SECAUCUS, N.J. -- Customers using home-shopping services most frequently order perishables -- not dry grocery, as many observers believe, according to a new industry survey.
That particular finding surprised the study's sponsors as well as Ron Hodge, senior vice president of operations at Hannaford Bros., Scarborough, Maine.
"This is not only surprising, based on what many of us expected to see, it also complicates the process because the more perishables you're delivering, the more handling difficulties you can expect," said Hodge during a presentation of the report at the New York State Food Merchants Association annual meeting here last month.
"I wouldn't think that you'd want to live through too many bad experiences on perishables, so it would seem that those doing the selecting and delivery are doing a pretty good job at this point in time," he added.
Hodge, a New York State Food Merchants Association board member and former chairman, profiled the state of home shopping today and made projections about its future along with the survey's sponsors, Kraft Foods, Northfield, Ill., and Cornell University, Ithaca, N.Y.
Approximately 40% of the 60 chains and independent operators surveyed indicated they offer home shopping and delivery services and 18% said they would launch a program in the next year. Among the highlights of the survey, titled "What's in Store for Home Shopping":
Home-delivered orders average $77, or more than double the average in-store purchase.
Although 63% of retailers print catalogs containing items available for home delivery, only 6% of respondents include price listings. About 50% of those surveyed also maintain an electronic catalog and 23% of those feature price listings.
Among retailers contracting with a third-party firm, 83% perform fulfillment functions with their own staff and 38% handle the order-taking tasks. About half do their own delivery and tendering.
The vast majority -- 76% of home shopping orders -- are placed via telephone and accepted by operators or automated technology. Three-quarters are equipped to accept orders via fax; 46% can accept PC orders, and 4% of respondents have interactive-TV technology.
Perhaps the most stunning survey finding was the frequency with which shoppers order perishable items for home delivery, said Hannaford's Hodge.
For example, at King Soopers, Denver, 21 of the top 25 items most frequently ordered for home delivery are perishables, according to Edward McLaughlin, a professor at Cornell University who also spoke at the presentation. In addition, nine of the top 10 items most frequently ordered through Peapod Interactive, Evanston, Ill., are fresh produce, he added.
Other third-party home shopping and delivery services include Shoppers Express and Shopping Alternatives, both based in Bethesda, Md.
"Our assumption was the things that will be ordered most frequently will certainly be dry grocery because a can of soup is a can of soup and a can of soft drink is a can of soft drink," McLaughlin said.
Hodge noted that retailers have yet to exploit computerized home shopping technology, but rewards await those who do.
"There's no question we are not using the technology yet," he said. "I believe there is the tremendous potential for home shopping in the use of the computer and the modem."
Launching such an initiative requires a substantial investment in technology, training, staffing and logistics, he acknowledged, and the program may not be a profit center.
"There may be some reasons for people to stay in it without making a lot of money," Hodge said. "If you expect that somebody else is going to come into your marketplace with home shopping and take your business, an alternative may be to get into it to protect your overall market share."
The other reasons given by retailers were an enhanced image, increased loyalty, increased sales and profitability.
The survey was bullish on the future of home shopping and projected that by 1998, two-thirds of retailers in the United States and Canada will offer the service. Home shopping sales, which rose 73% over the past two years, are estimated to triple by 1997, the report concluded.
Despite the strong outlook for home shopping, there remain a number of thorny issues. For example, once the product leaves the store, who is liable for any losses that may occur? If the customer is not at home when the delivery arrives, who is responsible for the added cost of a second delivery attempt? How does a retailer protect the shopper data accumulated through such a program and prevent it from landing in the hands of competitors?
"There's been an awful lot of testing and experimentation by retailers across the country and [although] there have not been any home runs, there's been a lot of singles at this point," said McLaughlin.
