GOODWIN'S AIMS FOR "VIRTUAL" BACK OFFICE

KIM ANN ZIMMERMANN

CRESTLINE, Calif. -- Goodwin's and Sons Inc. based here is migrating to an Internet-based service for its information technology functions, enabling the retailer to store and retrieve all of its data via the Web.

The Internet-based service would function as a "virtual" back office, eventually eliminating the need for computer servers at the store, with the potential to cut IT costs about 25% by reducing hardware, software and staff.

In addition, using the Internet as the retailer's IT infrastructure would enable the retailer to make selective data available to suppliers, consultants and others outside the company.

"This is going to be a key to surviving for smaller independents," said David Goodwin, president and chief executive officer for the retailer, which operates four stores. "There are only about five major chains left now. For independents to compete, we've got to do things a little better, a little faster."

The retailer has been using the Internet-based service for about 9 months to upload point-of-sale transaction data. Transaction information goes directly from the point-of-sale terminals to the Internet and is also stored on in-store servers. The service will also be capable of capturing the retailer's inventory and labor data.

"The beta site is almost bug free and we're happy so far," Goodwin said.

Goodwin said that eventually the in-store servers will be eliminated, possibly this spring.

"It will save us money in long run. We won't have to maintain the computers. We won't have to add memory. We won't have to buy a new server when one crashes," he said.

He also noted that data stored on the Internet is updated more quickly than it is at the store level. "Our server is updated every seven minutes. The Web is immediate."

The retailer is also looking to use the service for data beyond POS transactions as applications become available.

The service is an alliance between eRetail Services, Riverside, Calif, and Hewlett-Packard, Palo Alto, Calif., and EDS, Plano, Texas.

Initially, eRetail Services will target the grocery retail segment and should be in full production within one year, according to a source familiar with the situation. The service is building a community of service providers to handle the transaction business of the retailers on the service. Service providers could eventually compete for the business of the participating retailers.

Approximately 40% of a store's IT needs can eventually be replaced with with this Internet-based service, according to the source. For the typical supermarket operating on a 1% net margin, that amounts to an 42% annual increase in net profits, the source noted.

"As I understand, they are looking to form alliances with with payroll processors, for example, who would handle all of that data and functions for us," Goodwin said.

He noted that the Web-based service could ultimately make consulting services more readily available to the small and mid-size retailer.

"Say I want to figure out why my meat sales have dropped. I could make my historical sales data available to a consultant who, theoretically, could provide me with some analysis to improve my sales. This is not something that is generally available to retailers other than the big guys."