@LARGE
They're Net guys now

By Scott Kirsner
Globe Staff, 7/10/2000

The Juice Guys are spending the summer starting up a new business on Nantucket.

Twelve summers ago, Tom Scott and Tom First launched a beverage company called Nantucket Nectars on the island. Their quirky bottle caps and homespun radio ads made that company a New England legend.

This summer, they're working on the foundations of a business-to-business Internet start-up called Shelflink. Tom and Tom have dialed down their day-to-day involvement in Nantucket Nectars (now headquartered in Cambridge), becoming co-chairmen of that company and promoting CFO Mark Hellendrung to president, and they're devoting the bulk of their energy to the new start-up (also headquartered in Cambridge, just down Dunster Street from the first).

The two Toms, who met as freshmen at Brown University, are now co-CEOs of Shelflink. They've rounded up $8 million in financing from a syndicate of three venture capital firms, including Highland Capital in Boston. Their aim is to simplify communication between small mom-and-pop convenience stores (just like the ones that initially stocked Nantucket Nectars), the distributors who stock their shelves, and the suppliers who make the products they carry. One of the stores involved in their pilot program, which began on Nantucket last month, is Sconset Market - which was also the very first store to carry Nantucket Nectars.

Which begs the question: Can the Juice Guys do it again?

First and Scott understand the dynamics - and the economics - of the relationship between suppliers, distributors, and retailers. When they began bottling juices, they acted as their own distributor, and eventually expanded their territory until it included Boston, the Cape and Islands, and Washington, D.C.

''The level of communication between suppliers, distributors, and retailers is so low,'' says First. ''For a year or two now, we've been thinking about ways to make the communication easier and take costs out of the supply chain without disintermediating anyone.'' (The Juice Guys' distributorships nearly bankrupted the company before they sold them off in 1994. The company has been profitable since then, with sales growth better than 30 percent a year.)

Shelflink will put Net-connected PCs inside independently owned convenience stores, allowing the stores' managers to place orders and schedule deliveries online. As they're ordering, they can get information about suppliers' promotions (and the lucrative placement fees they generate).

By aggregating orders for the distributors, Shelflink will ideally reduce the workload of the distributors' salespeople, who spend most of their time arranging and driving around to appointments with retailers to take orders and introduce new products. And before long, the system will be able to spit out data - extremely valuable for suppliers - about what sells and what doesn't.

First and Scott aren't yet sure where exactly the revenue will come from - whether it will be distributors paying them for streamlining their sales process, or retailers paying for the convenience of easier and more accurate inventory management, or suppliers paying for the sales data. But the Juice Guys (should we call them the Net Guys now?) know how to be flexible.

''I guarantee you that the strategy we have today won't be the right one,'' says Scott. ''Nothing's perfect from the outset. We will hang in. We know we'll have to make a lot of lefts and rights along the way.''

Shelflink faces a number of obstacles and hazards. But First and Scott, having been in the retail environment for a dozen years, may be able to understand and navigate them better than the archetypal (and doomed) greenhorn Net CEO.

To begin with, there's the issue of getting PCs and Internet access into businesses that, for the most part, don't already have them. First and Scott say they'll work with partners to supply the hardware and connectivity. Then, they've got to convince store owners and managers to change the way they order products (and only a fraction of their products, since Shelflink won't be able to offer a majority of the items a store stocks, at least early on). And, then, they have to train them to use the system.

There's a good amount of work to be done on the distributor side, too. As orders come in from retailers, distributors don't want to have to re-key them into their own order-processing systems, so Shelflink will have to write the software that will link its own system to those of its customers - which can get complex and pricey.

Time isn't on their side, either. First and Scott were able to build Nantucket Nectars methodically - almost leisurely - because their early investors were patient money. This time around, the clock is ticking. Though First and Scott funded some of the earliest Shelflink start-up costs out of their own pockets, the big money is coming from venture capitalists, who'll be looking to cash out within five years or so. In contrast, Nantucket Nectars remains a privately held company after 12 years.

Venture capitalists ''are in the business of doing some kind of flip, whether it's a sale or an IPO, and that will be new territory for us,'' First acknowledges. ''That's a different kind of challenge.''

Especially if the venture capitalists' time frame for a liquidity event isn't in synch with Shelflink's customers' time frame for adopting the system. First and Scott admit that the adoption rate will likely be slow. ''We can't just walk in the door and change the world,'' says First. ''We have to pace it. The hard part is getting people to understand what [Shelflink] is about, and not disrupting the way they do business every day, because they've got a job to do.''

As Shelflink brings on more employees - it currently has 11 - First says about half will have retail industry backgrounds, so that they can understand the concerns of retailers, distributors, and suppliers and help bring them up to speed with the Net. This fall, they'll be bringing Shelflink to retailers in the Boston area, working first with a number of Polar Beverages' retail accounts.

First and Scott are well aware that the conventional wisdom says all the good Internet ideas have already been taken, that the business-to-business wave has already crested, and that breaking into the black must be Job One.

If anything, they're energized by the Internet economy's newfound focus on profits.

''Coming from outside the dot-com world, we're used to proving that we're a viable business,'' says Scott, who sits on the board of Waltham's Send.com and has invested in a handful of other Internet start-ups. With Nantucket Nectars, ''we had to meet with our bank every month and show them inventory and receivables and the bottom line. I wouldn't want to build a business any other way.

''This concept, in some form, will succeed,'' Scott continues. ''Convenience stores will order online, and those orders will be sent to distributors in digital form. The question is, `Can we be the people to make it happen?' We want to succeed at this business. We like the challenge of trying to do it again.''

Scott Kirsner is a contributing writer at Wired and Fast Company magazines.