Whether home-shopping services ultimately prove popular enough to be cost-effective (and vice versa), they are already providing some retailers with access to hard-to-reach customers -- including homebound individuals and time-starved two-career families.
In addition, home shopping's interactivity gives it the potential to be a powerful market research tool, providing valuable data about customers.
Byerly's, Edina, Minn., used home shopping as a means to "target customers who weren't shopping our stores as much as maybe they could be," said Tracy Wiese, communications manager.
The retailer offered home-shopping services from February to November 1996 in partnership with Shopping Alternatives, Bethesda, Md. Wiese said that Shopping Alternatives ended the contract "when they took a strategic direction to a warehousing concept. The door is still open for us to do home shopping, but we haven't been able to find the right partner yet," she said.
Byerly's found that home shopping was a powerful lure. "Our figures showed that at least half of the people who used our home-shopping and delivery services didn't shop Byerly's as their primary grocery store," said Wiese. "So this was a way to introduce Byerly's to a different group of shoppers than those already in our stores."
The retailer gathered data by asking "a few brief questions" when shoppers called in to place an order for the first time, said Wiese. "We did as little surveying of customers as possible, because we wanted home shopping to be a good, fast, convenient service. I'm sure there are opportunities to do a lot more research comparing home shoppers to those who come into the store," she added.
One thing that surprised Byerly's about home shopping was "the number of orders that came in via modem," said Wiese. "We had expected the majority of orders would come in by phone or fax on our toll-free numbers, but close to one-third of customers ordered on a regular basis with their modem."
Wiese attributed the popularity of on-line ordering to a combination of a customer group that was comfortable with this form of communication and improved technology. "Customers using the software to put their order together and modem it in could pull up that same order the next week, take off a few items and add a few others, and just resend it," said Wiese.
Schnuck Markets, St. Louis, recently kicked off a home-shopping service accessed through an Internet site, www.schnucks.com. As Byerly's did, Schnuck hopes to reach currently marginal customers with the promise of convenience.
"We think we'll see customers who are incapacitated in some way or can't leave their homes," said Bob Drury, vice president of management information systems at Schnuck. "As these people put it, now they can reach the top shelf." Drury added that he expected some home-shopping customers would be adults ordering for aging parents.
Drury predicts another primary home-shopping group will be "busy households with both spouses working, who have very little time to do anything but keep up with the rat race. These people find that an hour they spend in a supermarket is an hour they'd rather spend doing other things."
He added that while both these consumer groups already shop in supermarkets, "it wasn't as convenient as this. We're in the service business, so we must take advantage of any distribution channel that the economics make sense for, and this is one of them."
Economics was behind Schnuck's decision to limit ordering to a web site rather than offer phone and fax options. "Those are both labor-intensive options, and to make home shopping work you've got to reduce the labor content as much as you can," said Drury.
One of the strongest examples of the market research potential of home shopping is demonstrated by Peapod, Evanston, Ill. The company, which offers consumer-direct services with retailer partners in several major markets, also offers a "very powerful one-to-one marketing arena," according to Tim Dorgan, executive vice president.
Because customers access home-shopping services via Peapod's web site, shopping a virtual store before placing their order, "we can target messages and events, including samples, on-line ads and promotions to consumers, based on their previous purchase behavior," said Dorgan.
"For example, a manufacturer could target either a non-user or a former user of a product. And then, because we capture all the purchase behavior, we can see in a real way what happens as a result of that event. It becomes a controlled test situation, only for the people shopping on-line it's not a test, it's real world. They're responding with their pocketbooks in a very real way," said Dorgan.
Currently, most of this marketing muscle has been exerted for packaged goods manufacturers: a total of 18, including Kraft Foods, Glenview, Ill., and Bristol-Myers, New York. "We're just getting to the point where we can provide information that's of interest to the retailer," said Dorgan.
Nevertheless, Dorgan sees many parallels between the "virtual" store and the physical one. "In our environment, we can put displays anywhere, so it becomes an interesting way to pretest display locations," he noted. "For instance, we put a display for hand lotion in the banana aisle. This created an impulse purchase for a fairly expensive product in an unusual location.
"While that's an extreme example, it may help us find out something about merchandising to help guide what happens in a traditional grocery store," Dorgan added.
The closed-loop nature of Peapod's system also allows the company to integrate demographics with purchase histories and responses to promotions. "We capture demographic information via on-line registration, then put it in the database," said Dorgan. "We can certainly target events against that, to provide another level of specificity."
Dorgan believes Peapod can operate as an "on-line lab" to discover information applicable to both on-line marketing and traditional retailing. "If you believe the on-line channel will be big, you want to know how to become the best marketer within it. How do I place my ads, how do I do my offers, whom do I target?" said Dorgan.
While home shopping can be leveraged as a marketing and research tool, one of the key areas to explore is home shopping itself.
"There's still so much to learn," said Tom Furber, vice president of Hannaford Bros., Scarborough, Maine, who manages the chain's Hannaford HomeRuns service. While the program has offered home-shopping services to Boston-area households for 18 months, and is currently handling more than 1,000 orders per week with an average order size of $90 to $100, Furber said the company is still on a learning curve.
For example, Furber feels multiple communication methods are still needed for customers to order home-shopping services. "Customers want to use a web site, a telephone or the fax; they prefer whatever is easiest at the time, wherever they are," said Furber. And newer technologies may soon supplant these methods. "How big is Web TV going to be? We could find that it's the easiest medium for everybody."
One learning experience has been significant for Hannaford, which has no retail stores in the markets its HomeRuns programs serve. "We feel like we get to learn about people who shop for groceries in the Boston area," said Furber.