Blast From The Past: Online Groceries & IPO? (OPEN, PG, AMZN)

Does the Webvan IPO seem like a million years ago?  Or what about Peapod?  We may get an IPO from a similar company in the U.K. called Ocado, an online grocery retailer.  The Times Online reported that management is changing its anti-IPO stance of last year and that the OpenTable, Inc. (NASDAQ: OPEN) IPO now has the company considering a share float in 2010.  In a way, this could be a positive for Procter & Gamble (NYSE: PG) and even Amazon.com Inc. (NASDAQ: AMZN).

Jason Gissing, a former Goldman Sachs banker, is the head of the company and he is causing a stir because this report he was so adamant just last yearabout not pursuing any initial public offering.  It seems that the pressure of quarterly earnings accountability and having to answer to meager shareholders may be less of a concern if the valuations can be that high.

Ocado is still not profitable and its main customer and shareholder is the U.K.-based supermarket chain Waitrose.  But Procter & Gamble (NYSE: PG) took a stake earlier this year that was based upon a valuation of 500 million Pounds (about $810 million today). The obvious benefit, other than the instant wealth of course, is the ability for it to expand internationally.

This will be interesting to see how it all plays out.  In the U.S. there are operations such as NetGrocer, FreshDirect, Peapod and Webvan (both are still around), and others.  Even Amazon.com (NASDAQ: AMZN) is in the game.

One of the biggest challenges here is the trust factor for those who are picky over which selection they buy.  Grocery store margins are already very low compared with most industries, so the key here is managing waste, returns, and more.   Another issue is the perishable factor since many online delivery services today only deliver frozen goods and non-perishable groceries.

Let’s just say that this U.K. IPO is one to watch.  Online grocery shopping is available at a few dozen online outlets, and is not any longer uncommon at all in several major metro areas.  When Webvan and Peapod were public there was a much smaller Internet user population in the U.S.  There was also an aversion to making any online transactions.  This is commonplace today.

Maybe we are about to see a resurgence of the milk man.

JON C.OGG