Home shopping service returns to Sainsbury's

NIGEL COPE

The home shopping service set up last October to supply groceries provided by Sainsbury's is to start trading again next month.

Flanagan's, which ran a home delivery trial in Wandsworth, south London, for three months, ceased trading earlier this month due to financial difficulties. However, it has now been re-financed and a new supply deal set up with Sainsbury's. Sir Michael Sandberg, the former chairman of HongKong Banking Corporation, is on board as chairman and has invested in the company.

Adrian Flanagan, joint chief executive said: "We had to decide whether we would be a small niche operator, or take the market by storm. We have decided to go for the latter."

Richard Chadwick, Sainsbury's director of business development, said: "Home delivery is a small but growing market. We have a lot of projects looking at this market and this is one of them. We see it as a way of offering more choice to the customer."

The re-financing of Flanagan's, thought to be a multi-million pound deal, is in two stages. The first cash injection has been completed. The second will involve a private offering to other shareholders. Sainsbury's has an option to take an equity stake but has yet to take up that option. "We are just a supplier," Mr Chadwick said. However, Sainsbury's is offering assistance with technology and logistics.

As before, Flanagan's will start the home delivery of groceries in Wandsworth with 2,500 lines, mostly well-known brands, supplied by Sainsbury's. The cost to customers is pounds 4 per delivery regardless of the size of order.

Order is by phone or fax and orders received by 6pm are delivered the following day within a two hour time slot. Flanagan's is hoping to offer a same-day service. Payment is by credit card.

The company has 12 vans which will trade under the Supermarket Direct name. Flanagan's is looking at the possibility of joint branding with Sainsbury's if the supermarket giant offers its own brand through the system.

The delivery process of home shopping is seen as a key part of the development of shopping on the Internet and other forms of electronic retailing. Sainsbury's is already selling wine on the Internet. Tesco is selling wine on the Compuserve on-line system but is also looking to expand into other areas of home delivery.

Mr Flanagan said the company planned to puts its printed catalogue on the Internet and CDRom in time. The plan is to concentrate the service on the London area for three years and then spread out into other large conurbations. "I don't think it will work in rural areas," Mr Flanagan said.

The company hopes to extend the range to 25,000 lines in the future.