Great Universal Stores sells the sort of sensible clothes that your granny wears around the village - which doesn't at first glance make it the company most likely to succeed on the Web. But Lesley Mingay, in charge of Web business development, has set up one of Britain's most ambitious Web-shopping sites: Shopper's Universe. Since she went online in June, tens of thousands of people have cruised through her Web mall, credit card on keyboard. Here she talks to John Browning and James Flint about the old-fashioned virtues that make for success on the Web, and the new relationships that new media is creating between customers, retailers and manufacturers.
Wired: Why do you think you will succeed on the Web?
Mingay: Because we're very good at home delivery. If you actually analyse the coming age of multimedia and online shopping it's not the front-end interface which is the challenge; it's actually the problems of delivering the stuff to peoples' homes. Very few people in the world have got that ability. We want to leverage that ability into new markets, and so extend our customer base.
What does it mean to say that you are good at home delivery? What do you do well?
Three Ps: pick, pack and dispatch. You have to take orders from a customer database and pick the goods up from a warehouse. You have to be able to break down from the ten or twenty lots you pick up from the warehouse to a single package for a single home. Then you have to get it there. Those are really the core processes. It's all very boring office stuff, but it's incredibly difficult to do.
Deliveries into our warehouse are timed to the half hour. Everything is bar-coded, and the bar code for a product tracks it right the way through, from the time it leaves the manufacturer to the time it gets to the customer. Completely seamless. And at huge volume. White Arrow Express, our delivery operation, is bigger than ParcelForce. It delivers over 2 million parcels a week, 100 million a year - just in the UK alone. That's a lot of parcels!
How quickly can you respond? Fast enough for the Net?
It's very finely balanced. You have to work long enough in advance to know that it takes China ten weeks to manufacture the material for a t-shirt, say, before it shifts to Taiwan for the garment to be manufactured; it takes six weeks for it to be manufactured and four weeks to be shipped. Those are long lead times, so we've got very sophisticated demand prediction algorithms to anticipate how many we're going to shift of this pair of jeans or that top.
But if suddenly a product is hot, and there's a run on t-shirts, the system has to readjust to order extra t-shirts and cope with them when they hit the deck four weeks out, making sure, for example, that there's enough space in the warehouse. That may mean trying to clear out some products that haven't sold so well. Those are real problems for people who've never done this kind of home delivery.
Does the Web change those challenges?
No. There is very little difference between taking an email order, or a phone call or a letter.
So there's nothing radical or challenging about your move on to the Web?
In terms of customers there is. The core customers of our catalogues in the UK are middle-aged women of modest income. These are the least likely people to be computer-literate, or have a PC at home or at work. So we have to develop new services for customers who are on the Web. They tend to be affluent, male, youngish, higher education, et cetera - and these are the least likely people to buy from us at the moment.
Half our catalogues are women's fashion. So to reach the Web market we're also looking for new product groups. A CD, a video recorder, a pair of jeans and other products are simply inappropriate to sell in a catalogue, or we haven't got enough space or they don't fit our catalogue customers' tastes. But they are absolutely the right thing to sell on the Web. Burberrys, for instance, which is already on the Web site, wouldn't dream of selling through a catalogue. Totally wrong customer base. But it may be right for them on the Web.
So what changes the product mix and presentation?
All the catalogues lead with fashion. The first 300 pages are female fashion, the next 100 male fashion and then you get the "back of catalogue" stuff: hardware, entertainment, sportswear and so on. On the Web, we lead with the back-of-catalogue stuff, and pick particularly that which is most likely to appeal to men. So the only fashion we've got there is sportswear: trainers, t-shirts and what have you. That's extremely successful. We also sell CDs, videos, a range of home entertainment stuff, gardening, DIY.
We've got about 20 Web stores up and running now, each focusing on a different sort of stuff. And we'll expand those over time. We have a denim store, for instance. We recently added an auction where people can bid on goods.
Do you divide the catalogue like a store?
No. The Web site's divided that way because we wanted to build a shopping centre rather than a catalogue. The Web actually allows us to have shop windows and shopfronts much as in a physical shopping centre, and also allows us to bring in third-party brands, like Burberrys, to complement and support what we've got.
But once they get on the Web, aren't companies like Burberrys tempted to develop a direct relationship with customers themselves?
Maybe. We've just started talking about these issues with the manufacturers with whom we have relationships. A lot of them are building their own Web sites. But very few of them have any intention, or the ability, to run a transactional site. They're full of information about their products. So what we want to do is to give our customers that information before we sell it to them. We're talking to some suppliers about how we can link the two sides together: information and transaction.
Someone who has come into our site to look at a red bike could hop to the manufacturer's site for detailed product information; someone who's gone to the red bike information page on the manufacturer's site could hop to our site to do the transaction. We're also exploring ways of talking to customers before products are made, to ask what they want. But people lie about what they want, or they make mistakes.
People indeed do lie, but you can get smart about how you ask the questions. We could take a digital camera to the Far East, photograph prototype garments before they are made and let customers vote. That could actually help us to make smarter buying decisions, and show customers that we really are trying to give them what they want.
A lot of what you're talking about is the relationship between the customer and the manufacturer. There doesn't seem to be a lot of room for the middle man, which is what your company has traditionally been.
Yes, but ... I personally believe very few manufacturers are going to be able to cut out the middle man. Most manufacturers are very product-focused. They have huge numbers of skills to learn about managing customers. We know absolutely everything that our customers have ever bought from us. For manufacturers who've never even sold to customers before, learning how to collect and manage that sort of information is a big job, and it's risky. As soon as they start selling direct, even for a bit of their business, retailers may retaliate on the rest.
Also, manufacturers only have relations with customers interested in the particular product they make. If you only manufacture video recorders, even if you know that somebody wants a lawn mower, how does that help you? Retailers can develop much broader relationships with customers.
So how many people are using your site now?
In the first three months we've had about a million hits, which translates into tens of thousands of different shoppers. About 1% are purchasing; that's about average for direct mail, which is the only comparison we have. We've actually sold more electronically than I'd have thought.
What has sold well?
Sportswear. Especially quite expensive branded stuff. Everyone needs sportswear, even if they don't play sports.
How are you going to promote the Web site?
We're going to do a lot of off-line promotion. I believe that people will find us more easily if they know the name of the site before they get onto the Internet. We don't think that the search engines are going to do us much good, because you search for anything these days and you get 37,000 responses, and it's less than useless.
We are also working on tapping into communities with specific interests. We had a Euro 96 store selling official merchandise, so we had links into various football-related pages. If there are people who are interested in the products, they can hop over to us from a related site.
At this stage there's a lot we can do with reciprocal links, because everyone wants to build user communities. If there's a gardening site, link into the gardening store - and vice versa. That's the plan.
What was the biggest surprise your experiences on the Net brought you?
Personally, it was when we started getting orders even before we'd told anybody we were on the Web.
How much would you expect this medium to globalise your competition?
That is a tough one to answer. We've always had a relatively small overseas business compared to the domestic business - it's a multimillion-pound business compared to a multibillion-pound main company. The Web gives the ability to sell globally, but I'm not sure our customers want to shop globally. If you can buy the same product from someone in the UK or someone in Australia and it's the same price, why bother to buy from the person in Australia?
But for a lot of products, the prices aren't the same: CDs and software, for instance, are about two-thirds the price in the US as they are in Britain.
Where there are large price differentials in markets there is a real value for shopping globally. But over time, everyone expects those price differentials to close up. The Web increases pressure on prices.
Still, I don't think that price will ever be the sole criteria for buying something. People buy on brand loyalty, or because Ryan Giggs wears that aftershave. The way one is sold something in the UK is very different to the way it's sold in the US. Look at television home shopping: a huge, huge business shipping out jewellery in middle America. It's falling flat on its face in the UK with the same techniques.
What's your next big challenge?
To us the next one is now to develop the notion of personalised shopping - to make the customer interface more meaningful than it has been. Beyond that I think the big issue is moving into the home via TV-based delivery platforms. That's when we can start to really offer something new to our existing catalogue customers. Everyone's got a phone and a TV.
Is television a big change?
No. At the moment the PC happens to be the delivery platform. Tomorrow it's going to be digital satellite TV, cable TV, or something else entirely. These are just different front-end interfaces to the same shopping engine room. We build the core technology to do transactions and manage customer databases, and then just change what it looks like at the front end to cope with orders via a remote-control zapper, a telephone, a keyboard or whatever's most convenient.
More or less any technology can work, but two-way interactivity is really required before you can get down to personalised interfaces. To do that you have to get information from the customer as to who they are and what they want; you also need to use your database to tailor a response. We have no plans at the moment to put the cat-alogue on CD-ROM. The argument is that by the time our current catalogue customers have got computers with CD-ROMs, then the communications networks will allow us to do everything we can do on a CD-ROM across the network.
And what about home delivery - the core strength you were talking about?
One of the things that will develop is a whole area of collections. I wouldn't order anything mail order if I had to wait at home to get it, which is a problem now. But 50 yards down the road from lots of people there's a 24-hour garage. If they actually developed the notion of a 24-hour collection centre for packages, I could stop there on my way home, pick up my package and drive home. If the Post Office got its act together it would also be in a prime position to develop this notion of 24-hour pick-up points. There's a whole business there. It's just one of the new businesses that network technology is going to create - and like a lot of the others, it's got nothing at all to do with networks.
John Browning is executive editor, and James Flint is a section editor, at Wired.