July 27, 2006, 12:00 AM

Crossing Channels

K&L Wine Merchants uncorks a single database as a key to multi-channel success.

K&L; Wine Merchants started out like many small businesses: Two partners with an idea, some capital and the initials of two family members to give their new venture a name.

The partners, Todd Zucker and Clyde Beffa, set out in 1976 to capitalize on their northern California location and proximity to wineries and build a chain of discount stores selling a general selection of wines and spirits. The business did well and the company, named after the first-name initials of Clyde’s wife, Kay, and Todd’s wife, Linda, soon operated with five Northern California stores.

But things didn’t remain simple for K&L.; Warehouse clubs and other large discount chains began to appear in its market in the ‘80s, forcing K&L; to remake itself in the ‘90s as a specialty retailer, relying less on local stores and more on telephone and web sales to cast a wide net for its specialty customers. “When Costco opened up and took over the discount space, we decided it was time to transition to a specialty retailer,” says Brian Zucker, vice president and son of Todd Zucker.

Fixing the fractures

Using its connections with wineries and vineyards, K&L; built a niche in selling unusual wines, specializing in limited runs of labels from boutique wineries in California’s Napa Valley, the Bordeaux area of France and other wine regions. “We began selling the kind of wines you can’t usually find in a local store,” Zucker says.

It wasn’t long before the new K&L; built a strong national following. Indeed, its growth happened too fast for comfort, Zucker says. After a story about its boutique wine offerings appeared in a national magazine in the fall of 1997, orders surged into its web site and call center. K&L;’s multi-channel presence had suddenly mushroomed, priming the company for rapid growth.

But its true growth potential wouldn’t be realized until later, after it reworked a fractured system of data management that kept each selling channel’s order data in separate databases. Even its wine-of-the-month club data was in its own database.

Making things more complicated, K&L; was still relying only on its store POS system, The Retailer, for handling orders for the web and its call center as well as its stores-a process that required an extensive amount of double entry of customer and inventory data, slowing down operations and keeping managers like Zucker from spending more time on merchandising and marketing.

Moreover, with five main and unintegrated databases in all, K&L; was unable to benefit from cross-channel flow of information-creating a problem for its new business model of selling rare wines, many available only in short runs. If only one or two bottles of a particular label were available in one of its stores, K&L; wanted to be able to tell customers in any channel that the wines still could be ordered. And once a particular label sold out, whether the sale was in a store, through the call center or on the web, the company wanted to let customers know as quickly as possible that it was no longer available.

Migration

The answer, Zucker says, was to migrate to a single database, where all customer, product and inventory data could be kept in a single location and accessible to customers through any channel as well as to employees at stores, web site, call center and warehouse. It was a bold move for a retailer in the late ‘90s, when most retailers saw the web channel as a separate entity, experts say. “Back in the ‘90s, no one was talking about multi-channel retailing,” says Gene Alvarez, retail industry analyst for Gartner Inc. “The intent was to demarcate everything.”

Indeed, even today cross-channel data integration in order and inventory management that can support true multi-channel retailing is uncommon among retailers that sell through multiple channels, experts say. “Retailers are on the lower end of the maturity curve for inventory management and order management processes,” AMR Research Inc. says in a recent report, “Technology Trends in Inventory and Order Management for Retailers and CP Manufacturers.”

Even though many retailers claim to have automated processes for inventory and order management, most are not driven by web-based systems fully integrated across the retail enterprise, providing the kind of support necessary for true cross-channel services, AMR says, figuring that only 10-16% of retailers have data in a consolidated and web-enabled data repository to support real-time visibility and access to data across multiple channels.

But such is the allure of multi-channel retailing these days that many retailers push ahead with multi-channel and cross-channel projects without first deploying the necessary infrastructure to support cross-channel data flow, experts say. “A lot of retailers are confused about what multi-channel retailing really means,” says Mark Riseley, London-based retail industry analyst for Gartner.

More chances for frustration

Many retailers either don’t realize that multi-channel retailing requires integrated customer, product and inventory data shared across each selling channel, or they don’t have the cross-channel organizational support for it, he says.

But without shared information in a central database, retailers who reach out to customers in multiple channels can cause more problems than they solve, Riseley says. If an in-store kiosk isn’t integrated with multi-channel order management and inventory management systems, for example, a customer might order something at the kiosk only to find out later that it wasn’t in stock. “Retailers would then be giving their customers more choices in how to be disappointed in four or five channels instead of two or three,” he says.

Adding to the challenge is that many retailers still don’t have a designated executive responsible for multi-channel retailing. “When we did a survey of retailers, it was hard to find specific people with responsibility for multi-channel activity,” Riseley says.

Nonetheless, more retailers are beginning to see the light of integrated data systems, experts say. “More retailers are recognizing the need to create a persistent shopping experience across all customer touchpoints,” says Rob Garf, retail industry research director at AMR Research.

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