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Switching gears into the future.

During the last 10 years, there have been numerous experiments involving grocery shopping by phone. San Diego, Sacramento, Brooklyn, Memphis and Minneapolis have all seen telephone grocery shopping services come and go. Looking at this series of experiences, several lessons seem to emerge.

Customer interest is strong. A shortage of interested customers has not been a critical problem in most of the past phone shopping experiments. In fact, several of the operations were overwhelmed with customers when they opened. While difficult to measure, it does seem that one of the principal motivations behind customer interest, the "poverty of time," has increased in many segments of our society over the last decade.

Food marketing expertise is important: Some phone shopping experiments were put together by people who lacked experience in food retailing and wholesaling. Other operations benefited from considerable staff experience in these areas. While in some instances prior experience can inhibit flexibility of thinking, it appears that those operations with a solid foundation in the food business were more successful.

Home delivery is a major problem: Virtually all of the previous experiments in phone shopping provided home delivery which proved to be one of the toughest operating challenges. Essentially, it proved too difficult to establish adequate business in assorted areas to absorb the fixed delivery cost. This problem was compounded by the fact that actual delivery and payment required precise coordination of schedules between the shopper and the delivery person. Problems in this area added significantly to distribution costs. Current Activity

Today, two telephone grocery shopping operations--Grocery Express in San Francisco and Phone In-Drive Thru of Los Angeles--have attracted considerable attention. Both have displayed staying power and it is worthwhile to consider whether these operations signal the beginning of a major change in food distribution patterns in the U.S. The Phone In-Drive Thru differs significantly from Grocery Express and from most of the earlier experiments.

Phone In-Drive Thru provides the shopper with the convenience of telephone shopping but does not offer a delivery service. Instead, the customer places an order for grocery and perishable products at least three hours in advance, specifies a pickup time, and then drives to the facility where she simply picks up her assembled order and pays for it--and a $1.50 service charge--by check.

This provides the shopper with a considerable increase in convenience. The Phone In-Drive Thru promotion claims that the concept allows a shopper to reduce grocery shopping time by 50%. That boast is based on a claimed average of 49 minutes per regular shopping trip.

Phone In-Drive Thru has solved the delivery problem by asking customers to pick up groceries and take them home. Two other major challenges remain: handling the orders in an accurate and efficient manner; and attracting a sufficient number of customers to support the operation and produce a profit.

It appears that Phone In-Drive Thru has been innovative in addressing the first challenge. Several innovations can be highlighted which suggest that it is definitely on the right track.

Layout: The 37,000-square-foot warehouse is laid out so that replenishment and picking aisles alternate. This permits the simultaneous performance of both functions and ensures product rotation. The placement of products in the warehouse is optimized to minimize product damage during selection.

Computerized control: Virtually all aspects of the operation are computer controlled to promote productivity and accuracy. Some of the more interesting innovations include:

* "Pre-receiving" inventory to maximize customer service.

* Daily forecasts of meat sales as a guide to meat production.

* Computer control of assembled orders, to ensure efficient and accurate assembly prior to customer pickup.

* Pickup scheduling that ensures high customer service while maintaining labor productivity.

While it is difficult to judge the net effect of these innovations, it appears that they represent steps that will help to guarantee that Phone In-Drive Thru will effectively manage its basic function, i.e., receiving and assembling grocery orders for customers. Marketing

The other challenge in attracting a sufficient customer base appears to have been more difficult for Phone In-Drive Thru to overcome. In spite of an aggressive promotional effort, including $4 worth of free meat or produce with the initial $25 order, the company has been able to develop a customer base of only a little more than 3,000 customers. This figure is somewhat below expectations, although the average order is running at $67.

There are two "controllable factors" that could be adjusted to increase customer acceptance of the concept.

* Variety: The operation carries approximately 4,000 items and emphasizes branded products that sell well in the Southern California market. Experience with warehouse stores suggests that this offering may not be an adequate variety for the typical shopper. In fact, Phone In-Drive Thru has arrived at this same conclusion and has recently added a number of "customer-requested" items. Clearly, it has not yet fine-tuned its assortment.

* Location: The current location is distant from major traffic arteries. This deprives the operation of potential customers who might be unable to find the facility.

On balance, it appears that Phone In-Drive Thru has broken some important ground in defining what might be a food distribution concept of the future. It appears that the concept of emphasizing pickup versus home delivery could spur the growth of the concept.
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Author:Bishop, Willard R., Jr.
Publication:Progressive Grocer
Article Type:column
Date:Jan 1, 1984
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