Tower Blog

A blog about smart POS software for independent small businesses.

Month: October 2005

The Apple iTunes / Coles deal still rankles

Big businesses move in circles many in small business cannot comprehend. Deals are interlocked favors which build layer upon layer and in a way which cuts out all other players.

National and global corporation relationships are such that small business has no hope in achieving a level playing field.

I’m not writing this to be critical of big business but to acknowledge the reality of the game. On the iTunes deal announced last week, Apple wants to sell more iPods, Coles has the retail network so it is logical that they enter into a mutually beneficial deal. Small businesses, like newsagents, never had a hope because Apple wouldn’t seem them on the radar as relevant. While newsagents have more stores than Coles, they lack the one think which Coles leverages exceptionally well our of their head office – market power.

The only way small businesses and, specifically, newsagents, will be able to leverage in a way similar to Coles will be for them to create and or control products and services exclusive to their channel. It may be that the focus is on premium service, for example – service so good that customers rave about it. If newsagents can deliver that and have customers talking up the line that they prefer to deal with newsagents then suppliers will want to tap into the goodwill built through such service.

I appreciate that this is less tangible than an exclusive product as such. However, it is something which newsagents and, indeed, all small businesses, can own today. But it’s a chicken and egg situation. You need great traffic to be able to serve enough well so they rave about you and you only get the traffic if you have good current product and right now you’re only getting this if you’re a big business mate and doing a reciprocal deal.


Apple has tainted its image by doing a deal with Coles Myer and hopefully consumers will see it that way and not purchase recharge at Coles stores.

In the meantime it would be good if our politicians researched deals like this from a policy perspective and assessed whether they are in the best interests of the consumer. The last time parliament research anything like this was in the late 1990s. Small business is not on their radar it seems.


Coles Myer, Apple and the social responsibility of cutting out small business

Coles Myer and Apple have done a deal giving Coles group stores exclusive access to selling a prepaid card consumers will use for purchases at the new Australian iTunes store. They are using technology provided by Bill Express to manage the transactions.

Newsagents have 50% more Bill Express prepaid outlets than Coles yet they are not part of the equation. Okay, that’s business. Deals between companies are done every day so why is this one different?

Newsagents are a better fit with the typical iTunes consumer. Newsagents are better socially connected than Coles and this should sit well with Apple.

Just as businesses have an obligation to buy Australian, so too should there be an obligation to seek out small business partnerships. Otherwise the big will get bigger and the small will cease to exist.

I’m not proposing a free kick for newsagents from Apple. Rather, a commercial and more valuable arrangement than with Coles. Newsagents offer more outlets than Coles, equal compliance (through Bill Express) and a better consumer connect i this space.

Newsagents have committed to $25K in hardware infrastructure to support the Bill Express network and to lose a logical fit such as with Apple must make many wonder about the value of the investment.

I would like to see Government place an obligation on big business to somehow work with appropriate small business networks on deals like this in the future.


Australian government small business policy

Why is the government demanding that Telstra compete in an open marketplace while it protects the best stores in the Australia Post retail network from open competition?

Why has the government allowed Australia Post to aggressively pursue product lines sold by small business newsagents?

Why has the government demanded that newsagents deregulate (in 1999) yet refused to open the sale of postage stamps to the same retail competition?

Is the government prepared to compete with all small business sectors or will it restrict its enterprises to competing with newsagents?

How does the government feel when its employees visit small business newsagencies, note retail prices for items and return to their PostShop and adjust sales prices?

Does the government have a small business policy which is pro small business?

Why will the government not set a policy of selling off the PostShop retail businesses to local small business people?

Footnote: This is a repeat of what I have posted at my newsagency blog. I have posted them here because they relate to the small business issues I cover here. The two faced approach of the government on small business needs an explanation.

The government operates 863 PostShop retail businesses. These businesses are increasingly competing with newsagents for general stationery, greeting card and related business. The old post office has become a retail chain and it is trading off exclusive postal products to grab sales which would otherwise have gone to small business.


Offer of collusion spurned

A few months ago a competitor approached me about the support fees we charge, suggesting I might consider reaching an “accommodation” on support fees. His suggestion was that we both increase fees and stop trying to take customers off each other. I refused to even consider the suggestion, knowing it to be illegal. His response was along the lines of no one will find out.

I’d forgotten about the brief exchange until reminded today when talking with some folks about the Trade Practices Act. Thinking back to the suggestion of a few months ago I wondered how many such collusive arrangements go unnoticed.

Small business is tough enough. While I’m not about to dob in the competitor I am wary of everything they do because their suggestion demonstrated the lengths they would go to for revenue.

I’ve taken the opportunity to remind my sales team members to be careful about what they promise and to be even more careful about any conversation with a competitor.

While I was never going to agree to anything which disadvantaged my clients and prospects, just being invited to consider it makes me feel somewhat dirty.


The Wal-Mart you don’t know

This Fast Company article from December 2003 documents some of the practices of Wal-Mart and its negotiations with suppliers.

Small business often focuses on how a major competitor like Wal-Mart in the US or Woolworths, Coles, Harvey Norman or Bunnings etc in Australia might have on their business. As the Fast Company article outlines, the impact can be felt way down deep in the supply chain. Small businesses are not as tough in negotiations in part because they are not as powerful. Therefore they carry themselves the financial pain inflicted by big competitors on suppliers.

Maybe this is why newsagents get 5% commission for selling Vodafone recharge compared to the 16% paid to a major supermarket chain. Who knows? The greed of some of these giant companies inflicts a pain which is felt not only by suppliers and the sooner the broader community understands that their discounts are not as beneficial as the TV commercials make out.


Is there no end to fuel discounting?

At the supermarket today they are offering 14 cents a litre off fuel. Certainly that’s what the signs were screaming at me. However, upon reading the fine print I have to buy certain products, post the receipt, my details and 50 cents postage fee and wait for a bonus fuel voucher to be sent. It’s all too hard. I’d prefer better prices at the checkout. Every time. But then they cannot bounce me to their company owned fuel outlet from where they would bounce me back to the supermarket.

The range of fuel discount offers is an opportunity for independent retailers. Ignore the hype. Provide discounts at the register and put real money back into consumers’ pockets. Not this hypes up cents a litre off which, in real terms (if you shop around for fuel), is probably not worth as much as they suggest.


A challenge for Google moving forward

The moves by Google over the last year have been astounding. Their profit announcement this week is proof that they are serving their customers well and that will please their shareholders. The challenge for Google is their size. Rather, the challenge for the rest of us is the size of Google. They are the Microsoft of our time. Even more so. Their size makes it challenging for competitors on a range of fronts. However, it is difficult to work out who is a competitor, for Google is playing in so many spaces and on a variety of scales. Sure Yahoo is a competitor. But from stories published over the last few weeks so are book publishers and newspaper publishers among others. The internet has been a leveler, allowing small and independent businesses to establish electronic real-estate almost as easily as much larger competitors. That opportunity is less today than a few years ago thanks, in part, to the Internet becoming big business in itself and thanks to the clever Google advertising tools which only larger businesses can afford. Google’s success attracts more businesses online and with them come more of the bricks and mortar world practices and independent businesses risk being drowned out again.

While the laws of economics meant that such growth and the attendant commercial power was inevitable, Google and other companies managing the freeways used to access online businesses have an obligation to keep it affordable.

My fear is that Google and any competitor their size will be like the giant shopping mall landlords who have priced their real-estate such that independent retailers give anything from 12% to 20% of their sales to pay rent. With shopping mall rent it’s a supply and demand situation based on finite space available. Google does not have similar physical world constraints and so ought not be under similar pressure on its pricing model.

I’m not a Google basher. Indeed I use their AdWords service and appreciate the sales the Google generated traffic brings. My hope is that it remains cost effective for small businesses like mine to get online and access the traffic Google and others control on their freeways.

We need a healthy small and independant business community online.


It must be Christmas

I’ve now received more than 10 letters and or calls from charities seeking donations connected with Christmas. In most cases the pitch is along the lines of give us this money and you get to put a sticker on your mail or a link in your emails indicating that you are supporting us.

While that in itself is not necessarily bad, that some pitch this ahead of the work they do is concerning. Maybe it’s what they have to do to get the ‘sale’.

Based on recent experience I prefer to make donations to organisations which are open about the percentage of donated funds which go to the actual work and charities which commit to not constantly harassing you for more money.


Stakeholder versus shareholder

Central to this start up we are developing is how we plan to look at stakeholders, that is the broader community which will interact with the business.

We want to set aside a portion of net profit before tax and return this in some way to the community. We want to do this because we genuinely believe in the community as a stakeholder in every business.

Achieving the goal is a challenge because we need to allocate the funds prior to tax being calculated. This means they need to be donated to charities etc which have tax deductible status.

It may seen naive but I would like the government to consider such a concept of community ‘stakeholdership’ (as compared to share ownership) and how businesses might allocate funds in a tax deductible form without the need for the funds going to tax deductible approved charities.

For example, we would be interested in providing a scholarship for rural students moving to the city to study. Under current arrangements would could only do this through a charity already established to do this and with tax deductible status. We want to keep the line between our provision of funds and the recipient as short as possible to ensure maximum funds get to the recipient and no on charity overheads.

While it is somewhat premature to consider these things for a business yet to make even a dollar in revenue, we want to have the processes in place from the outset so there is no doubt about our intentions and how we plan to execute.


chasing a deeper customer experience

It’s a constant battle this software company caper. At McDonalds or Subway, you make the food, the customer pays and you’re on to the next one. You rely on Head Office to do the marketing and get the menu right. Your only focus is customer service.

Here we design the software, make it, deliver it, train people how to use it and even use it ourselves in our own business.

I’m not complaining, I love this business. Some days, though, it is daunting. We genuinely want to deliver a unique and valuable customer experience: in every call; in every software update; and, at unexpected times. This is where it gets challenging – finding ways to engage with customers which are genuinely valuable and unexpected.

We’re working on a new type of user meeting, one where we get a small group of users together to expose their businesses to each other warts and all. Kind of an adult version of show and tell but with a please help call at the end. The show part is a reports from our software. We’re inviting them to come along with a specific set of reports – all the same for the businesses attending and for the same period.

We’re billing this as a self help group but with our people moderating, keeping things moving and providing insight into some of gems hidden in the reports.

The challenge, if our trial of this format works, is to package it so that we can get to our 2,000+ customers. Each session will include 5 or 6 businesses and run for 3 to 5 hours. There will be follow up and further training.

We’re not charging for participation as we see this event as another way we can dedifferentiate ourselves from others in our space. It’s not something Microsoft or MYOB would do for small business. It’s the difference between the local burger shop and McDonalds. Yes it’s hard work but it’s also an opportunity for joy when an attendee calls a few months later to say thanks.

Software companies have an obligation beyond the sale to make sure that the rewards we promise are achieved, particularly in the small business area. The software itself is not the solution, the day to day assistance, encouragement and advice is what the end user is really paying for.

Our first round table session is next week so maybe I’ll report back here how it went.


The startup as as mistress

My company turns 25 in January next year. While we continue to record good growth we’ve parented a small start up this year, investing around $30,000 and are a few months away from another start up which is a million dollar investment.

Starting new businesses is both frightening and exhilarating, especially if you are playing in a space foreign to you. We are more than a year in on the bigger of the two new ventures and we still have several months work to do. The only experts we could draw on are working with potential competitors.

We’ve funded this new venture so far and are about to seek capital outside to extend our intellectual resources and capital. Having not been in the need of capital for 25 years it’s an interesting situation. It’s compounded by the difference between the new business and our existing business and the possibility that the new business could eclipse the existing business in a couple of months if successful.

I am enjoying the dilemmas along the way but am concerned for the existing team and that the focus on the new business might think their efforts are not the main game anymore. While we have been open (internally) about our plans and included existing team members along the way, there is little feedback to indicate their feelings.

When you are $200,000 or so into a new venture and still months away from even getting close to any revenue it’s not unexpected that some doubts surface. Given the age of Tower Systems I feel as if I’m seeking a teen bride by pursuing this start up. Ridiculous as that may sound to some, I am sure there is a similarity in feelings. For example, the excitement of the start up takes one back to decades before. I wonder if I’m pursuing this for the same reasons a bloke married for 25 years would pursue a teenage girl: to prove he can; to feel younger; to find a goal in life beyond the mundane? I don’t think that’s me as this start up has an important social value for the community and a specific small business sector. We have built into the model a stakeholder dividend without the need to be a capital investor.

In the meantime I’ll find off the feeling I’m being unfaithful while enjoying playing with the startup and encouraging it toward its first steps.


Australian workplace changes are uneccessary and divisive

I am watching, reading and listening to the stories about the Federal Government’s proposed workplace changes and wondering about the impact on the employer / employee relationship. To make their case the unions paint employers as bad guys. To make their case the employers paint the current system as bad for business. The government says nothing (much) changes. The opposition says the world as we know it will end.

Caught in the middle of this are workplace relationships, especially in small business where employers and employees are close, friends even. Are the advertisements getting traction with either side? Are we more suspicious of each other since the campaigns started.

I’m not keen on the changes. While I think the current unfair dismissal laws are open to abuse (I know of employers who have settled for $5,000 rather than spend $10,000 on a case) I don’t see a need to legislate away basic rights which employees have come to enjoy. I appreciate that retail is now a 24/7 business (almost) however, I still see no reason to wind back employment terms as forecast.

I suspect the winners of the proposed legislation, if passed, will be big business. I would expect than many small businesses like mine will not alter current arrangements which have served the business and the employees well.

The legislation seeks to serve a one size fits all world. I am more interested in a cooperative arrangement which does not rely on legislative and contractual change for support.

I wish the government was spending its resources on measuring the social responsibility of business and obliging us to do more for the environment and the community. This would deliver greater economic benefit than these workplace changes.


Help for struggling small towns in England

The Retail Enterprise Network is using a grant from European Social Fund’s Equal programme to improve the social, environmental and economic ‘health’ of selected retail districts and communities within England. The initiative is helping communities including independent small businesses to revilatise town centres. More at the retail Enterprise Network website.


Social responsibility of suppliers to big and small business

Corporations have an obligation to maximise shareholder value. They also have an obligation to be socially responsible. A corporation’s commitment to social responsibility can be understood by looking at how it treats small business compared to big business.

As I have blogged in another place, Vodafone has set a commission structure with at least one national supermarket chain paying a 16% commission on sales while paying small business newsagents a commission of 5% on sales.

The difference between what newsagents are paid compared to supermarkets is breathtaking and says something about Vodafone’s commitment to small business and those who work in small business. The more small business is squeezed like Vodafone has done the fewer small businesses there will be. This means fewer jobs, less choice and more of a clone retail landscape.


Social responsibility index

Further to my post ten days ago calling for businesses to have a sign like this at their entrance, what is manufacturers labeled their product with these for measurements.

Think back to the 1990s and the sweatshop campaigns. While I am sure sweatshops continue today there is no easy way for consumers to be informed at the time of making a purchase.

As a consumer I want to make the right purchase. As a supporter of independent small business I see that this group has the best opportunity to be seen to be doing the right thing in terms of social responsibility. If only the government would introduce a system of transparent measurement and reporting on social responsibility measures.

I’d like to see labels like the one above on all items so we can stop supporting business not doing their bit for the community and the evironment.


Wal-Mart hate coverage

Wal-Mart is copping a bagging from all round the place and while that may not be unusual for a company this size, the stories in the last week are particularly strong. From MSNBC: Wal-Mart’s Giant Sucking Sound; from the Manteca Bulletin: 50 join forces to stop Wal-Mart. There are many more like these and the giant behemoth pursues growth.

I have no problem with a business pursuing growth. However, when a business is the size of Wal-Mart it has obligations. It’s entry into a community kills businesses for sure. Government has an obligation to ensure social and economic balance. This is why our government should be looking at work being done in the UK and the US in this area.

When a community says it does not want a national or international retailer moving in the government should listen.


The shop floor is a leveling experience

I own a software company and a retail business with two stores. I spent over three hours today (Saturday) on the shop floor doing regular retail stuff: answering questions; serving customers; cleaning and staking shelves. It’s good leveling work. After three hours my body felt like it had been working for a full day, I was ready for a break.

Every single thing I did on the shop floor today related back to what we do in our software company in some way. I come away from these real life experienced more committed to saving time, streamlining processes in the software, improving the employee and therefore the customer experience and finding ways for independent small businesses to continue to act personally yet to act with more consistency.

This time in the retail business is like time in a client’s business. It is part of our social responsibility as a software company to strengthen the connect with our clients and to understand their needs.


Less technology better in retail

Technology is getting in the way of customer service. Yeah that may seem odd for me to say given that I own a technology company. So be it. I was at the supermarket a couple of days ago and asked the checkout person a question, they tapped something on their keyboard but said nothing. I asked the question again. They then pointed to the LCD screen facing me. The information I wanted was there. I went through the rest of the transaction assuming they could not speak for some reason. At the end of the sale when they handed me the receipt they drones “have a nice day” and moved to the next customer.

While this one experience may not reflect what happens at all supermarket checkouts, it certainly made me wonder about all this technology being put at the counter, especially the customer side technology. It’s like a defence wall being built to protect the retailers from their customers. I hate it as much as I hate these self service checkouts.

While some customers from my company have asked for LCD displays and other intrusive devices (beyond the usual slim customer display) for the customer side of their counter, thankfully most have not, preferring to provide human based customer service.

Friendly knowledgeable customer service is the point of difference small business can win – if it embraces the opportunity wholeheartedly. Sure use the technology but keep it low profile, focus on human to human contact as much as possible. Customers love it and will remember the experience. Especially if bigger business competitors in your space are more focused on technology solutions.

The more technology you have at the counter the greater the opportunity for customer phobic sales staff to hide behind it and not interact and that’s not good for any retail business.


A lesson in how not to sell from Servo Savers

Servo Savers have been chasing my retail business, trying to get us to be part of their fuel discount program. Their latest pitch came today in the form of a call from their sales representative for our area. He was rude, obnoxious and threatening. I had said I would not consider meeting with them unless they provide up front an outline of what the costs would be. He refused and said I was the only one who ever demanded such information. he told me my business would suffer and may even not survive without Servo Savers. He said he had Harris Scarf, Priceline, the Kodak shop and a couple of others ready to go and wanted my newsagency in for the area. He brown nosed so much about me and my business it was embarrassing. In fact, he had no idea and was throwing everything (compliments and threats) in an effort to interest me.

I have a loyalty program operating in my business. It’s just over a year old and is responsible for 28% sales growth. It rewards customers from within the business. The Servo Savers model is built around fear about high petrol prices. It would drive my customers to petrol outlets where they can purchase what I sell in my shop./ That does not make good business sense to me. I mentioned this to the sales guy and he went off on a rant about how I don’t care about how much my customers pay for petrol. It was time to end the call.

This call was a reminder about the sales process and the damage which can be done in a high pressure sales situation. This guy lost me from any future pitch he might make and indeed any pitch from Servo savers. They ought to be more careful who they have representing their company.

The call was also a reminder to review sales processes our team follows and ensure that their pitch is professional and respectful.


Why independent retailers matter and do they ever think about it

In this post a while back I listed 10 reasons why independent retailers matter. I was reminded of this yesterday when working on a business plan for a start up we are developing. It is one thing to look from the outside and say this is why a particular channel or a business exists, it is entirely another for the founder of the business to have such views. If the owner does not have a view as to why the business exists and why the community needs such a business then surely it will drift and ultimately close. Just existing as a business gives you no rights at all. You’ve got to deliver genuine social as well as economic value.

I got drawn into a deep canyon of thought about this while considering the business plan for this start up. I want to ensure that we have a solid and purposeful foundation for existing and that these ‘principles’ are part of our day to day operation.

Back to my earlier post on independent retailers. If they don’t understand and believe in why they matter then their future will be limited. It’s one thing to berate consumers into buying local and another entirely to have independent and local retailers to operate their businesses delivering and delivering on their value to the community.


Mandarin user meeting a success

Our first even Mandarin language meeting in Melbourne yesterday was a success with good feedback encouraging us to do this more. Next stop, Sydney where we have even more Mandarin speaking users.


Our first Mandarin language software training session

We have a bunch of our Mandarin speaking clients coming to the office for a Mandarin only user meeting. This is a first in our channel and from what I can determine a first for small business in Australia.

We have been offering Mandarin and Cantonese language support for over a year and felt it was time to provide a group training session in a language our Mandarin speaking users are more comfortable with.

While each of these clients speaks English we have found from our Help Desk that Mandarin communication is more likely to lead to a better outcome.

If the session goes well in Melbourne today we will host another in Sydney. We will wait for feedback from those attending to determine if it is worthwhile.

While there is a business outcome for us if today’s session is a success, our investment in this strategy is also about being true to ourselves and our service goals for all clients and not just those who speak English.


Konica Minolta disappoint

We have bought three monster Konica Minolta digital copies machines over the last year and a half. Two colour one black and white. Our total spend is in the vicinity of $65,000. We’ve been using these machines plenty, often spending above $4,000 a month on per copy charges. Konica have just rewarded us for our loyalty and our significant business by increasing our per copy charge. A request that they reconsider this met with a refusal.

What galls me about this is my discovery that a colleague is getting a much better deal than me having bought just one machine and generating less per month revenue for Konica.

Maybe we’re just bad negotiators. The Konica representative told us it was the best deal ever. We are feeling burnt by this and would not recommend Konica copies to anyone.


Banks realise they are a service business

It’s taken many years but it seems Australian banks have finally realised that they were wrong to run from customers and close branches. According to today’s newspapers the major banks are busy opening or planning the opening of branches. Duh! Banks are service businesses. By opening more branches and providing better customer service sales will increase as will profits. While retreating from customers might have lowered costs, the benefits were short term. Customers soon started drifting to banks which offered service.

Of course the banks are not opening these extra branches as a community service. This is still about profit and it fixes their earlier mistake.

It’s frustrating that while most of the banks stumbled over this customer service issue small business, in the main has remained focused on delivering good service, locally.