O&F: What’s happening to multichannel retailers? First came the dot-coms, then their seeming collapse; then catalogers opening retail stores; now we see reports that brick-and-mortar stores are having a hard time.
Doster: I wish I had a definitive answer to that; all I can do is give you my view. Obviously there’s been a scramble since the dot-coms have failed as pure retail plays, in other words, dot-coms without any brick and mortar or catalog presence. I think the dot-com business is going to continue to grow, but it’s going to be just one channel among multichannel possibilities.
We’re seeing a lot of our clients who have been strictly catalogers in the past establishing solid Internet channels too. It’s going to be a long time before their [Internet] business is the predominant channel. I can’t say it won’t ever be, because “never” is a long time. But I do think the Internet side of the business is going to grow faster than the catalog or the brick and mortar side.
O&F: Why will it be faster?
Because it’s still relatively new, still growing from a relatively small base, and people are still getting used to it. I think as more people get more comfortable with the Web they will probably use it more, particularly if it’s seamless, so that you can place your order on the Internet, and pick up your order at a retail location, or order on the Internet and return it to a retail location. . . .
O&F: As a shopper, that really does seem like a convenience.
Doster: I think it is, and that’s what we tell all of our clients and potential clients: It has to be so seamless that the rules are the same whether it’s on the Internet, in a catalog, or in a store. Use the same basic set of business rules.
Now in the catalog business, we’re seeing some unevenness. Most of our catalogers continue to grow, but not at the pace that their Internet business is growing, and not at the pace their catalog business has grown in the past.
O&F: The year before last was a boom time, and we heard from many catalogers that they had been seeing double-digit growth. That clearly has slowed down.
Doster: As far as the retail, or traditional brick and mortar, side of this equation is concerned, you’re seeing some big failures out there, but you’re seeing some against-the-grain successes. That changes from day to day, month to month, and year to year. Just to cite the Gap: Look at what they were doing in the late ’90s. They had double-digit growth, and it seemed like they could do no wrong. Now if they don’t have double-digit sales shrinkage, they’re close to that.
These things clearly go in cycles. There’s a good likelihood they will come back. I’ve never seen a retailer, with the possible exception of Wal-Mart, stay on top of the pile for any length of time, and I’ve been around retailing now for over 30 years.
Somebody will rise to the top, they’ll stay there for a while; then they’ll lose market share, go back to the middle of the pack. They may rise again or they may not.
O&F: Is there a generally applicable reason why a retailer will go to the top and then move down again?
Doster: Oh, I think in most cases, particularly among clothing retailers, they had the right vision of their customers at exactly the right time. They guessed correctly as to the color and style and the type of clothing that people would want that particular season, and that’s very difficult to do, particularly on a consistent basis.
O&F: Partly timing, partly luck?
Doster: I think it is.
O&F: I don’t suppose retailers would like to hear that.
- Doster: Most retailers use the excuse of the weather. But that’s true
if the weather is bad, those buyers don’t show up, those people just never materialize later. Part of it’s luck. Sometimes they just have a different vision.
You know, it’s very easy to look at some of the retailers that are failing out there today and see why. You can walk into any Kmart store, and to me it’s very apparent what’s wrong. They’re cluttered, they’ve got all that trash up in the front of the stores, including the food. The first thing you run into is Martha Stewart, and you can’t see back into the rest of the store. It leads you to feel, as soon as you enter the store, that there is nothing else in it except Martha Stewart. Martha Stewart is very popular, but your initial impression should be exposed to more that one line.
Even with the recession, consumers haven’t stopped buying like they have in times past. So I think retailing is going to continue strong, it’s just a matter of the mix, who’s going to be the dominant retailer for a while, and the allocations of the three channels.
[Speaking about direct sales management systems, you asked about] the size of the market, and I wish I knew.
O&F: We have had the suspicion that no one does know.
Doster: I don’t think they really do. There are so many different segments. If you’re just talking about new sales of software licenses, that’s one thing. If you’re talking about sales of software licenses and hardware, that’s another thing. Then you’ve got support and custom programming. I’ve felt that this is a $100 million-a-year business, much the same size as it was before the pure dot-coms came into it. Now they’ve left again. You can see what happened to our largest competitor, how their volume went up to $45 million and it’s dropped down around $25 million now. I think their latest quarter was just a little over $6 million.
O&F: Would you give a 25-word-or-less definition of the difference between a CMS and a WMS?
Doster: A WMS normally drives the operation within the warehouse itself, whereas a CMS, like our system, runs the whole enterprise. It will process orders; do the ordering, control inventory; and include warehouse management (though that module is usually not as robust as those of the big warehouse management systems). We integrate marketing and some type of general ledger system or accounting system into the CMS, and these are functions that wouldn’t normally be in a warehouse management system at all.
Usually, I look at a WMS as just one piece of software you need to run the business. You can interface that to our catalog management system or use our own warehouse management system.
O&F: I know that you also have an accounting background, and we’ve been reading a lot about accounting in the last few weeks. I’m wondering what sort of effect this turmoil may have on your industry.
Doster: Enron brought a lot of things out, didn’t it? Our industry wasn’t into the types of things that were happening with Enron. Enron was using some pretty esoteric accounting techniques to get where they thought they needed to be because they wanted to get all the debt off the balance sheet. That’s not the case in our industry. There may be debt, but it’s not the type of debt that you can pass off that way. As for what’s going to happen, as far as I know, our industry isn’t in trouble from an accounting standpoint.
Is it going to have an impact on business in general? I don’t think so. I guess I would describe it as a non-event to our business. I think that 9/11 probably had a much bigger short-term impact.
O&F: Does that continue?
Doster: No, we don’t continue to see it. In fact, about 30 days after 9/11, it was just like somebody opened the floodgates, and we have more business now than we dreamed of having at this point in 2002.
O&F: Is this a sign of general economic recovery?
Doster: Well, that’s part of it. I have several theories. I think that people spent so much money doing Y2K remediation back in the late ’90s and even into the year 2000, that they took a breather in 2000 and said, we’re not going to spend the money unless we absolutely have to. Let’s reassess our priorities and go from there.
Maybe it’s just a coincidence that this happened last October for us, but we are seeing a big increase in business.
O&F: The magazine covers many areas, and the comments we hear about the economy are mixed.
- Doster: We had our annual User Conference here in Indianapolis in February. We had a good representation of our users here, and we asked them the question: “How is your business now
is it better, worse, about the same?”
I don’t think more than one or two hands up saying it was worse. Most agreed that it’s a little more difficult to do business, that it may be a little more competitive out there, but we didn’t hear anybody say that they were having a terrible year. Overall, the outlook was realistic but surprisingly upbeat.