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HOW TO MAKE PRIVATE LABEL STICK ON THE WEB?

Like the stocks owned by the companies offering the service, on-line grocery shopping has its ups and downs. Private label, a component of a supermarket's e-tail program, has been caught on the same roller coaster. As a result, observers say, the implications of marketing and selling store brands via the Internet are virtually unknown."Each Web site has different perspectives on what needs to be done.

Like the stocks owned by the companies offering the service, on-line grocery shopping has its ups and downs. Private label, a component of a supermarket's e-tail program, has been caught on the same roller coaster. As a result, observers say, the implications of marketing and selling store brands via the Internet are virtually unknown.

"Each Web site has different perspectives on what needs to be done. It's a gray area for us. We're trying to figure out how to do it right," said Craig Espelien, corporate director of store brands at Supervalu, Minneapolis. The wholesaler currently supplies such on-line grocery e-tailers as Streamline, Home Grocers, Peapod and Webvan.

"I read an article that said anybody who was exclusively on e-commerce and did not diversify would be out of business in a year. There are a lot of wounded and dying because of the plethora of e-commerce, and others are going to falter just because of the number of retailers," added Bernie Rogan, company spokesman for Shaw's Supermarkets, East Bridgewater, Mass.

Shaw's began its on-line home-shopping program three years ago. However, the company chose to discontinue the service because it didn't generate enough interest.

Rogan said Shaw's drafted a contract with a company that is now defunct. "The profile ran for 11 months, then the vendor said we can't afford to offer this service," Rogan said. In addition to the e-commerce side, there was an 800 number. Shaw's and its partner opted to break their contract when only 6% of the business was generated at the Web site. "They had anticipated more usage from the modem and Internet customers," Rogan said of the vendor.

Rogan said Shaw's offered its entire product mix on-line, even Shaw's Own brand, which makes up 40% of the chain's sales. "There's a clear acceptance of our store brand," he added. Even if a buyer were new to the site or supermarket chain, Shaw's picked up additional private-label sales because of its lower prices, Rogan said.

Shaw's had no minimum order and deliveries were made in the mornings and evenings. "The average order was over $100, usually $125 per order," Rogan said.

He added that the company was pleased with the way on-line shoppers purchased because they typically bought all their groceries at the site, and did not seek lower prices at other stores. The convenience of home delivery and on-line shopping was enough of a draw to buy their entire shopping list in just a few clicks of a mouse.

However, there are drawbacks, Rogan noted. E-tail shoppers aren't influenced by in-store promotions or the smell of the fresh-baked bread that just came out of the oven. Consequently, their shopping lists are pretty much the same week to week.

Eventually, Shaw's would like to get back into grocery e-commerce, "but we haven't been presented with a model that works," Rogan said. "Our intentions are to someday get back into it when the system is there. It's a convenience to our customers," he added.

For now, Shaw's uses its Web site to promote new products like its recent Safe Science line of chemically safe cleaning products. Rogan said Shaw's often uses the site to promote its Shaw's Own label.

Many of the current on-line e-tailers might take offense to Rogan's comments, observers said, but added that there is so much activity right now that it's hard to discern what's working and what's not.

Some retail companies present positive findings, while others report negative results, and subsequently get out of the business. For the supermarket industry, it's hard to determine all the facts.

Because there are so many paths of merchandising, the importance for e-commerce retailers to focus on one is clear. Supervalu's Espelien explained, "The key is what does the retailer want to be: upscale; for every man; or price-[driven]."

So, stores that take the upscale approach are going to offer specialty items under the store label; those that are striving to develop a traditional-store image must couple national brands with private-label brands that emulate the national brand at a price point that shows value; and those that want a price-only operation must use private label to instill the lower price image, Espelien explained.

Once the e-tailer has nailed the image, it must also determine its consumer. "Most [Internet shoppers] are in the 50% or above income [bracket], have higher education, are more computer literate and are savvy shoppers," he said.

"They have dual incomes, probably more money than time, and are willing to pay for delivery. They are less likely to be stock-up shoppers and they have a tendency to buy their whole list rather than shop three stores for price. The trick is to find out what their purchase pattern is for private label," he added.

Rogan said his on-line customers were anticipated to be baby boomers and young, career-driven folks, but it turned out to be anybody who needed the convenience of home delivery.

"Ideally, the supermarket sites are used to attract shoppers other than the ones who go into the store," Espelien said.

Those who buy private label on-line, Espelien added, have to first be comfortable with purchasing national brands on-line. Then, they can move to store brands.

"By doing this, the [on-line store] is creating brands and a value site," Espelien noted.

In a traditional bricks-and-mortar store, private-label shoppers tend to be middle-income, better-educated and with larger families, Espelien said. However, there is still some debate as to who the e-tail and private label e-tail consumers truly are.

Enter the Private Label Manufacturer's Association, New York. This organization is sponsoring its annual "Consumerama" conference June 15 at the Crowne Plaza LaGuardia Hotel in New York. This year's topic is "Private Label and the Internet: What Are the Implications for Store Brands?"

"There's not a heck of a lot of information out there about the [on-line] consumer," said association president Brian Sharoff. "What has been left out is the consumer's attitude. What are they happy with, what are they not happy with," he added.

These questions are some of the ones that will be addressed at the conference by way of a focus group session. Attendees of the conference will hear directly from on-line shoppers about their experiences and expectations of e-tailers. According to the PLMA, topics will include customer satisfaction, convenience and ease of use, consumer loyalty, security issues and attitudes toward private label.

One thing that is certain, Sharoff said, is that private label sold over the Internet must be given the same attention as in a traditional store. For example, the product must maintain high quality and the packaging must be appealing, he added.

Some of the e-commerce merchants that will be discussed at the conference will include those who service the New York area: Waldbaum's, A&P, ShopRite, King Kullen, Genovese, Target, Kmart, Priceline.com and Peapod.

SN visited some of the better known sites and found a handful promoting private label on the site, while others did not. Internet groceries such as On-lineGrocers and Peapod did not mention private label on their sites at all.

However, at Albertson's and A&P, store brands were available in a promotions section of the Web sites.

Albertson's large black pitted olives made the chain's "Top 50" list at 69 cents.

A&P has a link at www.apmetro.com that says "Our Brands." At this site, additional links are available for Eight O'Clock Coffee, Master Choice and America's Choice. A brief description is given of each brand. Plus a list was available for 29 Master Choice items that were offered at a discount to frequent-shopper card users through March 25. SN visited the site after this date, so the site had not been updated.

Products that were part of the Master Choice discount mix included chamomile tea, cheese crackers, Texmati white rice, roasted red pepper pesto, and whole grain brown mustard, among others.