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September 27, 1999

InformationWeek500
Retail Turns To Clicks And Mortar

Retail

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"Those are things that pure E-businesses will not be able to do," says senior VP and CIO Ron Griffin. "Most of our customers want to touch and feel, to come in for a Saturday project and walk out with what they need. But there's a subset that wants to buy on the Net. It gives us another channel to satisfy our customers."

Home Depot is also at the forefront of another major IT trend in retail: the deployment of leading-edge networking technologies within the company and its supply chain. Home Depot is one of the first to deploy asynchronous transfer mode communications across public WANs from MCI WorldCom and AT&T, and plans to have ATM capabilities in its 900 U.S. stores by year's end.

Although the ATM network will be able to support bandwidth-hungry applications such as full-motion video, it's first being used as the backbone for Home Depot's revamped graphical interface point-of-sale application and a Java program that lets job seekers apply for employment online at in-store kiosks.

Applicants can specify preferred hours, store locations, and store departments, allowing Home Depot to match people with jobs they really want. "That reduces turnover, which is particularly beneficial with our growth rate," Griffin says.

Home Depot's network backbone also supports the company's new application for processing returns and refunds, a transaction volume equivalent to that of the sales of the chain's fourth-largest store.

The system, based on bar-coded receipts, speeds refunds for legitimate returns and reduces fraud by checking returns against a central database that can spot patterns typical of theft-ring behavior. The returns application won the best in-store automation award at the industry's Retail Systems '99 show in June.

Tight Links
For distribution companies, the year's key trend is the use of IT for much tighter links with retailers and vendors throughout the supply chain (see story on electronics distributor Marshall Industries, the InformationWeek 500's No. 1 finisher, p. 66).

"We've really seen a paradigm shift over the past 12 to 18 months," says Jack Scott, CIO of food wholesaler Certified Grocers of California Ltd. "We're moving from being a good wholesale distributor to becoming a retail enabler. Our 2,700 grocery retailers don't have the infrastructure capabilities of big chains like Kroger or Safeway, so we're trying to work with them as a virtual chain."

For example, Certified Grocers has deployed a wireless application called Interactive Order, which lets its retailers place orders on handheld radio-frequency devices from Symbol Technologies Inc.

More than half the distributor's orders are now placed this way. Certified Grocers also uses Symbol's RF devices in its own warehouses to receive orders, which are transmitted from the company's Windows NT and OS/390 infrastructure.

Certified Grocers is taking part in a Grocery Manufacturers of America test of scan-based trading with Andronico's Markets. Scan-based trading triggers automatic replenishment orders at the point of sale and gives distributors and manufacturers real-time feedback about the sales performance of specific products. "To be competitive at the cost-of-goods level, we need to have not just the volumes, but also the efficiencies of the large chains," Scott says.

Like most other types of companies, retailers and distributors have used year 2000 compliance efforts as a spur to complete much-needed core system overhauls during the past year. For example, Sears wrapped up the replacement of its 20-year-old homegrown payroll system, which handles processing for its 330,000 employees, with a PeopleSoft Inc. package that ranks as the world's largest PeopleSoft deployment.

Sears also replaced a homegrown credit-card processing application for its 65 million Discover cardholders with a package from Total System Services Inc. Last month, Sears rolled out a revamped in-house-developed product-information database.

Tandy has converted its 5,000 stores to a new point-of-sale system. Developed with ACR Systems Inc., the client-server application, which runs on SCO Inc.'s version of Unix, reduces a store manager's close-down time every night from 40 minutes to five.

Year 2000 compliance efforts may have been the motivator, but that's the kind of technology-enabled efficiency gain that makes a big difference for retailers and distributors in any year.

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