LACK OF AWARENESS CUTS ON-LINE SALES: REPORT

NEW YORK -- Consumers are deterred from using on-line supermarket shopping services because they are unaware of such services in their local area, according to a report by Datamonitor here, a business information company specializing in industry analysis.port, "Online Grocery in the U.S., 2001," the market for on-line grocery shopping is growing strongly, with total consumer expenditure increasing

NEW YORK -- Consumers are deterred from using on-line supermarket shopping services because they are unaware of such services in their local area, according to a report by Datamonitor here, a business information company specializing in industry analysis.

port, "Online Grocery in the U.S., 2001," the market for on-line grocery shopping is growing strongly, with total consumer expenditure increasing at a compound annual growth rate of 108.6% from $80 million in 1996 to $1.5 billion in 2000.

At the same time, consumers remain largely unaware of local services and are also discouraged from using on-line supermarket channels because they do not know which sites to visit, the report noted.

To combat such barriers to adoption, the report advised, supermarket executives need to pay special attention to marketing initiatives.

"Supermarket executives are not accustomed to building brand awareness and marketing on the Internet," said Erlina Hendarwan, consumer analyst with Datamonitor. "Traditionally, they have limited marketing to a localized audience.

"In order to exploit the market potential of on-line grocery, supermarket executives should begin to build brand awareness and consumer demand now, in preparation for on-line supermarket developments in the future."

Internet grocers need to align their front-to-back-end office systems to provide adequate order fulfillment, service availability and customer support, she added.

According to the report, on-line supermarkets must implement marketing and production plans that include an efficient logistics and supply chain system and link automated order processing with personalized marketing efforts.

In the future, concerted customer relationship management techniques and advanced technology developments, such as broadband Internet access and wireless technologies, will drive the growth of on-line supermarket shopping.

Datamonitor said "dotbams" (a term the company invented to describe brick-and-mortar retailers who invest heavily in on-line shopping services) will emerge as the most important players in the future on-line supermarket industry.

Spurred by consumers' need for convenience, dotbams will provide shoppers with a full range of supermarket items and a more flexible and less expensive order fulfillment system of in-store pick-up, the report predicted.

The ability to leverage the value of their existing brand, loyal current customer-base and pre-existing infrastructure will result in lower costs and allow them to reach profitability at a faster rate, the report said.

"Future growth in pure-play grocers will be limited by the slim profit margins and difficulties in offering effective order fulfillment and customer service," said Hendarwan. Pure-plays' domination of on-line shopping is beginning to wane as supermarket chains buy them out, the report observed.

"Major potential exists for joint ventures between other on-line service providers (e.g. Webvan, Amazon.com) and brick-and-mortar grocers, which will further reduce overall costs and improve customer service."