Saturday, 24th July, 1999  High Tech "Juices Up" Retail Business  A Talk by Manoj Tripathi,   Jamba Juice .  Our thanks to Raman Dakshinamurthy for the minutes

Mr. Tripathi began his talk as a casual discussion about the retail business, and pointed out certain dramatic differences on how people view 'technology'.

• In contrast to the outlook in the valley, technology is not taken for granted outside the valley. 
• In the board rooms of many organizations, technology is still considered as a tool, and in a sense, 'tolerated'.
• CTO-s rarely report to the President/Chairman, but rather to a Controller or Operations.
• In marketing technology to such companies, no amount of high-tech talk makes a substitute for down to earth facts.

In explaining the last point, Mr.Tripathi used the example of how one would sell an inventory and supply chain management programs to a grocery chain. A question such as "Do you want to run out of milk?" would go a long way in getting the management's attention rather than the explaining the marvels of a technology.

He also noted, that with the advent of the "dot-com" operations the situation is changing, albeit slowly. In retailing business, there are always a vast choice of projects that need to be invested in/dealt with. So, the management is very choosy in picking their battles, and this makes it difficult to get funding for high-tech improvisation projects.

Going forward, Mr. Tripathi maintained a very interactive discussion and answered several questions particularly on the impact of e-commerce to retailing.

1. Webvan claims to cut cost by using an efficient back end process do you think this is a threat to retail grocers?

   In E-commerce, generally when there is a product differentiation from others, there is lot of money to be made. However, in situation such as this, the efficiency of execution matters more. Another aspect that affects their prospects is convinience of  shopping-this is a good idea for very localized busy neighborhoods as in the bay area, however cannot be directly applied throught the country easily. Also, there is the issue of people wanting to touch and feel the groceries they like to buy.

2. What about the concept of PeaPod delivering in storage

   Convinience to the customer is the key here. This concept has been around for a long time in the meat industry where frozen meat was delivered to refrigerators in the garages of homes. The web is a new interface tool to make the ordering easier. Again, its the efficiency of the backend that counts. Nowadays the web front-end is relatively cheap and the technology is there.

3. Is the customer support better in brick & mortar company compared to web based company.

   Traditional retailers deal with customers on a one on one basis, and their customer adaptation/feedback is based on millions of face to face transactions. This would be very hard to replace through the web. However, a major issue faced by traditional companies recently is the privacy of their customers. i.e. how the information they have about the customers is being treated.

4. How about making customized clothing through the web, like Land's End ?

   This is an interesting business approach. Once again here the  key is still the cutomer experience. There is also chipshot.com which customizing golf clubs.

5. Is there anything to be gained in retialing by minimizing the time between manufacturing and delivery to the customer. For ex. perishable foods?

   A big application evolving there now is specialized catering. you can order food over the web and be delivered to the home or office. However, large and identical orders (such as in  parties) are more suited for this approach.

6. How has technology affected your business?

   Over the past 15 years, technology has been used in retail to  improve efficiency and to reduce the cost, and increase in speed. The cost of food is fixed, but the labor cost gets  optimized by increasing efficiency. Even 1/2 percent makes a  big difference.

7. When going to the mall is considered a "social" experience, how can the internet compete in replacing it ?

   There are varying degrees of what one considers a 'personal' aspect. For example, paying bills every month cannot be considered a "life enriching" experience. I would love to automate this kind of drudgery. Buying milk and juice may seem routine to someone, where as it could be someone else's every day exercise! This is a tricky aspect, since it is a  quality of life issue.

8.  What about business that maintain both a traditional store front and a web-based presence? how will you decide which wins?

   To a retailer, this is not a difficult task. Today being on the web is a must, so companies loose money to make it happen. However ultimately, they will consider it as a separate business and evaluate its profit margins.

9. When a business sells on the web, and has retail outlets, how does the company avoid conflict of interest with its primary sales outlets?

   There are several solutions to this problem. It is easy to track the zip code for the source of the order, and give the local retailer a 'piece of the action'. Or you could send them info about the recent purchase and let them do some 'target' marketing. Or, when sending material to the buyer, we print "Your local store is located at .. " information.

10. Is it an option to automate the making of juice in Jamba juice?

   Our experience so far is that automating juice making for some strange reason does not produce the same taste. We do not make the juice until we receive the order, so the customer is able to experience the smell of fresh fruits before being juiced. The ambience in our stores is also very important and greatly affect customer habits. We montior and adapt such small things very carefully to continually improve our business.

11. How do you do relation ship marketing?

   There are several "Rings of Retailing" in this business. Typically in store fronts, every thing from the layout of the store, the windows of the store, the angle in which the products are displayed, .. etc, is a marketing tool. Each aspect has to be planned carefully to suit the behaviour of the customer. Eg. Men are very reluctant shoppers, and have different needs. Also, many stores have club cards, or discount cards that help them track who buys what, when how often, and how much money they spend. This allows for very targetted marketing.

12. Finally what is the future of technology in retail business?

   Any thing that improves the bottom line will be greatly welcome. Ability to perform demographic and cyclographic analysis on customer behaviour and the ability to identify link products that can be bundled with current products. There are tools that can even analyze the P&L for each bay in a store seperately, and helps change the layout of the store.
   There are also ideas to do wireless check out counters so cusotmers can carry a small device with them that automatically generates the bill when they get to the counter.

 

  Susan Mason talked about the strengths/weaknesses of an effective 
business plan and provided insights into what VC/Angel firms are 
looking for when reviewing proposals in her talk "What's your business model" 

She addressed the following questions: 
*       What is the business model? 
*       Why does it matter? 
*       What are the components? 
*       How will you make money? 

What is it?

A business model provides the fundamentals of how your business seeks to address a problem in the market place and how why your business has a competitive advantage over other players in the industry. 

Why does it matter?

It provides a common language for all parties to understand and acts as a road map for where the business is going.  The focus is on sustainable growth as new competitors move in and it's aim is to isolate problems and identify market opportunities. 

What are the components?

1. Markets & Customers: Profile your customer base and segment 
    according to needs.  Always think of the competition and 
    the likelihood of substitution. 
2. Products & Services: What is the whole product definition so that 
    it is in a state ready for shipping to the marketplace. 
3. Distribution Channel: How do you reach your customer base - direct or 
    indirect? 
4. What is your marketing strategy - is it through sales support 
    or partnering or other? 

How will you make money?

Key questions to answer here are: 
What is your "financial engine" and how will you make money from this business? Identify sustainable ways of generating revenue - is it through subscriptions, advertising or % of transactions. 

(Copies of slides used in Susan's presentation can be found at the onset 
website at www.onset.com) 

She also addressed a number of questions from members: 

1. What is the role of NDAs? 
- NDAs are signed when we get into heavy technical analysis and patents are 
required. Generally, the VC industry is open so that word spreads easily if NDA are broken. 
- Look at portfolio of VCs' companies and ensure that they are not already 
funding a competitor. 

2. What within the team do you look for? 
- We look at market opportunity first and then the team and it's eLook at 
portfolio of VCs' 
companies and ensure that they are not already funding a competitor 

3. What within the team do you look for? 
- We look at market opportunity first and then the team and it's expertise 

4. What is an attractive TAM? 
- ~ $500Million for TAMs but also depends on the dollar amount going into 
the seed funding and the emerging market 

5. What skills do you look for? 
- We look for technology founders who have the expertise of their 
product/service - 
we are not so concerned about their business background as the VCs will usually 
bring in the business expertise to  help develop the business 

6. Between VCs and Angel funds - how do you share ownership of the company? 
- Convertible notes to company 
- Board of directors 
- Usually, Angels disappear from the board when the VCs come in 

7. Which deals didn't you do and regret? 
- Netscape: Interactive TV Play ('94) 

8. What level of information do you look for in a business plan? 
- Characterization and clarity of market opportunities and problems 
- Backed up by customer responses (do not use standard sources e.g Gartner, D&B) 

9. How do VCs assess salaries for founders? 
- We look at market salaries but want to keep costs as lean as possible 

10. What % of company does the VC get? 
- 1/3 goes to the founding team (at seed); 1/3 is set aside for the pool of 
incoming employees and remainder goes to the VC 

11. What are the typical exit strategies? 
- Either IPOs or start to position the company for an acquistion 

12. Who are the typical Angel investors? 
- Angel group/forum 
- Breakfast club 
- Garage.com 

Speaker Profile 

At ONSET Ventures, Susan specializes in hardware and software investments in the communications, networking and security arenas and currently serves on the board of Arcot Systems, Inc. Early in her career, she held positions in marketing and engineering design of high-performance and microprocessors for Fujitsu Microelectronics, Fairchild Semiconductor and NCR Microelectronics. 

Susan received a B.S. in electrical engineering from the University of Colorado and her M.B.A. from the University of California, Los Angeles. 
 

 
Introduction : 

   Amit Shah began his talk with a brief look at the history of the telecom industry. Where Bell and Marconi worked on technologies for solving specific sector related problems. As time evolved, the government had to take control of broadcast technologies and telephone industries. During this period, many corporations also developed their own proprietary networks. Amit began his career in "LAN". Even as late as '93, networking meant that equipment was deployed to communicate within a corporation and between various buildings in a campus. With Govt. de-regulations of Telecom and the boom of the internet, several fundamental rules of the game have changed.

 
Networking Industry: 

   Splitting the topic into Yesterday, Today and Tomorrow, Amit provided a very comprehensive look into the industry's major stages. 
 

Yesterday 

Voice was considered a service, Data Pipes were a service 

Bandwidth was precious - almost a luxury. 

Connections were "circuit" based. Erlang's Theorm was used for predictions. 

Networks were designed specifically for different consumers and geographies.

• AIN (Advanced Intelligent Network) is here, and it has introduced a logical separation between H/W and S/W in networking. 
• This allows new features to be introduced into Telecom by making new software. Example, Caller Id, 3 way calling etc.
• De-regulation of telecom has brought new services such as DSL to the market much more faster than it would have come. (E.g. TI had a technology for 2MB data pipe over copper wires for many years, but never came to market)
• Telecom companies are hesitant to sacrifice 'cash cows' of their business. E.G. Long distance calls typically cost only 1/2 cent a minute. T1 lines are still a cash cow even after dropping prices. 
• Multi-service backbone is a reality today, i.e. ability to carry voice, data, and video over a common channel.

 
Some tips for near term hot markets

Indians are being sought after for start-ups, and 

the market is ripe. 

You only live once - the process can be intoxicating, and finally 

do remember that you only die once.

1.When do you see a Internet dial tone happening  

Look for IP telephony in companies first. About 2-3 yrs before all phones are connected to internet. 

2.Could you elaborate on demarcation of the network  

Typically in a company, the company is used to owning the network infrastructure. Out sourcing of this    service is available now. Infrastructure companies such as Exodus are coming up, so companies may end up not owing their networks.