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Non-Tech : CDWI CD Warehouse -- Ignore unavailable to you. Want to Upgrade?

To: Ron Kline who wrote (113)	9/24/1998 4:50:00 PM
From: Robert Skinner	Read Replies (1) \| Respond to of 550

09/23/1998 By Jon Denton Daily Oklahoman Staff Writer CD Warehouse to Navigate Tangled Web for Commerce Even with all its flash and dazzle, amazon.com is losing money. The Web site sells tons of books over the Internet. It gets attention, but it may well be a couple of years away from a profit, says Jim Lee. Vice president of interactive marketing at CD Warehouse Inc., Lee believes he has found a way to imitate the best of amazon.com's success and ignore the rest. He calls the concept "brick, mortar and the Web." Oklahoma City-based CD Warehouse is willing to bet $1 million on the idea. The music reseller will use IBM's Net.Commerce Start as a merchant server -- that is, consumers will be able to search for products and use credit cards for purchases. The electronic commerce site will go online just before the Christmas season. Lee and CD Warehouse Chairman Jerry Grizzle share more than a corporate dream.While occupied with a growing company, they are each doctoral candidates at Oklahoma State University in Stillwater. Lee is preparing to write his doctoral dissertation. It focuses on e-commerce. For him, the outcome of the CD Warehouse Web works will become an academic as well as commercial point of study. Web site sales can make a profit, and there are a few examples to prove it, Lee says. Amazon.com is not among them. It cannot control its spending. Marketing costs are eating up capital. He points to Internet sales by LLBean (www.llbean.com) and Recreational Equipment Inc. (www.rei.com) as returning profits. They are among the better models for Web marketing. "Where your Web is your sole channel of distribution, it is difficult to make money. The more synergies you can combine, the better off you are," Lee said. He was encouraged when he researched the virtual site competition. "To my knowledge, there are no profitable music vendors on the Web," he said. "Where companies on the Web can profit is in addition to their channels of distribution." Instead of taking a top-down approach and signing a multimillion dollar contract with a search engine, he chooses to use the company's greatest strength: its franchise stores. But what Lee and Grizzle don't want is retail competition from the franchiser. Instead, CD Warehouse will send e-commerce customers to the nearest store with the inventory. The customer will order the music and pay for it online. The franchisee will get a sale. The parent company, in turn, will earn a royalty. Even so, there's always trouble in paradise. Lee finds the technical complexity of the venture daunting. The challenge is to build a reliable electronic link to 300 CD Warehouse stores.Eventually, the company will have a master database. "If you've only got five stores, you don't need IBM, but with our number, you need a bulletproof system. We interviewed a number of vendors, and IBM came out way on top," Lee said. "That was one of the criteria. We didn't want to be anybody's guinea pig. There's too much at stake in this to take a chance." The CD Warehouse vision goes beyond selling used and new music. Lee foresees a community of music lovers. They will have access to a chat rooms, bulletin boards, music reviews, concert tours and tickets, celebrity biographies, and album sound clips and reviews. (end)