Ask the experts: how to break into alternative retail.

At the Emerging Channels conference, we filled a notebook with advice about bringing software into new retail channels. Some nuggets:

* On the demographics of the grocery channel: "Most of the growth in home computing is occurring among middle-income families with younger teenage children. Ninety to 95% of the customers who walk into a grocery store are women--that's who we're homing in on, too. And women are getting more and more involved in making decisions about computer software. Women spend as much time online now as men--an average of 3.6 hours vs. 3.9 for men. That's gone up dramatically over the last six months. They're more likely than men to conduct personal business online and receive electronic mail." (Chuck Whitaker, Major Connections)

* On the size of the bookstore channel: "The book market is a big, untapped market. There are a lot of consumers walking into those stores with the right demographics--maybe not for productivity software, but certainly for information and reference software, and for multimedia. At some Chapters stores, software does more business than the entire children's department. A typical Chapters superstore will soon be doing the same software volume that a Babbages or Software Etc. used to do in a mall, and some already do that well today." (Dennis Zook, Z Group)

* On the absence of "confrontational" relationships: "You go into an alternate channel and the retailers are willing to work with you. They don't gouge you the way traditional software retailers do. A buyer at Menards said to us: 'You want an endcap? It's not going to cost you anything. All you need to do is give me a sign that's 48" wide and 18" high. And we'll give it to you for six months.' Get CompUSA to say that to you." (Bob Citelli, ImproveNet)

* On consumer pricing: "You have to look at price points for what a channel already sells. For instance, supermarkets sell a lot of items for maybe 30 to a dollar. We once priced a supermarket software product at $9.95, and that seemed to work out pretty well. But you have to look at pricing backwards as well. When you take out the supermarket's margin plus the distributor's margin--which is way bigger than we're used to in software--and the stocking rep's margin, a $9.95 SKU is going to deliver back to you somewhere around $3.50." (Richard Miles, Re:Launch)

* On mass-merchant sales techniques: "If you have to demo the product, you've lost the sale. The whole point is that you're supposed to presell the consumer, whether through advertising, word of mouth, or just by bombarding buyers with a message that the product is at the top of its niche. Right now, Toys R Us has PCX and M64 videogame stations--five or six televisions. But what you won't see in the main software aisles are any form of edutainment, entertainment, or educational software demonstrations. They're too hard to do." (Jesse Allread, DX3 Consulting)

* On bookstore sales techniques: "In the bookstore environment, where people buy by browsing, having some sort of demo is important. With Chapters, I think one of the key ingredients is that we've created six interactive demo stations, which show 100 to 150 products. The customer can sit down at a desk that's very much like in their home, with a computer, a keyboard, and a mouse. They actually get to see the program, see the graphics and content, and get the feel of using it. But there's no switching of live product in and out of the computer." (Dennis Zook, Z Group)

* On sales techniques in enthusiast channels: "In an enthusiast channel like camera stores, the important players ordinarily aren't big chains. They're more likely to be local stores like Bob's Photo Emporium, where the sales people typically are enthusiasts themselves. The sales people understand what they're talking about, they're commissioned, and they know how to add onto the sale. When they start selling things like digital cameras and high-end video, they're actually used to explaining and demoing. Moreover, hardware drives enough revenue in these channels to make software demoing worthwhile. If a consumer is going to spend $600 on a nice digital camera, another $100 for software doesn't look so bad." (Richard Miles, Re:Launch)

* On shelf life: "It's typical for bookstores to keep a book on the shelf for a long time--maybe forever. Even if a title doesn't take off in the first 90 days, book dealers know it may get reviewed or win an award six months later, and then it takes off. To make this possible, book publishers extend net-90 day payment terms. The stores would like to have software on their shelves long enough for people to get to know it, but their payment terms are often too short." (Dennis Zook, Z Group)

* On risk avoidance: "The successful niche retailers--the Toys R Us, the Barnes & Noble, etc.--don't take chances on stocking every single product that's out there. They realize they can't promote 16,000 SKUs, so they look at sales numbers and in-store demographics, and they work with distribution to develop the best possible selling software and promotions to wrap around it." (Jesse Allread, DX3 Consulting)

* On creating channel-specific products: "At Books That Work, we were involved in a test at Lowes with our plumbing product, and it sold very well. But then Ingram added it to a product mix that included Myst and Windows 95. Just as people don't go into CompUSA for ways to fix their toilets, they don't go into Lowes for printer drivers. Ingram's product mix failed and we lost the account." (Bob Citelli, ImproveNet)

* On the importance of reliable shipping dates: "Book lines come out at specific times of years, the buyers are used to buying at these times, and usually they're buying books four months out with an exact date when that book is going to come out. They build their open-to-buy and their marketing budgets four months out, based on what's coming. Software has always been a problem for bookstore buyers because they never know when it's coming out, and they never hear about it until a week before it ships." (Dennis Zook, Z Group)

* On persistence: "The trick is having a strategy that includes failure. The Wright Brothers didn't fly the first plane they built. There were a lot of crashes, a lot of trials that didn't get off the ground. The key issue in new channels may be packaging, it may be distribution, it may be timing. You could do almost everything right and still miss the opportunity by six months." (Richard Miles, Re:Launch)

Jesse Allread, president, DX3 Consulting, 1430 Bidwell Ave., Chico, Calif. 95926; 916/891-0557. E-mail: [e-mail]. Robert Citelli, vice president of marketing, ImproveNet, 125 University Ave., Palo Alto, Calif. 94301; 650/322-1197. E-mail: [e-mail]. Richard Miles, president, Re:Launch, 600 Bancroft Way, Berkeley, Calif. 94710; 510/649-2920. E-mail: [e-mail]. Chuck Whitaker, director of purchasing, Major Connections, 11419 Mathis, Dallas, Tex. 75234; 972/401-4780. E-mail: [e-mail]. Dennis Zook, principal, Z Group, 90 Ronson Dr., Etobicoke, Ontario M9W 1C1; 416/243-3138.