SMART AGENTS DO THE SHOPPING; SOPHISTICATED TOOLS WENDING THE WEB IN SEARCH OF BARGAINS

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At first glance, it would be easy to underestimate the marketing revolution represented by the new BargainFinder site on the World Wide Web.

The immediate capabilities offered (http://smartstore.ac.com/smartstore) certainly appear quite modest: Type in the name of a musical artist and the CD in which you are interested, click the on-screen button, and BargainFinder hustles off to the Internet sites of eight different CD merchants. It scans their offerings and, in a minute or two, reports back the various prices and availabilities of the desired CD.

The site, designed as a demonstration by Andersen Consulting, Chicago, is a slick application, but scarcely earth-shaking -until you examine the implications of the smart agent technology of which it is a very early example.

"Smart agents will cause huge changes in the ways in which buyers and sellers meet and engage in transactions," predicted Gilad Zlotkin, research fellow at MIT's Sloan School of Management and co-author with Jeffrey S. Rosenschein of "Rules of Negotiation: Developing Conventions for Automated Negotiation Among Computers" (MIT Press), a book that examines some of the potential applications of smart agent capabilities.

The technology, Mr. Zlotkin said, can make it possible for buyers to examine thousands of offerings from potential sellers in the blink of an eye and will result in "the development of a kind of marketplace that has never been encountered before."

Added Samuel May, senior analyst for Yankee Group, Boston, "Agents make possible a much more sophisticated matching of supply and demand, and marketers need to be aware of the way in which this technology can change the way the market is configured."

Imagine, for example, the impact of an agent that can be instructed to query all car dealers in an area for best offers on a spe-cific model. How about software agents that replace human travel agents by finding the best deals on airline tickets? Or how about scanning local grocery-store databases to find the lowest prices for products on a shopper's list?

Such have been the dreams of the purveyors of electronic shopping. But until now, actual applications have been few.

Search engines like the Web's Lycos (http://www.lycos.com) and InfoSeek (http://www.info-seek.com) function as rudimentary smart agents, translating a user's information request to a listing of appropriate Web sites. And several news sources, including The Washington Post's Digital Ink on AT&T Interchange and the San Jose Mercury News' Mercury Center on the Web (http://www.sjmercury.com), let users set up a program that automatically downloads information of interest to them.

Next on the docket, it seems, are smart agent programs designed for marketing.

AT&T, for example, plans to incorporate into its PersonaLink online service intelligent shopping assistants that will help users browse, select and purchase products from merchants on the service's Market Square plaza.

At Andersen Consulting, executives already are thinking about expanding the study to categories beyond the initial CDs.

"We picked CDs as our first effort because they are very standardized products, they involve a very simple buying process and there are plenty of sources [for CDs] on the 'net," said Steven J. Johnson, Andersen managing partner of consumer products. "Other possibilities include computer soft- ware, travel and consumer electronics products."

While BargainFinder points up exciting possibilities, it also illustrates major challenges to developing smart agents.

"BargainFinder is a really provocative demonstration . . . but it is just a research project. It is held together with chewing gum and toothpicks," said Matt Kursh, CEO of Santa Monica, Calif.-based eShop, which develops software enabling merchants to create and operate online storefronts and which is working with AT&T on its PersonaLink service.

The problem, said Mr. Kursh, is that "the [online] CD stores are not built for BargainFinder to come in, and its creators have had to reverse engineer a way to do that. This makes it somewhat fragile, and if somebody makes changes in their CD store on the Web, then BargainFinder will probably have problems."

Within days after BargainFinder was launched, some online retailers took steps to make it more difficult for the software to access their databases. Some retailers changed their thinking and agreed to cooperate with Andersen; others, however, continue to resist.

"An important part of what we wanted to learn in the experiment was to find out not only how customers but also how retailers would react to agents," said Bruce Krulwich, BargainFinder's creator.

Mr. Kursh predicts that "sell-side" agent technology may work better than "buy-side" technology, and expects to see electronic shopping services based on eShop software-and that incorporate sell-side agents-in full operation this fall. "Sell-side agents will help you find the best products for you," Mr. Kursh said. "They will give you coupons as you shop, make suggestions and do the same kinds of things that a good [human] salesperson at a store would do."

His company is field-testing electronic shopping services with such retailers as Tower Records, The Good Guys, 800-FLOWERS and Spiegel.

Perhaps most intriguing is the potential impact of applying the technology to the grocery industry, a notion that raises the prospect of a fundamental restructuring of that part of the retail sector.

"Walking a grocery store like you were picking merchandise in a warehouse is a waste of people's time, and it forces retailers to maintain a lot of space," said Mr. Johnson of Andersen Consulting. Smart agents combined with online ordering are poised to reshape this approach.

Smart agents also can be seen as part of a more general phenomenon.

According to the Yankee Group's Mr. May, "This is part of a very large trend to cut out middlemen and to more closely link consumers directly with suppliers. The intense global competition is pushing us inexorably toward efforts to reduce inventory stocks in a broad range of products and drive out unnecessary cost."

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