MAKING HOUSE CALLS

DEENA AMATO-McCOY

Home-shopping programs promise to usher in a new age of retailing by radically altering how customers order and receive products.

The specter of such change already has prompted many retailers to begin offering a home-shopping program, via telephone, fax or the Internet, and in many cases to partner with third-party firms to provide the service.

Yet, despite the swirl of publicity surrounding the potential of home shopping to capture a major share of supermarket business -- some say it could easily account for 10% or more of total purchases by the turn of the century -- significant questions remain about the impact these programs will have on the industry.

Issues such as how to create a home-shopping and delivery program that is cost efficient and profitable, and how to gauge the sales impact if shoppers no longer walk the store in person loom large for many retailers and wholesalers.

More than one supermarket executive expressed concern about the bottom-line impact and financial feasibility of offering home-shopping programs.

"There needs to be an efficiency between bringing customers their orders and keeping costs down," said Rafael Hernandez, director of marketing for Fiesta Mart, Houston. "Home shopping is not a cheap proposition; there needs to be a demand to make the service available."

While home shopping clearly offers consumers an added convenience, most retailers stressed that the goal of home shopping should not be to replace traditional retailing.

"As much as I love technology, it is the store that does a marvelous job of providing the environment to appeal to all of a person's senses," said David McIntyre, data processing manager for Wade's Supermarket, Christiansburg, Va. "Three effects that cannot be matched on computer are sound, smell and personal interaction. This service will not replace going to a store -- it is just one portion of a busy market."

According to Bernie Rogan, spokesman for Shaw's Supermarkets, East Bridgewater, Mass., home shopping "was devised to assist in an hour of need, or to make the chore simpler for those who find it hard to shop."

Charlie Burns, senior vice president of marketing at Minyard Food Stores, Coppell, Texas, went even further. "To me, home shopping takes people out of the store and away from the traditional shopping experience."

Yet, electronic commerce will play a significant role in the industry, and distributors must come to grips with how best to cash in on the opportunities and develop programs that both meet customers' needs and add to the bottom line.

It is for that reason that a rapidly expanding roster of leading chains and independent retailers are diving deep into the home-shopping waters and seeking answers to enable them to thrive in the emerging retail environment.

Retailers and third-party providers nationwide are now experimenting with variations of home-shopping services in the hope of finding the winning combination of customer service, affordability and bottom-line results.

One such retailer is Bread & Circus Wholefood Supermarkets, Newton Highlands, Mass., a subsidiary of Whole Foods Market, Austin, Texas. The retailer began a three-month home shopping test in November.

Under the program, orders placed through Bread & Circus' web site at http://www.wholefoods.com are filled and bagged by employees in the retailer's Brighton, Mass., store. Initially, customers were required to pick up their orders at the store, but beginning this month, a home-delivery component, with a $12 service fee, was added. "There has not been grocery delivery in any meaningful way in 40 years," said Christopher Martin, president of Food-online.com, Bread & Circus' service provider. "We're helping Bread & Circus bring on-line shopping to consumers, while they continue to maintain a connection with their shoppers."

Wade's Supermarkets is another retailer involved in evaluating the benefits of home shopping after launching a two-month test program. The pilot, managed in-house, provided a limited group of 50 customers the opportunity to order from a selection of 5,000 products via the Internet (http://www.wades-foods.com) or by telephone.

"The service allows the opportunity to sell a little bit extra, and make a little bit extra," McIntyre said. "The profit margins for supermarkets today are thin; if there is a way to crank it up through an opportunity, you have got to go for it.

"We have not seen a profit, but I would like to see an increase in market share eventually," he said.

Many retailers are leveraging their involvement in home shopping by relying on third-party firms to help with the service.

Peapod, Evanston, Ill., works with supermarket retailers to provide home-shopping services via personal computer, telephone and fax, and home delivery.

Peapod's retail partners include Kroger Co., Cincinnati, in the Columbus market; Jewel Food Stores, Melrose Park, Ill.; Safeway, Pleasanton, Calif., through its stores in San Francisco and San Jose; Stop & Shop Cos., Quincy, Mass., in Boston; and beginning early 1997, Randalls Food Markets, Houston.

Meanwhile, through Shoppers Express, nine retailers reportedly are now offering home shopping in 11 markets. Those include Vons Cos., Arcadia, Calif., in the Los Angeles market; Kroger in the Dallas market; Bashas' Markets, Chandler, Ariz., in the Phoenix market; Quality Food Centers, Bellevue, Wash., in Seattle; Finast, Maple Heights, Ohio, in Cleveland; Big Bear Stores, Columbus, Ohio; and Price Chopper Supermarkets, Schenectady, N.Y.

But even Shoppers Express is restructuring its business model to meet changing consumer demand and spur profits.

Bashas' is to be the first retailer to add these features to its home-shopping service. "Our program will get a face lift with an Internet ordering site and additional delivery options for a fee of $7.95," said Becca Anderson, spokeswoman for Bashas'.

"With these improvements, some officials are expecting to see sales increase by half, if not double," she said.

But other retailers, at least for the moment, are having to shut down their programs as a result of third-party change. Giant Food Stores, Carlisle, Pa., and the Atlanta division of Winn-Dixie Stores, Jacksonville, Fla., have discontinued their home-shopping services from Shoppers' Express.

Other players, such as Shaw's; Byerly's, Edina, Minn., and Scolari's Food & Drug, Sparks, Nev., have also had to pull back from the home-shopping arena in recent months because of restructuring plans involving their third-party provider, Shopping Alternatives, Bethesda, Md.

"We did not have a downturn in business and our average orders remained the same, though we did not see any real growth," Shaws' Rogan said.

Minyard's Burns said that chain has offered home-shopping services in three Dallas stores for several years, simply as a result of customer requests. "We offer the service for competitive reasons. There is a demand for the service in the stores that offer it; they are high-end stores and high-end customers can afford that service."

Another chain testing the waters of home shopping, albeit gingerly, is Fiesta Mart. The retailer now offers a variation of home delivery -- for customers spending $30 or more, the retailer provides a minivan to take the shopper home. "We offer this form of home delivery in three locations, one in Houston and two in Dallas," Hernandez said.

Supply and demand will determine if home shopping is offered to Fiesta Mart customers in the future, he said. If enough customers request it, it may be an option in the future. "Customers need to get comfortable with technology such as fax machines, computers and the Internet. Then retailers need to better market the benefits of the technology. Once the two groups meet in the middle, and customers are researched, then retailers can attract a new generation of home-shopping customers," Hernandez said.