January 31, 2001, 11:24 AM

Using the Internet to level the battlefield for independent retailers

(Page 2 of 2)

With a telesales team of about 15, the company is focusing on independent retailers nationwide, including Alaska and Puerto Rico, and is honing its efforts on Promotions Unlimited’s customer base of 7,000 retailers. Although the company uses the Internet for connecting retailers, Goliath Falls understands that it will take more to serve the small retailers than just setting up a web site. The company’s team of 13 account managers calls on retailers regularly and also passes on information on the latest products available through the site. And the company also plans to use hybrid marketing, via direct mail as well as the Internet, to promote products. In addition, it will add a chat room to the site for retailers to swap ideas, Greenberg says.

Handholding

Ben Franklin Stores, an independent variety and craft store chain that Promotions Unlimited bought out of bankruptcy in 1997, is Goliath Falls anchor tenant for its aggregate online buying service. With the Ben Franklin stores on board, Goliath Falls has more clout to develop critical mass. “Like anything else, no one wants to jump in first. But since the company is based in promotion retail, Goliath Falls will know how many orders it will take to make the power buying cost effective for small retailers,” says Okamura.

Ben Franklin Stores’ Director David Larsen says using Goliath Falls not only makes it easier to get information and buy goods, it is also faster than the old system and will eventually help change the dynamics between suppliers and retailers. “We have a lot more buying power and we have the ability to get products much quicker,” he says noting that some special buys can take up to four weeks to receive. “Traditionally, it has been very difficult to get information from suppliers and manufacturers because vendors will go first to a chain store that can make quicker buying decisions, with a better payout, than independently owned stores,” Larsen says. “With Goliath Falls becoming a buying power, vendors now will hopefully go to Goliath Falls first.”

While access to information and product buys online provides a faster way for small retailers to stock their wares, it’s also less labor intensive for a middleman such as Goliath Falls. “One of the biggest efficiencies gained is in the paperwork,” says Okamura, who notes that pre-Internet buying groups were paperwork-intensive. “There were a lot of transactions done by phone, FAX and mail. Automating this process by using the Internet allows the middleman to do more business with less labor,” he says. Okamura says, however, that signing up small retailers that do not have computers may mean more work: “They’ll have a lot of preaching to do,” he says. But Greenberg believes Goliath Falls’ grassroots approach is on track. “Right now we’re investing in the infrastructure and educating retailers,” Greenberg says.

And Goliath Falls has plenty of solid financing, which will help the company expand to retailers outside the Midwest. Goliath Falls has investments from Promotions Unlimited, as well as $10 million from Compaq Computers and is expecting to close a huge deal at the end of this month. “We’re working on additional funding that looks promising because people believe in our domain expertise and our ability to help consolidate the fragmented independent retailer market,” Greenberg says.

Goliath Falls plans to use the new money to expand its back end inventory and infrastructure, including plans to buy and run its own warehouse. Clearly, the company plans to have an impact on the independent retailer market with its web-buying, product information content and small business services, just as the Internet has had an impact on retail in general. “The Internet is having a huge impact on store owners being able to get new products in their stores, in some cases quicker than the chain stores” Larsen says. “It’s all about getting information out to the retailers.”

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