15 December 2004

Small tricks, big business

By Rob O'Neill
December 14, 2004
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Zoran and Sonia Naumovski in their Sydney Boost franchise. Photo: Natalie Boog

Boost Juice has had a stratospheric rise since it began four years ago, starting a mini-revolution in Australian retailing and opening a niche in healthful food consumption.

It owes its success - which will see it with 175 stores by the end of the year - to a timely idea and the hard work of its franchise lessees, who in turn owe much of their success to Boost's IT systems that smooth their business's operations.

When Zoran and Sonia Naumovski plunked down $120,000 to open their two central Sydney Boost Juice bars this year, IT was as important a consideration as brand and location. They are typical of Australia's 54,000 franchise owners, the economy's backbone of mum-and-dad operators, who need efficient IT systems to run a competitive business.

Sonia, who runs the business day-to-day, rates the group's buying power and IT system consistency, which aids training at both sites, as two significant benefits of being part of the Boost franchise. Boost manages the IT system, which includes a company network so franchise partners have access to critical business systems such as human resources, interstore communication and the supply chain.

"Basically (it) allows us to concentrate on the general operation of the business rather than worrying about the IT side of things," says Zoran. "The current set-up means we can just walk into the business from day one and concentrate on running the business in an efficient and profitable manner rather than getting caught up in IT issues. Training and exposure on the point-of-sale system is provided prior to opening day and can also be obtained by communicating with other partners."

Their story highlights the benefits to be gained by those who dream of owning a business and by independent operators considering joining a franchise. These advantages are in scale and access to services, a powerful brand and marketing machine, bulk buying and technology for competitive advantage.

According to the Franchise Council of Australia - which represents three-quarters of Australia's 800 franchise brands and 54,000 franchise workplaces employing half a million workers - IT plays a growing role in assisting marketing and building the brand.

Council chief executive Richard Evans says that in addition to delivering better systems for accounting and other applications, IT plays a big role in the modern franchise in delivering education and training along with facilitating communications.

"As use of the web increases, franchise systems are seeing webpage development as another arm to their marketing approach," Evans says.

The attraction of a franchise's mature IT systems is not just for new operators such as Zoran and Sonia Naumovski; long-time independent operators such as Sydney motel owner David Osborne are also swayed by the logic of plugging into a big IT provider and its marketing generator.

Osborne joined the Best Western franchise in 2002 after his Paramatta motel in Sydney had been operating independently for more than 25 years. A changing market that no longer favoured the go-it-alone approach lay behind his decision. And technology played a significant role.

"We used to operate through the Yellow Pages and the NRMA directory, and that worked quite successfully for many years," he says. "Travelling sales representatives carried the NRMA guide in their glove boxes."

But then cost-cutting businesses began to tender for all-of-business contracts for accommodation, taking the decision out of the hands of their road warriors. Bookings were more often made through global distribution systems (GDSs) and online and customers were increasingly seeking loyalty programs and rewards.

"We needed to become part of a larger group," Osborne says. He chose Best Western after evaluating its IT systems, brand, marketing, and fees.

"Best Western stacked up as the best option overall," he says, along with infrastructure and development in the US backed by a "pool of money" to develop its IT that smaller Australian operators such as his can't match.

The central IT team has delivered applications that make a difference to his business. On top of cost-effective access to systems, the company has developed an application called Best Cheque to manage commissions paid to travel agents.

As an independent operator, such commissions are a nightmare to process, but Best Cheque allows that to be managed centrally by the group. The result is Osborne's property is more attractive to agencies, he gets more bookings and the administrative hassle of managing agency payments is taken off his plate.

"These services offer us a genuine competitive advantage and enable us to overcome many of the shortcomings associated with a smaller independent operator," he says.

The franchise association still allows Osborne to act independently, too. For instance, the company intranet helps his staff to be aware of tender opportunities for accommodation that Best Western Wesley Lodge can respond to locally as an independent business or through the group, whichever is most appropriate.

Best Western's Australian deputy CEO, Michael Kerr, says delivering IT has been one of the company's biggest challenges over the past four years.

"We had to take advantage of new IT products coming onto the market and encourage the operators to take them up," he says. "We can provide IT infrastructure services they could not afford independently."

Each operator has a micro-site within the group site, linking with the main global distribution systems. Kerr says 40 per cent of bookings are now made through the website.

Operators can take part in deals for communications services and hardware. Support and security are also managed by the franchise.

"We have a sophisticated intranet," he says. "If someone spills ink on a carpet, they can find a fix for it there. There's a lot of business support and training."

In addition, the franchise can view inventory online and help operators set rates and manage their yield. This is one area of which Kerr is particularly proud, with the group managing to increase average yields by 20 to 30 per cent in a static market.

"Any increase in the rate goes 95 per cent to the bottom line," he says.

In Sydney, Bondi real-estate agent Ron Bauer is another former independent small-business owner who says he was "floored by the technology and how it is being adopted and promoted" when he joined the Ray White group.

He feels the IT benefits have provided tangible business benefits to his operations. And it's not just the real-estate agent who benefits - Ray White corporate benefits from increased revenue because all commissions are put through the network instead of being kept on paper or reported manually.

At the customer end, the website is more functional and generates more traffic and sales leads, while internally the intranet and other forms of electronic communications are several steps ahead of what Bauer was used to.

The intranet comes in two parts. The first is Infocentral, which is available to everyone in the Ray White network. Bauer says there is a vast amount of information there, including standard documents, contracts and form letters. The system also includes vertical market websites for Ray White's divisions and other businesses.

Then there is the "principals" site, which is security protected and for proprietors only. "I was floored by that," Bauer says. "There's so much in there and I've really only seen the tip of the iceberg."

Joining the franchise has changed the way Bauer does business: "We had our own ideas about how things should work but we are learning that a lot of what we've done could have been done better and more efficiently."

For accounting and monthly reporting, there is a system called Impact, with all data managed from the franchise head office, where back-up and security are also managed to remove one big headache for the local operators.

According to the group manager of IT, Tom White, Impact is to be replaced with a more web-centric system from New Zealand developer Online Solutions Ltd. The system has already been tested in Ray White offices across the Tasman and proved to be a winner. It will enable access from home and also potentially from client premises.

On top of the Impact change, White and his team of 12 IT staff are working on new tools to manage listings, to present marketing material to property vendors and to deliver real-time market data to help franchisees make decisions about growth.

Bauer is also enthusiastic about the franchise customer relationship management system that tracks buyers and sellers and helps match their needs to produce sales.

White, as the force behind the technology at Ray White Real Estate, has a straightforward philosophy for the delivery of IT services.

"We aim to deliver simple, effective tools for both offices and salespeople to serve a wide range of what they do in the market but not to dictate what they do."

Looking after the family

Boost has ridden the health wave, and in just four years grew from one Adelaide shop to 140 stores throughout Australia and New Zealand. According to BRW's Young Rich edition, founder and former fashion model Janine Allis doubled her net worth last year to $36 million. Earlier this year, the company launched a pilot brand extension, the Boost Health Bar, expanding the juice franchise into the health-food market.

For Boost Juice Bars' IT manager Eddie Tucker, hardware and software support and the selection of a point-of-sale system are the priorities.

"We are keen to make the transition as easy as we can for (franchisees) when joining the Boost family," Tucker says.

Boost's IT service is working on a standard telecommunications and internet package for the group.

"We are looking at providing a bundled telecommunications package whereby Boost, through Telstra, will provide a complete end-to-end managed delivery of telecommunications and internet set-up to provide ease of delivery to new and existing franchisees."

As in any significant business, IT plays an advisory role in discussions across the group to help the business reach its goals. Tucker says his department works with the business but is "firm on system standards and ethics".

The scale of the business is also now delivering purchase breaks for franchisees. "Having a popular brand name carries weight with existing and potential vendors which allows for increased services or reduction in purchased unit prices," Tucker says.

To support its international expansion into New Zealand and next year Dubai, the business must ensure point-of-sale and other systems are compliant with foreign retail trading and governance requirements. -- Rob O'Neill

Franchisee's recipe for business reporting

Some franchisees are so big in their own right, they need to implement their own IT systems. That was the case with Melbourne-based KFC and Pizza Hut operator Southern Restaurants, which owns 58 outlets in Victoria and South Australia.

The company needed to find a system to do dual reporting to manage its Australian June 30 year-end and also November 30 for the US-based franchisors. Southern Restaurants' payroll system also had specific requirements, needing to manage 1200 employees and unique requirements for superannuation, allowances and the movement of casual staff between locations.

CFO Michael Corry says the existing systems were not meeting increasingly complex requirements and the need to access information when it was needed and in the form it was needed. Improved response times, scalability and quality reporting were vital.

The company has chosen software from Australian-based software developer Pronto, which has particular strengths in the retail segment.

The Pronto Xi system is providing integrated functionality with Southern Restaurants and also helps manage more than 60 suppliers.

12 December 2004

ONLINE TRAVELER

Ins and outs of finding deals on the Internet

By Darren M. Green
Special to the Tribune
Published December 12, 2004

For those privy to the tricks of the trade, the Web does indeed offer budget-conscious travelers a virtual cornucopia of savings opportunities. Read on to learn the ins and outs of finding travel deals over the Internet.

Hotels

There's no other aspect of travel so fraught with deeply discounted online opportunities. Here's how to do it:

www.quikbook.com--Quikbook combines quantity (searches yield impressive listings), a Web site which is intuitive for beginners, detailed information and photographs, and, most importantly, the best overall average hotel prices in a series of test searches. Honorable mention in this category goes to www.octupustravel.com.

www.hotwire.com--When a specific hotel is not part of the equation, Hotwire gets my nod over its predecessor in this field, www.priceline.com. Enter your parameters (e.g. four-star or better near the river), and Mr. Hotwire spits out a list of heavily discounted options which includes all of the pertinent information except the actual name of the property.

Last-minute deals

According to PhocusWright, an online travel research company, one-third of online travel consumers plan trips within two weeks of departure. The Web sites below offer relief from exorbitant prices for the truant:

www.smarterliving.com--If you're flexible as to date of departure and destination, sign up for the Smarterliving e-mail newsletter, published by one of the true pioneers in discounted online travel. Loads of discounts will find their way to you every week.

www.site59.com--Specializing in package deals for trips booked anywhere from three hours to 14 days prior to departure, Site59 provides the best bang for the buck in finding last-minute online travel specials. Site59 powers the last-minute travel sections for a bevy of 800-pound gorillas in the Internet travel arena (including Yahoo Travel, Travelocity and Orbitz), so they must be doing something right.

www.11thhourvacations.com--The winner of the "best of the rest" category, this Web site, which also offers discounts on cruises and vacation rentals, may be just the ticket if Site59 doesn't cover your particular destination for some reason.

Airfares

While at least partially responsible for the online travel revolution, airfare discount Web sites no longer offer dollar savings to rival those in the above categories. No matter, you may yet squeeze a couple of bucks off the ticket price at these sites.

www.sidestep--The Sidestep comparison engine, which can be downloaded in a couple of minutes, magically appears on the left side of your monitor every time you search for airfares online (be it at an airline Web site, Expedia or another discounter). It takes the search parameters you've entered at your destination Web site and kicks out a list of lowest prices which you can compare to the results generated by the Web site you are visiting. If there's a better deal out there, Sidestep will find it, and all you need to do is click on the relevant link to be transported directly to the purchasing screen at the winning Web site.

www.travelocity.com--Check out the Dream Maps feature if you're simply looking to get away for the cheapest price possible. Enter your airport of departure, and Travelocity will produce a map with the cheapest fare to cities both within and outside of the United States. Simply click on the most interesting fare, and you'll be presented with dates for which such fares are available.

Airline Web sites--While not a very exciting recommendation, it's always worth taking a peek at the airlines' Web sites before booking online.

Packages

Once hailed as the "next big thing" in online travel, this genre hasn't really lived up to its billing. Even though all of the major players have jumped on the bandwagon, evidence of any real savings in booking the whole enchilada at once rather than purchasing flight, hotel and car separately has been difficult to find. Nonetheless, if you count yourself among the legions of time-strapped vacation planners who'd rather click on the purchase link once rather than three times, check out the vacation package tab at www.expedia.com to peruse probably the most impressive listing of allegedly-discounted, all-in-one options.

Cars

Rental cars tend to cost what they cost regardless of where booked, but for those convinced they can beat the system, you may well use www.orbitz.com. Search results are displayed in "matrix" fashion, which makes side-by-side comparison-shopping easier.

Auctions

Yes, auctions. If you just can't seem to find your dream vacation online at the right price, a good last ditch effort is www.skyauctions.com, which lists vacation packages which have sold at auction for as little as $1. Also, www.ebay.com has taken the plunge into the online travel world by offering cruises, vacation packages and loads more to the highest bidder.
The sweet taste of e-commerce success

By Adam Turner
December 7, 2004
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Bert Werden... built his WineStar online wine cellar from the back of a Strathmore bottle shop in Melbourne's north. Photo: Simon Schluter

Tucked away in a suburban bottle shop, Bert Werden is a seven-year e-commerce veteran whose site now turns over $4 million a year.

While well-financed competitors such as Foster's WinePlanet - which collapsed in 2001 - burned cash with no hint of return, Werden quietly built his WineStar online wine cellar from the back of a Strathmore bottle shop in Melbourne's north.


WineStar hosts the most popular wine forum outside the US, receiving a million hits a month. But it was uncorked in 1997 as a five-page website with an order form.


"A guy who used to come in here and buy Jim Beam-and-cola cans said we should go online," Werden says.


"I designed our first website in Excel but we still found people actually using it, which amazed us because we were just piss-farting around at this stage. It went from fortnightly inquiries to weekly inquiries to daily inquiries, so we thought we should look at the full e-commerce bit."


Back then, e-commerce was touted as a business revolution. Anybody, anywhere could sell anything to anyone - eliminating superfluous costs such as shopfronts and sales forces. From the selling of car parts to automotive giants to getting text books into school kids' backpacks, in this electronic grand bazaar anyone could hang out their shingle and be a global player.


Expectations soared with the share prices of the newly listed online retailers (e-tailers) as they built lavish cyber shopfronts for consumers. Online business-to-business marketplaces were also constructed so organisations could screw down their suppliers on the prices of everything from stationery to semiconductors.


No idea was too ambitious, no business plan too sketchy - build it and they will come.


But often, no one came.


An example is winepros.com.au, which is about to be used by wine group Cheviot Bridge for a backdoor listing on the Australian Stock Exchange, five years after the original e-tailer raised $25 million in capital and three years after it went into voluntary liquidation.


Another was Werden's chief competitor, Foster's, which closed down WinePlanet after its bricks and mortar retailers revolted - but not before it dropped nearly $100 million into the venture. It was joined in the same year by bottleshop.com.au, which burned $405,000 in two years.


But it is not all doom. After a hard couple of years Australia's wider business community is embracing the internet after watching the rise and fall of many e-commerce startups.


Half of small business and 40 per cent of medium-sized business are now taking orders online, according to the Sensis 2004 e-Business Report. The past year saw many more shop online - the proportion of small businesses buying goods and services jumped from 45 per cent to 55 per cent and medium businesses rose from 64 per cent to 74 per cent.


Capitalising on this trend, online marketplace corProcure - formed from 14 shareholders including PricewaterhouseƂ¿Coopers and Telstra - has turned 90 degrees from when it was conceived as a massive buying group for Australia's blue chips. Australia Post bought the flailing online marketplace to be a foundation for its e-commerce platform.


After sifting through the e-commerce graveyard to see where others went wrong, Australia Post's corProcure product manager Karyn Welsh shifted the marketplace's focus from blue chip giants to medium and large-sized companies.


It's a lesson that might have saved corProcure competitor Cyberlynx, which looks set to implode after it emerged last week that five of the seven founding companies will abandon a marketplace that was supposed to generate $9 billion a year in transactions. "The biggest corporates have buying power in their own right, but the medium to large companies don't have so much power and so only by participating in a collective buying group can they achieve similar savings," Welsh says.


corProcure's downfall was a lack of direction, with "14 shareholders pulling it in 14 directions," she says.


"The technology was fine - it was like having a Rolls-Royce motor but no body, so we had to build the body around it."


Fear of missing the e-commerce wave drove the construction of many online marketplaces, but poor management led to their downfall, says Ariba's Asia Pacific managing director, Peter Stavroff.


Ariba builds electronic procurement systems for online marketplaces and itself rode the e-commerce roller coaster but survived by expanding into services and training.


"On paper you'd look at corProcure and say, "That's just got to work', but it was an absolute dud," Stavroff says.


"To get multiple stakeholders to agree on the same thing across multiple businesses is almost impossible - that's really the bottom line. I think a lot of people were blurry-eyed about the hype and there were people making decisions who didn't know what they were doing."


And with in excess of $50 million a year now passing through corProcure, Australia Post's Welsh says e-commerce wasn't a failure, it just failed to match the hype.


At the peak of the e-commerce hype, WineStar was quoted $50,000 to build an e-commerce website. Werden resisted the temptation to build an expensive site in the hope customers would come and instead bought a $200 off-the-shelf e-commerce package. He customised the package himself and also started an online wine forum for customers, which he follows closely to predict sales trends.


Four years after the dotcom bubble burst, and having outlived well-financed competitors, Werden says overcoming the impersonal nature of shopping online is key.


"I think we've succeeded because we've made an impersonal medium quite personal with features such as the forum," Werden says. "Now we need to build on this by winning over the older market - those in their 50s and over who may be comfortable using email and the web but haven't embraced e-commerce."


Despite the demise of so many online business ventures, e-commerce is not a failure and most of those which survived the dotcom mania are turning a profit, says Forrester Research vice-president John McCarthy.


E-commerce rode the wave of dotcom hype and was unceremoniously dumped when it failed to reach unrealistic expectations, McCarthy says.


"I don't think e-commerce failed - like anything else, the people who understood what their target market was and had a viable business plan survived," he says.


"As for the 'Field of Dreams' approach - build it and they will come - that was just crazy. A bad idea is still a bad idea no matter how much money you throw at it."


The new Brisbane owners of dStore, one of the darlings of Australia's short-lived dotcom love affair, have taken heed from the lessons of the past four years. In 2001, while in receivership, dStore was bleeding $300,000 a month, which was less than it was losing when it was trading because of a technology and business model that saw the cost of filling an order rise to more than what the consumer paid.


Under HotShed, dStore turned its first profit after only nine months, says HotShed and now dStore chief executive, Andrew Cooper.


"When dStore was launched we looked at it and thought it was amazing but everyone's expectations of e-commerce were far too high," Cooper says.


dStore's downfall was due to a weak technology platform and poor marketing, he says, and HotShed acquired it for the chance to showcase its own e-commerce platform.


"A lesson that we've taken out of dStore is that we gear our advertising towards finding those consumers that do shop online rather than trying to convert consumers into online shoppers," Cooper says.


"dStore is a profitable business now, it's just nowhere as big as the original investors intended it to be."


Similarly, the challenge to resuscitate Melbourne e-tailer Wishlist fell to Australian dotcom veteran Adrian Finlayson.


As the industry went from boom to bust, Finlayson took on the task of turning around Wishlist. He shed almost three-quarters of his 120 staff when it became obvious the world was not beating a path to the door.


"That was certainly a massive low point for the business,'' Finlayson says. "Wishlist got caught up in the hype - there's no doubt about it. In those days the business was building for massive growth and the expectations were set for growth of 200 or 300 per cent per annum."


An e-commerce consultant during the excesses of the late 1990s, Finlayson was snapped up by software developer FreeMarkets in 2000 to run their Australasian operations after a stock market frenzy saw its share price peak at $US370 ($A474).


"People spent too much money building solutions they didn't need; you spend money in a different way when the market throws money at you and expects you to grow quickly," he says.


The most successful businesses now build solutions slightly behind their needs rather than anticipating, he says.


"In today's environment, I don't know of any successful business that builds on the belief that they will come. E-commerce does fundamentally change the way people do business, whether it was back then or now, but now the market has a different perception of the value of that change and of how quickly you should grow within that change."


It is a formula that served WineStar well. It has a growing customer base and Werden has turned his attention to the building phase. Preparing to fight off the next onslaught from online competitors, he hopes to move WineStar from the back room into its own premises and modernise the inventory system.


"Strathmore Cellars and WineStar are getting in each other's way," Werden says.


"The retail giants such as Woolworths and Coles Myer are eventually going to make another big push and that will be our biggest challenge."


Andrew Spicer


chief executive, WebCentral Group, Australia's biggest web host.


Broadband is enabling a second wave because it is more convenient.


The rise of micro-markets - online sole traders akin to the stallholders at weekend markets - on sites such as eBay and Amazon has led to the rise of a new class of entrepreneur. These small, home-operated stores, specialising in categories such as jewellery, are made possible because of the improved quality of shopfront software and mature e-commerce payment security options such as credit-card processing and PayPal.


Women have found goods and services online that appeal, and that broadens the market.


The financial services and entertainment sectors are getting their collective act together. I wouldn't want to be a video store owner with Telstra's video download service letting people people download what they want.


Government is speeding its use of e-commerce providing tenders, documents, forms and other information online.


We will see an acceleration in e-commerce in the next year, but it won't be at the bubble level.


Len Augustine


Marketing director, SAP, business software developer


Integration between the website that the customer accesses and the back-end warehouse is becoming huge. Even small entrepreneurial companies that sold online overlooked how to get the product out of the warehouse and into their customers' hands, but that is much of the cost.


The big challenge in Australia was finding a logistics provider to deliver at a time convenient to the consumer. Businesses are using their relationship with SAP to smooth the process of doing business with each other.


The transport and logistics companies had to put in systems to track pallets, which would often get left in yards at the other ends of Australia.


Radio frequency identification (RFID) tags in 10 years make an amazing difference to the supply chain. You will plan and execute a supply-chain delivery using real-time data. Leaving the RFID chip alive as it enters the consumer supply chain, you can do more interesting things, such as a "smart shelf" that queries the warehouse and then supplier to see if a good is in stock and, if not, how long it will take to get it to the consumer.


Bruce McCabe


Managing director and analyst, S2 Intelligence, independent analysis firm


We will see a steady increase in volumes of online sales, but it's not explosive any more.


The most important driver of change in the online buying experience is as the "semantic web", where contextual information is added to products and services to help us better search for them.


The next is the ability to be able to find things based on their geographic location, such as what Sensis is now attempting to tie together, but that may be more like a 20- to 30-year process.


Another aspect is trust and security, which has developed slower than we would have thought five years ago, because consumers don't understand these issues.


Demographics play a big part, as youngsters who didn't have credit cards five years ago now do and grew up with shopping online.


Over the last year Australian businesses found B2C delivered the most value but next year they are cranking up their B2B projects, improving the ways businesses interact with each other and streamlining their supply channel