RETAILERS MULL PRACTICAL USES OF ON-LINE COMMUNICATIONS
Byline: MATT NANNERY
LAS VEGAS — Retailers speaking at the Riscon show here recently said they were fed up with all the hype surrounding the information super highway. Instead, they want to focus on the practical benefits of on-line, interactive data communications with their suppliers and, eventually, their customers.
“My concern is that we are getting too caught up in the glamour of the information super highway,” said Andrew McKenna, president of Home Depot’s Midwest division. “We need this new technology to make sure we are in stock — to merge our systems with our suppliers’ and make their inventories our inventories. That is where we are going to find some efficiencies.
“When we should be stressing practical uses, vice-president Gore is going around the country overhyping this.”
David Carlson, senior vice-president of corporate information systems at Kmart, also focused on the practical uses of interactive communications. He said retailers intrigued by the prospect of on-line interactive home shopping should follow the development of Time Warner’s “Full Service Network.” The on-line network is expected to allow participating retailers to reach 400 pilot households in the Orlando, Fla., area.
“All retailers have to track what’s going on in the early tests to see if interactive home shopping is commerically viable,” Carlson said. “We are part of the Orlando test, and retailers should watch how it progresses carefully. In a way, our existing business is a cash cow to get us to enter this new world.”
Other retailers are less enthusiastic about “betting the store” on on-line home shopping. And some worry that manufacturers will use the medium to sell directly to the consumer, therby diverting some of their sales volume away from retailers. The concern has already proven true concerning one-way, non-interactive home-shopping ventures like QVC and the Home Shopping Network.
“There is a threat to some retailers by the information super highway,” commented Dennis Connors, senior vice-president of management information systems at The Gap. “Why go to a Kmart to buy a product if I can buy it directly from the manufacturer. If manufacturers try to by-pass around the retailers, retailers are going to have to rethink their businesses and find ways to add some value.”
Kmart’s Carlson was undaunted by the risks involved in interactive shopping. “In one sense we already bet the store every day,” he said. “We go out and sign 30-year leases on stores on the bet that there won’t be a seed [demographic] change in 30 years.”
Carlson added that the touch-and-feel shopping experience many retailers say is so dear to shoppers may be just a hassle for busy people.
“I suspect there are a lot of people who don’t like the shopping experience we romanticize,” he said. “If you’re a working woman and have to go to the store with three kids hanging on your arm, it’s not always enjoyable.”
“People will have more choices because of the information super highway,” added Carolyn Chin, general manager for electronic market services for IBM. “I’ll be able to shop in stores, which I love to, or I’ll be able to do it at home interactively.”
Cinda Hallman, vice-president of information systems at DuPont, said on-line systems may actually help retailers increase store traffic if they exploit them properly. Harried shoppers who can check on price and product availability from home would be more likely to head straight for one retailer’s store and bypass others in a mall.
“If I know the Home Depot has exactly what I want before I go shopping, that’s going to save me some time,” she said.
“Maybe trying to duplicate the shopping experience in a multimedia situation is not where we want to be, but maybe we can use that media to get information to our customers to support the shopping experience,” Home Depot’s McKenna added.
Kmart’s Carlson said reaching target customers more effectively is among the primary attractions of interactive systems for that chain.
“We send mailing after mailing on toy sales to customers who may have bought one toy years ago,” he said. “We are interested in taking the $5 million a year we spend on mailings and Sunday newspaper ads and putting it into electronically efficient media. Sunday newspapers are very inefficient for us.”
Like Kmart’s Carlson, Home Depot’s McKenna also sees potential in tracking and using household-specific data on consumer buying. McKenna, however, said he feels he is somewhat typical of Americans who like to sit down with a newspaper on Sunday morning rather that power up their PCs.
“We have to experiment with these things to find out where there is real commercial viability,” he said, “and getting information on consumer buying is a very good idea. But believe me, I prefer sitting on the porch with a newspaper with real Kmart ads in it. I’ve flipped through the on-line newspapers and it’s very difficult to find the information you want.”
The first bottom-line benefits of PC-based interactive communications for retailers will come from links with their suppliers, rather than with consumers, panelists said.
“The first real benefits of the information super highway for retailers will be in business-to-business transactions with vendors,” McKenna said.
“Conceivably, local stores will be able to keep a minimal inventory, but offer a kiosk screen where shoppers can have whatever they want delivered the next morning,” commented Jere Drummond, group president of BellSouth Telecommunications.
Kiosks in stores would help allay fears that households without PCs will not have access to the information super highway. The concern is important to retailers who want to make sure they reach large segments of the population.
“The big hurdle is access, at least from my perspective,” said The Gaps’ Connors. “What is the cost of access? Is it a 280 processor and a modem, or is it more?”
IBM’s Chin said interactive kiosks in stores and libraries will lessen the problem.
“If we have to worry about getting the internet wired to every home, it would create a very high cost structure,” she said. “But we can supply access through libraries and public kiosks.”
Chin said the pervasiveness of automatic teller machines proves that the idea of interactive public kiosks is a viable one.