DES PLAINES, Ill. -- Customers tapping into Jewel Food Stores' computerized home-shopping program are more loyal and ring up higher average transactions than other shoppers, including those enrolled in the chain's frequent shopper program.
That's just the tip of the iceberg, though, in terms of benefits realized from the home-shopping program, said Ed Hanson, sales manager at Jewel Food Stores, Melrose Park, Ill., a division of American Stores, Salt Lake City.
Because customers using the service must indicate in advance which items they want to purchase, Jewel is able to gauge not only actual sales but also purchasing intent. That, in turn, has led to the discovery of several merchandising problems, including frequent out-of-stocks, that were harming sales.
The program was also used to test the effectiveness of new promotional tools, such as on-line coupons and cross-merchandising involving unusual groupings of products.
Hanson and Tim Dorgan, president of the Interactive division of Peapod, Evanston, Ill., discussed the benefits of Jewel's computerized home-shopping program at a meeting here of the Merchandising Executives Club of Chicago. Jewel has been working with Peapod for several years on offering home-shopping services.
"We're finding the [home-shopping customers] are the best shoppers we have, above
and beyond customers in our frequent shopper program. Peapod customers spend about $110 a week, which is incredible. They do all their fill-in shopping with us. They load up to justify the delivery fee," Hanson said.
"They don't go off to Wal-Mart or a pet store or some other retail outlet; they purchase the full complement of groceries with us each and every week," he said.
While Hanson sang the praises of the program for inspiring heightened customer loyalty and spending levels, however, he listed other, perhaps more surprising, benefits that have come from the chain's involvement in home shopping.
Information on consumers' purchasing intent vs. product availability and willingness to accept substitute items, for example, has yielded some unexpected revelations.
"We found out that we had out-of-stocks in our variety of eggs throughout the day. Upon investigating, we realized that the way we shipped the eggs, the pallet configuration we used, was resulting in our never having all five varieties on the shelf at any given time," Hanson said.
"Peapod brought that issue to our attention. Now we're reconfiguring those pallets and solving the out-of-stock problem in that category."
Jewel is able to see more clearly how product sales "vary by time of day and by day of week. We found we have shortcomings in the evening and morning hours and on Sunday. Peapod helped us change distribution patterns to go after Sunday sales," Hanson said.
"Scanning never really tells you about out-of-stocks. It can predict what you might have sold, but it doesn't tell you exactly what happened. We may consider an item to be a dog, because we don't see sales. But if there are production problems, it can't get to the point of purchase. So [knowing] purchase intent is extremely beneficial," he added.
The computerized system has also been used to test the effectiveness of on-line coupons, the first of which featured $1 off on a bottle of hand lotion. The coupon appeared on-screen when customers "visited" the produce department.
Since launching the test, per-capita consumption of the lotion shot up "by a factor of 50 just from the coupon," Peapod's Dorgan said.
In addition, computer shopping makes it possible to merchandise in nontraditional ways. Hand lotion, for instance, would probably never be displayed in the produce aisle in a supermarket. But in an on-line program, it's logical to advertise products in high-traffic areas, Hanson said.
The program also features a holiday aisle that lumps together all available holiday-related merchandise that shoppers can purchase at Jewel. "On-line you can do anything in the store. You can make it as big or small as you want. You can adjust the number of aisles and create selling sections. There is a lot of potential for us as a retailer to build these things," he said.
One issue Jewel is now seeking to tackle with regard to the shopping program is how to expedite the fulfillment process, Hanson said.
"A $100 order can clog up the checkout line. We're looking at putting registers in the back of the stores or using handheld checkout technology."