The Computer Evolution


The most successful beverage alcohol retailers find that over time, their computer systems grow on them.

Hi Time Cellars in Costa Mesa, CA is a well-established (in business since 1957) and highly regarded beverage alcohol operation.

0307cmpDiana Hirst, partner and general manager of Hi Time Cellars, in Costa Mesa, CA, has been using the same computer system for eight years, while constantly adapting and improving its capabilities.

Hi Time has been using the same computer system, from CAM Commerce, for the last eight years. “It does all our point-of-sale, all our ordering, handles our mailing list, generates a lot of reports,” reeled off Diana Hirst, a Hi Time partner and the store’s general manager.

Hirst is happy with the system, which handles the store’s 16 registers and back-office terminals.

But she is not complacent; she is always looking for ways to improve her capabilities.

When CAM developed the ability to run a retail operation’s Web site, Hi Time jumped at the chance to be the first to use this new capability. “We are their guinea pig,” Hirst said. While Hi Time currently has a web presence for its wines via WineAccess.com, Hirst wants a Web site that can be used for the store’s spirits, beers and other products.

And Hirst is eyeing the possibility of integrating her store’s credit card processing into the CAM system.

Adding Capabilities

In short, Hirst doesn’t have to think of her computer system as a “done deal.” Even though she is happy with her present system and is not in the market for a new one, Hirst, like many retailers, sees that her computer system can be in a constant state of evolution. Capabilities can be added, systems can be more tightly integrated, improvements can be made.

Jim Arnold, one of the owners of the two-store Kahn’s operation in Indiana, calls himself a “KISS guy,” KISS being shorthand for “Keep it simple, stupid.”

“The way I look at it, if it’s running well, I’m not messing with it,” he said.

Arnold’s two stores, Kahn’s Fine Wines & Spirits in Indianapolis and Kahn’s Fine Wines Marketplace, which incorporats a gourmet grocery and a restaurant with a full-service liquor store, have been running a computer system from Atlantic for at least 12 years. “We were using it when it was called Metropolis and was UNIX-based,” Arnold said. “Now, they call it Spirits and it’s Windows-based.”

But this self-proclaimed “KISS guy” continues to look for ways to improve his computer system. He decided to use a different accounting package, from Peachtree Software, rather than the one offered by Atlantic, for example. “With the accounts receivable from Spirits, the one thing I don’t like is that it shows an unlimited history on every bill. We’re a full-service caterer, with a lot of repeat customers and every time we would print out a bill for a delivery, it would show six months’ worth of their transactions,” he explained.

Leveraging A Web Site

Like many beverage alcohol retailers, Arnold is now looking at the potential of his operation’s Web site (kahnsfinewines.com). “It would cost about $35,000 to write the software that would link the Web site to our stores’ inventory and pricing information, but what I find is that, more than anything, people use our Web site to look up products before they come in to shop,” he said. Arnold’s Web site keeps track of the number of hits it receives and where, by zip code, those hits are coming from. “I can tell you that the bulk of our visitors are locals and we are shipping very little [to other areas in Indiana,]” he said.

Can you get your computer system to work exactly the way you want it to? No, said Arnold, and it would be impractical to try. “The way I look at it, if you have 100 things specific to the way you do business, you pay the computer company to customize their system to handle 50 of them and then you adapt the other 50 to the way the computer system works. It’s the only way to survive.”

And sometimes, despite their best efforts, retailers find themselves with a system that is just plain unworkable. Maybe the computer company goes out of business. Or maybe the system just doesn’t do what the retailer was told it would. That, said Ken Friedman, is what happened to his operation, the 12-store Bottle King chain, headquartered in Livingston, NJ.

Friedman is, in fact, considering filing a lawsuit against the company that provided it with its former system.

“It doesn’t even add properly,” said Friedman, Bottle King’s president and a member of the Wine & Spirits Guild. “We discovered that when we did an audit and found that the numbers didn’t jive.”

Friedman has been searching for a replacement system since 2001. “It has taken a tremendous amount of time to find the right one,” he said. One of his requirements was that the computer company agree to take responsibility for any damage to his business caused by flaws in the system. “Most would not give that kind of guarantee,” he reported.

Friedman, who does not want to identify the new company he is now working with, said that Bottle King has already paid for a lot of modifications to be made to the new system. And in early June, the chain began testing the system in one of its stores.

“We’ll know soon,” said Friedman grimly. “We’ll know, after a couple of weeks [of running the test store], if this system works for us.”

Although he could do without the aggravation, Friedman believes that getting the right computer system is of paramount importance. “We are now in a period of information,” he said. “You need information to know how to sell, to have the right pricing, to do the right marketing. If [your computer system] doesn’t work, you are out of business.”

Even when retailers are happy with their systems, they still have to put quite a bit of effort into keeping them current. When Kreston Liquor Mart in Wilmington, DE adds a second location in nearby Middletown, its system will, of course, have to be expanded to handle both locations.

But even before that, Bob Kreston has made “some wonderful changes,” he said. Kreston has been using the CAM 32 system, from CAM Commerce, for the past seven years. DSC_0936

Changes currently in the works include connecting his Web site, krestonwines.com, to the store system. This change will allow the Web site to access direct inventory information from the store system and should be in place by the end of the year. “I’m talking to a lot of companies about that,” he reported.

Kreston also began offering gift cards last year. Right now, he uses an outside company, the one that handles his credit card processing, to handle them. “But we may integrate that all into one system,” he said.

And he is thinking about using a capability of his CAM system to print out customized receipts. “If customers buy a certain brand, their receipt might be printed with a coupon for a competing product for next time,” he explained. “You could even use this feature to print out a recipe based on their purchase or use it to prompt the salesperson to make a suggestion.”

Kreston Liquor Mart, in business since 1933, has a long history of being computerized. “My father was one of the first to be fully computerized and was instrumental in developing his first system,” said Kreston. “Since then, we’ve had one other system — from a company that went out of business. We’ve come a long way over the years.”

Computerization for the smaller retailer, in general, has come a long way. It used to be that small- to medium-sized retailers, such as liquor retailers, could only look on wistfully while large, national retailers used the most sophisticated — and expensive — technologies to run their businesses. As computer power has become increasingly affordable, however, that has begun to change.

Microsoft in the Game

Perhaps the clearest sign of that has been Microsoft’s recent entry into the market of systems for small- to medium-sized retailers. (See guide.) “Smaller retailers have the same opportunities and needs as larger retailers,” said Jim Greene, lead product planner for the new software product, called Retail Management System (RMS), at Microsoft Business Solutions.

As technology develops, some beverage alcohol retailers believe that the whole reason for having a computer system has changed. “We use our system to manage our marketing, not just our inventory,” said Burt Notarius of Prime Wine in Kenmore, NY. “CRM, or customer relationship management, is the real reason to be computerized.”

Notarius’s operation has been computerized since 1977. Now, he has taken the loyalty-card concept to the next level. His card program, which he started back in 1987, has 140,000 cards, 90,000 of them active. An astonishing 72% of all of Prime’s sales are made using these cards. Called the Premier Card, it’s also good at Premium and Prestige, two nearby beverage alcohol stores owned by Notarius’s sons.

“Customer names and addresses are the most important asset a retailer has,” Notarius said.

But he goes beyond just knowing a customer’s contact information. Notarius does what is called “market-basket analysis” on his customers, analyzing what they bought and how they bought it. “I know that my best customers shop with me an average of 13 times a year,” he said. He also knows that, once a customer hasn’t shopped at his store for 90 days, “there is an 85% to 90% chance that we lost them as a customer.” Therefore, if a customer hasn’t made a purchase in a certain number of days, Notarius’s CRM system starts sending that customer direct-mail pieces.

And analyzing his present customers can help Notarius identify people who are similar but have not yet been to his store. Using Claritas, a market-analysis company that can provide him with the names and addresses of potential customers, Notarius can target non-customers who live in the same areas and have similar demographics to his best customers. “In the last year, we have focused on getting these good addresses and marketing to them,” he said. “This is sophisticated, targeted marketing.”

Targeted marketing is also, he said, something pretty much any retailer could do, at least to some extent. “It used to be that only the very largest retailers could do this, but now, smaller retailers have the ability to buy the computer power necessary to do at least some of this themselves,” he said.

Loyalty cards and other customer relationship management tools are the hot topic among liquor retailers and the computer companies they use. Over the last several years, many computer companies have added such capabilities to their systems.

“We were one of the first ones to have [loyalty cards] in our industry,” reported Bottle King’s Friedman. His operation has issued over 300,000 cards. And over time, Bottle King has tweaked and improved its cards. They are, for example, available to customers as both cards and as keychains. And after having been frustrated himself in other stores, Friedman set up his system so that, even if customers forget their cards, they can still identify themselves at the register. That way, the customers can get their discounts and Friedman can get his information.

More importantly, Friedman has played around with different pricing structures and amounts. Retailers have to give a big enough discount, he believes. “When you spend a $100 at the supermarket, using its loyalty card, and then see that it saved you a whole $1.25, that’s more insulting than effective,” he explained. “In our stores, you get a discount of at least 10 to 15%. That assures the customer that they are getting the better deal with us.”

Kreston also uses loyalty cards — his store has issued 13,000 of them — to target his marketing efforts, which include weekly e-mails and bimonthly newsletters as well as six to eight other direct-mail pieces a year. “Targeted marketing helps save you money in the long run,” he said.

Transactions processing is another area of development in computer systems meant for small- to medium-sized retailers. Many companies now offer the ability to integrate credit card processing into their p-o-s systems. “The main reason we want to do it is for accuracy,” said Hi Time’s Hirst. When a store uses a separate terminal for credit cards, the clerk must ring the sale, then re-enter the amount in the credit card terminal, then enter the credit-card approval back into the p-o-s system. This leaves a number of opportunities for error.

The latest technological development in credit card processing — using the Internet — could have the biggest impact on the small- to medium-sized retailer. “They can get supermarket-like speeds without the cost,” said Chris Justice, senior vice president, sales for Concord EFS, a national payment processor. While traditionally, a large retailer, such as a major supermarket, would get its credit card processing speed from a $1,000 per month frame-relay system, now smaller retailers, using an internet connection they probably already have, can get the same speed, Justice explained.

New Payment Systems Add Speed

Microsoft, in partnership with Citibank Merchant Services, has added a new online payment-processing module to its Retail Management System (RMS). And Datasym has also introduced, in partnership with Mercury Payment Systems, an online payment-processing capability.

The big advantage to retailers? Speed. An internet transaction can take four to five seconds to process compared to a minute for a phone-line system. “And at high-peak times, like the holidays, that can make all the difference in the world,” said Microsoft’s Greene.

Meanwhile, the way customers want to pay continues to evolve. “Eight years ago, we didn’t take credit cards at all. We were all cash and checks,” said Kahn’s Arnold. “Now, 75% of our revenue comes through credit cards, and we’ve gone from accepting 50 to 100 checks a day to getting about five.”

Many computer companies and payment-processing companies, like Concord, are anticipating that debit cards will become a major form of payment. Indeed, Concord has, through mergers over the last five years, created the largest PIN-secured (ATM and debit-card) payments network in the United States, called Star. “Debit is, for the third year in a row, the fastest-growing tender type,” said Justice, “and Visa recently reported that 52% of all its transactions are debit.”

Change is the only constant: that old saying is particularly true in retailing and in computer technology. Just ask Prime’s Notarius, who is currently working on equipping members of his wine staff with handheld computers that can access product information from the store’s computer system. He is also thinking about installing touchscreen kiosks for his customers to use. Notarius actually tried such kiosks once before, years ago, but a lot has changed since then.

“I am always very interested in using technology to do a better job communicating in the store and marketing to bring people in,” he said.

It’s a constant process. *

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