A-Clue.Com
by Dana Blankenhorn
Volume III, No. XXV
For the Week of June 21, 1999

This Week's Clue: Korean Grocery

This Week's Clue: Korean Grocery

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Online Drug Wars

The Broadband Dance

Cutting If Off In Spite

The Myth of Traffic Value

Clued-in, Clueless

Ever since the Web was spun, I've been obsessed by the topic of traffic. My location in Atlanta has something to do with it, but the problems here really result from bad planning, so that answer doesn't fully satisfy me.

No, I really believe the Web can (if properly applied) greatly reduce the number of trips we make every day. More of us can work at home, sure, but we should also be able to cut the number of shopping trips we make each day. You know the trips I mean. You need one more ingredient for a recipe, or one more tool for that project. You just remembered what you forgot, and you have to run out and get it. Maybe, if you could rearrange your schedule (or your menu) you could cook that dish or do that project tomorrow. But you get on the road anyway, knowing that the thing you lack still won't magically appear on your doorstep.

Along the way you pass a host of places that could help. Little hardware stores, small groceries, tiny drug stores. But, suspicious they don't have what you want, you pop into the parking lot of the mega-super-complex, and come back with tons of stuff that winds up in the back of your closet (or your refrigerator) and is never seen again. 

The closest thing to a solution I have is to (as the Coneheads say) "consume massive quantities." We go to Costco  for the 40 pounds of laundry soap, the eight-packs of spaghetti, and the giant jar of crushed garlic. Over the course of the average month our family of four will spend $800, and two afternoons, engaged in this back-and-forth, which we call saving money. And when Costco

re-worked their Web site I had a lot of hope. But I was very disappointed. There's still no way for me to input my regular shopping list there, and check things off when needed, so that when the total reaches, say, $250, the Costco truck will come by some evening. I don't know if they can handle the system integration (not to mention the truck fleet) necessary to make this work. I do wish they could. 

The closest thing to my dream is the Streamline  system, which supports shopping lists, and they've gotten an awful lot of hype from people  who know . They have a counterpart in the San Francisco area  which seems to be going for the upscale gourmet-delivery market, but they're not everywhere nor do they want to be for everyone. And what if I need something that's not on my regular list?

So I came up with a franchise, which I offer free to any franchisor, in the hopes they'll serve my neighborhood soon. To get into this business the franchisee needs a Web connection, a van, and a willingness to work hard. The franchisor handles money and marketing, systems and routing, sending orders to the closest franchisee. (They'll also want a good customer service operation, so they can switch accounts that want a new supplier.) In this scheme customers initially set-up a form with what they need often, but can also e-mail emergency orders on request. The franchisee fills the orders (from wherever necessary) for a "transport fee" on each order (plus a reasonable mark-up). I call it "KoreanGrocer.Com" only because we have lots of Korean-owned convenience marts in my neighborhood and their owners seem to work very hard. (Hard work is necessary to make this work.)

Over time, a franchisee can know more about what the people around them want them to stock, and maybe they'll lose a few emergency orders as regular customers come into the store, knowing that what they need will be there. They'll certainly gain enormous customer loyalty that will be hard to shake. And - if the line of products offered is wide enough - I think this can do what the online grocers have thus far been unable to do. That is, get it to me NOW. There's enormous value in NOW. (A Toronto weekly currently has the now.com URL, but I suspect they'd sell for the right offer...) 


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I'm becoming a semi-regular on TechEdge Radio, delivering Clues and bantering with host Virginia Webb. It's strange being bigger in Phoenix than Atlanta, but it's fun. Hope you enjoy it.

You can now get your Daily Clue at ClickZ, putting a "clued-in" spin on the day's news. I'm also continuing to do monthly columns for  NetMarketing, Boardwatch, and  Intellectual Capital. I'll also begin work soon with the IC folk on a book project concerning politics and the Internet, which will appear first on the Web. A-Clue.Com is also the Monday e-commerce column of Andover.News. Buy my book now. Subscription instructions are at the bottom of each issue.

Remember that it's still journalism -- checking the news, calling people, listening carefully and writing on deadline -- which keeps the Clues coming. If you're looking for excellent work, give me a call at 404-373-7634. Now back to the show...


Online Drug Wars

One of the first business stories I ever followed avidly was Martin Wygod's moves with Medco Containment, a company that tried to cut drug costs through a methodology that will sound familiar. They would sign up regular buyers of drugs, and arrange with insurance companies for deliveries by mail. (Eventually Medco was bought by Merck and became the Merck-Medco Managed Care business.)

This gave me many of the Clues I use to analyze today's Web drug stores, like Drugstore.Com . To make it work, you need to not just get consumers on-board, you also need to get drug companies (suppliers), hospitals (distributors) and insurance companies (payers) on board. Making that work takes the same controls placed on pharmacists in the real world.

The first requirement is ridding the market of thieves. States have become fairly innovative in this and the work is moving ahead. The second step, one Drugstore.Com claims to be engaged in, is linking corporate drug e-commerce to medical information. There the "early foot" is held by (of all people) C. Everett Koop. He's got the best-known brand name in the information area (he just owns 11% of the common, a real businessman runs the operation), and a deal with Drug Emporium lets someone else do the heavy lifting. There are analysts who think the site is terribly overpriced (and it's funny that Koop's $50 million stake makes him the richest ex-Reaganite by far) but there is a lot of heavy lifting to be done here, and the "affiliate" share may just be fair.

Let me summarize. Making drug sales work on the Web requires a master of political intrigue, big business relationships, and systems integration mastery. That's something current players have, something the pure Web plays don't have. It is easier to teach an elephant a mating dance than to have a bee pull out tree stumps.

The Broadband Dance

We know it will take billions of dollars to upgrade phone and cable networks for broadband. Cash (not stock) must come from somewhere. Bellheads and cable head-ends are offering to spend but they first demand the power of monopolists to control the lines and keep competitors out.

That's behind the bidding war between Qwest and Global Crossing for US West. As the most rural regional Bell, US West faces the highest per-line cost for the needed upgrades, but it also holds the most promise as a potential monopolist - or duopolist (if matched against cable). In most of the territory ADSL won't work (it's too far to the switch) and a high-fiber diet is a necessity. Thus, the interest by fiber companies, and the interest by US West Senators like John McCain in giving them the "incentives" they want in exchange. (Although there's no interest in the flip side - taking the responsibilities for customer service that are common among regulated monopolies. )

Certainty in the regulatory environment, however, is what's most needed before bankers (as opposed to brokers) put up cash (as opposed to floating stock). In that effort FCC chairman William Kennard has shown himself completely Clueless . He wants to go to court to prevent local regulation of cable assets, but only to protect his agency's refusal to clear the air on the subject.

For the real work to start, the games must end. If Kennard is fishing for political contributions (as I suspect) it means the game won't end for at least two years. The Clue that results is that the struggle over broadband will remain a political struggle, not a technology struggle, so that only the low-hanging fruit (wealthy urban neighborhoods) will gain access to this technology over the next several years. If the rest of you want broadband, you can get a satellite or move. Washington has spoken, and as usual its message is "gimme."

Cutting If Off In Spite

There's Clueless, and then there's just plain Stupid. Network Solutions, unlike Yahoo, actually has a complete directory of the Internet. (It must have one in order to deliver the domain naming service the Internet depends upon.) Someone finally figured that out, and decided the database would make the basis of a great online directory.

Now, here's where it gets Stupid. Chief Financial Officer Robert Korzeniewski told Reuters that listings in the new "dot com directory" will be free to companies who register through Network Solutions. But NSI will charge a fee (probably equaling its registration charge) to those who register their domains elsewhere , as they now can .

The really Clueless bit is that investors bid the price of NSI common up 10% on this news. No one considered the precedent of UU.Net, which years ago tried to shake-down ISPs for access to its backbone network until it realized that, if it refused carriage, it really wasn't providing an "Internet" service anymore, just a glorified private network. You don't charge people to be listed in the White Pages, unless you want some other directory company (like Register.Com) to grab the business.

The Myth of Traffic Value

In selling his publishing and trade show outfits to Penton, then buying back the online assets, Alan Meckler said that "weekly page views" should be the measure of a Web site's absolute value. He defended his deal to take about $250 million from Penton, then pay about $38 million for Internet.Com, by claiming he was paying a record price for the Internet.Com sites, based on this measure.

So Internet.Com's Steve Harmon estimates that Blue Mountain Arts, which just gives away online greeting cards and is perennially one of the most-visited sites on the Web, is worth $650 million . The question is, to whom? To someone who could leverage that, responds Upside, presumably by selling other stuff. The question is, would the traffic stay there if BlueMountain were just another huckster, or would it go elsewhere? Here's a case, it seems, where the ClueMaster needs a Clue...

Clued-in, Clueless

Clued-in this week is DoubleClick, which succeeded in grabbing some "real world" assets in buying Abacus (which targets catalog deliveries) for $1 billion. When we get a Clued-in Hall of Fame, I want Kevin O'Connor in there next to Harry Motro.

Clueless is Furniture Brands International Inc., the largest furniture maker in the U.S. which, in a Great Luddite Moment, proudly told the media it not only won't have a Web site, but won't distribute its products through Web sites because they threaten its distribution network. (Your Clue is to not open a drug store, but a furniture store.)


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