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Information Technology: The Internet

Shop Online--Pick Up at the Store

Retailers hope the Net will turbocharge their outlets

Your 10-year-old is howling. He needs the new Vince Carter basketball shoes--now. Being an indulgent, tech-savvy parent, you begin scouring the Internet, only to find the shoes are sold out. Thus begins hours of phone calls to local stores, all fruitless. What if there were a more efficient way to shop--say, using the Net to locate instantly the merchandise you wanted at dozens of real-world stores? In e-commerce parlance, to use clicks to get inside bricks.

These days, traditional retailers yap about the power of "synergy" between their stores and their Web sites. Most, however, have done worse than fail. They haven't even tried. Now, new strategies are starting to materialize, and they center on a simple idea: Let consumers use the Web to dive directly into the inventory at their nearby stores, instead of waiting for stuff from a distant dot-com warehouse. Customers save browsing time and get instant shopping gratification. "It's increasingly important to let consumers choose how they want to get their product," says James Vogtle, Boston Consulting Group's e-commerce research director.

In theory, there's a payoff for retailers, too. By letting buyers place orders and make pickups themselves, they wring more value from locations that already carry the costs of receiving, storing, and merchandising goods. Using the Net to increase foot traffic also helps ease the long-simmering objections of local retailers who say Web sites only steal their business.

So far, only a handful of retailers are taking this path, including Circuit City Stores Inc., Office Depot, and Service Merchandise Co. This summer, however, a wave of retailers is expected to add this feature to their Web sites. Helping to lead the charge are two shopping-mall giants, the 257-mall Simon Property Group Inc. and the 136-mall General Growth Properties Inc. Meanwhile, a young upstart, found.com, is pushing its vision of Web-to-store purchases with venture backer KKR-Accel Internet Co. "This is absolutely where brick-and-mortar merchants need to be in the future," says Forrester Research Inc. analyst Lisa Allen."SKEPTICAL." Not everyone is sold. "If you've found an item online, how can you be sure it isn't sold in the store before you get there?" asks Don Paschal, manager of global store marketing for ICL Retail Systems Inc., which designs retail computers. Indeed, even Amazon.com Inc. CEO Jeffrey P. Bezos says he's "skeptical" of a need for consumers to peek into store inventories, saying that Wal-Mart is in stock 97% of the time. "You're going to do all this for the 3% of the time you're out of stock?" Bezos mocks.

That's not the mood at Circuit City, which says this approach allows it to better serve must-have-it-now gearheads. For the past year it has offered a Web feature called Express Delivery, which allows users to search, in real time, product availability at three stores. Are you a Columbus (Ohio) shopper looking for a new digital camera? At Circuit City's site, you can check on cameras available at the three Circuit City stores in Columbus. Any time users click on a product, the site tells them which stores have it in stock. With a few more clicks, they can then have it plucked from that store's warehouse and ready for pickup.

Already, 50% of Circuit City's Web site users get merchandise from physical stores, says Chief Information Officer Dennis Bowman. Against pure dot-coms, "the major source of leverage we have is our stores," he adds. This approach is ideal for electronics, says Bowman, because customers often research products online, but try them out before purchasing. Bowman also credits the system for reducing conflict between the in-store staff and the company's Web site. Stores get full commissions for all online purchases they fill.

This example is just the crude beginnings of a new clicks-to-bricks world, argues Richard Lawson, the 29-year-old CEO of found.com. With support from Accel-KKR and Sun Microsystems Inc., Lawson plans to do the grunt work of wiring store inventories to the Web. From there, he envisions a still more sophisticated offering in which customers will be able to search for items--say, a hard-to-find style of Levi's jeans--across multiple retailers at once. That convenience appealed to Simon Property Group, which with found.com is developing systems that Simon hopes will be in place in at least 10 malls by the holiday retail season. "Being able to communicate like that with the customer is going to increase their satisfaction tremendously," says Simon Group CEO David Simon.

Once enough users start searching for products, says Lawson, retailers will then have access to real-time data measuring consumer demand. That, he adds, will give them incredible new power to forecast demand and allocate inventory. "All of a sudden, you'll know that 27 people are looking for the same item from one brick-and-mortar store," says Lawson. "That knowledge didn't exist before."

Of course, it's easy to talk about what the technology will do. It's far more difficult to make it work. Retailers have to piece together three complex and often outdated systems--their inventory computers, their cash-register data, and a Web catalog describing the products. Then they have to devise a system for retrieving items from within the store, which generally means relying on a clerk to rummage in the aisles. The whole process is a "Rube Goldberg device," says Fulton R. Macdonald, of retail consultancy International Business Development. "All kinds of errors occur in physical stores that can mess up inventory status" and ultimately disappoint customers, he says.

Lawson admits snafus may develop. He insists, however, that retailers will re-engineer their sales floors to meet demand. "Customers will be able to find a product anytime, anywhere," he says. Now the challenge is whether his vision will help retailers find that most elusive item of all: synergy.By Dennis K. Berman in New YorkReturn to top


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