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The case discusses the business strategy of two Internet-based grocery retailers: Alcampo in Spain, which is a traditional, brick-and-mortar supermarket chain, and Peapod in the US, which is only an Internet-based grocery retailer. It describes the Alcampo move into Internet commerce and the way the company has developed and operates its online grocery shopping system. It highlights the challenges that this Alcampo move presents for reconciling both the physical and virtual mode of operation. The case contrasts the business model of Alcampo in Spain with that of Peapod in the US and pinpoints the strengths, weaknesses and future potential that each approach presents. It also raises the cultural and technological factors underlying the two business approaches. The case concludes with issues related to the increasing competition in Internet-based retailing and the business opportunities offered in Internet-based grocery retailing. The teaching objectives include: (1) to contrast the business strategies of a traditional, brick-and-morter supermarket chain and an Internet-based grocery retailer; (2) to assess the development and operation of an Internet-based grocery shopping system in Spain, and the challenges of operating through both physical and virtual channels; (3) to stress the importance of relationship management in computer-mediated commercial transactions; (4) to determine ways of improving the business model and service quality of Alcampo''s and Peapod''s Internet-based business; and (5) to analyse the competition strengths and weaknesses of Internet-based grocery retailers and their future outlook.