WORLDWIDE CONNECTIONS

JAMES FALLON

LONDON (FNS) -- Architects sail through a store's floor plan via virtual-reality technology as they manipulate shelving and fixtures to determine optimal store layout.

Food retailers, suppliers and other businesses surf the Internet to strike deals with one another and find a place in the hearts of consumers through computerized home shopping.

Those are some of the innovative technology-driven scenarios that retailers and wholesalers worldwide are now beginning to explore seriously.

"At a time when retail margins are tight and profits are hard to come by, the use of technologies such as virtual reality can be seen as key to the continuing profitability and success of a retail and wholesale business," said an executive familiar with a virtual-reality system now being tested at J. Sainsbury here that is designed, in part, to develop store layouts more effectively.

Among the programs now being tested:

Woolworths, Parramatta, Australia is participating in an electronic information network

electronic information network for trading goods and services, sharing information worldwide and setting up home shopping programs.

Independent Grocers Alliance, Chicago, has set up a World Wide Web page on the Internet to streamline communication between its members throughout the world. Eventually, the alliance also expects to use the system to reach consumers.

Albert Heijn, a division of Netherlands-based Ahold, has launched a home shopping system through which consumers can order products via fax, telephone or compact-disc interactive technology and have the items delivered to their homes for a nominal charge.

The march to implement new technologies comes as the food industry worldwide is facing new competitive challenges to the way it has traditionally conducted business and targeted consumers.

"The question facing everyone is, 'How can we reinvent this business?' " said Bruce Rogow, a consultant at the Gartner Group, Stamford, Conn. "It's an issue facing all food retailers and manufacturers over the next 10 to 15 years."

It's also an issue that has many companies in a state of flux.

"There's going to be a lot of change in that period," said Tom Vadeboncoeur, director of customer services at Coca-Cola Europe, London. The company is funding a study by Coopers & Lybrand that will explore the future of food retailing in the year 2005 as part of its Coca-Cola Retail Research Group of Europe.

"Everyone recognizes that alternative shopping and delivery technologies can no longer be ignored," he added.

The need to alter how business is conducted by tapping into new technologies already has resulted in a dramatic leap in logistics efficiency in many countries.

In the United States, the drive to cut costs out of the distribution system by leveraging information systems has been the focus of the industry's sweeping Efficient Consumer Response initiative.

That is now also spreading overseas. Paris-based CIES, The Food Business Forum, recently launched a program dubbed ECR Europe. "European food retailers can benefit from ECR, especially in the nonfoods area," said Martin Taylor, a London-based retail analyst with Management Horizons, Columbus, Ohio.

Reg Clairs, group managing director of Woolworths in Australia, said the issues surrounding ECR should be among the industry's key focuses internationally in the years ahead.

The greatest information technology challenge going forward will be improving the link between suppliers and retailers to cut inventory costs and ensure just-in-time deliveries through cross-docking practices, Clairs said.

But the frontiers of where technology will be employed in the near future don't end with logistics. While retailers strive to implement better supplier-store links, they are also looking at new ways to reach customers.

Sainsbury, for example, is now testing a virtual-reality system for use by the chain's architectural staff to evaluate store design layouts, said a spokeswoman.

The system allows a personal computer user to roam a simulated Sainsbury's store, raise or lower shelves, change fittings, remove walls and place products in different areas of the store. The "virtual store" environment includes 27 checkouts and 24 two-sided shelving units and provides complex views of the side and rear walls in such areas as the deli and bakery.

Eventually, the system might be available for consumer shopping, the source said. "Its usage and application are going to snowball in the next two years."

Retailers also are exploring use of the Internet and on-line services for expanding the horizons involving home shopping. London-based Tesco (http://www.tesco.co.uk\) and Sainsbury (http://www.j-sainsbury.co.uk\), for instance, have launched limited home-shopping trials on the Internet.

Albert Heijn also has launched a home shopping program called "James." The program, which enables customers to buy nearly any product carried by Albert Heijn supermarkets, is available to consumers around Amsterdam and other cities in the Netherlands.

Consumers can order products via fax, telephone or compact-disc interactive technology and have them delivered to the home. Product prices are the same as in the store, although there is a delivery charge.

Albert Heijn also is working on developing a virtual-reality system that would tie in with the James program.

Woolworths of Australia also is experimenting with home shopping as part of its innovative Global Electronic Marketing and Merchandising Network buying system, called GEMMnet. The system initially was launched in September 1994.

This August, though, the chain began a home shopping trial using GEMMnet to provide product information to customers. Woolworths describes GEMMnet as an electronic catalog of goods and services worldwide, according to Janet Clough, manager of the electronic trading group at Woolworths.

Suppliers from local farmers to Coca-Cola, Kellogg Co. and Procter & Gamble also have joined the system. "This is part of our strategy to grow our business outside the traditional confines of the supermarket," Clough said.

IGA, for its part, is adapting to the changing demands in the food industry by using the Internet to help enable its diverse group of members to share information and improve their operations.

Jim Anderson, IGA's vice president of finance and management information systems, said the system has been in operation since February through an IGA Web page (http://www.igainc.com) on the Internet.

IGA chose the Internet because it was an inexpensive way to communicate, with a page on America Online costing about $9 monthly and hardware and software costing about $15,000, Anderson said.

IGA contends that it eventually can communicate directly to consumers via its Internet pages as it becomes easier to access computer networks. Anderson predicts from there it could take the system into home shopping and home delivery.

The Internet will be available via cable television in the not-too-distant future, and once that happens, customers can easily use it for home shopping, he said.

How well companies like these can push the technological boundaries to explore new avenues of food industry sales could determine who survives and thrives in the next decade, industry observers said.

Thom Blischok, managing partner of retail industries at Coopers & Lybrand, London, predicts that 50% of today's retailers will be out of business by the year 2005.

"Everything now is driving toward a better understanding of the customer," added Martin Digby, also at Coopers & Lybrand. "With little inflation and increasing competition, food retailers are driving to get costs as low as possible and demand as high as possible. Information technology remains the No. 1 button to do that."