Supermarket chain checks out Facebook

Supermarket chain checks out Facebook

At first blush, Facebook and supermarkets might seem like chalk and cheese, but social networking websites have caught the attention of Woolworths as it prepares a new push online.

Still in its initial stages, the retail giant's moves to re-embrace the web are guarded and devoid of the hype that greeted the launch - and flop - of early internet grocery stores during the dotcom boom. But according to Woolworths' chief information officer, Dan Beecham, customers are urging the company to do more online and the vibrant atmosphere of popular destinations such as MySpace and Facebook is making its influence felt on the company's website designs.

"There's a resurgence in online," Beecham says.

"There are more interesting things that can be done online than, say, 10 years ago, whether it's hosting your photographs or sending your photographs to your friends. There are a whole lot of different retail opportunities.

"But then, what we also want to seek to do is satisfy the core business - the groceries - and make that experience as effective and as interesting and as quick as we possibly can."

Beecham won't divulge the specifics of Woolworths' plans but he says the company has already started development of some of the internet shopping services.

The company budgets about $200 million a year for new information systems, giving it plenty of spending power to build websites that it hopes will pack more punch than the grocery industry's first forays into online shopping.

But Beecham is adamant that the company won't launch its own social networking site and will instead attempt to create a sense of community that brings customers back to the web again and again.

"MySpace, Facebook and so on are a huge success so that's an indicator of what customers want . . . That sort of thinking is where the customers want to be and we'll do our best to support that," he explains.

"[Building] a community and trying to connect with your customers has got some real potential."

Beecham notes that Woolworths' efforts to create a more interactive environment for shoppers extends to the offline world.

In particular, he points to the company's trial of a new bricks and mortar format - a deli-style store known as Thomas Dux - that was launched in Sydney's Lane Cove last December.

"I think there's a very clear message from our customers about a desire to be a little bit more engaged in the process. When I say that [I mean], making the experience warmer, more personal and in some cases more educative.

"Clearly, there are different sorts of shoppers. There are people who want to get in and get out of the store very quickly and there are others who are more interested in understanding what the different products can do and how they can convenience their lives."

Woolworths, through the launch of new self check-out systems in its supermarkets last month, has already made clear one of the ways it hopes to make shopping more convenient for customers who value speed.

But Beecham's comments about the desire of some customers to learn more about products may give a hint of what Woolworths has in store for its revamped online shops.

Much like, community forums where customers exchange recipes or views and reviews on the quality or nutritional value of foods could be features. Photo sharing and other non-grocery-related services might also appear.

The supermarketing heavyweight's hopes of building online and real-world communities are what one technology supplier to the company describes as part of a retail industry push to make itself central to people's lives.

Financial services offerings such as credit cards and store ATM networks, fuel discount schemes and the propagation of new formats are just some elements of the strategy, the executive, who declined to be named, says.

Retailers such as Myer are also mining vast quantities of data collected through loyalty programs and their own credit card schemes to develop marketing that's targeted to specific customers.

Beecham, who formerly worked in IT at Macquarie Group, says that Woolworths' move into providing financial products, such as a Visa card due for launch later this year, is forcing the retailer to run its information systems more like a bank.

"Clearly, the financial switches that we've implemented, they push us to a whole new area of reliability. So I'd say in that sense we're having to become more aligned to financial services standards in terms of uptime and reliability.

"I think it is fundamentally changing us and changing the standards we operate at."

He says that kind of reliability and scalability is critical to any new websites that the retailer might launch and points to fulfilment problems as one of the reasons earlier attempts at selling groceries online flopped.

The company is developing a new enterprise merchandising system that would support internet shopping. The designs for the system also include a greater capacity to handle foreign currencies and international taxation regimes.

"We have a global sourcing team up in Hong Kong and we are establishing another in Shanghai, and I think at a strategy level there's an acknowledgement that there will be other places beyond China where we may need this sort of support," Beecham says.

"That's one dimension of the way we can improve our sourcing. Clearly the other is to be ready if our business ever wanted to run a different adjacency to what it's running today: if we wanted to do business in a different geography."

Again, he declines to reveal further specifics of the company's plans but notes that flexibility is integral to any of the applications it builds.

Woolworths, secretive at the best of times, is particularly coy about its information technology strategy, but the $200 million a year investment in new systems - one of the largest of any Australian business - is testament to the central role IT will play in future expansion.

The company is already extending software platforms such as AutoStockR, developed for Woolworths supermarkets under the multibillion-dollar Project Refresh and Project Mercury programs - to its other brands.

New Zealand supermarkets are also receiving the systems, while other technologies, such as a Kiwi-developed back office application known as Isis, are wending their way across the Tasman to Australia.

Beecham says that the pace of development and future plans means that Woolworths is about to invest in two new Sydney data centres that it will build from scratch at a cost of many tens of millions of dollars.

He can't say when the retailer will have the centres up and running but the scope of the project is a clear indication that it anticipates an enormous increase in its computing demands.

"In terms of physical space, I'm looking to have capacity that is probably four times what we have today and our goal is to split that across two sites.

"We're doing due diligence on two sites in western Sydney . . . as it currently stands the plan (and this has to go to our board of directors and get the right approvals) is we'll buy blocks of earth and start from that."

Fairfax Business Media

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