Apple’s user-tracking PR debacle has dominated recent headlines (not to mention the season premiere of South Park) but Cupertino’s iOS isn’t the only mobile operating system alleged to flirt with privacy issues. This past Wednesday in Detroit, a class-action lawsuit was filed against Google for much the same reason that led to Apple staring down a lawsuit filed in Tampa: the storage and transmission of users’ geolocation data. READ MORE
Does your business need an enterprise resource planning (ERP) system? If your company is experiencing rapid growth and the corresponding strain on legacy systems, or if you’re starting a new process — such as manufacturing — from scratch, you may benefit from an ERP system, experts say. Such a system maintains in a single database the information gleaned from a variety of business functions, such as financial, manufacturing, human resources, and customer management. As such, ERP systems offer a bird’s-eye view into the working of the company and allow users to cross-reference business functions. An executive might drill-down into the data, for example, to learn how business financials were affected by installation of a new customer relationship management (CRM) system. When ERP includes manufacturing information, businesses can reduce inventory by closely tracking customer orders and shipments, says Eric Kimberling, president of the Panorama Consulting Group in Denver, which helps companies clarify ERP goals before implementation. Act like a bigger business ERP systems help you behave like a bigger business, says analyst Dan Miklovic, research vice president for the manufacturing industry at Gartner. “By automating finance processes, you can do things like accept online orders and to business-to-business transactions electronically, instead of via e-mail,” he says. Many of smaller players think they’ll have difficulty finding an ERP application. But all major ERP providers — with names like Oracle, SAP, Syspro, Microsoft Dynamics, and Epicor — make specialized offerings for small and mid-sized businesses, Kimberling says. Many other vendors cater exclusively to the small and mid-sized business market. “When ERP is done right, the number one benefit is streamlining your processes and making them more efficient than doing data entry and keeping track of stuff in spreadsheets and digging for data,” Kimberling says. “ERP makes those things more flexible and accessible to employees.” Take Solaicx, which implemented an ERP system in July. The Santa Clara, Calif., based company has been moving from research and development to the manufacturing of ingots and wafers for the solar industry. It recently opened a manufacturing plant in Portland, Ore. “We were running QuickBooks and some miscellaneous packages. In the research and development stage that works fine,” says Jeff Osorio, Solaicx’s chief financial officer. “But in commercial applications, with the volume of transactions that would be going through manufacturing, we needed more.” Solaicx now houses its financial and manufacturing data within the new ERP system, from Syspro. That kind of integration makes for greater visibility into all aspects of the company, Osorio says. The real value to small business Bear in mind, however, that purchasing and implementing an ERP system is no small task, these experts say. Consultant, vendor, or other outside help is often needed here. The real value to small and mid-sized businesses comes in the way they customize and configure the core product to their own particular industry and individual needs, Miklovic says. But ironically, that kind of customization can be harder for small businesses to find. For example, businesses located in areas without a pertinent systems integrator or reseller that can essentially make a house call, could face customization challenges, he says. “The challenge is making sure the domain expertise is available in the geography you’re operating in,” Miklovic says. An automotive supplier in California, for example, will have a tougher time finding a reseller with pertinent automotive expertise than will a similar-sized supplier in the Detroit area. In the same way, a Californian small or mid-sized business serving the wine industry will have an easier time finding an ERP reseller to meet its needs. “But the good news is, ERP systems are affordable and can radically improve your business,” Miklovic says
Many companies talk about getting close to the customer, but Microsoft pushed this idea to the extreme when it hired Nelle Steele to show up at 5 in the morning at the Milwaukee home of Tim Tucker. The owner of Air Engineering Inc., a supplier of industrial air compressor parts, is Microsoft’s model customer. Steele’s mission was to observe Tucker at close range, arriving as soon as he stepped out of the shower, then shadowing him until his workday ended at 10:30 p.m. Steele, a cultural anthropology Ph.D. student on leave from the University of Wisconsin, is one of five anthropologist-ethnographers (and the only one focused on entrepreneurs) that Microsoft hired full-time to conduct a field study. Called “Dawn to Dusk,” the study documents the work habits and thought processes of a species the software behemoth had never before tried to understand: owners and employees of small businesses. In tailing her quarry, Steele discovered, to her surprise, that small companies kept vital information in disconnected places — what she called “data silos” — from scribbled notes on scraps of paper to files on a PC that could be accessed by only one employee. This made it harrowing to try to answer basic questions like, “How did we do in the Northeast last quarter?” “I saw the pain that data silos caused day to day,” says Steele. Her work is part of Microsoft’s $2 billion research and development effort aimed at convincing these tribes of technological primitives to join the modern world. While most of that is earmarked to improve products, a lot of it is going to spreading the word. That’s in addition to two recent acquisitions — Great Plains and Navision business management software at another $2.4 billion — to enhance its offerings for small business. Even for Microsoft, with $50 billion in cash in the bank, that’s a major investment. Microsoft has started trying to care about these customers. Why us, you might ask, and why now? Partly it’s because “enterprise” customers, those that have more than 1,000 employees and 500 PCs, aren’t spending on tech the way they used to. So the industry’s top names, including IBM, Hewlett-Packard, and Dell, have started going after the littler fish. Even among this crowd, though, Microsoft’s push into small business is remarkably fervent and richly funded — and for a good reason: competition. There are two parts to the story that follows: the first is the challenge Microsoft faces and the criticism it has endured in the past. The second is what Microsoft is doing — with a degree of success — about both. Microsoft’s push into small business is remarkably fervent and richly funded — and for a good reason: competition. Today, 90% of small and midsize businesses run on the Microsoft platform, says Mika Krammer, an analyst at Gartner, a research firm. That’s a stranglehold on this enormous market of 8 million companies in the U.S. and 40 million worldwide. Globally, these companies pay almost as much for info tech — $400 billion a year — as America spends on defense. But despite its long history of dominance, Microsoft faces a looming threat from Linux and the insurgent open-source “free software” movement. Linux could do what the Justice Department couldn’t: end the era of Microsoft’s near monopoly and strip a sizable chunk of its sales and profits in the coming decade. Many industry analysts and media critics think that Linux is more secure and reliable than Windows, a prime target for hackers. Entrepreneurs have been paying close attention to the debate. Two of their biggest role models — Amazon and Google — now rely on Linux to run their websites. At a Yankee Group conference in San Francisco in March, small-business owners commiserated with one another about Microsoft’s disappointing customer support and their dislike of paying licensing and upgrade fees. They griped about how Microsoft’s new releases often seemed more like beta software — test versions with plenty of kinks — than reliable finished products, and they bemoaned the software’s vulnerability to viruses and the constant need for patches. With mighty IBM putting its clout behind Linux, some small businesses are starting to convert, often with impressive results. Satellite Records, a 35-employee music retailer in New York City, made the switch after IT director Steve Shapero found Microsoft’s software simply too high-maintenance. “It’s like American cars and Japanese cars,” says Shapero. “Do you want a Chevy Impala or a Honda Accord? It’s great that Detroit and Microsoft are finally making things that don’t suck, but we’d rather have the state of the art.” Shapero said that Microsoft server software would require a full-time person to keep it running, which the company didn’t want. “As an independent consultant I like to set up a Linux box, deploy it, and ideally never hear from my client again,” he says. Other customers were motivated by cost savings from not having licensing fees. Westport Rivers Winery, a 20-person family business in Westport, Mass., cut its annual tech budget by 60% with Linux, according to an IBM case study. Rob Meyer, Internet director for Anaconda Sports, a 200-person sporting goods distributor in Lake Katrine, N.Y., says it saves around $3,000 a year on licensing fees now. What’s more, small-business owners still feel a residue of fear from Microsoft’s long history of abusing power in its quest for total dominance. They remember how the company tried to hijack their websites in 2001 with SmartTags, an aborted Windows feature that would have turned many of their own words into links to Microsoft’s sites and advertisers’ without asking their consent. And they read about Microsoft’s vendetta against guitar-string maker Ernie Ball, based in San Luis Obispo, Calif. Four years ago, the founder’s son and CEO, Sterling Ball, was a victim of a “nail your boss” campaign by the Business Software Alliance, a trade group that Microsoft co-founded. BSA raided the operation and found that a few of its 80 computers had unpaid copies of Microsoft products. Ball said it was an accident, a case of unused programs left over on old PCs when they were passed from engineers to clerks. But he still had to pay $90,000 in fines and legal fees. Microsoft sent the news clips to other small companies as a threat. Since switching to Linux, Ball has saved more money than he lost in the contretemps. “The money that I’m not spending on new versions of Office and on fighting viruses is going into marketing and R&D,” he says. Now that it fully grasps the Linux threat, Microsoft isn’t being so heavy-handed with small businesses. Instead, the company is trying shrewdly to make its own claims of parity or superiority. Executives dispute Linux’s claims of better security and reliability and point out that “free software” isn’t actually free because you need to hire people to install, maintain, and customize it. (That’s how rivals, particularly IBM, are looking to profit.) Still, Linux is “a real threat, and we take it seriously,” says Darren Huston, the Microsoft vice president who leads U.S. initiatives for small and midsize businesses. The stakes are stunningly high — a $400 billion-a-year global market! — and this is going to be an epic battle waged over a long time. Krammer says that Microsoft will continue to dominate that market for several years because smaller customers are often slow to switch to new software and most buyers won’t really consider Linux until it becomes more mainstream. Besides, there aren’t yet many business programs based on Linux, and those that are available, such as Sun’s StarOffice, aren’t as good as Microsoft’s offerings. Microsoft remains vulnerable, however, because small-business owners resent being captive to such a powerful force and not having viable choices. A January Yankee Group survey of companies with fewer than 500 employees found that 43% of them are concerned about becoming overly reliant on Microsoft’s products and services; of those respondents, 72% were actively seeking alternative vendors. “Microsoft’s challenge,” says Krammer, “is to go from being a necessary evil to something that small businesses like to invest in.” Improvements are being made, but there is always room for more. In April Microsoft launched a revamped and much easier-to-use Web portal at www.microsoft.com/smallbusiness. Still, you might have to wait half an hour when calling customer service. Even more frustrating is how Microsoft keeps smaller customers at arm’s length by forcing them to work through intermediaries — local consultants who sell Microsoft’s software, set it up, show buyers how to use it, or write their own software to work with it. There are some 325,000 of these folks, who go by awkward acronyms and names such as “VARs” (value-added resellers), “ISVs” (independent software vendors), and “certified partners” (individuals who have passed training courses run by Microsoft). Small businesses hook up with these “partners” mainly through word of mouth, but if you’re an entrepreneur with little tech savvy, it’s hard to know whether your accountant’s sister-in-law or your lawyer’s fraternity brother is the best person to apply software to the challenges of your business. To help, Microsoft’s newly redesigned Web page has a “partner finder” to identify local consultants and their areas of training and expertise. The cottage industry of Microsoft’s partners is getting some big new players. Both HP and Dell are starting to hawk their consulting services to businesses with fewer than 500 employees. IBM is reaching out to entrepreneurs too, but rarely dips below the 500- to 1,000-employee range. While all three companies embrace Linux, they also promote Microsoft’s products as part of their overall packages for clients. Although finding the right partner and setting up a new software system can be stressful, there’s a compelling reason for sticking it out: Microsoft now offers many extremely useful products for small and midsize businesses. Microsoft divides this huge market into two parts: The 7.5 million “small” businesses with fewer than 50 employees, with no more than 25 PCs and with a maximum of $5 million in annual revenue. The 330,000 “midmarket” companies with fewer than 1,000 employees have up to 500 PCs and up to $500 million in revenue. The smallest businesses probably don’t have a PC network or even a professional info-tech employee. These start-ups can benefit from Small Business Center (formerly bCentral), a set of Web-based services hosted by Microsoft on its own computers. The pitch is that it’s like hiring Microsoft to be your info-tech department for a monthly or annual rental fee, usually after a 30-day free trial. First developed in 1999, the services — aimed at businesses with fewer than 25 employees — have quickly become popular, attracting more than 2 million users in the U.S., Microsoft says. One of them is Jack Marshall, president of Pastry Chef Central in Boca Raton, Fla. His small family business sells baking and pastry tools through pastrychef.com. “It’s supercheap,” Marshall says of Microsoft’s “shopping-cart” services, which cost only $249 a year (excluding credit card verification fees, which are billed by a third-party partner). “You can’t beat it.” And even though Microsoft can’t give the little guy all the powerful features of an Amazon, “they’re moving toward that,” he says. Marshall particularly likes the new “order status link” that sends e-mail purchase confirmations to customers with Web links so they can check on delivery without having to contact the company: “That’s been a fabulous timesaver for us.” Besides time, there’s the money: Microsoft says that the top 100 customers for Small Business Center’s e-commerce service averaged $43,000 in revenue last December. Small Business Center also offers ListBuilder, which enables companies to send mass e-mails to customers to let them know about sales or other news. Microsoft handles the mailing, then tracks who opened the messages and were inspired to visit the sender’s website. The cost: $29.95 a month or $299 a year. Microsoft surveyed 100 ListBuilder clients and found that businesses sent e-mails to an average of 30,000 customers, though some had amassed lists of more than 100,000 names. (Microsoft says it does not keep e-mail addresses for its own use.) One of Microsoft’s most useful hosted Web services is SharePoint, which allows colleagues to share information and collaborate with one another and their customers. SharePoint is sadly underused by small businesses, but it’s a smart idea. In a Microsoft case study, Jeff Williams, president and owner of Carolina’s Choice, a furniture manufacturer in Rocky Mount, N.C., says SharePoint allowed his company to make up-to-date sales information available 24 hours a day to a network of 700 furniture dealers (the cost: $19.95 introductory price, then $39.95 monthly). As fledgling companies grow, Microsoft wants to wean them from paying monthly rental fees to investing in licensed software installed on PCs (which is how Microsoft has always made most of its money). The staple of the desktop PC has long been Microsoft Office (Word, Excel, Outlook, and PowerPoint), which boasts 400 million users worldwide. “Everyone I hire out of college can use it,” says Eric Meslow, president of Timbercon, a 30-person, $4.5 million fiber optics manufacturer in Portland, Oreg. That gives Microsoft a big advantage over Linux, which often requires training. The latest twist: Last October, Microsoft introduced Office Small Business Edition 2003, which lists for $449, while earlier Office users can pay an upgrade price of $279. The prices are up to $50 higher than the standard version, but Microsoft throws in two compelling programs. First, Business Contact Manager consolidates all the information you have about a customer, a dramatic improvement over the haphazard data silos discovered by Nelle Steele that could spell lost leads or missed sales opportunities. The program can identify long-neglected sales accounts or alert you to what’s coming up in the pipeline in the next seven days. Timbercon’s Meslow says that before his salespeople had this “sales funnel” feature, it took them an hour a day to monitor their accounts. Now it takes “about two minutes,” he says. Meslow figures that saves a total of 20 hours a month for his typical salesperson, who generates an average of $150 to $200 an hour. Office’s other addition, Publisher, is a tool for creating websites, e-mail newsletters, and other marketing materials so you don’t have to hire professional design firms or printers. Timbercon saved $72,000 in the first year by designing portions of its website and product data sheets. “Publisher was one of the larger surprises of the new line for us,” Meslow says. “Five years ago you could tell if something was created in Publisher. Now it looks professionally done, and it’s relatively easy to use.” It’s also fast, he says. A project that once took three weeks for outside firms to design and print can be created in-house within a week. “Five years ago you could tell if something was created in Publisher. Now it looks professionally done.” Terry Szpak, VP of marketing and sales at Telesystems West, an 18-person, $2.5 million company in Bellevue, Wash., that sells and installs phone systems, estimates sales rose $5,000 to $10,000 a month thanks to Publisher. Over its first dozen years, Telesystems had put together a database of 5,000 customers, but employees were too busy to create or manage promotions to sell additional products. With Publisher they were able to turn out flyers and e-mails. “It’s hitting people who already trust us,” Szpak says. “Marketing to our existing customer base has been a boon.” Office and Business Center provide benefits to companies with multiple PCs hooked up only through the Internet or what’s known as the “sneaker net” — people simply walking around, a likely scenario for a start-up. But as the business grows, even greater opportunities can come from setting up a PC network with a separate machine dedicated as a server. About 7 million of America’s 8 million small businesses still don’t have a server, according to Microsoft. It charges $599 to license its Small Business Server software for five users, and Dell and HP both sell the hardware with this software already installed for under $1,000. (Customers can later expand by licensing up to 75 users before they have to switch to a more capable product.) The investment usually pays for itself quickly. A server makes it easier to back up data that might otherwise reside on isolated PCs. It lets employees look at each other’s calendars and contacts, hook up to the network remotely, and share software for business functions such as accounting and inventory. Having a server enables a company to host a SharePoint intranet, which is how the Fischer Group changed the way it did business. The 23-person, $10 million Orange, Calif., food manufacturer representative firm had relied on old-fashioned paper files for purchase orders, contracts, contact information, and memos. They were often misplaced. Worse, employees could only get to the files during business hours. “Our biggest problem was wasting time and money physically handling job documents,” says Gene Austin, the company’s general manager. “It was like putting $100 bills in a pile and setting them on fire.” Once Fischer digitized this material, finding information and responding to customers became easier and faster. Small Business Server also provides security for a company’s network, an area where many small businesses are turning to Linux, including Timbercon, which runs its firewall on an open-source software server. Even though Microsoft still relies on its partners, it’s trying much harder to make direct contact with its customers. The company now offers free seminars for small businesses in 160 cities, many of them far-flung rural outposts like Casper, Wyo. Cynthia Bates, Microsoft’s general manager for U.S. small business, says that everyone on her team has to spend one day a month working for a customer’s company to see what daily life is like. “We want to humanize Microsoft rather than be the company in the backroom,” says her boss, Darren Huston. Meanwhile, our intrepid cultural anthropologist Nelle Steele has begun a new two and a half year study called Small Business Better Together, which is applying technology to three small companies in the Seattle area. The owner of one of the three didn’t want customers to wind up with voice mail; he insisted that an employee take a message. But these employees relied on sticky notes applied to computers or chairs. When these fell off, the customer’s needs would go ignored. Microsoft responded by buying new hardware and donating software. Now, Steele reports, “people are taking messages for each other in Outlook.” The notes haven’t gone away entirely. Some things stick for a long time, and no amount of technology will change that. Sidebar: Microsoft a la carte Info-tech options for your small business Small Business Center (formerly bCentral) What It Is: Online services for hosting e-commerce websites, processing customers’ orders, developing sales leads, and launching e-mail marketing campaigns Pros And Cons: Microsoft rents many useful Web-based services on a monthly or annual basis, though the other options — especially eBay — are popular with small merchants and with customers. Alternatives: Amazon, eBay, Yahoo Office Small Business Edition 2003 What It Is: Tools for creating and editing documents, spreadsheets, presentations, and marketing materials; managing e-mail and calendars; and tracking contacts and leads Pros And Cons: Everyone’s already trained on Microsoft’s excellent suite, the global standard with 400 million users, but OpenOffice is a viable option — and it’s free. Alternatives: OpenOffice, Sun’s StarOffice Small Business Server What It Does: Runs and provides security for PC networks Pros And Cons: It’s a good product. But Microsoft charges $599 for five users, while open-source rivals like Apache are free — and critics say they offer lower maintenance costs and better security. Alternatives: Apache, EmergeCore IT-100, Novell’s Small Business Suite, Red Hat Linux Alan Deutschman is a writer living in San Francisco and Roanoke, Va.
Despite the daunting advantages of their Net-based rivals, conventional retailers have something in store to compete: new technology With high-powered 3-D glasses covering his boyish face and his right hand gripping a joystick, Raymond R. Burke looks as if he’s set to pilot a virtual jet fighter. Actually, he’s about to go toy shopping. The glasses enable Burke to step inside a dazzling virtual toy store in which he can view model cars and toy trains without having to fuss with any child-resistant packaging. If he wants to access reams of information–to find out, say, if a product is in stock–he can press a button and the answer flashes in an electronic box beside the item. And since the virtual showroom offers unlimited space, he can walk around (or feel as though he is) a fully assembled swing set that stands behind a giant slinky. Burke is just doing his job: mock-shopping in a Cave Automatic Virtual Environment, a $500-million machine that works only with the help of a couple of ponytailed Ph.D.’s. As director of the Customer Interface Lab at Indiana University’s Kelley School of Business, the 42-year-old devotes much of his time to developing and testing new ways for brick-and-mortar retailers to steal a few tricks from anxiety-inducing Internet-based newbies. “There are some things that are just better and easier to do on-line,” says Burke, “but there are ways to bring those characteristics into the physical store.” That sounds backwards. After all, since on-line shopping started to click earlier in this decade, many critics have ranted about the Net’s disadvantage as a shopping environment. According to the once-prevailing argument, Internet retailers were doomed because customers couldn’t touch what they were buying–nor could they try it on or take it home. And besides, who on earth would be trusting enough to transmit sacred credit-card data into the unknown atmosphere of cyberspace? Bargain hunters, that’s who, and plenty of them. Last year consumers transacted nearly $8 billion worth of retail business over the Internet, according to Forrester Research. Granted, that’s less than 1% of last year’s $2.7-trillion total retail bill. But it’s growing fast; this year cybershoppers are expected to spend more than $18 billion. But more than the raw numbers, what’s truly shaking up the retail establishment–in segments ranging from toys to health supplies to used cars–is the inescapable awareness that ventures like eToys Inc. and E*Trade Securities Inc. represent the speedy emergence of a threatening business model. “An Internet business is a very scary competitor, because it doesn’t need to make money right now and it has an extraordinary amount of cash,” says Ananth Raman, an associate professor of technology and operations management at the Harvard Business School. “Sure, category killers and membership clubs were bad and you knew they could hit you, but you didn’t think it would happen in six months.” Indeed, although Net-based retailers have yet to perfect their business models, they’ve demonstrated some core efficiencies that look downright unbeatable. And yet even with the power of Amazon.com and its $20-billion market valuation, only 1.9% of all adult books were sold over the Internet in 1998, according to the Book Industry Study Group in New York City. Most uppity “dot coms” are still out to “Amazon” their sluggish brick-and-mortar rivals with such potent weapons as price and selection. “The Internet has struck the fear of God into the typical retailer,” notes Raman. For bigger retailers, egged on by Wall Street, that translates into feverish deal making with new Web partners (Rite Aid recently announced that it will buy about 25% of on-line company Drugstore.com) or spending megasums to orbit their rivals in cyberspace (Toys R Us has invested more than $80 million in its on-line operations). In the panic the behemoths have apparently overlooked an option that some smart small retailers are already exploring: conventional stores–as expensive to build and maintain as they can be–are not exactly evaporating. By employing a clear strategy, traditional merchants may even convert their earthbound structures into highly effective weapons as they battle against the “dot com” upstarts. In fact, according to Burke’s research, the characteristics that on-line consumers most appreciate about Internet shopping aren’t out of reach of the Net’s brick-and-mortar counterparts. What consumers crave, reports Burke, is lightning speed at the checkout line, convenient locations, and access to reliable information about the products they want. In March and April of 1998, Burke surveyed a nationally representative sampling of about 2,400 retail customers. Only about 12% had shopped on-line in the previous three months, but those consumers tended to be more affluent and better educated than their noncyber-savvy counterparts. And, in many instances, the customers who had browsed the Web for bargains tended to shop slightly more frequently than the typical consumer. Of those who shopped in real-world discount stores, only 57% were satisfied with the speed of the shopping experience. And even more demoralizing was the fact that only 44% were content with the amount of product information found in real stores. Moreover, many typical retail-store customers weren’t waiting in line because they feared being on-line. In fact, more than 70% said they believed they would benefit from in-store technologies, such as kiosks or self-scanning machines. For Burke, whose research is bankrolled in part by retailers like Sears, Roebuck and Target, the numbers suggest that retailers can deploy new technologies to serve up the benefits of on-line shopping right from the shopping floor. But a major part of Burke’s expertise is in developing and researching shopping innovations, not studying companies. There are, however, retailers–and yes, they do take up actual space in a physical dimension–that have arrived at similar conclusions simply by watching their customers. They’ve even begun to act. “There’s no sense trying to hide information from people, because there is nothing they can’t find on-line,” reasons retailer Renny Coe. “So why not show them that we have nothing to hide?” PRODUCT INFORMATION Too much is about right Coe’s comment may seem ho-hum until you consider that the business he’s in is not exactly renowned for its openness with customers. But even the car business–Coe serves as general manager for MotorQuest Dodge in Dearborn, Mich.–has been wrenched open by the Internet’s information free-for-all. For the plugged-in car buyer, Web-based merchants like Autobytel.com offer smooth routes around the often harrowing trip to the car dealership. Consumers now routinely find sales quotes, compare different models, and scan safety records before they ever sit behind the wheel. Of course, many retailers and manufacturers trickle out only as much information as serves their ends. But on-line merchants don’t attempt the impossible task of restraining consumers from seeking out a slew of data sources. On-line consumers use the Net to scan through any information that might help them to make a product decision. In so doing, shoppers have sent a blaring message: unbiased information is often more valuable than actually having the product itself. That message reached Joe Ricci, an owner of MotorQuest Automotive Group, the parent company of the car-dealership chain. Since he founded the business, in 1996, Ricci has spent nearly $5 million to refurbish its existing locations in Dearborn, Mich., and Wellesley, Mass., and to add a third location in the Detroit suburb of Southgate. His goal: to create a homey environment where customers can access all the information they could want. Walk into one of those dealerships and you can’t help noticing that you’re suddenly swarmed by…nobody, actually. Gone are the salesmen, clad in their Members Only-brand jackets, waiting to split off from the pack and serve up a suspiciously firm handshake. Instead, there’s a carpeted area outfitted with oak desks and ceramic vases. There, in a living-room-like environment, shoppers can jump on one of three computers to access the Internet at the heightened speed of a T1 line, with MotorQuest’s own home page as a guide to the Web sites of auto manufacturers, along with other sites that provide information on pricing, loans, and leasing, as well as reviews. MotorQuest also offers NADA 2000, proprietary software that enables buyers to calculate the value of their current car directly from the National Automobile Dealership Association. NADA sends Coe monthly updates of the information. “The goal is to give the consumer everything on the Net along with all the sources of information that we have at our disposal,” he explains. To be sure, customer computers or kiosks, which shoppers can use to order products not in stock and to get additional product information, can cost tens of thousands of dollars, hog valuable floor space, and serve only one shopper at a time. But Burke and his nine interdisciplinary researchers have designed a “shopping assistant”–a handheld computer with a built-in bar-code scanner–that allows consumers to check prices and snag product descriptions from just about any spot in the store. It could work like this: Before shopping, buyers would enter a personal profile that includes information about their dietary needs, budgetary constraints, and even a list of current prescriptions. Scan a bottle of olive oil and the computer might report that the salt content is too high, for example, or suggest a less pricey brand. The computer could even be programmed to retrieve recipes from the Martha Stewart Web site, based on the foods the user has stocked up on. “This sort of device can pull information from almost anywhere, including a store’s server or a manufacturer’s Web site,” says Sonny Kirkley, a researcher from Indiana University’s School of Education who works with Burke, “so the amount of information a consumer could access in the store is really limitless.” In addition, Burke has also developed an application that would allow shoppers to harvest reviews from like-minded people about which brand really did change their social life for the better. While the device could slow shoppers down (a definite no-no in the Internet age), Burke says his research shows that shoppers are willing to take more time if they believe it will result in a better buying decision on big items. “It takes about 12 seconds for a shopper to buy toothpaste,” says Burke, “but something like a sofa is a more thoughtful purchase.” SPEED Adding ‘searchability’ to store aisles Skirt the periphery of a supermarket–where the staples like milk and eggs always seem to reside–and you can’t help wondering whether stores are as user-friendly as they could be. After all, retailers want shoppers to be exposed to as many situations as possible in which their impulse-purchase reflex might kick in, thereby boosting profits. On the Internet, by contrast, a resourceful shopper can locate and purchase products with just a few taps on a keyboard. That process, however, has one obvious limitation: it can take days or even a week to receive a book from, say, Amazon.com. But what if brick-and-mortar retailers could combine Internet-like speed with the instant gratification of real-world shopping? To that end, Burke and his colleagues have added a product-finder feature to their handheld gizmo. Having trouble locating roofing nails? Scribble the product name into the handheld device, press Enter, and–voilÃ!–a map of the store appears on the screen indicating where the product is located. The device could also save time at the checkout line. If you’ve scanned your purchases while cruising through the store, a self-serve cash register could read the total from the shopping assistant and then bill a credit-card number that you’ve stored in the device. Such technology, of course, won’t be available–never mind affordable–for another year or so. Which is why retailers like Mike Largent have sought out simpler methods to speed up the shopping experience. Largent, president and CEO of Stambaugh Hardware Co., a $30-million chain based in Boardman, Ohio, has blatantly disregarded modern merchandising rules in the name of fulfilling consumers’ cravings. Since purchasing the 153-year-old chain in 1997, Largent has built six new stores and has plans to open eight more this year. None is bigger than 13,000 square feet–as compared with the company’s existing units, which run to 28,000 square feet–and each carries about 18,000 different products, a considerably lighter load than what is typically carried by competitors like Home Depot, which stocks between 40,000 and 50,000 products. “Part of the problem with the big stores is that you have to walk the length of a football field just to find a doorknob,” he says. In addition, each of Largent’s 21 stores is equipped with a computer, enabling customers to choose from an additional 54,000 items through the company’s Web site. He’s currently making deals with large wholesale distributors that will deliver products to either the customer’s home or the nearest store. “As a retailer today you just can’t afford to forget the Internet,” says Largent. “It’s impacting everyone’s business.” CONVENIENCE Create a habit-forming shopping experience It’s true that brick-and-mortar stores can’t produce the same rich and vibrant interactive experience as their electronic rivals. But that doesn’t mean they shouldn’t try. So believes Joshua Wesson, whose wine stores are practically walk-through Web sites. “The type of learning that the Macintosh took advantage of is precisely the sort of thing we take advantage of,” says the cofounder of Best Cellars Inc., a two-unit chain based in New York City. “Our stores have a graphical user interface.” Shoppers are expected to rely on visual cues, which is why the stores have no aisles. To speed up the shopping process, Wesson has created a color-coded icon system for his entire inventory, which is priced at under $10 a bottle. Each wine falls into one of eight categories: fizzy, fresh, soft, luscious, juicy, smooth, big, and sweet. For each class, Wesson posts a colored icon along with a brief description. “Fizzy,” for example, is “full of bubbles, full of fun.” Wesson goes so far as to place icon stickers on the back of each wine bottle so that customers don’t have to tote around a copy of Wine for Dummies to remember exactly what it is they’ve purchased. “We like to call it a point-and-sip environment,” he says. Wesson, who employs 75, plans to open two more stores this year–one in Seattle and another in Chicago–as well as launch his own transactional Web site. Compared with Burke’s 3-D glasses, Wesson’s real-world ideas seem quaint. Then again, the real world does have its limitations. But with the tools Burke is developing, even retailers with storefronts should be able to replicate enough of what shoppers value about cybershopping to make the trip worthwhile. “If you look at retail stores, they really haven’t changed much in 50 years,” says Burke. “The Internet is helping to force changes that were too long in coming.” Joshua Macht is a former associate editor at Inc.
