The arrival of videotex and other electronic shopping systems lets smaller companies try out some fresh marketing options.
Silverman's Inc. had been selling shirts and suits in Grand Forks, N. Dak., about the same way for 71 years. It is, says vice-president Steven Silverman, the largest men's clothing store in North Dakota. One location, one market, with sales of around $2 million a year.
Now all that has changed.
Last fall, Silverman tapped into Viewtron, a videotex shop-at-home system that Viewdata Corp. of America, a wholly-owned subsidiary of Knight-Ridder Newspapers Inc., operates in southeast Florida. Silverman set up a separate corporation, Essential Clothiers Corp., which has the same clothing lines as the original store, but offers them electronically to an entirely new group of customers.
As Silverman, who also is president of Essential Clothiers, puts it, he has, in effect, created a new store without having to worry about staff, inventory, sales space, or any of the other problems that the Silverman family has wrestled with for more than seven decades. Essential Clothiers is simply another marketing outlet for the same inventory that Silverman's stocks.
That is not to say that the new venture presents no problems. But the long-awaited advent of videotex and other electronic marketing systems can offer startling new opportunities to small companies. In the case of Silverman's, the new marketing option promises to transform the entire company: While there are only 45,000 people in Grand Forks and 650,000 in all of North Dakota, there are some 1.6 million in metropolitan Miami alone. "The potential exists for Essential Clothiers to become bigger than out retail operation. We could become a major national company without ever opening another store," says Silverman.
"We can be in business 21 hours a day, seven days a week, and we don't need someone to be available to take orders or wait on customers," Silverman explains. viewtron subscribers can call up a display of Essential Clothiers's wares on their home televisions by using special keyboards and telephone-line connections. The orders are punched in directly by consumers and nearly all are entered during the night or at other times when customers are not usually out shopping, according to Silverman.
"We check the order index at least once a day," he says, "generally early in the morning." The customer is then sent a confirmation electronically to verify that the order has been received. The confirmation is personalized, allowing Essential Clothiers to achieve a "high tech/ high touch" relationship. "We promise shipping within 24 hours from the time the confirmation was sent, 48 hours if alterations are needed."
So far, sales have been slow, but Silverman considers Essential Clothiers still a test operation. He thinks it will take the company roughly three to five years to make money on the videotex operation because it requires further research to refine and perfect it. "We're spending more time analyzing than doing the business," Silverman explains. "Say we retail the merchandise for $35 and theoretically it costs us $17.50. Well, we're probably spending another $20 to $25 worth of time, phone money, and everything else to find out why the customer bought the product and who they are."
Originally, Essential Clothiers offered Viewtron customers a broad range of clothing with not much depth in terms of different brands and styles, so that Silverman could get a feel for what the customers would want. In the future, the new company plans to tailor its offerings to the new market. "We'll start to narrow down the range and go into greater depth," Silverman says."If dress shirts seem to be the hot thing, we'll try to have the most complete offering [customers] can find anywhere."
Despite the long wait for an initial payoff, Silverman is enthusiastic about videotex as a marketing vehicle. It is, he says, "a perfect way for a small business to grow as long as they understand the system." When Times Mirror Co. Launches its consumer videotex system in Orange County, Calif., in the fall, Essential Clothiers will enter the southern California market, too.
The importance of videotex has been predicted for years, but it is only recently that the systems have begun to move out of the pilot phase. Videotex is an interactive system in which a subscriber can shop at home using a specially designed terminal and a television screen. Customers can use the system to seek out the goods and services they want, from appliances to gabardine slacks; then they can actually place orders over the same system.
A marketer, such as Essential Clothiers, buys space on the system by the "page," which corresponds to a full display screen. The pages might include graphic displays, lists of products, descriptions of the goods, or order information. Essential Clothiers, for example, has about 60 pages on the Viewtron system. The first page carries a picture of a double-breasted sport coat, the Essential Clothiers logo, and an index of all the clothes the company carries. The pages also include a questionnaire called "Nobody Just Like You," which covers clothing sizes, such tailoring preferences as cuffs on trousers, and other information often needed in ordering. The customer completes the questionnaire and sends it to Essential Clothiers electronically. Then, to place an order, the customer simply checks a box on the order form, notifying the company that the rest of the order information is already on file. It all happens simply, directly, and electronically.
The new technology has brought a whole array of new marketing options to small businesses, offering vast opportunity as well as an element of confusion. Since most small businesses work with limited marketing budgets, any funds that go into newer -- somewhat experimental -- marketing vehicles might have to be taken away from more traditional advertising and promotion media.
"It's like going into the world's largest candy store. You've got your quarter and you want everything, but you're limited by what you can afford," says Benson P. Shapiro, professor of marketing at the Harvard University Graduate School of Business Administration. "Small businesses damn well better think carefully about priorities and not move too quickly."
Nonetheless, the options can be tantalizing. Viewtron, for example, is just one of a number of interactive electronic systems that allow for some sort of at-home shopping. "The real potential advantage of videotex is that the message is communicated to the prospective customer on the same channel that can be used to place an order," claims Roger Strang, a visiting associate professor of marketing at New York University.
Knight-Ridder's Viewdata Corp. of America was the first to offer full service with its Viewtron system. It was introduced last October after a lengthy test to a potential 1.3 million households in southeastern Florida. Viewtron's goal in the first year of operation is to establish at least 5,000 subscribers in the Miami area. The bulk of the market is assumed to be families with male heads of household from the ages of 25 to 49 with yearly incomes of $35,000 or more each -- an upscale market profile that is sought by virtually all the players that have entered the videotex field.
That is why Miami auto dealer Mike Seidle is using videotex. Seidle, a vicepresident of Bill Seidle's Datsun/Bill Seidle's Miami Mitsubishi, has been using Viewtron for several months. So far, sales have been somewhat limited, in large part because the subscriber base is still small, Seidle says. But he thinks it" can work for small businesses because the markets are targeted. You're not paying for national exposure."
Times Mirror Co., through its Times Mirror Videotex Services, will launch the Gateway videotex system in Orange County, Calif., in August. Penny Welsch, manager of marketing communications for the new operation, predicts that videotex will be a "great equalizer," putting smaller companies on a much more equal footing with their larger competitors.
"A big retailer is not going to have a lot more prominence than a local merchant," Welsch explains. "We're going to offer local shopping mall merchants in Orange County a very reasonably priced package allowing a certain number of pages which include information about their stores. We also set them up with videotex terminals with which they can create or alter their own ads at their own discretion."
Silverman concurs. "There's no reason we can't grow as much as multi million-dollar retailers like Sears. Look at out market. Look at how many people they can reach. In the videotex system, we're on the same level with the big guys. The opportunity is there for a small business like ours to grow."
But videotex is not without its troubles. Currently, the systems operate over telephone lines, and that doesn't allow for the glamorous videos possible on services like The Cableshop, a 24-hour-a-day, all-commercial, interactive cable channel now operating in limited test markets nationwide; or Qube, an interactive cable system that has been hitting more than 250,000 subscribers in six test markets (Chicago, St. Louis, Houston, Dallas, Cincinnati, and Columbus, Ohio) for more than six years. But the cable systems haven't rolled out into full operation yet.
"Two-way cable just isn't ready," insists James Holly, president of Times Mirror Videotex Services. "We tested two-way cable in 1982 and it worked. But to do it on a large scale, a lot of work has to be done. The equipment, the software, the networking, the reliability is just not there in most of these cable systems. It will be over time, but it'll be at least two to five years."
These telephone-line systems, however, currently rely on a dedicated terminal developed by American Telephone & Telegraph Co. called Sceptre. Viewtron subscribers have had to purchase the control keyboard for $600, but the company just began offering the loption of renting a terminal for $39.95 a month. Gateway will include the rental of the Sceptre as part of a $30 monthly fee for the first 2,000 subscribers in Orange County.
Neither Viewtron nor Gateway has developed the software to adapt home computers into receivers of the videotex information. According to John Borden, senior analyst with the Boston-based consulting and market research firm Yankee Group, "it was a major error, failing to ride piggyback on the excitement of having a computer in the home."
Yankee Group predicts that by the end of this year, around 13.1 million homes in America will have computers. Twelve percent of these will have the modems necessary to receive the videotex services over telephone lines. By 1988, Yankee Group believes the numbers will at least double.
The question of using the home computer to receive the videotex services may have been answered emphatically in February, when CBS, IBM, and Sears, Roebuck announced a joint venture to begin development of a commercial videotex service to households with home or personal computers.
It will be several years before the as yet unnamed CBS-IBM-Sears system is up and running, but Borden believes that "we're on the verge of something new, because the medium has attracted the sophisticated players now. Over the past several years, videotex has sputtered and dragged on -- a whole lot of noise but not a whole lot of money has been made."
The very novelty of the videotex systems, however, might be a plus for some marketers. Professor Shapiro of Harvard sees two distinct advantages to being on the forefront. The first is that "sometimes the first people in just buy it cheaper because these people are all pretty hungry. The second is that sometimes you can really get a leg up on your competition and develop a whole new way of marketing."