Software: a hard sell no more? - Home Office Merchandising

Discount Store News, June 1, 1992 by Pete Hisey

Office superstores have carved out a large chunk of the computer market, but to date have not been able to convert that position into software sales, where the real money is in the computer business.

In part, that's because of the enormous complexity of dealing with thousands of skus, most with a short shelf-life. But a rapidly changing marketplace has also played a role.

"It's difficult to get a fix on," noted WORKplace executive vice president Jim Nakamura. "There's so much out there, and your inventory exposure in enormous."

WORKplace originally let Egghead run its software departments, but has slowly built up its software business over the past few years. Now, Nakamura said, the chain is ready to expand its selection.

"We went through a pretty steep learning curve," Nakamura said. "We made a lot of mistakes, and frankly, we didn't get much help from our vendors. But I think we've got a pretty good handle on the business now, and expect it to really take off."

Software accounts for about 5% of total sales at WORKplace, and should at least double in the near future. "We learned the hard way what can go wrong," Nakamura said.

What can go wrong is that the customer brings the software right back after purchase. The average shopper is comfortable with computers, but not truly computer literate. A small business owner, for instance, may decide to purchase a business management system rather than hire a bookkeeper. But since entrepreneurs are rarely accountants, many owners find their new software incomprehensible. So the software comes back.

Retailers and vendors are taking steps to mitigate this situation. BizMart has a data base called BizData that lets consumers look up their system and find out what software and peripherals to use with it. But Jim Berk, president of the chain, said that the company will be going even further this summer, with "a whole new look to the presentation of software at retail." The program will be "extremely customer-friendly."

"The biggest issue in the software is getting the customer to understand what you have to sell," Berk said. "Some of the manufacturers' packaging is very attractive, but it's not necessarily consumer-friendly." Packaging may provide information, he said but it's not always presented in a way customers can use.

Vendors have been looking at that problem. Most users are familiar with their computers in only the most casual sense, and need a great deal of confidence simply to make a purchase. And they must be able to use the program once they get it installed.

According to Ridgely Evers, group product manager for Intuit, a publisher of business management software, "Accounting software has the highest level of dissatisfaction in the category. Nearly half of it never gets installed, according to our research. And that reflects on manufacturer and retailer alike."

Mass retailers are advised to stick with easy-to-use core applications, like word processing, accounting and desktop publishing when they first get into the software business, then add more specialized, advanced applications. "If there's nothing easy to use in a category, you're probably better off skipping it," he said.

In software sales, particularly through business-oriented outlets like office superstores and wholesale clubs, the real action is in small entrepreneur-based businesses, he said, and what they need are programs that will make them more productive was their companies grow. "Price is not really the issue, but ease of use," Evers said. Intuit programs like Quicken and QuickBooks "cut out the mumbo-jumbo" associated with accounting.

Management Information Software has also taken a plain English approach to its business management software Manage 2.0, which requires the nonaccountant user to simply update billing, payments, and deposit slips. The program adjusts the books off-screen in real time, taking most of the work out of bookkeeping. According to director of communications Mark Short, the company offered a significant rebate to anyone who purchased Manage and sent back other software. "We've got a room full of $500 software that our customers couldn't figure out how to use," Short said.

Kevin O'Leary, president of publisher and distributor Software, also feels productivity software is the key to growth, but with a different twist. "The trend is toward software that performs a specific function," he said. "That keeps the cost down, and gives users what they need now, not a lot of stuff they might never need. And, it keeps them up-to-date."

"This is a heavy impulse market, and the mass market is going to own it in the next few years," O'Leary said. "Traffic is the key to sales; software is turning into a commodity, and brand management, like in cereal or soap, will be very important. If you have the titles, the prices and the traffic, you can be successful."

As a distributor of sorts, Softkey will "take the risk out" for mass marketers by supplying fixtures, churning merchandise, and taking back anything that doesn't sell. Key to the company's approach is establishing a brand presence; it cuts the cost per title by spreading around the promotion costs.