CONFERENCE FOCUSES ON CONSUMERS' VIEWS ON PRIVATE LABEL

BARBARA MURRAY

NEW YORK -- Missing from the landscape in this country is a mainstream retailer that is developing and marketing its own brand on the Internet in the way that Tesco does in the United Kingdom, said some attendees at the close of the 2000 Consumerama conference. The show was held here June 15 and sponsored by the New York-based Private Label Manufacturers Association. (See related story on Page 21).

This year's Consumerama focused on what consumers think about the Internet, and how those thoughts can shape retailers' offerings in the future. The highlight of the day was an hour-and-a-half discussion by actual grocery shoppers who use the Internet, but unlike the national average, they were not loyal to private label in any discernible way. Asked how the availability of private-label products influence their choice of a supermarket, they said it has no bearing, except for one fan of Pathmark's light yogurt. "Nothing compares to it at all," she said. Someone else said she likes Master Choice's honey mustard better than any brand.

No one had bought any private-label brand on-line, and they said those choices are not even listed. In store shopping, one of the men said he buys America's Choice milk, bleach and laundry detergent, and he likes Key Food iced-tea mix. Three said they would not buy vitamins, children's medicines, or medicine overall, if it were private label.

Another woman said Pathmark's private-label packaging looks cheap, but she liked Master Choice's upscale-looking black packaging. Then at the end, she said she resents paying more for the packaging and advertising of national brands.

While the panelists said they buy store-brand paper plates and napkins, they wouldn't buy mayonnaise, shampoo or baby formula that was private label. "My girlfriend had to convince me to buy generic diapers," said one panelist. Most of them used the terms "generic" and "private label" interchangeably.

Marcus Bokkerink, vice president of The Boston Consulting Group, and about 80 other PLMA members, staff and guests watched and listened as the focus group -- eight women and two men, all apparently from Long Island -- described their shopping experiences over the Internet, one with Peapod and the rest using Priceline and one using a combination of Priceline and Waldbaums.com, where he can check the weekly specials but not order on-line.

"The difference is just so stark," Bokkerink said. "Here, [private-label products] are at entry level price points, and are considered cheap." The focus group members, who mostly said they wouldn't bring a private-label food product to a party, were considered atypical by some in the audience, who noted later that they were all suburbanites in multiperson households.

Three audience members singled out orange juice, cola and spaghetti sauce as products they would not "take a chance on" buying in a private label.

In frozen foods, the national brands are better, several said. One complained of finding more stems in the private-label frozen broccoli, more florets in the name brand.

Only two attendees said they were "true blue" to one food retailer. The others shopped wherever they found the best deals. One of the women said the weather plays a role in her Internet shopping, adding that she shops on-line more frequently in the winter. Another said she does about 10% of her grocery shopping on-line now, but would do more if it wasn't so time-consuming. Most said they use the Internet to save money, but not to save time. "It's quicker to go to the store," said Melissa, a young college student. She said she would shop on-line if it resulted in a saving of $10, but wouldn't do it for $2.

"There's a fantastic opportunity here," said Bokkerink, who said he believes fully educating the American consumer about private label is a "ten-year task."

His conclusion from the consumer panel, he added, is that "these consumers are being forced to make compromises. The ideal isn't here yet. You don't have full choice. Missing is a mainstream retailer who offers the same price and quality on-line and delivers it."

Groceries and other replenishables are a small on-line market right now, but the market's future was of keen interest to the 100 or so who attended the conference.

"I'm appalled, or impressed, by the need for all of us to do more educating" about private-label brands, said Bokkerink. "We can only do so much," said one of the manufacturers present. "The rest is up to the retailer."

Forrester Research, Cambridge, Mass., believes on-demand delivery players, such as Webvan, Peapod and HomeRuns, will win in the future. "The reason people buy groceries on-line is that they don't have time to go to the store," Rob Rubin, director of research at Forrester, said. "If I can't buy all of my groceries on-line, then I don't want to buy any of them on-line," he said, "because I'll still have to go to the store."

"Certain communities are never going to get on-demand deliveries. If you live in a very rural area, it's just not going to be profitable for someone to deliver groceries to your home," Rubin continued. "But if you live in an affluent neighborhood, within a densely populated metropolitan area, you're very likely to have one of these delivery companies providing you with service.

"We believe that by the end of 2008, all metropolitan areas that have 500,000 households or more will have on-demand delivery providers," Rubin said.

Rubin's data shows that 3.6 million households purchased groceries on-line last year, spending an average of $303 during that year. They are very high technology users: 81% of those consumers use personal computers at work, for instance, and they have cell phones and high-speed Internet access at home, averaging more than three years of on-line experience, spending roughly 14 hours a week on-line. However, for grocery buying, income is less predictive than household size, Rubin said. "Rich people eat out more than poor people," he noted.

On-line sales of health and beauty aids are growing rapidly, while the amount of food, beverages and household supplies being bought over the Internet is not, However, it is producing more revenue than the HABA group.

The health and beauty aids category will continue at about $6 billion, but food, beverage and supplies will produce almost $17 billion in revenue, by 4.8 million households, Rubin said.

If people are buying their food on-line, they are not buying it off-line, he said "because you can only eat so much food." Therefore, the Internet channel does not represent incremental sales, as it might in other categories.

Eighteen million households in the U.S. were purchasing other categories of goods on-line, but not replenishables, in 1999. Convenience purchases are typically first. The next wave is buying research items on line, such as travel arrangements or financial products. Another 17 million households were on-line, but did not make any purchases. "We believe that 23% of this group will be making purchases on-line," Rubin said.