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9/18/2003
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Retail: General Merchandising: Retail Industry Holds On Tight

Guardedly optimistic companies use technology to retain customers, cut costs

It's been a tough couple of years for the retail industry, so this fall's relatively strong back-to-school season brought some level of relief for retailers. Sales rose slightly beginning in the early summer months, and if the economy improves, consumers will spend more on clothes, appliances, groceries, and perhaps even holiday presents.

But it's all very guarded optimism, with lingering concerns about unemployment and shaky consumer confidence. That context shapes the thinking behind retailers' business-technology strategies as well. The leaders view technology as a competitive advantage during these uncertain times and continue to spend on it. But they're looking for solid evidence that an initiative will boost customer satisfaction, cut costs, and improve speed and access to information internally or with business partners.

In some cases, retailers are relying on technology to deal with smaller staffs and constrained resources. And many are forging ahead with investments in some of the most cutting-edge areas of retail IT, including software for optimizing product prices and workforce productivity, industrywide data standards and collaboration efforts such as UCCnet, self-checkout systems, and even remote monitoring of the appliances they sell.

Kmart Corp., which recently emerged from Chapter 11 bankruptcy, is meeting corporate goals--more-profitable sales, improved efficiency, lower costs--with a smaller staff and budget than last year, says CIO and senior VP Karen Austin. Among Kmart's top priorities are technologies to improve collaboration with suppliers and other business partners. Bankruptcy gave those collaborative efforts a new sense of urgency, since Kmart needed to work better with partners to lower costs and improve merchandising.

A key part of Kmart's strategy for differentiating its stores is better-tailoring them to their respective communities. Newly upgraded IBM point-of-sale systems let the retailer analyze specific community buying patterns and stock each store accordingly. Another application to enable direct store delivery is used to connect Kmart with its suppliers. It includes electronic invoicing to help cut costs from invoices that don't match up, as well as a wireless connection to help employees expedite receiving of goods in stores.

Sears, Roebuck and Co. is among those retailers looking to IT to help turn a mixed bag of financial results into solid gains in business performance. For its second quarter ended June 28, Sears boosted net income to $309 million, up 35% compared with a year ago. Still, Sears' revenue for the quarter rose a meager half-percentage point, to $10.2 billion, and the company estimates same-store sales will be flat or show low single-digit growth for the rest of the year.


Steve Junk, VP for selling systems at Sears

Better task management is critical where management jobs have been eliminated in a corporate restructuring, Sears' Junk says

Photo by Bob Stefko
IT is core to a corporate improvement effort intended to grow profits and revenue, say Sears' business-technology managers. A new system based on software by StorePerform Technologies Inc. addresses the goal of improving store productivity by letting managers assign and track tasks. Better task management is particularly critical following a corporate reorganization that eliminated a large number of management positions, says Steve Junk, VP for selling systems. The system, which Sears calls Workbench, tracks all types of requests, such as asking employees to remove recalled products, put up signs, display new products, and perform routine maintenance.

"We were concerned a bit about the Big Brother" implication, Junk says. "But stores like structure as much as we do." Sears rolled out the system in the first quarter and eventually wants to link it directly to individual performance reviews.

In a more-futuristic effort to enhance customer satisfaction, Sears is piloting a program in 50 households that allows the company to monitor the critical parts of appliances via a dial-up connection to consumers' homes. It could be years before such remote monitoring is widespread, but Sears is building interest among technology companies and appliance manufacturers, says Bill Kenney, VP of emerging home solutions.

At upscale retailer Saks Inc., vendor collaboration is particularly important when dealing with seasonal products such as clothing. The company has a new Web system for Saks buyers and vendors that tracks orders and automates invoicing. These efforts result in improved efficiencies and faster delivery of merchandise.

"You want to have merchandise in your stores so it can be sold," says Barb DeYoung, VP of systems assurance and security. "You don't want it sitting in a truck or a warehouse."

Saks also is installing new point-of-sale software with customer-tracking capabilities amenable to customer-loyalty promotions, DeYoung says. For instance, Saks is piloting a program that recognizes and rewards a customer at checkout with a small gift, like a certificate for a free latte from the in-store coffee bar.

"We're looking forward to some initiatives that enhance the customer experience," DeYoung says.

Another project under consideration is to provide commission-based sales associates with customer buying histories created by the new point-of-sale software so they can offer more personalized shopping assistance.

Warehouse-store retailer Smart & Final Corp. has finished installing a computing platform based on Microsoft's .Net that provides the corporate office with transactional data in real time, says VP of IT Robert Graham. The system lets it provide institutional customers and suppliers with up-to-date information.

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