BILL GATES, BILL FIELDS DEBATE CYBERSPACE VERSUS RETAIL SPACE
Byline: Matt Nannery — with contributions from Annie Gowen
CHICAGO — Microsoft’s Bill Gates and Wal-Mart’s Bill Fields faced off here Tuesday. The hot topic: The Internet vs. the store.
“You will see a divide where younger people wouldn’t even think of making a major purchase without at least checking it out on the computer,” said the chairman and chief executive officer of Microsoft. “There is going to be a mix of traditional retailing and electronic shopping, but the consumer is going to decide what that mix is.”
Fields’s view: “This vision of the future, this homogeneous shopping experience, will probably be the most boring shopping experience. People will still go into stores.” Fields, who is president of the Wal-Mart Stores division of the world’s largest retailer, noted that traditional merchants already compete with $65 billion in annual sales direct to the home.
Along with several other corporate heavyweights, the two participated in an informal panel discussion, an event open only to 160 ceo’s and corporate presidents attending IQ 1996, a national retailing/manufacturing conference devoted to exploring the benefits of Quick Response.
Other participants included VF Corp.’s ceo and president Mackey McDonald; Bob Rockey, president of Levi Strauss North America, and Haggar Corp.’s chairman Joe Haggar 3rd. Rounding out the panel were the heads of three technology companies: Jerome Swartz, chairman and ceo, Symbol Technologies; Robert F. Meyerson, chairman and ceo, Telxon Corp. and, L. Michael Hone, chairman and ceo, PSC Inc.
IQ 1996, which ends its three-day run today, is sponsored by the Voluntary Interindustry Commerce Standards committee and AIM USA.
While the discussion, moderated by Harvard law professor Arthur Miller, was broad, several points — in addition to the rise of the Internet as a shop-at-home venue — stood out:
* The necessity for companies to harness technology to drive cost out of the entire distribution pipeline rather than pushing costs onto their trading partners.
* The question of mass customization, which Levi’s is already answering with it’s Personal Pair custom-fit women’s jeans program.
* The strong desire of retailers and apparel makers to predict how, when and where individual customers want to shop.
Some of the more intriguing innovations foreseen by the august panel were “smart cards,” helping retailers target specific customers via computer profiles; wireless shop-from-home gadgets that are cheaper than computers, and supermarkets with self-checkouts, an idea already being test-marketed in Great Britain. One panelist even went so far as to suggest there might one day be service personnel who perform their duties via a microchip implanted in the brain, a theory that brought hoots of derision from the other panelists.
It was on the questions concerning the Internet that Microsoft’s Gates was most at home.
“The real technological advances in supply-chain management are coming from PC technology and the Internet,” he said. “It’s amazing to think of the way people did EDI in the past. It was a very expensive technology that didn’t reach down to small suppliers. But now, with the Internet, it’s so cheap to link up.
“By 2005, the supply chain is going to be a lot more efficient, and the apparel and retail industries are not going to have to invent their own technologies to make that happen.”
But using technology to link up to the consumer is just as important as using technology to link up with trading partners, according to Haggar.
“We all have all kinds of technology now,” he said. “But if a manufacturer doesn’t have people who can use it to service both the retailers and the consumers, that technology isn’t going to do anybody any good.”
“I’m really not sure what the benefits of all this technology are,” added Wal-Mart’s Fields, “but the ability to understand what the consumer wants is perhaps the biggest asset a retailer can have in the future.”
“What Bill Fields is talking about is using that consumer purchasing data to determine the different product mix in every store,” added VF’s McDonald. “Unfortunately, we haven’t found the systems and software to manage that data now, even though we have tons of raw data.”
“It’s not how much data you have,” Levi’s Rockey interjected. “It’s how you mine that data. The future is in the database-mining concept.”
Nevertheless, Gates predicted that soon, when a customer buys a product, the move will be immediately visible throughout the system, from supplier to manufacturer to distributor to vendor, thus taking much of the guesswork out of supply and demand. This computerized streamlining will also help retailers work up so-called “smart cards” or loyalty identification files on regular customers and their usual purchases.
And while many on the panel had different views on the how best to tap consumer purchasing and demographic data, Fields at least, was clear on the goals of such data analysis.
“All consumers really want is to get what they want when they want it in the most cost-effective, convenient way,” he said. “That’s all that’s important to them.”
That’s one of the reasons Wal-Mart is exploring the Internet as a way to reach customers, according to Fields, who — even with his defense of traditional retailing — did joke about the possible effects of the Internet on traditional in-store retailing.
“We are very interested in the Internet, because one day consumers may turn around and find they don’t need to come to our stores anymore,” he said. “And we don’t want to be sitting around on our hands with nothing to do.”
Most panelists agreed that the Internet would not replace the visual, tactical in-store shopping trip, but added that it will complement traditional shopping for many consumers and perhaps replace it for younger shoppers who are highly computer-literate and very short of time.
“It all comes down to consumer behavior,” Microsoft’s Gates said.
Gates said that even if those potential customers don’t end up buying the goods on line, they will use the pricing information they found on the Net to make a more savvy buying decision.
Levi’s Rockey seconded Gates’s view that closing the sale on line may not be the wisest use of the Internet for retailers and apparel makers.
“One of the missed opportunities with the Internet is the opportunity to dialog with consumers,” Rockey said. “That dialog may be more important than the actual sale.”
Consumers can find a wealth of information on the Net to help them make more educated purchases, according to Gates.
“A customer who is comfortable using a computer can tap into almost anything,” he said. “The amount of information they will have to choose from will soon be overwhelming.”
Wal-Mart’s Fields predicted the advent of large super-convenient outlets and smaller niche stores.
But, he acknowledged, “Internet shopping can have both value and convenience. And it can enhance store shopping. The technology does not just have to reside in the home.”
However, many retail and apparel related Web sites are not the eye-catching consumer magnets many in the industry would like to see — not yet at least. It’s a situation Gates feels will soon change.
“If you look at Internet shopping today, it’s pathetic compared to what it will be down the road,” he said. “We can make it a lot more interesting.”
But while the Internet proved the sexiest topic before the panel, questions of driving costs from the pipeline were on the minds of VF’s McDonald, Levi’s Rockey and Joe Haggar.
“If you are just trying to shift cost from one party to another, both parties are going to lose,” McDonald said. “We have to reduce inventory for both. You don’t want to have huge quantities of product stored at retail, but you also don’t want to see that inventory stored in a manufacturer’s warehouse. By reducing inventory, you can cut cost. The cost cannot come out of product quality.”
Levi’s has eliminated inventory entirely in it’s much-lauded Personal Pair jean program and is building new distribution centers that can pick and ship one item as easily as it can thousands, according to Rockey.
“The situation is already changing,” he said. “We are in a pull system today. And that’s why we are building DCs that are quantity neutral. We will be able ship one piece or 10,000 if that is how the retailer wants to be served. We, as an industry, have to stop referring back to old, push-oriented business processes.”