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September 27, 1999

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Retail Turns To Clicks And Mortar

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From intranets to virtual chains, retail has found plenty of new channels on the Web

By Clinton Wilder

f 1998 was the year retail and distribution companies wondered, "What will the Internet do to us?" then 1999 has been the year they decided what to do with the Internet, and they moved aggressively-in "Internet time"-to execute those plans.

After the impressive 1998 holiday season sales results of online startups such as Amazon.com and eToys, many traditional brick-and-mortar retailers stepped up their efforts to sell on the Web. As a result, this year saw a marked shift from the conventional wisdom that traditional players lacked the nimbleness and flexibility to compete with the online upstarts. Instead, they're using IT to integrate their retail and distribution infrastructures with their online channels to become a retail hybrid, resulting in the latest industry buzzword, "clicks-and-mortar" companies.

Retailers are linking E-commerce sites to legacy inventory applications and databases to offer services that Web-only competitors can't, such as the option to return a Web-purchased item in a physical store.

"The Web is causing the third significant transformation in the history of retail," says Jerry Miller, senior VP and CIO at Sears, Roebuck and Co. in Chicago. "The first was the mall/shopping center concept 50 years ago, and the second was the big discount chains 20 to 25 years ago. We elected not to participate in that one and, frankly, we suffered. But this one is driven by technology, and we intend to be a big part of it."

Like other retailers, Sears is learning that consumers are willing to buy a lot more on the Web than books, compact discs, and toys. The company's site for selling appliances online, launched in May, gets a million visitors a month. Some visitors use the site for research and then go to the store to buy, but many others purchase appliances online. Sears also has a site for its Craftsman line of tools, and it plans an aggressive advertising campaign this fall to tout its online channel.

On the supplier side, Sears maintains a secure Web site where 2,200 vendors can check online for the status of their product sales and inventories in Sears stores and warehouses. Sears has also embraced intranet technologies in a big way, giving employees access to information they haven't had before, such as daily sales reports and E-mail access to the CEO. "We will continue to develop new applications using Web technologies," Miller says. "We're going to get this company wired."

Rebranded Stores
Tandy Corp. launched its www.radioshack.com site for Web sales Aug. 31, and online customers will be able to return items at RadioShack retail locations, thanks to a revamp of Tandy's legacy inventory and point-of-sale software. Tandy also took the perhaps even more radical step of rebranding its brick-and-mortar Tech-America stores, specializing in computer components, with the name RadioShack.com.

"RadioShack.com has been a bit of a turbocharger for IT throughout the whole company," says Tandy senior VP and CIO Evelyn Follit. "In everything we do, the speed we need to react is much greater."

The Web has even begun to penetrate the retail bastion of independent sales forces, with companies such as Mary Kay Inc. and Tupperware Corp. recently launching sites to allow online distribution of their products. On Sept. 1, Amway Corp. rolled out Quixtar, its application to enable online ordering by the 1 million independent business owners who sell its home and health products. At the launch, Amway's Internet business group became a separate spin-off company, also called Quixtar.

Amway has invested about $10 million in the project, including multiple DS3 lines to handle Quixtar's projected volumes. Quixtar runs on Microsoft Internet platforms and uses IBM's MQSeries middleware to link to Amway's legacy applications and DB2 databases.

"Through 1998, we looked at IT from an efficiency standpoint-how much we could save per order," says Randy Bancino, senior manager of the Quixtar group. "But now with the Web, we have new revenue channels; we needed a whole new strategy and business model. Now, we don't launch a major project without a major Web site to go with it."

But Amway is not using the Internet to sell directly; the Quixtar site is used by the company's independent business owners to order and get information about Amway products more easily.

Home Depot Inc., which has a variety of customer-service functions on its Web site, plans to join the retail Web-selling crowd by year's end. Home Depot uses BroadVision Inc.'s commerce server platform and will offer customers the option of picking up online purchases at its physical stores.

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