Retail: General Merchandising: Stores Look For Service With ROI

Retailers beef up supply chains and add wireless checkouts and kiosks to speed transactions, cut costs, and draw customers.

Laurie Sullivan, Contributor

September 17, 2004

4 Min Read

Other businesses have strategies tied to supply-chain optimization and customer service, with a focus on improving customer-facing applications. Big Lots Stores Inc. during the past year initiated projects geared toward design and development efforts in merchandise planning and allocation, transportation management, and data warehousing. While the driving force for these projects is to enhance supply-chain efficiencies, incremental sales, inventory turns, and reductions in cycle times, the underpinnings ultimately improve customers' shopping experience.

Among the hottest retail supply-chain questions are whether to embrace radio-frequency identification tracking technology and how fast to do it. Albertsons Inc., Wal-Mart Stores Inc., and others have made it a priority, yet many other retailers still are investigating whether RFID will pay off in lower costs and fewer out-of-stock products. Boscov's Department Stores LLC is researching possible benefits from RFID in improving customer service by making sure stores don't run out of products. So far, the cost of the labels and infrastructure required remains too high. "But inventory would be so much easier," says Harry Roberts, senior VP and CIO at Boscov's. "That would free up the salespeople to help customers instead of counting merchandise."

Burlington's Friedman sums up the reasons most companies don't have item-level RFID tagging on their radar screens. "Even if the tag is 5 cents, all the scanning equipment, the infrastructure involved, and the hidden costs outweigh the benefits," Friedman says.

Burlington is investigating using the technology on conveyer bins and cartons to track goods moving through its distribution centers. That would mean more of its suppliers would have to ship to its distribution centers rather than directly to its 350 stores. Today, about half ship to distribution centers, but that's expected to increase to three-quarters by the end of the year. If suppliers were to ship cases or pallets of goods to the distribution centers, Burlington theoretically would reconfigure the pallets and put RFID tags on them before reshipping them to stores. This way, suppliers wouldn't have to invest in the technology. The problem is that the retailer can't see a clear return on investment, not even one that would help improve customer service.

The retail industry hopes an IT infusion will boost customer service to bring back dedicated and loyal consumers, either to brick-and-mortar or online stores, just for the experience.

INDUSTRY LEADERS Company Revenue in millions Income (loss)
in millions Wal-Mart Stores Inc. $256,329 $9,054 Kroger Co. $53,791 $315 Safeway Inc. $35,552 ($170) Albertsons Inc. $35,436 $556 Walgreen Co. $32,505 $1,176 Supervalu Inc. $19,160 $257 Food Lion LLC $10,651 -- Saks Inc. $6,055 $83 Inc. $5,264 $35 Giant Eagle Inc. $4,739 -- Big Lots Stores Inc. $4,174 $81 Pathmark Stores Inc. $3,991 $17 Burlington Coat Factory Warehouse Corp. $2,697 $65 Sheetz Inc. $2,400 -- eBay Inc. $2,165 $442 Red Apple Group $2,100 -- Spartan Stores Inc. $2,055 ($7) Boscov's Department Stores LLC $1,100 -- Belk Inc. -- -- Publix Super Markets Inc. -- -- QVC Inc. -- -- Raley's Inc. -- -- Financial data is from public sources and company supplied.
Revenue is for latest fiscal year.
Dashes indicate companies requesting financial information not be disclosed.

SNAPSHOT INSIDE COMPANIES Average portion of revenue spent on IT 1% Companies using radio-frequency identification -- Companies globally sourcing products and supplies 40% HOW COMPANIES DIVIDE THEIR I.T. BUDGETS Hardware purchases 21% IT Services or outsourcing 12% Research and development 7% Salaries and benefits 27% Applications 22% Everything else 11% INDUSTRY FINANCIALS Average year-over-year revenue change 5% Average year-over-year net income change 15% DATA: INFORMATIONWEEK RESEARCH
See year-over-year shifts in business-technology practices for this industry.
Compare and contrast this year's data with last year's.

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