The e-retailer heads into the holiday shopping season behind a 30% increase in fulfillment spending and a widening net loss. North American sales increased ...
Some retailers are dumping paper to conduct store planning via the web.
The more stores a retailer operates, the more opportunity for increased sales, broader product lines, widespread market testing, insurance against regional downturns-and mistakes in store merchandising that can undermine all of the above. Despite the best merchandising and marketing strategies devised by executives, results depend on translating plans from headquarters into action at each store.
And that’s easier said than done.
“Retailers are wonderful planners, but what separates the men from the boys in retail is execution,” says Paula Rosenblum, research director in the retail practice at research and analysis firm AMR Research Inc. “And execution happens at the most granular level in the store. I’d rather see a grade B planner who executes at a grade A, than a grade A planner who executes at a grade B.”
A direct line
Among the biggest challenges facing retailers since they began spreading out into chains a century ago is transferring the big ideas from those at headquarters who dream them up to the people who carry them out at each store. Little had actually changed over those 100 years-until now. The ubiquity of the Internet today is smoothing the flow of plans and ideas for some retailers who are pioneering web-based planograms. One of those pioneers is The Home Depot Inc. “Using the Internet helps with everything, because it’s a direct line into our stores,” says Shannon Roh, a director in Home Depot’s store merchandising operations.
Getting mounds of paper documents to each store is a huge chore in itself, especially when senior executives expect each store, regardless of how far-flung, to receive and carry out marching orders at the same time. A merchandising gurus’ best plans for product assortments, displays, pricing and promotions can wind up in the liquidation bin of ideas if store personnel don’t receive their instructions on time-or fail to carry them out correctly and in a timely manner. In retailing, lost time in executing store plans amounts to lost sales and lost revenue, with the risk of lost customers as well.
Retail’s heavy reliance on a frontline workforce that turns over rapidly each year adds to the challenge of getting stores to comply with instructions from headquarters. In addition, the ongoing struggle to meet sales quotas and adhere to seasonal demands and promotions frazzles many employees. Any improved communication from headquarters can provide a more organized and pleasant shopping experience for customers and a more rewarding environment for employees and managers. “Retail often comes down to an interaction between a high school student employee and a harried housewife,” Rosenblum says. “Anything that helps with that situation helps the retailer.”
$2 million in one year
And so a few retailers are adopting web-based planograms. “It’s an early-stage business,” notes Srikant Vasan, president and CEO of StorePerform Technologies Inc. But an indication of its potential comes from Sears, Roebuck and Co.’s announcement last month that it is deploying StorePerform technology to all 870 stores, after piloting it for a year. In addition, StorePerform has received $10 million in venture capital funding. The company has been marginally profitable, Vasan says, but sought outside funding to accelerate development.
In addition to Sears and Home Depot, which uses the web-based Task Management application from Reflexis Systems Inc., such national chains as diverse as Dunkin’ Donuts Inc. and Staples Inc. are adopting web-based store planning. And StorePerform claims four of the top 10 retailers, although it won’t name names beyond Sears, as customers. Retailers who have adopted the technology say that not only are in-store merchandising plans acted on more accurately and quickly, but related costs are down, employee morale is up and headquarters now has a way to more easily verify that orders were carried out by all stores.
Dunkin’ Donuts, a unit of U.K.-based Allied Domecq PLC, reports saving $2 million in the first year of operating the web-based Task Management store planogram system for about 9,000 locations, notes Raju Sharma, director of marketing for Reflexis. The savings come in the elimination of paper-based forms, the time it takes to fill out and send these forms and the reduction of data-entry errors. “Now if there’s a new coffee flavor added to the menu, it can all be done instantly online, without having to print out thousands of forms,” Sharma says.
Likewise, office products retailer Staples expects to save millions of dollars a year by using Reflexis’s Task Management system as a means of improving communications with stores, Sharma says. Once a new merchandising program is launched, store managers across the country are able to view program details, while corporate managers and field supervisors can check the same system at any time to monitor program status in each store.
In the past, the production of cumbersome paper reports-difficult and costly to modify and re-send once they were printed and on the way to stores through courier services-hampered efforts to coordinate tasks for stores. These reports would be followed by additional instructions via a mixture of phone, fax and e-mail communications. “Store managers would have to check how the latest instructions fit in with earlier instructions, but the messages were disorganized in different means of communication,” Sharma says.
Moreover, relying on phone, fax and e-mail made it more difficult for headquarters to distribute promotional materials as well as instructions on a one-to-many system that would enable headquarters to simultaneously and economically distribute materials to hundreds or thousands of stores. “There really was nothing that did this,” Rosenblum says. “You could’ve made a stretch and put this into Microsoft Project Central, but that’s only a one-to-one distribution, not a one-to-many relationship that connects headquarters with hundreds of stores.”
The ability of Home Depot and other retailers to significantly improve headquarters-to-store communication emerged in the past couple of years along with the rise of web-based task management systems from Reflexis and StorePerform, AMR says.