Safeway Rolls Out Online Shopping

"The supermarket realm was sort of untouchable and now it's under attack," Metzger said. "The name of the game today is 'share of stomach.' If you can create a new segment for yourself, all the better."

Generally, the online grocers operate in the same way. They drop off fruits, meats, vegetables, household items and even prescriptions, as Safeway does, at your doorstep and tack on a delivery fee.

Their business models vary, however. Some have no stores, such as three-year-old FreshDirect.com, which specializes in delivering gourmet foods to New York area homes.

Peapod has a distribution warehouse in Gaithersburg and delivers to homes within a certain time. Shoppers can create lists, sort products by price and view nutritional information.

Safeway.com distributes its groceries from stores that deliver within 20 miles. As the online sales at a particular store grow from 4 to 6 to 10 percent, the company begins distributing from another nearby store, Rhodes said.

Willard R. Bishop Jr., president of Willard Bishop Consulting Ltd. in Barrington, Ill., said Peapod must "climb a much steeper hill" than Safeway with its business model because it is a free-standing entity.

"Safeway regards the [online] business as an incremental business versus a completely new one that has to carry all the weight associated with it," Bishop said. Peapod "has to pay for all of the building, the inventory, the utilities, the insurance. There's a lot more fixed cost."

Peapod says it is not worried about the new rival in town.

"We don't see our business being interrupted by Safeway.com," said Elana Margolis, Peapod's manager of public relations. "We think there's enough business to go around."