America Online and Web grocery merchant NetGrocer announced a multimillion-dollar deal July 14 that gives NetGrocer (www.netgrocer.com) exclusive rights to sell groceries on AOL's proprietary service and on its Web site at www.aol.com.
According to a statement released by the companies, AOL will receive a guaranteed minimum payment of $15 million over the duration of the agreement, which runs for three years on the service and two years on the site. AOL will share in advertising and transaction revenues once certain unspecified thresholds are met.
NetGrocer's products will be featured on AOL's service in a variety of its channels, including shopping, lifestyles, interests, personal finance and health.
AOL currently claims 11 million members, which makes this deal NetGrocer's most important online partnership to date. In May, it announced a deal with television shopping's QVC in which NetGrocer and three other Internet merchants will get space on the iQVC Web site at www.iqvc.com in an area to be unveiled sometime this fall as The Square @ iQVC. iQVC claims 450,000 “shopping sessions” each week.
So far, the demand for groceries on the Internet has been relatively low. Boston research firm The Yankee group estimates that just over 500,000 homes in the United States bought groceries online last year.
In an online retailing report earlier this year, auditing firm Ernst & Young, New York, lumped household products, health and beauty aids, and food and beverages in a wait-and-see category. In fact, groceries didn't even make the firm's roster of what's selling online, which in descending order listed computer-related products, books, travel, clothing, recorded music, subscriptions, gifts and investments.
In November, club giant CUC International, Stamford, CT, invested $5 million for a 25-percent stake in NetGrocer before CUC merged with HFS Corp. to become Cendant.