LOS ANGELES -- As retailers aggressively launch web sites to enhance their competitive position in today's changing market environment, they may be challenging the wrong rivals. Retailers need to shift their energies to combat their true on-line competition -- electronic home-shopping networks -- which strive to gain Internet-savvy customers.
"Your competitors are the electronic home-shopping services, not the guy sitting next to you. What are you doing about that?" asked Christine Comaford, president and co-founder of PlanetU, San Francisco. "Today retailers are still relying on p-shopping, or physical shopping; however they need to focus more attention on e-shopping, or electronic shopping."
Comaford spoke during the opening general session, "Leveraging the Internet to Drive Sales," at the MarkeTechnics Convention here. The convention, which ran Feb. 22 to 24, was sponsored by the Food Marketing Institute, Washington.
"The Internet can be a huge advantage for retailers. You have already earned your consumers' trust," she added. "I cannot stress enough the fact that it is an advantage [for retailers] that the electronic third-party networks do not have the consumer relationships and bonds that you have. You need to execute and work that."
To compete in tomorrow's retail arena, the supermarket industry needs to focus on these new practices before third-party on-line networks establish solid virtual retailing niches, causing further competition.
"For example, if someone told the travel-agency industry two years ago that Microsoft would be a vital competitor, [the industry] would have laughed," she said. "Now Microsoft is the No. 3 travel-booking service on the Internet. Supermarket retailers need web sites, and even though p-shopping will continue, you need e-shopping. Otherwise home-shopping networks will cause problems."
Comaford reported that while retailers are spending considerable money to gain an Internet presence, not many retailers are seeing substantial paybacks yet. "Twenty-four percent of supermarket retailers currently have web sites, and 14% are planning to launch a site," she said. "It costs up to $2 million to create a web site, and about $500,000 to maintain it. While some retailers are on the edge and trying new things, other retailers are frightened."
According to Comaford, as the Internet begins to attract more of the supermarket industry's customer base, this medium can hold the key for retailers to interact with customers. Also, interacting with consumers can be achieved by using promotional methods similar to those that retailers have grown accustomed to in a physical environment.
"Over 30% of American consumers connected to the Internet are not reading traditional newspapers; instead they are going to the Internet for information. Also, 35% do not watch television and are accessing the Internet for entertainment," she explained. "Retailers can use common promotional vehicles on the Internet to increase sales and profit, decrease their [operating] costs and 'toast' competitors."
According to Comaford, retailers should spend between 1% and 3% of their promotional budget for on-line marketing. "It is a low-impact way to test a promotional on-line campaign," said Comaford. "This should be doubled each year for five years."
Besides gaining instant customer contact, Internet marketing allows retailers to continue forging a relationship with customers, while measuring lifetime value.
"The Internet can help you to target offers to the right person, at the right time. This includes targeted promotions and coupon offers," she said. "If promotions and incentives hit the correct consumer, you could see your redemption rate increase by about 50%. This medium has potential to triple your [promotional] return on investment. In the physical world, it is harder to do this, but the Internet is dynamic and allows consumers to react immediately."
By integrating frequent-shopper databases, "retailers can track who bought what item, at which store and when. The faceless consumer has got to go," she said. "Now retailers can target more things to more users, for a fraction of the price. In addition, you can monitor how effective the targeted promotions are. If you use the medium, you will discover how less expensive, and more effective [targeted marketing] can be for you."
As the Internet becomes more mainstream, new opportunities will continue to open for the supermarket industry.
"Many do not realize that one in four American adults is on the Internet, and 58 million adults use it either on a weekly basis, or twice a month," Comaford said. "Looking ahead, there are expected to be 175 million users by 2001. One-third will be teens, and one-third seniors. This [latter] group is the prefect candidate for home shopping and delivery."
