Far from killing it off, e-commerce is opening up new avenues for the convenience store. Belinda Gannaway assesses on the variety of systems and schemes that are helping to bring the c-store online In this world of global online sourcing and retail megamergers, the small store sector could well seem somewhat overlooked. But the e-revolution that is chucking the various bits of the grocery industry in the air while commentators guess where they will land is not bypassing the convenience market. In supply chain management, range sourcing, customer relationship management, value added services and staff training, the internet is offering a host of opportunities to the corner shop. The IGD believes the biggest impact on the sector will be in improved communication between the different levels of the supply chain for product ordering, promotions, pricing data, transfer of funds and so on. The opportunities for cost slashing are enormous. Senior retail consultant at Cap Gemini Doug Duffin says: "B2B e-commerce is enticing retailers. So much money is spent buying products to sell that anything happening to reduce that cost is lucrative." Additionally, with order servicing by suppliers still a major irritation, the internet could prove something of a rift healer. Retailer and supplier perceptions of service levels differ and, in the long term, this may undermine trading relationships, the IGD suggests. Online benchmarking of information could help identify and overcome differences in service levels between retail customers. The IGD's latest convenience sector report says: "Improved dialogue between suppliers and retailers is vital in order to develop relationships and implement a number of modern management theories such as category management and Efficient Consumer Response (ECR)." In the US such benefits are already in evidence. The first dedicated internet exchange for the c-store market goes live this summer after an extended trial. Oil company Chevron, which owns and runs 700 c-stores and supplies 6,500 branded independents, has already made significant savings from the pilot. Wal-Mart subsidiary McLane Company, a fulfilment and distribution group, is also involved in RetailersMarketXchange (RMX). And IT partner Oracle is in discussion with small store companies and wholesalers to bring the "full-service marketplace for all c-stores and their suppliers" to the UK. RMX promises to reduce costs and improve the "marketing reach, effectiveness and efficiency of delivering products and services". It will be personalised for the retailer "combining the dynamic marketplace of a trade exchange with specialised software and services that deliver the...business systems, customer services and community networking that c-store retailers need to run their businesses." So how does it work? For symbol chains such as Chevron, the benefit is "stickiness", explains Mary-Lou Smulders, Oracle regional vice-president for exchange business development. "Independently managed Chevron stores are vulnerable to other major chains, which can stick their names up overnight," she says. "RMX creates stickiness around the latest promotions, direct news and much more." For the brand owner, RMX provides a more direct way to communicate with retailers. "Today they have very little way of communicating how a promotion runs; when it starts, when it ends," Smulders says. "Often that means a promotion doesn't get stocked or doesn't get executed appropriately." Previously Chevron employed a huge store visiting sales force. Since its pilot began 18 months ago, it has saved up to $20m on an annual basis. While there are opportunities for online auctions with RMX ­ they work in the same way as "big box" exchanges such as Oracle's GlobalNetXchange ­ Smulders thinks they've been "significantly overplayed because it's the easiest thing to understand". "There is an element of auction for a very generic type of goods in RMX," Smulders adds. "In other exchanges we've seen significant benefits on the products they've chosen, whether for or not for resale, and those benefits shouldn't be downplayed. But in RMX the value proposition is significantly broader than that. "We've built a closed loop information system for the overall replenishment cycle," Smulders reveals. "It should be significantly more efficient than even those retailers that are using Electronic Data Interchange (EDI) today. In the past, only major retailers could use EDI as it requires a fairly significant infrastructure and cost. RMX works even for the one-off Mom and Pop store because all you need is a web browser. It's completely 100% web enabled." And, as Smulders suggests, the Mom and Pop stores are part of the Oracle vision for RMX."They can plug into it quite easily," Smulders says. There is no subscription fee and a 24-hour customer service centre takes retailers step-by-step help through orders. "For a lot of these folks it's still quite foreign to use a computer," Smulders adds. Back in the UK, the e-revolution on the street corner is less advanced. The convenience sector is some years behind the multiples in terms of the application of technology. Epos still only has 46% penetration in the symbol group sector and 62% in the c-multiple sector. McKinsey believes internet penetration in the small store sector is around 9%. But there are stirrings of activity, both at the back end ­ with Londis and Spar building portals for their retailers ­ and consumer-centred initiatives. At the front end, we have small store chains going into online shopping and home delivery. Take Bells Stores' trial of its internet service, launching this week. It will service workplaces near its central distribution depot, moving to home delivery, where the average spend is higher. The service should attract new ABC1 customers rather than cannibalise Bells Stores' traditional D & E consumer base. A dedicated picking centre will stock a range of products more attractive to the online customers. Douglas Gurr, leader of McKinsey's UK retail practice, says the issues surrounding B2C e-commerce are two-fold. "Can you make the economics work and add incremental sales? And how on earth can you offer a better offer than Asda and Tesco when you can't outrange them and you can't outprice them?" he asks. The challenges are certainly high. Gurr believes a strong brand in a concentrated area plus minimal distribution costs will be critical. But B2C opportunities are not just about c-stores doing it for themselves. Dropzone 1 offers online shoppers the option of having goods left at conveniently located Londis, Spar and Jet fascias. By its summer launch, Dropzone 1 aims to have 5,000 stores in the scheme. It will only handle non-perishable goods and customers will be charged a £1 handling fee. Spar retail development controller Barry Wallis says: "I don't see this as a big revenue generator but it's another service to bring customers into the store and attract incremental business." But there's more to e-commerce benefits than being in the right place for other retailers' deliveries. The first obstacle is getting on line. Cat Internet is putting 1,000 internet kiosks in c-stores by the end of the year. These machines are multi-functional, offering value added services to customers who pay to use the kiosk ­ retailers will also take a commission from any online sales made at the store ­ and e-benefits to the retailer. The cost of B2B back end applications will be covered by charges paid by customers for internet access. These kiosks also offer opportunities for suppliers to tie up online promotions with instore point of sale material. Cat Internet is negotiating tie-ups with branded suppliers that will include broadcasting of TV ads instore and point of sale tie-ins. Marketing director Andrew Williamson says: "This has got many legs. We're a doorway to the internet and we're a marketing platform for suppliers at the point of sale. On top of that, the B2B back end is as broad or as narrow as the multiple or brand owner wants it to be." Booker, recently merged with Iceland, has pioneered e-commerce in the independent sector. The service offers a host of online packages for the retailer, including online auctions for short life and special product offers, WAP phone offer alerts and a soon to arrive banking and insurance arm. The internet site will allow online ordering and consolidated customer invoicing as well as creating new bidding opportunities for retailers either individually or as combines. McKinsey's Gurr says: "These are nice ideas; the challenge is making sure they're not just incremental costs." If e-commerce has the ability to deliver anything to the small store sector it is to strip costs and improve service levels in store. This end of the market may be behind the big boys in implementing the technology, but it is not too late to join the race. {{COVER FEATURE }}