Camarillo-based Pink Dot is betting there are a lot of lazy people beyond the borders of Southern California.
With $32 million from two rounds of venture funding late last year, the firmly entrenched grocery delivery service is gearing up for an ambitious nationwide expansion next month to compete with the likes of Kozmo.com and other Web grocers.
"This market is huge and there are a lot of places for people to play," said Pink Dot Chief Executive Dan Frederickson.
The expansion is being funded by money that Pink Dot raised from venture firms William Blair Capital Partners, GE Equity, St. Paul Venture Capital, Brand Equity Ventures, Graystone Venture Partners and Corber Corp. Frederickson said Pink Dot will complete its third round of funding within the next month, adding more fuel to its expansion plans.
Pink Dot currently delivers groceries in Los Angeles and Orange counties to people who order by phone or through its Web site, www.pinkdot.com. Company officials would not provide specifics on which cities Pink Dot plans to enter, or when, but said it will be in four new markets by the end of the year.
Even with such substantial financial backing, the company faces a tough road in the growing online food delivery market.
Jupiter Communications estimates that consumers will spend $800 million buying groceries online this year. But the competition is lining up. While analysts say the market is still open, it is becoming increasingly crowded and a shakeout is expected later this year after competitors go head-to-head in selected markets.
So far, not a single company has made a profit in the online grocery business, in which consumers order supermarket items from a Web catalog, charge purchases to their credit cards, then sit back and wait until a delivery van shows up with the goods.
Pink Dot is operating at a disadvantage because it's getting into the business relatively late, said Jill Frankle, e-commerce analyst with Gomez Advisors, an Internet research firm.
Kozmo has already built a brand name for itself through extensive marketing and is well known in New York, Boston, Seattle, San Francisco, L.A. and other cities where it has launched, Frankle said. Pink Dot is unknown outside the greater Los Angeles area.
Further, Pink Dot will also likely be competing against other Web grocers like Webvan and Homegrocer.com, both of which already operate in Southern California.
Frederickson, though, said Pink Dot has one key factor in its favor: its standard convenience-store fare consists of many products not offered by Kozmo.
Ian Larkin, managing director of Chicago-based William Blair Capital Partners, one of Pink Dot's venture funders, acknowledges that the field is competitive, but said there is enough space for Pink Dot to thrive.
"While (Pink Dot) may not win the war, they'll certainly come in second or third," he said. "I don't think the market is too crowded."
For reprint and licensing requests for this article, CLICK HERE.