CHICAGO -- An industry research group, the Consumer Direct Cooperative, has concluded that 5% to 15% of the market will be swallowed by an emerging delivery channel that allows consumers to order goods and services for pickup and home delivery -- bypassing the traditional retail store.
The group, assembled by Andersen Consulting here, comprises leading retailers, including H.E. Butt Grocery Co., San Antonio; Wegmans Food Markets, Rochester, N.Y., and Fleming Cos., Oklahoma City, and such manufacturers as Coca-Cola Co., Atlanta, and Procter & Gamble, Cincinnati.
A dozen other retail and packaged goods manufacturers fill out the group, which is now evaluating whether to move forward with more research or pilot programs to better understand the new distribution model.
"They're calling it 'Consumer Direct,' which automatically gets the hair up on retailers," said one CDC member, who requested anonymity.
"Retailers would prefer that this channel never emerge. It's another form of competition," the source told SN. "Their point of view is that if word gets out this can appeal to a large segment of the population and can generate a market share that is fairly significant. It will only increase investment in this channel, and they'd like to slow it."
CDC members financed extensive research, which concluded that a consumer direct model is a viable new delivery channel for the future. A meeting to discuss possible next steps may be held next month, according to the CDC member.
"Based on all of the research, it looks like 20% to 25% of consumers will have interest in signing up for this type of service," he said. "And that will represent 5% to 15% of consumer purchases" over the course of the next five to seven years.
More than 800 consumers participated in face-to-face, one-on-one interviews designed to gauge their interest in shopping and receiving other services coordinated through specialized distribution facilities, sources told SN. These so-called "consumer response centers" are envisioned as semi-automated, low-cost, high-volume hubs that could be located throughout the country.
"Think of it as a flow-through warehouse in a commercial park, which has a much lower labor cost and is focused on bringing product in and shipping it out on the same day," a source on the CDC said.
The consumer response centers would maintain low inventory levels and offer other services, such as dry cleaning, film development and video rental that could be purchased as add-ons, much like premium channels offered through cable TV companies.
CDC members have been tight-lipped about the research work, but several agreed to speak to SN last week, on condition of anonymity, and earlier this year when SN first reported on the group's creation. All the sources emphasized that the purpose of the study was to gather information about consumer demand -- not to endorse any particular delivery model, establish hard numbers about future market effect or predict the roles of industry players.
"I think, more than anything else, this [study] was a proof of the concept. People have talked about this [consumer direct] concept ever since the milkman went away, but it never really got going," a source on the CDC said.
However, advances in technology, rapidly changing lifestyles and growing dissatisfaction with the shopping experience will drive consumer demand for an alternative delivery model, the source told SN.
The group drew no conclusions about which industry players -- retailer, wholesaler, manufacturer or third-party company -- would lead the development of this niche, he said. It may be a question of who gets to the finish line first.
"This is another channel waiting to be developed. And either existing retailers and wholesalers will do it, or whoever the next Sam Walton or Sol Price is will do it," he said.
In addition to H-E-B and Wegmans, other members of the Consumer Direct Cooperative include Dominick's Finer Foods, Northlake, Ill.; Ukrop's Super Markets, Richmond, Va., and wholesaler Richfood, Mechanicsville, Va.
Joining Coca-Cola and P&G on the manufacturer side are Kraft Foods, Northfield, Ill.; Ralston Purina, St. Louis; Gillette, Boston; Nabisco Biscuit, East Hanover, N.J.; Ocean Spray Cranberries, Lakeville, Mass.; Sara Lee Bakery, Chicago, and J.M. Smucker, Orville, Ohio.
Other CDC members include Shell Oil, Houston, and Streamline, Westwood, Mass.
The latter company's consumer-direct business model, now serving 60 customers and officially launched last week, was a focal point of the CDC study.
Streamline hosted a gathering at its consumer response center in Westwood last week and was expected to announce future development plans, which were to include a $1.2 million Consumer Learning Center to serve as a lab for manufacturers to explore consumer-direct business models.
Through the Consumer Learning Center, companies could tour the consumer response center and visit the homes of consumers serviced.
