TESTING THE BOUNDARIES OF DIRECT;NINE PACKAGE-GOODS MARKETERS STUDY AT-HOME SHOPPING

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In an effort to understand the evolving direct-to-consumer market, nine major companies including Procter & Gamble Co. and Coca-Cola Co. are testing an alternative marketing and delivery system for package goods in Boston.

Spearheaded by Andersen Consulting, the study links the nine with retailers Dominick's Finer Foods, Ukrop's Super Markets and Wegmans Food Markets; wholesalers Fleming Cos. and Richfood; and Streamline, a direct-to-consumer operator in Boston.

The other marketers involved are Gillette Co., Kraft Foods, Nabisco Brands, Ocean Spray Cranberries, Ralston Purina Co., Sara Lee Corp. and J.M. Smucker Co. Each has a financial investment in the study.

Called the Consumer Direct Cooperative, the study is being conducted among 60 consumers who already subscribe to Streamline, a service that allows them to order products primarily through fax for delivery direct to their home or a central pickup point.

This project will permit marketers to explore "new ways of promotion, new-product introductions and continuous product replenishment to the home," said Fred Schneider, director of Andersen's Smart Store, a research and development center for the package-goods industry.

NEW PRODUCT TO BE TESTED

To weigh how the alternative system will affect new products, Mr. Schneider said one of the marketers involved will introduce its own new product, which he wouldn't identify, specifically for this 60-consumer universe.

The goal, he said, "is to begin to measure what the consumer does in his [virtual] shopping trips, whether they switch brand [loyalty] and how long does that last."

Currently, the purpose is to help marketers learn what kind of underpinnings their business needs in terms of staffing and logistics to manage the virtual shopping world.

"If indeed this kind of marketing becomes commonplace, [the Consumer Direct Cooperative members] need to learn what kinds of people they need to manage their business," Mr. Schneider said.

But he added that in the future, the model can be used to explore the effects of advertising and promotion on new and existing products.

TRADE PROMO IS IN THE MIX

Trade promotion also is figuring into the mix. Mr. Schneider said the old notion of retailers "selling" shelf space may change in direct-to-consumer marketing.

"I wouldn't pre-suppose there is no space to sell" for the retailer in direct-to-consumer marketing, he said. "The opportunity here is to rethink all of our old paradigms. How do we shape and maximize benefits to the consumer, not carry old practices into the new world?"

For supermarkets, he added, the aim is to find out what role retailers can play in a direct-to-consumer market and how it could increase their paper-thin margins. For marketers, the test will enable them to learn how marketing can affect continuous product replenishment, a system whereby a consumer reorders a product automatically at home via a scanning wand.

Said Coca-Cola Foods Senior VP-Sales Larry McWilliams in explaining the test internally: "We have been seeing macro consumer trends, such as women working outside the home and the aging of the population, that are changing the way people shop. [This is] an opportunity to explore what implication these trends have for marketers and the supply chain."

Right now, Mr. McWilliams said, Coca-Cola hopes to balance supply and demand and determine how to best deliver products to consumers. But he said eventually the program could have a big impact, "like category management has" among package-goods companies.

RALSTON'S STRATEGY

"This new [test] dovetails perfectly with our strategy of selling consumers pet food whenever, wherever they want it," said Ralston Purina VP-Public Relations Elmer Richars.

Another partner in the Boston test is Shell Oil Co., which hopes to find out what role it can play in the direct-to-consumer market as a pickup point for goods.

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