Small retailer six-packs a mighty punch

Gareth Cosslett finds out how a small retail chain used a killer combination of online shopping and home delivery to take on...

Gareth Cosslett finds out how a small retail chain used a killer combination of online shopping and home delivery to take on supermarket multiples.

The best word to describe the business strategy behind Bells Stores' new e-commerce project is one much used in the retail chain's Geordie homeland: canny.

This family-owned business based in Cleveland enjoys punching its weight against retail giants Tesco and Iceland through its 45 local shops in the North East. And its new step into the e-commerce world is presenting a fresh challenge as a retailer's David against corporate Goliaths.

Instead of catapulting stones, Bells is planning to fight with the same weapons used by the big boys. It is harnessing the same e-commerce technology used by Tesco. Unipower's Shopping Magic software suite will be used to secure Bell's own share of the market for grocery home delivery.

Managing director Steven Bell says success will be exploiting the firm's knowledge of the local market. "A lot of people think because you're entering the dotcom world, you have to be global. In our game, it's about logistics and covering the last mile. That's essentially a local thing.

"We're not going into this thinking we're conquering the world. It's an extension of customer service. We want to protect our local market and win more customers," he says.

Talking to Bell, it becomes clear that fear has been as a big motivator as any in steering him towards e-commerce. He quotes Bill Gates and various authors of e-business manuals. He talks of "a tidal wave you can either surf or drown in".

"It's like when electricity was invented," he says with awe. "Those companies which harnessed it were not necessarily profitable immediately. But they were still around 20 years later."

The 40-year-old gives an impression of being a no-nonsense retailer. He has sat down and mulled over how his squadron of shopkeepers will fit into the new economy.

And all credit to him. Many other independent retailers are still watching as the supermarkets steal market share. Bells has attempted to encourage a regional network of independent stores offering e-shopping to local markets from a central, shared hub. So far, it has fallen on deaf ears.

But Bells Stores has always had a pioneering spirit. Steven's father, Les, started the business as an ex-milkman in 1968 with two stores. He had been impressed by convenience stores in the US and spotted a gap in the market here.

There are parallels between the new e-venture and the early days of the bricks-and-mortar business. They now employ more than 1,000 people. "Bells Direct has cost us about the same as opening a new store," says Bell. Estimated first-year costs are about £250,000. It is planned the business will break even by the end of 2001.

Bell claims the relatively small start-up costs mean he can roll out quicker than big supermarkets. But he is in no hurry. "We don't feel we're in a race and we're not shouting locally. Service is so important that it's all about getting it right before going live," he says.

He also says as a convenience store, online shopping should not eat into its core business of distress purchases. Shoppers would still want a six-pack of lager on a Saturday night. Home shopping will cater for time-pressed weekly shoppers and steal business off supermarkets rather than its own store. He believes supermarkets have less of an incentive to get into home shopping because it cannibalises sales through bricks-and-mortar outlets.

But why should shoppers opt for Bells? In e-commerce, particularly, many customers prefer perceived security of a large, well-known brand to combat fear of the unknown.

Bell says those living outside the North East should not underestimate the power of his brand. "In the geographic areas we operate, we're as aggressive as national chains. We favour a lock-out policy of having three or four stores in a condensed area. People know who we are."

Since a quarter of a million people visit Bells stores daily, it does not have the marketing dilemma so many dotcom start-ups face. The spiral branding effect of its stores promoting the Web site and vice versa is powerful. This is especially truewhen backed by a strong advertising presence in local radio and newspapers.

The company is also talking to other well-known suppliers. The hope is the best-known local butcher, baker, sandwich-maker and florist will be supplying the products it delivers.

Bell is confident his business will succeed where many other dotcoms have failed. This is getting the nitty-gritty right in key areas like order fulfilment. "Remember who we are. My dad's an ex-milkman and we're a bunch of paper boys. We're used to making sure the right stuff hits people's doorsteps."

Bells Direct - how it works

In March this year, Bells began trials of its business-to-business Internet ordering and delivery scheme.

The chain delivers to 15 local businesses, including Coca-Cola Enterprises and a local Teeside radio station. It charges £2 per delivery, deliberately cheaper than Tesco's £5 , They make two deliveries per day.

Initially, customers load the Bells home shopping software onto their PCs via CD-Rom. Bells has also linked up with British Telecom to act as an Internet service provider. Customers are offered free Internet access via Bells home page

Before making each order, customers connect to the server for 20-30 seconds to download the latest product and pricing information. They browse the offer and assemble it offline before reconnecting to process. To handle the operation, Bells snapped on Unipower's Shopping Magic middleware to its existing Torex database.

Bells is, at present, negotiating with a local council to offer the service to council-run old people's homes. If the deal goes ahead, it will take of orders up to 350 per week.

Picking currently takes place in-store. The chain will soon roll out its consumer shopping service which should go live next year. It will open up a dedicated 5,000 sq ft picking centre, next to Bells' existing distribution warehouse. It will also increase products, from the 4,000 found in its stores now to 5,000.

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