June 1, 2007, 12:00 AM

Get smart

Business intelligence enables broader view of data and better handle on performance

Guitar Center Inc.-for many, as retailers go, it’s gotta be a fun place to work. Hit the sales floor in one of its stores, or live chat on one of its web sites, and one can hob-nob with shoppers about the latest in the instruments of rock ‘n’ roll and other musical genres. Visions of Eric Clapton, Jimi Hendrix, Stevie Ray Vaughan and Andy Summers abound. What could be better? Perhaps having rich, meaningful data to make the job easier and more profitable.

To obtain such information, Guitar Center invested in a business intelligence system that shows, for instance, how well individual sales associates at specific stores are selling guitars combined with extended warranties. “We can now get quick answers to questions while slicing and dicing data from several operations,” explains John Zavada, executive vice president and CIO.

Business intelligence-does this mean poring, eyes glazed, over reams of spreadsheets and bland computer screens stuffed with endless numbers, trying to make sense out of what it all means? Business intelligence, commonly called BI, can be tough to grasp-especially for retailers.

Business intelligence software traditionally has been known to help many businesses see how all aspects of their operations are performing and having an impact on one another. It can clearly show if new rollouts from a product development team are boosting profit margins, for example, or causing a net drop in income because they’re creating higher costs for warehouse and shipping departments.

In retail, however, it’s often another story because of high volumes of product SKUs-including many variations of color, size and material content for each product-plus the need to distribute different assortments of product mixes across multiple locations and selling channels. “Non-retail types of businesses with large volumes of products and parts don’t manage information the same way retailers do,” says John Hagerty, vice president and research analyst at research and advisory firm AMR Research Inc. “But retailers want to know the profit of each SKU and get down to high volumes of data for each product and each store location.”

The ability to grasp that kind of information is crucial to the successful operation of direct retailers as well as store chains, especially as retailers expand product lines and customer bases to serve the broadest possible market. “Business intelligence is being able to look at all aspects of your business and pull them together,” says Don Allen, senior director of I.T. operations for web-only retailer Drugstore.com Inc. “You don’t want blind spots when you’re trying to run a web site.”

Retailers also face the challenge of operating without the kind of integrated enterprise resource planning software suites other industries commonly use, software that can produce much of a company’s business intelligence data, Hagerty says. “For many retailers, the combination of software packages that run their operations is a mess,” he says. “So there’s often a need to put a business intelligence system above the multiple software packages to get a unified view of what’s happening.”

A new focus on business intelligence technology for retailers, meanwhile, is resulting in more options for merchants. Cognos Inc., Business Objects SA and Hyperion Solutions Corp., a subsidiary of Oracle Corp., for example, have added retail packages to their business intelligence software offerings, which are known for handling a general range of business intelligence data for manufacturers and others as well as retailers, Hagerty says.

Other vendors, including MicroStrategy Inc., QuantiSense, Manthan Systems and SeaTab Software, offer business intelligence packages designed more specifically for retailers with more of the granular business intelligence data merchants require for drilling down to SKU-level details.

“Where a retailer is coming from indicates which solution it should use,” Hagerty says. “MicroStrategy is strong in merchandising because of its pure quality of data and the number of SKUs and customer records it can handle. If a retailer is looking more at supplier relations and a higher-level view of merchandise and financial records, it might want to use Cognos or Business Objects. They offer more category management as opposed to SKU analysis.”

MicroStrategy also provides development tools that let retailers customize the way they receive and view information. For retailers wanting a more prepared business intelligence package, QuantiSense, Manthan Systems and SeaTab Software offer ready-made applications, Hagerty adds.

And retailers can take other paths to business intelligence. Oco Inc., for example, is offering a business intelligence system in a software-as-a-service platform, which frees retailers from having to purchase and install new applications. CoreSense Inc. offers small but growing retailers like apparel and accessories retailer Island Trends a turnkey e-commerce and store operations package with a business intelligence application that cuts across all operations in both selling channels.

The cost of business intelligence systems varies widely based on the volume of data, including a retailer’s number of product SKUs, database applications and system users. Prices start at roughly $50,000 and go up to $500,000 or more, Hagerty says.

Air guitar

At Guitar Center, the retailer’s MicroStrategy business intelligence really isn’t as much fun as imitating Clapton or Hendrix with a guitar on the sales floor-unless one gets excited by instant, even animated images that describe how well recent merchandising or marketing strategies are strumming along and how they are having an impact on other company operations.

The retailer’s business intelligence application is no dull, eye-tearing specter. The latest version has web development tools Flash and Ajax, which together quickly serve up graphical dashboard images that, at the click of a button, make colorful data points move on charts that show, for instance, how sales of Gibson Les Paul guitars are trending around the country and affecting warehouse and distribution costs, or how different prices for extended warranties help shape overall sales and profit margins.

Indeed, extended warranties on musical instruments are important as both a selling tool and a revenue stream, and Guitar Center has been using its business intelligence system to find correlations between special offers on warranties and the profitability of combined sales of products and warranties. “We want to know if it works to our advantage or not,” CIO Zavada says. “Then we’ll drill down to specific stores and salespeople, then down to all aspects of specific sales tickets.”

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