PHOENIX -- Like everything else in the supermarket business today, consumer demand is driving produce buying offices to adopt e-commerce sourcing procedures, said retail executives participating in a panel discussion of the emerging technology at United 2000 here, the annual convention of the United Fresh Fruit and Vegetable Association, based in Alexandria, Va.
"I think the consumer is probably going to come out of all of this winning the most," said Dan Hamilton, group vice president-marketing, for H.E. Butt Grocery Co., San Antonio, Texas. "This is about speed to market. This is about convenience. This is about a changing appetite that we're faced with on the retail side every day."
Mike Kemp, director of produce, Supervalu, Eden Prairie, Minn., said that customers are already using the Internet to a larger degree than supermarkets are, and in many cases have acquired intimate knowledge of the various aspects of each fruit and vegetable they consume. And, it won't be long before all shoppers have that data.
"I think that e-commerce is going to give consumers a better understanding of that apple, that pear or that orange that they're buying; who grows it; and what their agricultural practices are. They will be more informed in their buying decisions," he said.
Both men were part of the annual Produce Outlook 2000 roundtable, moderated by Fred Heptinstall, United's chairman-elect and executive vice president of Chiquita Banana North America, Cincinnati. Also participating were: Chuck James, chief executive officer of ProduceOnline.com, South Pasadena, Calif.; Mark Moore, co-founder and chief executive officer, GlobalFoodExchange.com, Atlanta; and Timothy York, president of Markon Cooperative, Salinas, Calif.
For their part, retailers are looking to the efficiencies inherent in e-commerce technology to streamlime daily office life in the post-consolidation era. Supermarket companies today are juggling 100,000 SKUs and buying for geographically diverse units, according to Hamilton, who said that customers are asking for more services and more products than ever before.
"We need something other than just pure manpower or womanpower to crunch the numbers. We need some organizational structure and e-commerce brings some of that to the table," he said, noting that the produce industry as a whole is a "nimble" group. "We have to be -- we're dealing with highly perishable products."
Gazing at their own crystal ball, retailers are simultaneously attempting to figure out how consumers are going to buy groceries, in this case, produce. Kemp believes that some are still going to want to touch and smell it and choose it themselves, though they may order it for pick up at a depot-type of format, where their Center Store items have already been picked and boxed.
"For some reason, consumers will stand in line for everything except groceries," he said. "They want to get in and out as soon as they can."
Translating that convenience into profit growth is the responsibility of the retailer, and that is where they see the true value of e-commerce.
"It doesn't think for us," said Hamilton. "There's still an element of making decisions, but it allows us to bring the information together in a more powerful way, so we can deliver to the customer quicker and more conveniently."
But consumers are only one side of the equation retailers are working with. On the other are grower/shippers who have been approached by their trade partners about going on-line. While acknowledging that fear and reluctance are -- at least initially -- thwarting the transition to paperless buying, Kemp said that many should actually feel relieved at the arrival of Web-based systems.
"Because, sooner or later, a company like ours [was] going to come and say, 'You need to invest in [Electronic Data Interchange].' And this is millions of dollars worth of softwear equipment," he said. "Today, the Internet is $19.95 a month, and it allows different-sized suppliers to compete on the same scale as the large ones. So, I think the fear should be more in not getting into e-commerce."
Hamilton said that the apprehension could be compared to the last big communications development, the fax.
"When I look at technology like the fax, it added another vehicle for us to communicate with our suppliers. I couldn't think of a world without it," he recalled.
Both men admitted that e-commerce technology is still in its early stages, and there are bound to be several false starts before it is fully integrated throughout all phases of the produce supply chain. But, even now, Web-based communication programs are starting to bring tangible results in ridding the distribution channel of redundancies and inefficiencies.
"I think that we're seeing technology flush out the real business need, the need for speed. Certainly, with the business that we're in, speed is very important in regards to perishability of product," said Hamilton. "I see this technology embracing this [supplier/buyer] relationship even more."
To that end, the retailer panelists urged grower/shippers to jump into the Web business and upgrade now, rather than later. The motivation on the supermarket side has become more obvious as the shakeout from mergers and acquisitions creates tremendous bottom-line profit pressure.
"The consolidation I see has got to be towards trying to working with supply," said Kemp. "Where we really could use the help is on the forecasting side. What I see so far is you're bringing in a lot to negotiate price, but there's another 25% of the cost of goods that comes into our warehouses, like transportation."
What retailers are looking for is an integrated system that manages and stores data on all aspects of the buy-sell equation, he added.
"You can't have a system for this and a system for that and try to monitor all of them -- forecasting supplies, knowing our needs ahead of time and sharing that information back and forth. I haven't seen a lot of that yet," he said.
"When you look at e-commerce, you got to figure out what business application it will have for you and when you get in. Less important is who you get in with," said Hamilton. "If you're trying to decide that, then I think you've missed the point. E-commerce attacks those business processes that are weak and frail. Those come out of the system, and that's where this adds value.
Kemp agreed, saying that "if you're just going to look at the cost of getting into e-commerce, you missed it. It's not just who you want to do business with, or what it's going to cost. If you're looking at those two factors, you're going to be sitting on the side when the train goes by.
He noted that Web-based commerce hasn't yet evolved to the point where all parties "have hard data saying 'this' is going to be the savings in produce. But I can guarantee that a year from now, there will be significant savings on both the grower side and the retail side."
Hamilton said it's not a matter of if B-to-B e-commerce will become standard operating procedure in the produce industry, but when.
"The ones who get in early will probably have the toughest road to go, but they will lead this emerging business, and we need this leadership," he said. "The more people we have involved, the better the product will be and the quicker we'll get to a resolution."
