Retail: Betting The Store On Technology

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By David Needle
Issue date: Sept. 9, 1996

ompetition for customers has never been stronger than it is now in the retail industry. Consumers have more options than ever, ranging from superstores and warehouse stores to specialty stores, mail order, and shopping online. To win more customers, or at least hang on to the ones they have, retailers are employing IT to collect and analyze a wide range of da ta about who is buying what. The companies are also enhancing existing systems to give more people access to that information.

"The companies using data warehousing and decision-support systems are making better management decisions for clearance and replenishment of products," says Steve Johnson, managing partner at Andersen Consulting.

One zealous convert to the practice of collecting customer data is Domino's Pizza Inc. Two years ago, the pizza delivery chain knew relatively little about who was buying its products. Since then, it has installed a PC and a network of terminals in each of the 700 company-owned Domino's outlets in the United States. Every night, each store sends detailed sales data and other information to a data warehouse located on an IBM RS/6000 at Domino's headquarters in Ann Arbor, Mich. The company uses an Informix database and, as a graphical front end, PowerPlay from Cognos Inc.

Deliveries account for most of Domino's business. That gives the company an advantage over rivals like fast-food chains because it automatically has the names, addresses, and phone numbers of its customers, along with what and when they ordered and how much they paid.

"That lets us really target our marketing and increase sales and profits," says Kenneth Herr, Domino's national director of IS. "We're now getting a wealth of knowledge that helps us track performance in different areas of the country and different market segments, such as our college stores versus military installations, and we can keep track of what's selling best."

Domino's is using a telephone caller ID system linked to the database to provide order takers with the identity, address, and preferences of customers as soon as they call in. The caller ID system is also being used in a test project designed to make it easier for customers to contact their nearest store in a metropolitan area where there may be as many as 40 stores. The project, being tested in Minneapolis and Denver, al lows Domino's to advertise a single phone number for the entire city. The system matches each call with a name and address, then automatically routes the call to the closest store.

Another company moving to better serve the needs of its local branches is Safeway Inc., a grocery store chain based in Pleasanton, Calif. "In the past two years, we have been consolidating all our systems activity and establishing a common foundation that encompasses purchasing, merchandising, distribution, and accounting," says CIO David Ching, who joined Safeway in 1995. Before that, Ching says, each store was on its own in gathering and analyzing data.

Safeway is in the process of building up its information warehouse with a broader range of customer and sales data and making it accessible to more managers by simplifying data access. "We want the process of extracting information from the data warehouse to be relatively transparent to users" so they won't have to know eight-character field names or where the data is loca ted, Ching says. "They can just go in, ask for the information--like match sales of product X to a certain number of stores--and the access tool will be able to find it."

The first phase of the project is well under way. "But we want to get smarter as to what information to keep," Ching adds. "It's easy to collect information, but if you don't organize it well or figure out a way to selectively go after it, you end up building a cluttered garage you can't back out of."

At Sports Authority Inc., the largest retailer that sells only sporting goods, having a handle on sales and inventory is critical because the Fort Lauderdale, Fla., company doesn't warehouse the goods it sells. Instead, products are shipped directly from suppliers to the chain's 145 outlets.

The company has placed a high priority on improving its communications infrastructure, moving about a year ago from satellite transmission of data to a faster frame relay system provided by AT&T. "We just found that with opening more stores, and the increase in E-mail and other information transmission, we needed more bandwidth," says Joe Crenshaw, VP of MIS at Sports Authority.

Every Sports Authority store has an IBM AS/400 minicomputer along with a network of at least one PC and 5250-model terminals. Managers use the PCs to access a Lotus Notes system installed last year for E-mail and to let employees in the stores send suggestions to headquarters.

A data warehouse is under evaluation. "We're looking at something that's more of an executive information system that can slice and dice the data," Crenshaw says. A central computer at headquarters polls the AS/400 at each store nightly, pulls the data in, and sends it to an automated replenishment system, which generates new orders as necessary.

But everything starts with sales, and that's another area where retailers are employing technology to better serve the customer. Sports Authority is testing in one of its stores handheld scanners from Symbol Technologies and Telzon that communi cate with the AS/400 via radio frequency and can print price stickers for each product based on its bar code. Unlike many retailers, Sports Authority still puts a price tag on individual items, instead of just putting a price on the shelf on which the products are sitting. "Our theory is that the customer wants to see a price sticker on every piece of merchandise," Crenshaw says.

Other retailers are making it easier for customers to find prices in case the shelf label is missing. At Toys R Us and Target Stores, for example, customers can go to a wall-mounted scanner and place an item's bar code under it to learn the correct price.

Safeway's Ching says there is a lot of interest in using scanners to let customers perform their own checkout. A customer would insert a credit card in a storage rack to obtain the scanning device, which would give the price of each item as well as provide a running total. In one scenario, the computer system would record the credit-card charge and generate a receipt without any involvement by a store employee. Such a scheme would rely on spot checks as well as the honor system to prevent theft.

Making in-store shopping more convenient is one of many competitive steps retailers will need to take if predictions about online shopping via the Internet are to be believed. Traditional retailers also are starting to use the Internet themselves, at least as an information resource. J.C. Penney, for example, has an online gift registry. But few retailers are taking orders, partly because of security concerns.

"We're not selling off the Internet and don't have any plans to, although there's been some talk about doing something for the Christmas season," says Sports Authority's Crenshaw. In the fast-food delivery area, Domino's Herr says it's simply easier to pick up the phone. "We're not living on the Internet yet.

To view the IW 500 Retail chart in PDF format click here

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