By Phat X. Chiem, Chicago Tribune

John R. Icke is putting all his eggs in the on-line grocery basket.

In 1997, he left a high-powered executive job to create ShopLink.com, an Internet-based grocery and delivery service that reported $12 million in revenue last year and not a penny in profits.

But with the verve of every virtual dreamer these days, Icke says his company is poised to take a big bite out of an industry pie that could grow to $3.5 billion by 2002, according to one estimate.

ShopLink.com isn't alone.

A growing number of on-line grocers are rushing to build Web sites and warehouses, while attracting top talent and loads of capital. And they're all betting on one unknown: Will time-starved consumers drop bricks-and-mortar stores for the convenience - and cost - of buying eggs and milk on line and having the items delivered to their doorsteps?

"The answer is an emphatic yes," Icke says. "This is an industry that is going to explode."

While some analysts are less optimistic, recent moves by several on-line grocers suggest they're gearing up for an intense fight to control this version of e-commerce.

Peapod Inc. of Skokie, Ill. (www.peapod.com), announced in late September that it had lured Bill Malloy away from AT&T Corp. to become its new president and chief executive. Malloy, who headed up AT&T's $6 billion wireless operations, comes on board just as Peapod is about to expand beyond the eight metropolitan areas it now covers, including metro Boston, and invest millions in new warehouses, trucks and staff.

In September, long-time Andersen Consulting chief executive and managing partner George Shaheen surprised industry peers by announcing he was leaving the consulting firm to head up Webvan Group Inc. (www.webvan.com). The Silicon Valley on-line grocery start up, which is gearing up for an estimated $300 million initial public offering, also has placed a $1 billion order for Bechtel Group to build highly automated warehouses in 26 markets across the country.

HomeGrocer.com of Bellevue, Wash., hired Mary Alice Taylor of Citigroup (and before that, Federal Express) in September in preparation for its planned nationwide rollout. That effort got a big boost with a recent $42.5 million investment by Amazon.com, which gives it a 35 percent stake in the Internet grocer.

The latest player in an increasingly crowded field, Priceline.com - the Internet service that lets consumers name their own prices for airline tickets and cars - launched its own grocery venture called WebHouse Club earlier this week. Following the same format, the service will offer thousands of brand-name items that customers can pick up at participating stores when their prices are matched.

Fred Schneider, director of retail e-commerce for Andersen Consulting in Chicago, said these moves are "a precursor to rapid growth."

According to new-media research firm Jupiter Communications, on-line grocery shopping could jump from $63 million in 1997 to $3.5 billion in 2002, and possibly another 20 percent by 2005. That still makes up just a fraction of the $443 billion grocery category, but some estimates put on-line shopping at a staggering $60 billion by 2005.

For now, however, Internet-based grocers aren't making money - in keeping with most e-commerce ventures. They're spending resources on growing their companies and building a market by targeting potential on-line customers deterred so far by the extra cost, computer technology, and wait time for deliveries, as well as traditional shoppers who can't imagine allowing someone else to squeeze their melons or choose their chicken.

Still, virtual grocers say they can offer what may be, for many families, the greatest commodity: time.

Peapod's items are picked out by trained "shoppers" working in a warehouse or special section set aside inside grocery stores that are stocked with groceries supplied by local grocery chains - in Massachusetts, it's Stop & Shop.

In most areas of the country, Peapod uses a business model that is becoming an industry standard: a centralized warehouse where orders are filled and staged for delivery. HomeGrocer, Webvan, and ShopLink all use the warehouse model.

Netgrocer.com also has struggled to find the right concept. The North Brunswick, N.J.-based on-line grocer removed its chief executive last year, replaced 80 percent of its staff, and shelved a planned $38 million initial public stock offering.

By sending packages by FedEx, Netgrocer is the only Internet service to deliver goods nationwide.

Much of the cost for on-line grocers has been trying to set up distribution networks in new market areas. Even though on-line grocers don't need as much infrastructure as bricks-and-mortar chain stores, they still need the warehouses to stock the groceries and people to deliver them on time, says Jack Staff, chief Internet economist for Zona Research in Redwood, Calif.

"The hope is that someone like Webvan can distribute goods far more efficiently than the Safeways of the world," Staff says. "We'll just have to wait and see."

Icke says the strategy is to win consumers with a dependable service and quality goods. Once they feel comfortable ordering food over the Internet, the company can expand into all aspects of e-commerce. ShopLink already offers a plethora of services, along with food delivery, such as dry cleaning, shoe repair, film developing and even bottle and can redemption.

"We're looking to become the concierge of the home," Icke says. "A whole new shopping paradigm is what we are creating."