OAK BROOK, Ill. (FNS) -- Ahold's controlling stake in Peapod will give the on-line grocer not only volume discounts in its purchasing power, but the basis to develop more powerful individual shopping data, said Thomas L. Parkinson, Peapod's senior vice president and chief technology officer.
Data will be key as Peapod and Ahold expand through the East Coast, said Parkinson, who founded the firm with his brother, Andrew, in 1989. In remarks at a dinner meeting of the Merchandising Executives Club of Chicago here, Parkinson detailed Peapod's advantages and future plans including:
Competitive benefits of its supply agreement with Ahold.
Development of deeper customer data as a result of combining its consumer knowledge with information gleaned from Ahold's frequent shopper card holders.
Merchandising programs to spark on-line sales, including produce and meal plans.
With supply agreements that have followed the Ahold purchase, noted Parkinson, Peapod can now purchase at discounts that give it an advantage over pure-play Internet grocers such as Foster City, Calif.-based Webvan, which launched recently in the Chicago area. As Peapod expands into Connecticut under the name Peapod by Stop & Shop, and in November into the Baltimore-Washington area as Peapod by Giant, it will have access to shopper purchase data collected by the two Ahold-owned chains through frequent shopper programs, Parkinson said.
Peapod expects to be able to use that data to set up its own programs by mid-2001, he added.
New Peapod customers will then be able to enter their frequent shopper numbers when they sign up with Peapod to give the on-line grocer that access. That, said Parkinson, will permit Peapod to develop the personalized shopper profile it already develops on customers much more quickly.
The profile lets Peapod offer shoppers a customized e-mail "flyer" of the week's promotions (when a customer requests such e-mail) and a customized shopping list to speed ordering.
Parkinson also explained to the manufacturers in the audience how Peapod can track total weekly sales for any product. He noted that featuring product photos on the Web site generally moves items quickly.
"That display is very high real estate," he said.
Produce is a critical part of an on-line grocer's success since it represents a "major barrier to trial" of such services for consumers, said Tony Stallone, Peapod's vice president, fresh markets, who also spoke at the Merchandising Executives Club meeting.
Stallone has been developing fresh programs, particularly in produce, for on-line grocery services for about nine years. He was with Scotty's Home Market, a Chicago home delivery service, which was acquired by Streamline.com. When Peapod bought Streamline's Chicago and Washington area operations in early September, that operation reverted to the Scotty's name, but is now becoming part of Peapod in Chicago.
"Produce is very personal to people," Stallone said, adding that customers have to be convinced they will get high-quality fruit and vegetables.
Scotty's (and now Peapod) starts by including a small shopping bag of complimentary fruit with a customer's first order, along with a four-color brochure telling customers the best way to handle each type of produce. Stallone also noted, and the company explains to customers, that a home-delivery company can preserve the "cold chain" from farm to door better than stores do.
"We have eight different temperature zones in our warehouse to keep each type of produce in the right environment," he said.
Scotty's delivers produce in refrigerated totes rather than by refrigerated truck. Styrofoam liners are used in cardboard totes, with cold packs or dry ice to maintain the proper temperature.
Produce, he said, averages over 15% of an order, versus 11-12% for a typical grocery store, "with very high gross and net margins."
Scotty's average order size, Stallone said, is $130, compared to about $120 for Peapod and $70 to $90 for other on-line grocers.
Part of the company's success has been the development of meal plans, with main dishes requiring no more than six to eight ingredients and no longer than 30 minutes to prepare. Scotty's puts at least three of those ingredients on sale when the meal plan is offered.
Along with ordering on-line, Scotty's customers can use a handheld scanner -- a Palm Pilot retrofitted with a scanner -- to scan items on the pantry shelf or refrigerator to make up a grocery list. Putting that scanner in a dedicated unit transmits the list immediately to Scotty's computer.