FMI MARKETECHNICS 1999-03-08 (2)

DEENA AMATO-McCOY

NEW ORLEANS -- As time-starved customers continue to look to the Internet for more convenient means of shopping for staple items, distributors are being pressured to explore more sophisticated applications to get customers to return to their sites.

Retailers need to focus on using data mining, interactive applications for pricing strategies and electronic niche marketing to remain competitive on-line.

"E-commerce is too big to ignore," said Tom Murphy, vice president of management information systems for Kroger Co., Cincinnati. "There are 250 million customers out there. [The Internet] gives us a great opportunity to get closer to them by establishing one-to-one relationships electronically."

Murphy presented the session titled "P-Commerce to E-Commerce," at the MarkeTechnics Convention here Feb. 26 to 28. The convention was sponsored by the Food Marketing Institute, Washington.

The first step in forging these one-to-one relationships is to apply data mining to home-shopping efforts. "Retailers need to personalize the home-shopping experience," said Dawn Dawick, president of Independent Delivery Systems, East Granby, Conn. "If you are used to treating your 'Gold Level' frequent shoppers special at the store level, do the same on the Internet."

For example, retailers can use data mining to analyze what each frequent shopper's most purchased items are. By presenting this as a personalized list to shoppers on-line, retailers can eliminate the need to sift through an elaborate list of items, thus keeping shopping time to a minimum.

"Retailers can present me with a list of items I buy 90% of the time, rather than skipping through 30,000 stockkeeping units," said Dawick. "By making the process easy for me, I will consider you my personal grocer as well as my virtual store."

Dawick presented the session, "Merchandising and Marketing on the Web," with Robert Ahlstrom, chief information officer for Marsh Supermarkets, Indianapolis.

Retailers should also integrate more interactive applications to attract and retain on-line shoppers. "We need to provide the ability to do price comparisons -- the leverage this application gives consumers is tremendous," said Kroger's Murphy, who noted that this service is currently available when shopping on-line for products including personal organizers, personal computers and cameras.

"A couple of Web sites enable customers to input a product name, and [the engine] searches all Web sites to find the cheapest place to buy the item, on-line," he explained. "It would not be too far of a stretch to put a grocery list together, enter it into the search agent, and instruct the engine to search for these products at the cheapest price possible, as long as they have the same quality, and ship them to my house."

If retailers adopt this application and couple it with competitive pricing, they may be able to lure customers back to their site for additional purchases.

Retailers can also spur additional on-line sales by electronically promoting their physical specialty departments. "Niche marketing and special departments are the relationships your customers are looking for on-line," said Dawick. "These are the qualities that make you great as a [physical] supermarket -- present that on-line to the customer."

Such practices will help to reclaim supermarket customers who are choosing on-line category killers such as Omaha Steaks, Omaha, Neb., and gourmet produce retailer Harry & David, Medford, Ore.

According to Dawick, Omaha Steaks generates $200 million each year in sales, and 5% of its sales in the last 18 months were made on-line. She added that Virtual Vineyard, an on-line wine retailer, sees 20% sales growth on a monthly basis.

"Supermarkets have a competitive advantage here and need to leverage their customer relationships," Dawick said. "People are thinking about you between 40 and 50 times a year. I can assure you people are not buying Omaha Steaks, or books from Amazon.com, between 40 and 50 times a year.

Marsh is among the retailers offering home-shopping services, and Ahlstrom agreed that niche marketing is a strong opportunity to increase on-line market share.

"We are going after share of stomach," he said. "Niche marketing is very real and provides real options for retailers.

"Distributors need to play to their strengths on-line, and create a complementary strategy for their brick-and-mortar presence," he added. "We need to strategically hedge our bets for the future. If we don't, the Omaha Steaks of the world will."