitors. That the two 5-year-old companies are combining shows how much the industry is consolidating, MindSpring gobbled up failed competitors, growing immensely as EarthLink made a deal with Sprint last year to buy the long-distance carrier's Internet access service. The new company's goal is to take out America Online, a popular destination for those new to the Net. The service built itself on its ease of use and its ever-popular chat features. Those afraid of computers or those fearing a high learning curve often want AOL to hold their hands. Many, however, tire of the service's interface and prefer a normal browser and email program. So services try for AOL alumni and promote more reliable services, faster access, and fewer busy signals. EarthLink's two other major competitors are still formidable: AT&T online services has 2.5 million users and Microsoft's MSN service has 1.8 million. Outside of proprietary services like AOL or its sister Compuserve, the difference between Internet service providers is negligible. You dial a number, you check your mail, and you browse the Web. That's it. You might as well be using a small local service as you would AT&T or Earthlink. In the Internet service business, for now, the company with the best marketing campaign wins. Once broadband takes hold, with users taking high-speed digital subscriber lines (DSL) or cable modems over dialup, the rules will change. Customers will want more of everything, served faster and more reliably than ever before. At that point, things will really get interesting. You've got competition II
The Internet is grabbing a revenue mainstay of the American print media, and publishers are scrambling to compete. This time it isn't the news, stock reports, or box score; it's classified ads, your local paper's cash cow. For decades, in order to sell your house, find a job, or buy a used car, you grabbed the Daily Bugle and flipped through those little ads in the back. Now you can do that for free online at countless sites without slugging quarters into a paper box or getting ink on your fingers. Newspapers haven't taken the online challenge lightly. They've jumped online, risking millions upon millions for a stake in future survival. But one-paper towns don't exist on the Internet. If readers in Texas are willing to read news sites in Pittsburgh or London for Clinton scandal updates, what's stopping them from digging through a server in Virginia to find a data-entry position? To heat up the battle against upstarts like Yahoo and AOL and CareerBuilder.com, one publisher wants local papers to join forces on a super site: a national classified ad directory. "Let us offer the New Jersey computer user the opportunity to view homes for sale in Colorado," William S. Morris III, chairman of the Newspaper Association of America, told the National Press Club. "Let us enable the unemployed auto worker in Flint, Mich., to scan employment opportunities in the Sun Belt." While his trade association represents 2,000 papers, Mr. Morris said 750 already have classified ads online. By joining ranks, the reasoning goes, dailies could create as formidable a product as the Yellow Pages. Too little, too late? Radio and TV, diminishing into the bland chain-produced products available in many cities, have already heavily damaged newspapers. If the classified ad wars are lost, the entire industry could face scary days ahead.

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