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Word Count: 791
Peapod provides online grocery shopping in eight metro areas in US Its online shopping website is backed by a powerful distributor network consisting of tie-ups with local retail outlets and recently its own distribution warehouses Members pay order and delivery fees for home delivery The company faces a financial crunch and is mounting huge losses despite its growth due to very high order fulfillment costs Its chief competitors are local grocers who sell at a lower rate than Peapod and other upcoming online grocers like netgrocercom homegrocer webvan etc Retail Grocery Industry Analysis The US retail grocery industry is 700bil including groceries health and beauty items and beverages Intense price competition has lead to market consolidation No single player holds more than 10 market share Supermarkets average 15 to 20 ROI by low cost direct purchases and sophisticated cost-effective supply chains and are an established brand Entry to online grocery retailing by existing players was viewed as either aCannibalizing its own local brick-and-mortar stores OR bAdditional sales channel The industry is highly price sensitive Presently the industry growth has slowed down to 34 due to business moving to wholesale clubs and drug stores The Online Grocery Segment Essentially its not a new emerging industry but an emerging sales channel for the grocery industry The online grocery segment seeks to sell groceries to the Internet savvy consumer online Its a highly competitive industry in its infancy Market research predicts a very high growth rate for this industry This disintermediation and self service model decreases the costs of setting up large retail outlets at various locations The software and equipment costs in 99 by Peapod are 3500 out of the total operating costs of 102000 indicating only approx 35 of the operating costs went in maintaining the website Thus the industry has very low entry barriers as any existing supermarket with high brand recognition and established distribution channels can easily enter
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