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Even with the backing of package-goods behemoth Procter & Gamble Co., the fledgling online grocery shopping industry has a long way to go.

P&G North America President Wolfgang C. Berndt recently told the Advertising Women of New York of the company's growing interest in online shopping, indicating marketing programs it's testing with Peapod, Streamline and Homeruns could be the beginning of much larger financial involvement.


P&G's involvement could be a much-needed push for the industry, said Burt Flickinger, a consultant with Reach Marketing.

"The revenue and profit contribution has been initially disappointingly small for the home delivery companies, so they really need to develop partnerships with the major branded-goods companies," he said. "If they do it with P&G, obviously it provides a huge coattails effect for the other branded goods companies at the same time."

In a January report for the Consumer Direct Cooperative, a group of retailers and manufacturers including P&G, Andersen Consulting projected consumer direct could reach sales of $85 billion by 2007 and sign up 20 million households, compared to 200,000 today.

But similar industry projections in 1995 that consumer direct would reach 10% of retail package-goods sales by 2000 have proved illusory. With sales under $60 million in 11 cities last year, the largest online shopping service, Peapod, does less business than a single Wal-Mart supercenter.

P&G's tests provide strategic legitimacy for the online retailers to develop a new stream of revenue from online advertising, Mr. Flickinger said, a way they can fund badly needed marketing.

Though many supermarket chains have formed partnerships with online shopping services, few of them have provided marketing support, Mr. Flickinger said.


For P&G and other marketers that get involved with online services now, the payoff is an early understanding about a shopping channel that differs markedly from ordinary retailing, said David Friedman, a consultant and co-author of the Andersen Consulting report.

Point-of-purchase advertising online presents new opportunities for brands to do "information-based promotion," said Mr. Friedman, noting, for example, that "If someone is looking to get out a particular kind of stain, [P&G] can tell them the tool to use."

Of the 20 manufacturers working on marketing programs through Peapod, including Kraft Foods and Colgate-Palmolive Co., many started with the types of promotions used in stores, said Tim Dorgan, exec VP of the online service.

But he said many are starting to explore more creative approaches and such areas as automatic replenishment of staples such as toothpaste and diapers, which appears to be one focus of the P&G test.


Today, the online services appeal mainly to shoppers who value convenience above all else and those too time-starved to shop, Mr. Friedman said.

Those are exactly the consumers P&G is trying hardest to find new ways to reach, Mr. Flickinger said. "The major currency shortage in the future with P&G's consumers is going to be a lack of disposable time."

Even so, such segments currently make up only 10% of all consumers today, so the industry will have to find ways to attract others, Mr. Friedman said.

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