PEAPOD SHIFTS ITS FULFILLMENT TO DEDICATED PICKING SITES

LINDA PURPURA

EVANSTON, Ill. -- To enhance efficiencies in the home-shopping picking process, Peapod here and its retailer partners are moving toward using dedicated fulfillment centers rather than picking products in stores.

Stop & Shop Cos., Quincy, Mass., Peapod's partner in the Boston area, has established a dedicated home-shopping fulfillment center at its Watertown, Mass., store, said Monica Connors, public affairs specialist at Stop & Shop.

John Furton, senior vice president of Peapod, said volume was a major reason for the shift to dedicated fulfillment centers.

"There comes a point where our sales volume is a burden on the traditional retail operation," he said. "Out of stocks are our biggest customer service problem."

The Stop & Shop fulfillment center has been operating since July, according to Furton. Peapod's other retail partners include the Columbus, Ohio, division of Kroger Co., Cincinnati; Safeway, Pleasanton, Calif.; Jewel Food Stores, Melrose Park, Ill., a subsidiary of American Stores Co., Salt Lake City; Randalls Food Markets, Houston; and Bruno's, Birmingham, Ala.

The company's original fulfillment model involved picking in the store. Furton declined to identify which retailers would be next to establish dedicated fulfillment centers, adding that sales volume in each market would determine when such centers are established. Dedicated fulfillment centers give Peapod the opportunity to lay products out differently than in a retail store, said Furton.

In fulfillment centers, "we would lay out product by volume moved and have A items, B items and C items," he said, explaining that A items are fast movers and C items are slow movers. "For instance, we could put ketchup next to corn flakes."

Each retailer's fulfillment center will differ depending on its format, said Furton. For example, Stop & Shop builds stores with second floors, so it is using this space for the fulfillment center. "The fulfillment center turns what amounts to idle space into productive selling square footage," Furton said.

Some Peapod retailer partners may use a store's basement space for a fulfillment center, while others might have a dedicated facility totally separate from the store.