Online grocery industry takes stock, lowers its expectations. (Media & Technology).

For bread, milk and other staples, Ignacic Hernandez suggests shoppers pass up his online grocery service. But anyone looking for a molcajete (a mortar and pestle made of lava stone) or a tortilla press or cornhusks for tamales won't be disappointed by MexGrocer.com.

The Web site offers hundreds of authentic Mexican food products, cookbooks and utensils tough to find north of the border. It's this emphasis on providing products unavailable at most supermarkets that has allowed two-year-old San Diego-based MexGrocer to survive.

Where just a few years ago online grocers like Webvan were being touted as a replacement for traditional supermarkets, the sector has been taken over by niche services targeting a specific group of shoppers willing and financially able to shop online.

"We want our customers to continue going to their neighborhood stores... and come to us for these hard-to-find products," Hernandez said.

Targeting L.A.

The Bay Area's OrganicExpress.com set up shop in L.A. this spring and has signed nearly 2,000 regular customers, according to Paul Johnson, the company's founder, president and chief executive. That's about half as many clients as the organic-produce provider serves up north, where the company's been operating since 1995.

"L.A. wasn't being adequately served," Johnson said.

He attributes much of the growth to local customers' focus on health and fitness and the fact that OrganicExpress offers items not easily found in traditional markets. But Johnson also credits online grocers, such as Webvan, for getting consumers used to the idea of buying food on the Internet.

"What they have done, for which I am grateful, is really develop the market," he said. "They gave us a huge head-start."

Online grocery services began to take off in the late 1990s and several companies jumped into what promised to be a lucrative industry. The biggest player was San Diego-based Webvan, which had about 750,000 customers at one point, many of them in L.A. County. But the company was forced to shut down in 2001, just a few months after buying rival HomeGrocer.com.

Following the dot-com implosion, projections for industry aren't as rosy as they used to be. At one point, eMarketer, an online business research firm, was projecting online grocery sales would climb to $33.6 billion in 2002, a 3,360 percent increase from 1998. But sales in 2000 totaled just $1.5 billion, and Datamonitor, a business research and consulting firm, now concludes that the industry won't reach the $26.8 billion mark before 2005.

Dave Heylen, a spokesman for the California Grocers Association, said brick-and-mortar grocery stores have little reason to worry about online competitors. The demise of some online grocers, he said, proves the point.

"They all learned their lessons from the Webvan experience that the demand is there but it's not a great demand," Heylen said. "Shoppers still want to go touch and feel."

Chains enter market

For those who don't, supermarket chains are starting to offer online service. Whereas setting up shop proved extremely costly for Webvan and others, traditional markets already have much of the infrastructure in place.

"Grocers are taking the ball and running with it," Heylen said.

Vons, the supermarket chain owned by Safeway Inc., expanded its online grocery service to L.A. and Orange counties and surrounding areas last week. Albertson's Inc. began taking online orders in Southern California earlier this year. Stater Bros. and Bristol Farms also offer online services.

"We just know that it's an area ripe with the type of customer that seeks the convenience of online grocery shopping. That's going to be somebody who's computer and Internet savvy and has the affluence to pay a delivery fee," said Mark Marymee, a spokesman for GroceryWorks, the company providing the online service for Vons.

"We know we're not going to be capturing the entire (grocery-shopping) universe. We're not trying to," he added. "We're trying to appeal to that section of the audience that wants the convenience.

Not everyone is convinced Angelenos need that kind of convenience.

"The supermarket is a specific part of the landscape here," said Rohit Shukla, president and chief executive of technology think tank Larta. He notes parking isn't a problem at most markets, the weather isn't keeping people stuck at home and locals love spending time in their cars.

"Why would you want to go on the Internet anyway?" Shukla asked.