S726 Case
Nine Lives Clothing Store: A World Wide Web Case

Michael G. DeGroote School of Business
McMaster University

Note: This case was prepared by Bob O'Keefe, School of Management, Rensselaer Polytechnic Institute, October 1994. Please use this teaching case as appropriate. Bob O'Keefe and Rensselaer Polytechnic Institute accept no responsibility for the accuracy of the information contained herein, or its continued accessibility as a Web page.

A Case Update: An update to this case, showing the state of the business and Web server as of May 1995, is available. This may be most useful after case discussion.

Introduction

In February 1993, Mary Jane (MJ) Nesbitt gave up a legal career to start her own business. The result is Nine Lives, the sort of small shop that many dream of running.

Nine Lives is a pre-owned clothing consignment store in Los Gatos, California. Not only can customers buy pre-owned clothing, but they can get Nine Lives to sell their unwanted clothes. What makes Nine Lives different from other consignment stores is that it deals with very high quality clothing from name designers -- Anne Klein, Liz Claiborne , Donna Karan, Eddie Bauer, for instance. It's a place to find a better price on expensive clothing. Best sellers include jackets, blouses and sweaters.

If you want to sell through Nine Lives, MJ will accept newly cleaned clothes that look good as new. The sale price will be approximately one third of the original price, and Nine Lives split the proceeds 50:50. However, if the garment is not sold after 90 days, you have to take it back.

The present store is small, occupying about 1,000 square feet, and there is no room for expansion. Inventory runs at about 800 to 900 items, with a cost of about $22,000.

The Nine Lives Web Server

MJ's husband, David Butcher, is a computer instructor who acts as accountant, handyman and computer programmer for the business. The idea of a World Wide Web server was his.

The Nine Lives Web server runs on a Unix-based 386 PC with 16 MB of memory and a 14,400 baud modem. It employs a HTTP (Hyper Text Transfer Protocol) server. Every morning, the PC (which sits in MJ and David's home) phones the local Internet provider, makes contact, and then waits for Web users to access it. The server provides Web users with an introduction to the store, and allows interested shoppers to browse and query the current inventory. The inventory database shares the PC with the Web server.

Users can query inventory by generating a personal shopping profile. They complete a form specifying the size, price and types of clothes (skirt, dress, blouse, jack et, etc.) they're interested in. The form is dynamic, created following an inventory query -- only clothing types that appear at least ten times in inventory have a clothing type entry generated for the form. The store uses an ancient Radio Shack 4P computer to act as a terminal to the combined inventory/Web PC, with sales, stock intakes etc. entered at the store and data sent over the phone line.

The query generated by the Web user can be held as a personal shopping assistant. The assistant has a user generated password attached, and users can access the assistant and cancel or change it as desired. For each assistant, inventory is checked daily; the customer is e-mailed when the query produces a match.

When a Web user wants to buy something from Nine Lives, they still have to go to the store or phone up MJ. Financial transactions over the Internet is not something that Nine Lives presently wants to be concerned with -- the problems are too numerous.

Value of the Web Server

Although the Nine Lives Web server was primarily a learning experience, Nine Lives is now as much as virtual shop as it is a physical shop. Web access varies between about 10 to 20 per day, sometime exceeding walk ins. The personal shopping assistants "reduce the cost of monitoring inventory as it arrives to almost zero", according to David. Further, for a Web user, the effort involved in finding out if desired item is available may be easier than visiting the store -- the "traditional information cost for shopper is lowered". As of August 1994, 13 personal assistants had been created. Says David:

Nine Lives sales are up, and I believe that the WWW server is partly responsible. The publicity has been tremendous.

MJ and David feel that the Web server is part of providing a quality service. The Web server would be no more than an advertising mechanism without the computerized inventory system and its tight coupling with the server. Says MJ:

The level of service Nine Lives provides customers and consignors would not be possible if it were not for the complete computerization of the inventory, accounting and consignor account maintenance. The generation of over 100 reimbursement checks a month with graduated consignor splits and discount/sales tax calculation would not be possible in a one-(wo)man store without the computer. For these reasons I consider the computerization of the operations of Nine Lives to be absolutely critical.

David suggests that the "WWW server is simply leveraging this tremendous business resource", i.e. the inventory database. The WWW is an "incremental cost", since quality service, in any case, demands the computerization of the stores inventory and accounting information.

One thing that MJ and David are struggling with is how to advertise the existence of the Web server. There is no `yellow pages' of Web-based businesses, and Internet `netiquette' makes e-mailing of advertising or posting adverts to News Groups something that Web providers have to be cautious about.

The Web and Small Businesses

Very few businesses as tiny as Nine Lives make use of the Internet. But David makes an interesting comparison between a small business using the Internet and typesetting:

Most small businesses do not have the skills to do typesetting, so typesetting jobs are hired out. I expect many small businesses bought laser printers and high-end word processing software just to reduce typesetting costs and allow more freedom of expression in business correspondence, and to enable them to create advertising copy on demand. If it could be shown that Internet software was no more difficult to learn than desktop publishing software and that Internet advertising was as effective as purchased advertising in newspapers, then I believe many small businesses would invest in Web servers.

What small businesses do presently provide Web-based information and services tend to use virtual malls, such as Downtown Anywhere or the Internet Shopkeeper. The virtual mall charges the business for hosting its Web page, and may also be involved in the production and maintenance of the page. David suggests:

The option of "renting space" makes perfect sense when local skills and resources cannot be utilized. The drawback is loss of control and direct management of the information. In addition, real-time information access (to inventories, for example) is problematic.

The Future

Nine Lives wants to grow and become more profitable. The basic Web server programmed by David and the notion of personal shopping assistants has a place beyond the present setting:

There is an opportunity for the Nine Lives model to be used in a transactional setting. A virtual record store is considering licensing the personal assistant technology, allowing an assistant to watch for 'the next new CD from group X' for example. In this situation, since the product is familiar, a sale could be made over the Internet.

Nine Lives Clothing Store: A World Wide Web Case Update

Note: This update was prepared by Bob O'Keefe, School of Management, Rensselaer Polytechnic Institute, May 1995. Please use this teaching case as appropriate. Bob O'Keefe and Rensselaer Polytechnic Institute accept no responsibility for the accuracy of the information contained herein, or its continued accessibility as a Web page.

Nine Lives in May 1995

Server 'hits' to the Nine Lives Web server are now running at between 1500-2500 per day, with about 50 people 'shopping' through the server each day. At any time, about 30 personal shopping profiles are in place.

Sales are up from 15% from last year, and every month is higher than the same month last year. The store is making a profit.

David suggests that the Web server is part of a premium service, not a way of directly selling clothes:

We are within driving distance of over 1 million people, so making simple information (hours, location, product description) is worth the cost of the connection. The other services (inventory lookup, Personal Shopping Assistants) create premium services for on-line browsers. No sales through the net - the product must be examined before being bought.

David's Present Thoughts on Web-based Business

Says David:

The Nine Lives site is stable. "Hits" or "visitors" are relatively constant. The Internet presence has resulted in publicity, "personal shopping assistants" and enough visibility to allow me to start a new business based on putting small businesses on the Web.

However, I believe the situation is "stalled." I believe the cost/benefit ratio of the WWW has been balanced at the current technology level. My theory is that the WWW evolution is stalled due to three major issues:

• HTML 2.0 was easy enough to understand that almost anyone could create documents without needing special tools or training, and programs could easily create output that was acceptable.
• HTML 3.0 is more complex, results in more expensive displays (takes longer to create the HTML), requires specific tools (editors) to enable novices to take advantage of it, and takes more work to produce through the output of a program (as the Nine Lives inventory query would be expected to do).
• Initial displays did not require security or transaction capability. Most were simply informative.

Many planned WWW displays (that I am aware of) are on hold pending transaction capability and secure commerce. There are a number of proprietary solutions available, but no universal method exists to allow commerce.

• Web browsers were free and relatively similar in capabilities Technological advancement occurred in "waves" with most browsers meeting new standards in a group.

Web browsers vary tremendously. The market has diverged from multiple browser technologies all trying to meet the same standards to one where browser authors are intentionally trying to set de-facto standards or exceed standards. The result is confusion in the marketplace, and poorer quality presentations on the WWW due to browser-specific quirks.

For these reasons, I believe we are at a plateau of evolution on the WWW. I am holding the Nine Lives presence at the current level until some direction and momentum builds in each of the three areas. In the "old days" I would "just do it" because the investment was low in relationship to the returns, but now I have to face major design changes, financial commitments, and market segmentation in each of the three areas listed above. Risks and costs have increased considerably since the WWW first began exponential growth.

I am waiting for:

• HTML 3.0 standards and associated authoring tools that meet my needs.
• Electronic commerce technology that is STANDARD and available worldwide.
• Web Browser behavior that is standard at some measurable level.

Standards - that's what we need to move forward!