HEINEN'S TESTS WEB SITE FOR ITS DELIVERIES

DAN ALAIMO

CHICAGO -- Heinen's Fine Foods, Warrensville Heights, Ohio, is expanding its 10-year-old delivery service to enable consumers to order on-line, said Tom Heinen, president and chief executive officer, speaking during the Food Marketing Institute show here this month.

The service is now operating in a test phase, but the retailer has no timetable for its official launch, he said. "We are in a trial period. We are working the kinks out, trying to execute it correctly. It's not that we don't think it will work, but we want to make sure that our customer satisfaction level is very high," Heinen said. It is not being actively promoted, except for a link on the company's Web site, www.heinens.com, he said.

Heinen's operates 13 stores in the Cleveland metropolitan area. The e-commerce project is operated for Heinen's by a software services company, Aurora Products, Beachwood, Ohio. The delivery service used by the retailer is Speedy Shopper, Chagrin Falls, Ohio. During the panel at the FMI show, it was also revealed that Haggen Inc., Bellingham, Wash., and Ukrop's Super Markets, Richmond, Va., are working on on-line shopping programs.

Operationally, Heinen's on-line shopping option is being treated as an extension of the delivery service, which takes orders by phone, faxes them to a nearby store for picking, and then retrieves them from the store for delivery. Orders placed on-line are faxed to both the store and delivery service. As to allowing store pickup by customers, "we do not have it yet, but we are moving in that direction," Heinen said.

"As a company, we are in the food-delivery business. The Internet is here to stay, and clearly the Internet is going to be one channel in which people will choose to purchase food. We don't see it eliminating supermarkets but we see it as one more way that people will procure food," he said.

The delivery service has been successful, Heinen said. "We think it meets the needs of customers. It's not a huge percentage of our business, but we believe that delivery is still part of an overall food-delivery program in the future."

The Heinen's on-line ordering service now offers 14 categories: produce, dairy case, frozen foods, assorted meats, seafood, baked goods, delicatessen, baby food/products, grocery (food), grocery (nonfood), pet food/supplies, beverages, alcoholic beverages and health and beauty. While much has been made of consumer resistance to ordering perishables on-line, Heinen said the retailer's experience with the delivery service disproves this.

"When we went into the delivery business, we expected that we would see far more center-store items ordered than perishables, and actually it was the opposite. We had more perishable items ordered, and the delivery service continued to be that way for over 10 years," Heinen said.

"Customers are still risk-averse. They still want to shop and feel comfortable with people that they are familiar with. So I believe that a good entry into the delivery business or the on-line shopping business is creating that partnership with the stores that exist that already have relationships with the customers," he said.

Other panelists said that in the future on-line customers are likely to be less concerned with the need to personally examine perishables. "With bioengineering, a tomato is going to be a tomato and who really cares whether I get to pick it out or not," said Ken Pray, an architect and coordinator of store design for Kroger Co., Cincinnati. "The issue is going to be whether I can trust the company I deal with to deliver the same tomato week after week, just like a bag of Doritos. I think the potential is there," he said.

Ultimately, for "the short-term future," grocery shopping will encompass both the on-line and in-store experience, said Jim Scanlon, managing director of retail operations for Ukrop's Super Markets. "I'm not sure how long that short-term future is going to last, but I still think the key is going to be the retailers that can provide consumers with the combination. There is definitely a need for expediency. Today people are on the run, they don't have as much time to shop the center of the store," he said.

"The more that people do buy prepared foods and the less time that they spend actually preparing their meals, the more time they will want to spend picking out the stuff that they are going to prepare those meals with. So perishable is a very key piece to see, touch and feel," Scanlon said.

A question was raised whether retailers are paying enough attention to center store and opening the door for competitors like Netgrocer, North Brunswick, N.J., an on-line company that sells packaged-goods products nationally, often carrying the full lines of manufacturers.

"It is essential that brick-and-mortar retailers attempt to do the same tie-ins with manufacturers that the Netgrocers are trying to do," said Scanlon. "Those relationships with the manufacturers are definitely a key to the future because you still need to make sure that someone is not getting a better deal than you are. If someone is going to carry a full line from Kraft, for example, they are obviously going to have the best costs all the way across the board. So we need to step forward and decide what we are going to do from a merchandising/marketing point of view to make sure that we don't lose that advantage. We can't forget about it," he said.

Concentrating on perimeter departments at the expense of center store may not be a wise approach, said Pray, "but I think it happens because we like to focus on what can we do differently from the guy down the street. We can do a great job on produce and we think we can do it better than the guy down the street, so we are going to focus our attention on that, not only the marketing, but the facility, the lighting, the decor, all the elements that go into creating that experience. A bag of Doritos is a bag of Doritos, and it is hard to think that we can draw people into that area of the store to make it be an exceptionally exciting thing. The guy down the street is going to have the same Doritos," he said.