Natural Foods Merchandiser

Competition Heats up for Hand-Held Order Scanners

Nettie Clark runs a vitamin shop all by herself. Until recently, she spent 15 hours a week ordering; now with some new gee-whiz technology, it takes mere minutes. "I felt like my brain was fried," says the proprietor of Vitamin Plus in Castle Rock, Colo. "I did everything by hand."

Clark isn't alone. Most natural foods retailers are technology averse, vendors and industry executives say. They use old-fashioned registers and wander the aisles of their stores with paper order forms dropping at their feet. A cadre of young companies wants to change all that with new, easy-to-use order-processing systems designed specifically for natural foods retailers.

About 18 months ago, Clark was approached by Aurora, Colo.-based NutriNet Systems, which offers a package called NutraBUY. It consists of a hand-held scanner and a PC.

Here's how it works: The retailer walks through the store and scans in the bar codes of any products needing to be reordered. The palm-top device logs the orders for later download to the PC. There, the retailer can finalize the order on-screen and then send it to NutraBUY via modem.

On the back end, NutriNet sorts the order by distributor or manufacturer and forwards the orders electronically. NutriNet also offers a completely Web-based system for retailers who have high-speed Internet connections.

"It saves my brain and makes it possible to run the store by myself," Clark says.

NutriNet Chief Executive Officer Dilip Chopra says his company offers a large database of products—some 30,000 SKUs and 540 manufacturers are represented in his computerized catalog. About 50 retailers are currently using the system, which was introduced in 2000.

"The deployment is not as fast as we would like it to be," Chopra says, citing marketing problems. But the issue is probably simpler: NutraBUY has stiff competition, and its cost, $199 per month, is nearly double that of competitors.

OrderDog Inc., of Lewisville, Texas, jumped into the market last year and has already signed up 200 stores for its order-management system. For $99 per month, OrderDog provides a free computer and one year of Internet service. The system hooks into existing hand scanners, such as those made by Telxon Corp., which was acquired by Symbol Technologies in 2000.

"We get the least resistance from retailers by using technology they're already familiar with," says OrderDog CEO Richard MacKillop. "We've tried to create an advanced level of technology with a simple interface."

Once OrderDog receives an order from the retailer, either via modem or the Web, it automatically checks for manufacturer specials and can save retailers up to 11 percent through promotions they weren't aware of, MacKillop says. Like NutraBUY, the OrderDog system enables retailers to finalize their order via a Web page before sending it on to distributors.

Joe Withey, owner of Withey's Health Foods in Kalispell, Mont., was a little apprehensive about OrderDog when he first tried it, because he's not the technical kind. The nerves were short-lived. "It's a piece of cake. The beauty of it is that I don't need to carry around order guides, and I'm saving eight hours a week, if not more," Withey says.

OrderDog makes the majority of its money from distributors and manufacturers. The company charges vendors a transaction fee of 2 percent per order. That's a good deal, says MacKillop, because OrderDog requests are accurate and sent electronically, minimizing returns and sales rep time. In July, the company inked an exclusive licensing deal with distributor Tree of Life Inc.

Living Naturally of Venice, Fla., also has jumped into the fray with its own ordering system called Scan Genius. Its twist on the theme is a hand-held scanner that recalls past orders and even makes suggestions based on usage algorithms. It also has a bar code label maker attached. The cost: $50 per month.

Living Naturally CEO Glenn Field says the brainier scanner will be the key to his company's success. "The problem with the [Telxon scanners] is that they are completely blind and the scanner is slow."

The company currently has 200 retailers on board and distributor relationships with United Natural Foods Inc.; Brea, Calif., wholesaler Nature's Best; and Nutri-Books, among others.

Last but not late to the party is 2BNatural Corp. of Redmond, Wash., which offers an order management package for free—including the scanner and a PC with a flat panel display. The company makes its profit from manufacturers and distributors. "We aggregate the buying power of all our customers," says 2BNatural President Dean South.

NutriNet's Chopra says the deals his competitors are striking with vendors are bad for retailers because distributors have an incentive to limit product choices to their own brands. "We're not in bed with anyone. We want to show every product out there to the retailers," he says.

MacKillop takes umbrage at the assertion, but admits some distributors like to play hardball. OrderDog recently backed off from a deal with UNFI because the company wanted too much control over information, he says.

Randy Barrett is president of The Business Writers Group (

and is a soulful bluegrass singer from Falls Church, Va.

Natural Foods Merchandiser volume XXIII/number 10/p. 34

POS and Order Management Meet in Middle

Fancy point-of-sale systems are rotten at ordering. Ordering systems are weak at inventory management. What's a merchant to do?

Nothing. Just wait a few months and the problem will be largely taken care of, say industry insiders. Both POS and order management vendors are working to integrate their hardware and software. ECR Software Corp. is collaborating with OrderDog Inc. Living Naturally is integrating with three companies, CAM Commerce Solutions Inc., Argus Systems Group Inc. and Dun & Dun. 2BNatural Corp. is also working on POS compatibility.

The real problem is getting natural foods retailers to buy a POS system—which typically combines cash register, credit card processing and inventory management functions—in the first place. Their resistance is an ongoing challenge for Mark Kolenic, a regional sales representative for CAM.

"A lot of [natural foods retailers] are hobbyists, and they're not so focused on profits," Kolenic says. "Sometimes you find people from an age group that doesn't like computers."

Or they're from that select club that doesn't like to spend boatloads of money. POS systems can run between $6,000 and $125,000 per store.

Joe Withey, owner of Withey's Health Foods in Kalispell, Mont., runs a tape on his register and does all his bookkeeping and inventory tracking the old-fashioned way. He loves his OrderDog system, but he has no interest in a POS installation: "It's very cumbersome."

The primary problem is maintenance of the enormous product database at the heart of any POS platform. To work correctly, the system must have up-to-date costing information for every product in the store. That can mean tracking and updating thousands of SKUs.

"The No. 1 thing a store [with a POS system] is looking for is someone to do the database for them," says Dean South, president of 2BNatural.

Order management systems are strong on placement of purchase orders, but they don't generally track how much is being sold out of inventory. A POS unit does this automatically at the register and offers limited order creation. It's then up to the retailer to place an order—often by fax—once the system sends up a flag that a minimum shelf count has been reached.

Everyone recognizes the two technologies need to meet in the middle.

"We have an ordering system but [order management vendors] can do things we can't do," says Otis Flieth, vice president of sales for ECR Software Corp. ECR just put in its first installation with an interface to NutraBUY's ordering system, at no extra charge.

Natural Foods Merchandiser volume XXIII/number 10/p. 34, 38

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