Finding Out What Consumers Love

The glory days of the Internet and e-commerce companies are over, but the managers of StoreAlliance are not letting this harsh reality ruin their dreams. Phrases like "electronic commerce arena," "B2B" and "ASP model," which we heard quite often in the recent past, are still being used fervently by this company.

The glory days of the Internet and e-commerce companies are over, but the managers of StoreAlliance are not letting this harsh reality ruin their dreams. Phrases like "electronic commerce arena," "B2B" and "ASP model," which we heard quite often in the recent past, are still being used fervently by this company. A closer look at the recent progress of this small firm from Ra'anana and the decisions by Discount Investments and Coca-Cola to become strategic partners therein reveals positive indicators for the future of the company.

StoreAlliance, a subsidiary of Retalix, which is traded both on the Tel Aviv Stock Exchange and on Wall Street, is involved in electronic commerce via the Internet. The company is hooked up, via the Internet, to the cash registers of 400 food stores, including supermarkets, small grocery stores and delicatessens. Using software developed by Retalix, StoreAlliance accumulates data on the stores' sales, including product names and prices, the quantities sold and the times of the sales. The data is then processed and supplied to organizations with interests in Israeli consumer habits.

Annual sales revenues at the supermarkets with which StoreAlliance is connected are estimated at $900 million, accounting for 25 percent of private retail sales and about 12 percent of the country's food sales - including those of the large chain stores. Since it handles so much data about consumer habits in various sectors and locations, StoreAlliance can present this information based on a range of parameters, such as the time of day, geographic location or sector of the population.

Data collected by the company reveals, for example, the impressive increase in the consumption of the Wissotzky tea company's new Rejwan coffee, following the firm's advertising campaign this past February and a subsequent drop in consumption of the coffee in the months after the campaign ended. When Rejwan held a sales promotion campaign that included discounted prices and gifts, consumption rose again, temporarily, but StoreAlliance's colored graphs show a steady decline in consumption, to less than 10 percent of the Turkish coffee market.

"From my point of view," says StoreAlliance CEO Assaf Gadish, "the drop in Rejwan's market share signals the end of the road for the brand. If, after all that effort, Wissotzky has managed to keep just 7-8 percent of the market, it means that its competitor, Elite, has won."

Karen Mimran, StoreAlliance's vice president for marketing, says that big companies such as Elite are willing to pay large sums of money for data like that. She notes that companies are already paying up to $10,000 a month for information packages. This, however, is only part of the company's business model, and the management is hoping to provide more varied services that generate much greater revenues.

The whole story began some 18 months ago, with a small initiative on the part of Tamar, a cash registers manufacturer. The cash registers, which can be found in numerous businesses and include a computer and a bar-code scanner, formed the basis for the development of a software program to accumulate and process data. Retalix, which develops software for chain stores and B2B e-commerce operations, bought Tamar and, with it, the data-accumulation enterprise that evolved into the company known as StoreAlliance.

With its 14 employees, StoreAlliance caught the attention of the Central Soft Drink Company (Coca-Cola), which acquired a 25 percent stake in the company for $5 million in cash less than a year ago. The antitrust commissioner, who had to approve the purchase by Coca-Cola, imposed strict confidentiality restrictions on StoreAlliance, due to the risk that Coca-Cola's control of the data poses to its competitors.

Gadish explained that keeping the data secret is also in StoreAlliance's interest, because without confidentiality assurances, no one would want to work with the company.

"If a retailer or supplier were to find out that his sales data was getting into the wrong hands, he would cancel the service and the company would lose the trust of its customers."

Discount Investments has also bought into StoreAlliance, by exchanging Trident - one of its subsidiaries that handles the electronic transfer of official documents - for 11 percent of the StoreAlliance stock.

StoreAlliance's business model is based on providing store owners with an inexpensive service that affords them control over high sales volumes. The big revenues are meant to come from the large companies that can afford to pay for the advantages of the data and the stores' ordering systems.

Gadish says that StoreAlliance identified the private food market as an inefficient one, with little information, a lack of technologically sophisticated tools and limited resources, when compared to the chain stores. The technology gap between the private food market and the supermarket chain stores causes waste and inefficiency for the food suppliers. StoreAlliance proposes practical solutions for streamlining the supply chain and saving money.

Gadish's data show that it costs a company $100 each time one of its salesmen visits a store. Studies have shown that 70 percent of a salesman's time is wasted in checking shelves and making out an order. "We can save the company all that time and thus reduce its marketing staff," he says.

Using StoreAlliance's inventory control system, a store can continuously update its orders system and can send orders directly to suppliers, without involving the store owner or the salesman.

All 400 stores that use the StoreAlliance system also use the Tamar cash registers. In order to recruit new customers, $5,000 will have to be invested in each new store. For this reason, StoreAlliance has signed a cooperation agreement with cash register manufacturer IBM.

StoreAlliance has not yet turned a profit, but it is not burning up cash either. The company has plans to quadruple the number of retail stores using its services; and the current fee of 1.2 percent of store sales is already generating annual revenues of some $10 million.