Buyers feast on dot-com carcass

By MARY JACOBY

© St. Petersburg Times,
published September 2, 2001

LANDOVER, Md. -- There was a funeral for the New Economy last week. It took place in a vast, hot warehouse outside Washington. An auctioneer delivered the eulogy to the resale men and corner grocers who had come to bury a company called HomeRuns.com.

Ten months and untold millions of dollars ago, this Web-order grocery delivery service expanded from its Boston base into the Washington area.

Whether it was cat litter, soda, diapers or a pound of sliced cheese, HomeRuns.com promised to rush it to the doors of wired Washingtonians for a $5.95 delivery fee.

To do so, the privately held company bought a fleet of 70 delivery trucks and hired 270 workers. It stocked a 145,000-square-foot warehouse with thousands of groceries stored on racks that stretched in rows as long as an Iowa corn field.

It bought expensive new equipment: stainless steel cutting tables and wash tubs, top-of-the-line scales and meat slicers, fork lifts and trash balers and hand trucks. It outfitted employees in blue shirts emblazoned with the HomeRuns.com logo (a stick-figure running with your delivery in hand) and khaki pants.

With $100-million in new venture capital funding, it boasted of plans to quickly conquer 20 more markets along the East Coast.

Instead, HomeRuns.com went broke. In abruptly suspending operations July 12, it became another parable of Internet Age mania and hubris, a time in business when common sense went out of fashion and get-rich-quick grandiosity reigned.

But the company left a large estate. Its heirs were the ants of the Old Economy who came to cart off its treasures.

The contents of the warehouse were auctioned off Tuesday to a group of bargain-seeking small businessmen who left shaking their heads at the enormous folly of it all.

HomeRuns.com was founded in 1996 by Maine supermarket operator Hannaford Bros. Co. Last year, Hannaford sold control of the company to a New York equity firm, the Cypress Group, for $100-million.

The publicity-shy company claimed 90,000 customers in the Boston and Washington areas. It has never said how many millions it lost, and its executives are not taking reporters' phone calls.

HomeRuns.com folded the same week as another Internet grocery delivery service, Webvan.com, which burned through $860-million in financing.

Such figures are nearly incomprehensible to people like Joe Rodriquez, a Cuban immigrant who owns several independent grocery stores near this blue-collar suburb of Washington. He came to the auction to buy cheese and meat slicers.

Did he consider HomeRuns.com a competitor?

He rolled his eyes. "No."

Why not?

"Because it just doesn't work. Your cheapest employee is your customer. He picks the items off the shelf, loads them in his car, and drives them away. You pay zero for that."

Labor is the major expense for grocers, who typically operate on razor-thin 1 or 2 percent profit margins.

Rodriquez made a sweeping gesture around the warehouse. He suppressed a smile. "The people who put the money in here, they lost their shirt."

Afrik Pius, owner of four grocery stores, agreed. "It's a tough business," the Nigerian immigrant said, adding that he hoped to pick up an inexpensive forklift.

HomeRuns.com warehouse workers earned about $8.70 an hour, 50 cents more at night, according to Eric Rivera, who worked in the produce department. Rivera said the warehouse filled about 300 orders a day.

If so, the operation was bringing in a paltry $13,000 in delivery fee revenue each week. That was not enough to support the company's large payroll and operating expenses.

And so, after 10 months in Washington, HomeRuns.com folded. Its Boston operations ceased, too.

Gordon Brothers Retail Partners, by contrast, has been in business for 98 years. The Boston-based liquidation company was founded in 1903. It has done a lot of dot-com auctions lately, and now it is doing HomeRuns.com.

Frank Santalucia is an auctioneer for Gordon Brothers. He is a wiry man in a long-sleeved dress shirt and tie. Remarkably, he doesn't seem to be sweating, even though he is talking nonstop into a microphone and the air in the warehouse is stifling, because HomeRuns.com is no longer around to pay for air conditioning.

Santalucia is standing on a raised stainless steel platform with wheels. The platform keeps him high enough to see the bidders, and when he is finished hawking one item, an assistant rolls him to the next lot.

A speaker for the microphone is also on wheels. It is strapped to a movable tray rack marked "meat department."

"Next is No. 343, a multiton pallet jack," Santalucia says. "Do I hear $2,000? No? Let's open it up at 15 hundred dollars. Do I hear 15? I have 15 up now. Fifteen hundred dollars. Do I hear 2,000?"

Biders nod. Or shake their heads. "I've got 28 hundred. Going once. Twice. Sold! An absolute steal at 28 hundred!"

Gordon Brothers says it cannot reveal how much the auction brought in for HomeRuns.com. But it was clearly a firesale.

"All this equipment, it's top of the line," said Dana Rolander, a manager with a local produce distributor. He had just exchanged high fives with a colleague in a green apron after buying three shiny new delivery vans.

"I hate to see a company go down, but it's great that we can pick up their stuff," Rolander said. "Fortunately, we're doing a little better than this place."

"They didn't save any expense," Chris Hoge, a specialty food distributor looking to buy some scales, said with a whistle. "Everything in here is state of the art."

Much of it had never been used, either.

There were scores of khaki pants in plastic wrapping and racks of heavily padded coats for working in the now defrosted freezer room, an area as big as an airplane hangar.

"A coat like that will cost you $275 new," said Lonnie Robinson, who is in the resale business in Pennsylvania. "If I could get it for, say, $15. Then I'd sell it to you for $50. We both win."

Robinson did not place the winning bid on the coats, but he did pick up a couple of costumes. For $175 he got a pineapple suit and grape-bunch suit with the HomeRuns.com logo on them. He tried them both on and danced around as if he were at a HomeRuns.com promotional event.

His 20-year-old son, Bryan, cringed. "I think he just buys this stuff because ... oh, I don't know. He's like a kid."

Bryan said his father never makes any money off the costumes he collects, but Lonnie Robinson protested. "This will fly off the rack with Halloween coming up," he said.

It will be up to historians to explain the mass psychosis that seized hold of investors in the late 1990s. Why did so many presumeably smart people throw so much money into so many bad ideas?

A man with a bushy black mustache and a black beret sat sprawled in one of 126 ergonomically correct office chairs that had been on the auction block. "Just call me John the Greek, a thoughtful observer," he said, declining to give his full name in an accent that has stuck with him through 40 years in the United States.

He is in the grocery equipment resale business. The dot-com era, he said, was a huge transfer of wealth from the rich to the middle class, better than any government program.

"You see, we are here to buy for $30 what cost this company $3,000 and resell it to you for $350," he said. "I make money, you get a bargain."

And HomeRuns.com?

John the Greek laughed. "They do not make out so good."

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