Soup to Sushi : Birth of a Salesman: Electronics
The three faces of Pat Eggleston stared back from the video screen.
Elizabeth, the Beauty Makeover Computer, had captured the junior college professor’s image in its video system and painted it with three new looks from its electronic palate of lipsticks, rouges and eye shadows.
An hour later, Eggleston left the Nordstrom department store in South Coast Plaza in Costa Mesa with $128 worth of cosmetics. “It was great,” Eggleston said of the computerized facial. “I could actually see what was happening to me.”
The folks at Elizabeth Arden think Elizabeth the Computer is pretty great too. According to Barbara Baker, director of U.S. marketing, weekly cosmetic sales during one of Elizabeth’s visits to a store can hit $25,000, four times the usual pace. More important, Baker said, half of the customers that Elizabeth has attracted during her 15 months on the department store circuit had never tried Arden products before.
Battling for a Share
“That’s key to us,” Baker said. “The customer base isn’t growing that fast and we’re all battling for our share. Computer technology is an effective way for us to bring people in.”
Shrinking profit margins, increased competition and slowed sales growth are increasingly forcing merchants to look to electronic wizardry for relief.
The gadgetry is already being used to sell everything from soup to sushi. Retailers, including such giants as Sears and Dayton-Hudson Corp., are looking for even more ways to link computer technology to their cash registers.
And beyond their razzle-dazzle novelty appeal--certainly a major reason for the sales boost they initially bring--the electronic gadgets may bring long-lasting changes to the retailing scene, according to some analysts.
The Magic Mirror
Consider, for example, the “Magic Mirror,” a French-made piece of wardrobe-fitting wizardry introduced to the United States by the L. S. Ayres department store chain in Indianapolis. Customers trying on clothes before the full-length mirror see their faces and computer-measured and synthesized silhouettes of the rest of their bodies. By merely pressing a button, the customer is dressed in any one of up to 80 fully accessorized outfits. Another press, and the outfit is replaced. “It’s a little bit of Disney World here in the Midwest,” an Ayres spokesman said.
Florsheim uses electronic catalogues to expand the number of its shoes a retailer can handle. The average Florsheim merchant carries about 25 of the company’s 250 styles. But with just a few taps on the electronic catalogue, a hard-to-fit or hard-to-please customer can find--and see in full color--the style and size he wants from among Florsheim’s full line. A few more taps on the machine and the shoes are ordered from the factory and shipped to the customer’s home.
A company spokesman said the nine machines already in use have performed so well that another 100 will be installed next year in Illinois shoe stores.
And then there is Sushi-tron. New Meiji, a Gardena-based operator of Japanese takeout restaurants, is testing a computerized ordering system in its new downtown Los Angeles sushi restaurant. Customers scan a light wand, a standard piece of equipment for grocery store inventory takers, over pictures of the sushi items they want. The order is automatically transferred to computer terminals hanging above the chefs. And all without the customer having to attempt to pronounce the name of the dish.
By some counts, the nation’s supermarkets, department stores and other retail outlets are already home to about 1,000 “transactional” machines, those which actually make a sale, and 12,000 “informational” machines, boxes that merely spew forth data.
By 1990, the accounting and consulting firm of Touche Ross & Co. estimates, there will be 30,000 transactional machines and 70,000 informational systems plugged in nationwide.
The turn to electronics comes at a crucial time for retailers. By one projection, the tapering off of Baby Boomers entering their prime buying years will cause retail sales to increase a paltry 2.3% annually over the next five years, less than one-third of the 8% pace of the last five years.
Electronic retailing gizmos may give some retailers just the ammunition they need. Deployed correctly--and the “correct” way is still a big unknown--the machines can boost customer traffic, increase sales volumes and allow merchants to expand their merchandise while cutting costs.
Among the long-lasting changes the electronic gadgets may bring to the retailing scene are decreased customer emphasis on price as the crucial factor in a purchase and more precisely targeted advertising within retail outlets, said Thomas Rauh, of Touche Ross & Co.
Price Comparisons
According to Rauh, shoppers have made price comparisons a critical part of a purchase decision because many retailers have reduced their sales forces to the point that customers don’t have enough information to justify buying the “high-priced spread.” However, with informational computers coughing up data on any item in a store, shoppers can learn why, for example, the price of towels varies so.
Beyond offering information, the machines can easily beam an advertisement or two.
Builders Emporium, the Irvine-based chain of do-it-yourself stores, will soon be adding computerized video machines to instruct customers how to complete the tasks that probably motivated them to go to the store to buy the required parts. In addition to the how-to lessons, the videos will carry advertising from manufacturers of products used in a particular repair job. In the future, Builders Emporium envisions using the machines, which come equipped with a printer, to spit out cents-off coupons from the product manufacturers.
“We’re at the leading edge now,” Rauh said. “We’re just now seeing what these machines can do for us.”
And with technological advances, many of these devices are becoming increasingly affordable. Elizabeth, the makeup computer, cost about $1 million to develop, but now costs just $60,000 for each additional machine. Magic Mirrors cost about $15,000 apiece and Sushi-tron machines can be purchased for just $1,000 each.
Yet, despite all its potential, the computer wizardry has produced mixed results so far.
Customer Resistance
Merchants, like bankers with their automatic teller machines used by less than 30% of the banking population, complain that they must fight customer resistence to electronics. Also, many shoppers refuse to patronize “electronic stores” because they want to touch the merchandise before buying. Complicating all this are the retailers’ own struggles to identify the best locations, promotions and merchandise for the various electronic retailing aids.
“Acceptance is moving more slowly than anyone projected,” said Rauh, who had once estimated that there would be 50,000 “electronic stores” in the nation generating $5 billion to $10 billion in sales in 1990. “In the last year we’ve learned it’s going to take a lot more consumer education.”
Added Paul Weiss, who follows retailing for Sutro & Co. in San Francisco: “A sizable segment of the public can’t handle an automatic teller machine, let alone something as complicated as ordering equipment through a machine.”
Indeed, there have been some notable and expensive flops.
In September, Avon, the door-to-door cosmetics merchandiser, abandoned an eight-month effort to lure customers to electronic kiosks peddling its makeup. Ken Gross, who directed the experiment, said 10 machines were placed in shopping malls, supermarkets and office buildings to reach customers unavailable to Avon’s traditional at-home sales pitch.
Wrong Kind of Product
However, after each location produced similar dismal results, Gross said, the company concluded that cosmetics aren’t the right product for a remote purchase. “Cosmetics is a feeling, touching, trying business. We had a terrific video (show). But you still can’t touch the product with a video.”
J. C. Penney, which cut short an experiment selling furniture via computers after several months of poor sales, has put aside all intentions of using electronic selling machines in its stores in favor of promoting a cable television-telephone system allowing customers to shop from their homes.
Some analysts suggest that Penney’s was stung by offering a line of merchandise too expensive for remote purchase. The retailer shrugs off such comments, saying only that it believes the future of electronic shopping is in the home, not as an also-ran in its stores.
CompuSave of Irvine, which makes state-of-the-art electronic shopping machines and sells discounted household goods through them, has also found the going rough.
Sales of its Touch-n-Save machines--a refrigerator-sized kiosk that allows customers to page through an electronic catalogue of 2,500 items by pressing a touch-sensitive video screen and then actually order and pay for goods with a credit card or check--are expected to hit about 500 units this year, one-sixth of initial projections. Furthermore, merchandise sales from the machines have been disappointingly low.
Working Mothers
CompuSave has targeted supermarkets and convenience stores for its machines as a way of reaching the harried, hurried working mother. The company’s theory has been that these women are so pressed for time that they would rather buy a television or other household item from an electronic mail-order catalogue during a regular grocery run than make a separate trip.
However, analysts have questioned whether anyone rushing through a grocery store is a prime candidate to buy a TV. Furthermore, the machines, which operate with a credit card, require a fair amount of faith in a computer’s ability to get things right without much human help.
“It’s going to take consumers a long time to feel comfortable with this,” Sutro’s Weiss said. “It practically takes a whole year to recognize that the machine is there, let alone approach it with an order.”
Although many retailers are still stumbling, some have already discovered a winning formula.
“Silent Sam,” the order-taking computer system of the Service Merchandise Co.’s chain of discount catalogue showrooms, has been one of the firm’s most popular innovations. By merely typing in the name and identification number of the merchandise wanted, a customer can place an order and then proceed to the cash register to purchase it. Within the next few years, all 289 of Service’s showrooms will have at least one machine, according to Sharon Swan, assistant vice president for showroom operations.
The successes are also spawning a lot of imitators and first-time experimenters.
Discount Coupons
Catalina Marketing of Los Angeles is trying out a computer system that allows supermarkets to dispense cents-off coupons to customers as they check out at the cash register. The system, called “Coupon $olution,” checks customers’ purchases as they are run through the price code scanner to determine if customers are to receive special cents-off coupons from one of Catalina’s food and beverage clients.
For example, Coca-Cola may offer coupons to purchasers of arch-rival Pepsi or a purchaser of diapers might be treated to a baby food coupon. The possibilities, Catalina vice president Chuck Gramlich said, are endless and allow food processors to reach their target audience much more directly than traditional newspaper and magazine coupon promotions.
Catalina is testing the system at 12 Southern California supermarkets and plans to expand into five new regions next year.
Sears, the nation’s largest retailer, has hooked up with IBM, the nation’s largest computer maker, in two very different tests. In the drapery departments of eight stores, including two in San Diego, customers can give the computer the dimensions of the windows and the style of draperies they want. The computer automatically calculates what the customer needs and relays the store’s best prices of those items.
Financial Services
Sears is also using computer terminals to help sell its array of financial services, which include savings bank, stocks and bonds, mortgages and insurance. Customers can get information on the various services--including detailed printouts--and then make an appointment to see a salesperson.
Results from the tests, which began six months ago, have yet to be compiled, but George Coll of Sears’ corporate planning department, said early response indicates that customers are far more accepting of computers than they were just a few years ago when a computerized ordering machine bombed in its catalogue merchandise department.
“Even though a lot of people are still testing electronic retailing schemes, it is not a fad,” Coll said. “The question is one of time: not whether it will take off, but when.”
