IT SOLUTIONS 1998-06-15

MARTY SONNENFELD

Supermarkets, like many other types of businesses, continue to develop home pages on the World Wide Web at a brisk pace. But some retailers are moving beyond a basic "Web presence."

Slowly, they are using e-mail to facilitate customer interaction, and are exploring how best to target customers with on-line advertising. In addition, retailers continue to investigate the power of electronic commerce to sell their products.

Opinions vary widely about the advantages of working with a third-party company that specializes in on-line sales vs. a retailer entering this market on his or her own. Many third-party providers that exclusively offer on-line ordering are considered a threat by many retailers.

An SN tour of supermarket Web sites found much similarity in the features and functionality of the sites. Some list store locations, many include postings of employment opportunities and most include information on weekly specials.

Shaw's Supermarkets, East Bridgewater, Mass., is offering a twist to its Web site. Customers who drop off their film at Shaw's stores can opt to retrieve their photos by downloading them in a graphics format from its www.shaws.com Web site, using an order-specific password.

Other retailers, like Dorothy Lane Market, Dayton, Ohio, believe that e-mail is an important part of a Web site. "We get a high volume of e-mail, including several hundred product inquiries per week," said Patrick Arnold, Web master for Dorothy Lane. In addition, he noted that he personally replies to all e-mail inquiries within 24 hours. "It's important for people to still feel that there is a human in there somewhere."

Some argue, however, that these features are still at a primitive level, and that many retailers are not yet taking advantage of the technology's capabilities.

"There aren't a lot of supermarket companies that have embraced the full power of the free Internet," said Ron Clyde, president and co-founder of the e-commerce company, Sugar Creek Group, Houston. Clyde, former vice president of electronic commerce for Randalls Food Markets, Houston, said he sees the main obstacles as "security concerns and a lack of knowledge."

"Today, most [grocers] view the World Wide Web as a marketing outlet similar to their sales brochure," he added.

One area that retailers are beginning to give deserved attention is the opportunity surrounding on-line ordering. While many are not yet seeing profits through their on-line ordering endeavors, it is evident that they believe it is beneficial to perfect the formula sooner rather than later.

In other on-line retail areas, companies like Amazon.com are seeing rapid success. However, sources still advocate caution for retailers looking to jump into on-line ordering and sales.

"Comparing the overall process of selling books to selling grocery items through the Web may be more like comparing apples and oranges." said Jerry Colonna, managing partner for Flatiron Partners. Flatiron Partners is a venture capital firm that invests in Internet companies that may provide electronic commerce, educational matter, even search engines.

"For groceries, you have to create a new distribution system, even if it's three kids running around town on bicycles."

Sugar Creek Group's Clyde believes that "stores that don't offer on-line services will lose customers to those that do."

"Even if orders at first are not that big, the [retailers] who make their moves now will be in a better position to keep a bigger share of the market when everyone else catches on," said Allan MacCannell, president of NYC Grocery Online, a third-party company that partners with New York City-area retailers to offer on-line shopping.

Even retailers with relatively lengthy Web experience are only slowly expanding their on-line offerings. Dorothy Lane, which operates two stores, has been on the Web for three years, according to Arnold. In addition to featuring 250 recipes and information on cooking classes on-line, "we take on-line orders for a small number of specialty items -- like our 'Heavenly Hams,' " he explained. "It's mostly local people who want to share the hams with friends and family in other areas."

While the company is contemplating initiating on-line ordering for all items, Dorothy Lane is considering having customers pick up orders at the store, and charging a small fee. "We think they're willing to spend a small amount of money to save 30 minutes in the grocery store," Arnold said.

Earlier concerns about third-party on-line grocery companies also seem to be easing. "People may think globally, but they eat locally," said Clyde. "Food is going to be the last thing to go away from the local store because people still want to shop with people they know."

Some third-party companies are acknowledging retailers' importance as trusted food marketers.

"We see our company as an ally to supermarkets -- definitely not as a threat. We have to respect the warehousing structures of existing grocers," said MacCannell. "The companies that are trying to be a threat are all going out of business."

MacCannell's NYC Grocery Online partnered with Karabelas Food Market & Cafe, New York, to offer shopping via the Web in December 1997. Since joining forces, NYC Grocery has used e-mail feedback to determine that "the on-line ordering to Karabelas is all or almost all new customers," said MacCannell.

Though much smaller, NYC Grocery Online is similar in structure to Peapod, Evanston, Ill., which partners with local retailers to deliver groceries. So far, Karabelas, a single 3,500-square-foot store on Manhattan's First Avenue, is NYC Grocery Online's only partner.

G&R Felpausch Co., Hastings, Mich., which operates 18 stores, will soon be expanding its Web functionality. "Within three months, we'll begin offering on-line ordering in Battle Creek and Grand Ledge, Mich.," said Mike Hubert, vice president of management information systems for Felpausch.

Even as retailers continue to launch new sites, it may also be important for supermarket companies to understand more about the Internet by stepping back to look at the technology in a wider context.

While e-commerce seems to be a strong area of interest, supermarket retailers are also focusing on on-line advertising to make their sites stand out from competitors.

Dorothy Lane's Arnold pointed out that a year after launching its Web site, the retailer stopped running newspaper ads. "Our customer count went down, but our sales have increased," he said, adding that the Web site has been a key factor in the surge.

While Dorothy Lane has had good initial success in Web advertising on its proprietary site, the retailer is also advertising its services on local Web sites.

"In addition to running our ad on some local radio stations' Web pages, we also do good box lunch business from our ad on Dayton.com," Arnold explained. Dorothy Lane provides on-line ordering at peak lunch times, calling the service Box Lunch. "We run the ad between 7 and 11 a.m., when people are thinking about what they want for lunch."