US retailer buys Genie software

By ADAM GIFFORD

Auckland software house Genie Systems has sold its OrderWare electronic procurement system to a division of giant US retailer Toys 'R' Us.

It is a big step towards widespread recognition in the tough United States market. Toys 'R' Us ranks at No 148 on the Fortune 500, with annual turnover of $US11 billion ($24.4 billion) from 1557 stores.

"We always believed we had a world-class product and this substantiates it," said Genie chief executive Mike Hendry, who moved to San Francisco in June to support the company's expanding operations.

OrderWare has been bought by the Babies 'R' Us subsidiary, which accounts for about 10 per cent of Toys 'R' Us revenue and is embarking on an expansion drive.

Mr Hendry said the company wanted to take many larger items, such as baby furniture and outdoor equipment, out of the retail stores and keep them at distribution centres or with the suppliers.

"Customers will come in, select the products they want from a catalogue - 'I want a rocking chair with tartan fabric' - and that will be dispatched direct from the supplier to the retail store."

Toys 'R' Us has a highly developed, strict retail format. "If they build a 60,000 square foot store, they've got to have a catchment of four million people within 10 miles to support that.

"If they want to service smaller markets, they have to reduce the floor plan without impacting on the profitability of those stores."

By using OrderWare, a web-based procurement system, staff at the 136 Babies 'R' Us stores will transmit the order for non-stock items to 15 distribution centres and 50 suppliers across North America.

Toys 'R' Us wants the application running in 10 west coast stores by October, when the company puts a Christmas freeze on new applications. Other stores will have the application early in the new year.

Mr Hendry said the extensive customisation needed was being done in Auckland, and would be incorporated into the core product, which was mainly built around business-to-business procurement.

"This is a huge market segment. This type of retailing - a showroom format as opposed to a retail outlet - is common in the US in household goods, appliances and large retail goods as companies try to minimise the inventory held at retail level."

Babies 'R' Us found OrderWare through the internet.

"The client looked for a year for a suitable solution, and was about to start an in-house development. Then the MIS [management information systems] director found us on the web," said Mr Hendry.

"I noticed he was running the demonstration, fired off an e-mail saying 'Can we help?' and they fired back 'Yes, can you do these things?' I said yes."

Mr Hendry said the price and other conditions were confidential, but Genie Systems would be paid according to the number of transactions going through the system.

"In the web world it doesn't make sense to charge any other way. The concept of a user is erroneous. You need to anchor it on something real, and transactions are real."

Mr Hendry said because OrderWare was written in Java in an object-oriented architecture, which meant bits of code could be reused, it could be installed or modified more quickly than applications written with older programming languages.

Genie Systems opened a Sydney office yesterday.