Putting Its Faith in the Front End

Like most multichannel specialty retailers, Family Christian Stores is hard-pressed to provide a seamless shopping experience to a very demanding customer base. By putting its faith in a retail platform and point-of-sale (POS) upgrade, Family Christian Stores is positioned to stand out in a competitive marketplace, as well as remain primed for enterprise growth.

Privately held Family Christian Stores, Grand Rapids, Mich., carries a broad assortment comprised of Bibles, Christian books, music and gifts (approximately 30,000 SKUs) across 310 stores in 37 states. Its loyal shoppers, who frequent the chain to uphold their commitment to living a Christian lifestyle, helped the company ring up $324 million in sales in 2006.

While Family Christian is a major player in the $4.3 billion Christian retailing segment, the company doesn’t downplay its competitive marketplace. “While we are double the size of our closest competitor, we do have a lot of competition,” Jef Fite, the chain’s senior VP and CIO, told Retail Technology Quarterly.

“There are many independent operators in this retail segment,” he explained. “And we also compete from a general merchandise standpoint. For example, Borders, Wal-Mart, Target and Best Buy all carry an assortment of Christian music, and even Amazon.com plays in this segment. With such a broad set of competitors, we need to make sure that we have a broad depth related to our product knowledge, assortments and convenience.”

Like its competitors, Family Christian also struggles with how to optimally compete in a multichannel world. “We strive to understand our shoppers’ needs, however they expect us to deliver service across a variety of channels—not just at store level,” Fite said.

It is this demand that prompted the retailer to create an online channel last year. Once Family Christian launched its site, it quickly became evident how important it was to integrate its physical and online worlds.

For example, if a shopper visits a store in search of a specific book and it is not available, “We need to be able to quickly special order merchandise and create a truly endless aisle,” Fite said. “The only way to achieve this level is to integrate the store with e-commerce.”

While Family Christian is well on its way to creating a successful multichannel strategy, it was nothing more than a pipedream five short years ago. Aware that a multichannel strategy was going to be a prerequisite to doing business in the 21st century, the company’s executive management team began evaluating a strategy in 2002. The first step was to get buy in from the company’s new president and CEO Dave Browne.

Once Family Christian’s information-technology group had Browne’s blessing, the team began pursuing its new retailing direction. However, the team knew the only way for this strategy to be successful was to get the support of the entire company. “We didn’t want this to be the ‘IT department’s solution,’” explained Eric Vander Veen, the chain’s director, IT applications and projects, and leader of the installation.

“To ensure that we included all users in our process, we had regional, district and store managers participate in our process from beginning to end,” he said. “We also enlisted participation from every corporate office department. By including these groups, the entire group shared the ownership of the system’s benefits and shortcomings.”

The consensus was that if the chain was going to achieve its goals and compete successfully, Family Christian needed an IT overhaul.

“We looked at how we could provide better service and stand out among our big-box competitors. It became clear that this would be enabled by in-store technology,” Fite recalled. “It became obvious that our first step was to revise our front-end system since this was our main customer touchpoint.”

The decision came at a crucial period. Family Christian was supporting 10-year-old DOS-based, “green screen,” distributed POS software from JDA Solutions, Scottsdale, Ariz. However, the chain’s increasing customer volume, revenue and store count was taking its toll on the antiquated solution.

“Our store traffic was increasing, but the POS system was slow in processing transactions,” he explained. “It also had limited functionality, making it difficult to upgrade as our business needs changed.”

The aging solution also couldn’t support integrated mission-critical solutions. For example, the chain relied on a simple dialup network to process a growing number of credit-card transactions. Besides being an unreliable network, “It was inflexible when capturing customer data,” Fite said.

“We couldn’t tie customer information to specific transactions, giving store managers little insight into business trends,” he said. “Since the system couldn’t support our current business activity, there was no way it would be able to support our future objectives.”

Starting Anew

The first step to choosing a new POS system was to transition to a new retail platform. For Family Christian, the ideal architecture was an open platform that would allow the chain to easily integrate applications at store level, as well as seamlessly link to its existing merchandising management system that resided at corporate. The company chose a Windows operating system that can run Java.

Next, Fite and his team pinpointed what the company’s ideal POS solution should look like. “We wanted a mission-critical application from a vendor that would provide us with technical support and become a long-term partner,” he explained. “It also had to be an economical solution that could deliver a positive return on investment in the long term.”

From a customer standpoint, the solution also had to deliver a top-notch customer experience and service at the front end. “This goes beyond just moving our shoppers quickly through checkout,” Fite said.

“It was just as important to find a solution that would help us to capture information about our customers and deliver perks associated with our loyalty program, ‘Family Perks,’” he said. “While speed and efficiency are important, we were equally concerned with customer intimacy, knowing who our customers are, and making them relevant offers.”

Agreeing that a best-of-breed approach was the way to satisfy these goals, Fite and his team canvassed the marketplace for the top POS solution providers. They pinpointed four potential companies and even proceeded with conference-room pilots.

However, it was the Portfolio POS (PPOS) solution from JDA that best fit Family Christian’s needs.

“We felt the Java- and intuitive GUI [graphical user interface]-based solution could deliver strong functional performance, scalability and stability,” Fite said. “We also had a 12-year relationship with JDA so we were comfortable with the company.”

The retailer signed on with JDA in spring of 2004, and by the summer Family Christian was underway with an 18-store pilot in its Chicago market. The software was housed in the retailer’s existing IBM SurePOS 4694 registers.

After the holidays, JDA released a new version of the solution, which was upgraded in all pilot stores. At the same time, Family Christian replaced older POS peripherals with updated thermal printers and flat-screen monitors.

“It was a lengthy pilot, but that was good because it highlighted changes in the solution and it helped us streamline our associate training as well,” Fite reported. “Most importantly, it helped us to preserve our initial hardware investment.”

With the POS pilot running smoothly, Family Christian quickly shifted gears and began integrating more functionality at the front end. This task became easier with the help of its new open retail platform.

First, the company bid farewell to its antiquated dial-up network in favor of a wide area network (WAN) that could support POS polling and credit-card authorizations. Simultaneously, Family Christian centralized its electronic-payments switch.

Both efforts helped the chain slash transaction authorizations from approximately 40 seconds to three seconds.

Next, Family Christian integrated POS to its existing merchandising solution. The Merchandise Management System (MMS), also from JDA, resided at the company’s corporate office.

The open platform enabled the retailer to integrate the solution into the front end, giving corporate executives insights into what merchandise shoppers are purchasing during each transaction. It also became the foundation for Family Christian’s leap into multichannel retailing.

“The integration eliminates the need to use separate systems to check a customer out, and it gives associates insight into inventory that is available across the chain’s network of stores,” Vander Veen said.

“If a shopper visits a store in Dallas and they are out of their desired item, we can look across different marketing areas or districts and order the item,” Fite said. “Our WAN supports real-time access to this data.”

This addition also supported the enterprise’s inventory-management operations. The chain has a warehouse in Grand Rapids, however, since most suppliers are independent operators, Family Christian supports a strong direct-store delivery (DSD) fulfillment operation. “Half of our stores’ merchandise volume is replenished by our warehouse, the other half comes directly from suppliers and publishers,” Fite explained.

“By having a direct link between store level and corporate, our 300-plus stores have the same information that our corporate buyers do,” he said. “Now the enterprise stays in synch with every piece of merchandise that arrives in stores, and is sold.”

Family Christian began making these transitions in 2005, and had all components rolled out by October 2006.

Making the Grade

As the industry gets more complex, Family Christian continues to add functionality to its flexible front end. Besides constantly upgrading the register with the newest version of PPOS software, the company is focused on PCI (payment card industry) compliance. The chain’s stores were all outfitted with the newest version of the software and its latest payment switch in August.

And each upgrade is successfully delivering substantial results. “We have decreased our overall credit-card transaction times by approximately 30% chainwide,” Fite reported.

The chain has also improved the accuracy of customer information captured at POS. “We capture well over 90% of this data,” he said. “Now we have a majority of our loyalty customers attached to a specific transaction and we know exactly what they are buying.”

The POS system also helped Family Christian increase its customer-conversion rates and average basket sizes, both of which contribute to margin improvements. Fite declined to reveal details about these increases.

The new system is also contributing to lower employee turnover. “We did some benchmarking and it takes us half the time to get an employee up to speed on using the system,” he said.

“It used to take an employee four hours to get comfortable using the POS,” noted Fite. “Today, it takes two hours to learn the full gamut of transactions. This familiarity has also lead to a lower turnover rate than other retailers.”

ALeap of Faith

The POS remains a work in progress. Besides testing the latest release of POS software, “we also tested a coupon-redemption application around Thanksgiving,” Vander Veen reported. “It greatly improved our margins compared to our manual process of applying discounts. The release we are currently testing enhances our ability to support coupons and also brings some additional advanced-pricing functionality.”

The newest project on Family Christian’s agenda however, is strengthening the chain’s evolving multichannel strategy.

“We expect our online channel’s sales to grow by 30%, so we are committed to creating a seamless experience,” he said. “The only way to achieve this is to integrate our Web site and stores. Our new platform will help us enable these multichannel activities.”

At the core of this project is the integration of the POS and MMS applications. “This will give our stores visibility into merchandise available throughout our store-level network as well as online,” he said.

Looking ahead, the combination will also support a music-sampling project. “We want to provide a way for shoppers to come in and sample music and video through a dedicated system or kiosk on the selling floor,” Fite explained.

“After they scan CDs and videos, we want to enable them to place an order on the sales floor, pay for it at POS, and then we can ship it directly to them at home,” he said. “We are being mindful of linking all the right pieces, because we know that integration is the name of the game to create a seamless multchannel experience.”

Fite declined to reveal when the sampling project will launch.

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