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City Institution Online

BY CSA STAFF

payment processor that is also an address-identification solution; and Google for Web analytics.

“Demandware knew how to advise us in streamlining the site,” Zilko said. “We were able to make it much more user-friendly and add more efficient checkout operations.”

The solution was officially deployed in November 2006, right before Zabar’s busiest month.

“As a result, our order volume increased at a healthy rate and business was better than the previous season,” he said.

The outsourcing partnership has also helped the chain beef up its call-center operations.

“Up until a few years ago, the call center was located in the store itself,” he explained. “Now the company outsources the operation to a Web-based call center, and we also manage our own center in-store.”

There are between five and 15 staffers working the in-store call center simultaneously, with one manager for the company’s mail-order operation. The call center and the Web, which feeds into one backend, receive about 200 orders per day during Zabar’s off-season.

The Web-to-call-center ratio has also shifted toward the Web, Zilko said. In fact, the company sees 60% of its orders coming through the Web and 40% through the call center. The site used to process 50% of orders and the call center processed 50%.

“Since our customers are now more comfortable ordering on the Web, we’ve made our site much easier for them,” he added. “We had a smooth migration and there are no complaints on the difficulty of placing an order.”

The big picture: Now that Zabar’s can handle its busiest shipping periods, the company wants to focus on learning about who is coming to the site.

“One of the biggest advantages we’ve gained is that analytics are now built into the system,” Zilko said. “We’ve learned a lot of things about our customers that we never knew before and it has translated into the ability to increase sales. “We now know what customers are searching for on the site and what products they buy together. We are also able to see how they shop between categories,” he said.

“As a result, we can now make business decisions to capitalize on that,” he added. “We’re integrating what we learned into e-mail marketing and cross-selling across the site.” Although Zabar’s hasn’t yet tapped into targeted marketing, Zilko said the company plans to pursue it later this year. The company also plans to further enhance its online presence. For example, online customer reviews that can further engage shoppers and help in their purchase decision-making is one priority.

“We’re also looking into blogs and would like to open specialized microsites for coffee,” he said. “We want to get videos up online to describe and promote the products,” he noted.

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Weekly Retail Fix

BY CSA STAFF

THE NEWS: SAM’S REALIGNS STORE-LEVEL MANAGEMENT

BENTONVILLE, ARK. Sam’s Club is changing the management structure in its stores. In the realignment, approximately 250 positions will be eliminated, Wal-Mart Stores announced last week. The company said it’s replacing five lower level management positions at each Sam’s Club location with three new higher level and higher paying assistant manager positions.

“This is not a cost cutting effort. We expect a slight increase in payroll upon completion of this change,” said Sharon Orlopp, senior vp of Sam’s people division.

THE FIX: Differentiation would better help Sam’s

Since Sam’s decided that its refocus on the business customer was too narrow, it has sought to find ways to make its clubs more attractive to primary shoppers, i.e., women. And that’s a pretty tough row to hoe, as Costco has done a pretty good job at satisfying the club customer in general and BJ’s has been going after female shoppers for several years now, with some success.

Having fewer managers with more direct responsibility could create a tighter knit club-level management and shorten lines of responsibility and accountability. Yet, without differentiating the offering, execution isn’t going to overcome all of Sam’s challenges.

That being said, a store-level management realignment might be overlooked at other retailers, but, this being Wal-Mart, everyone has to make a big deal about it. But that’s the price you pay as the big guy on the block.

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THE NEWS: TOYS ‘R’ US EARNINGS GAIN 40.1%

WAYNE, N.J. Toys “R” Us today posted net earnings of $199 million for its critical fourth quarter, which meant it turned a profit for the fiscal year ended Feb. 3. But special charges and gains had an impact on its numbers.

Sales for the previous fiscal annum were $142 million, the difference translating into a net earnings increase of 40.1% year over year. For the last fiscal year, Toys “R” Us posted net earnings of $85 million versus a net loss of $384 million for the previous period.

Operating earnings in the fiscal 2006 fourth quarter gained 53.1% to $571 million versus $373 million for the fourth quarter of fiscal 2005. For the last fiscal year, operating earnings were $649 million versus an operating loss of $142 million for the previous period.

THE FIX: Improved shopper experience ups comps

Of course, any observer has to take into consideration special financial circumstances. Fiscal 2006 operating earnings were positively impacted by $96 million from gains on property sales, slightly offset by restructuring and other charges. In fiscal 2005, operating earnings were negatively impacted by $410 million in costs relating to the merger of the company, as well as $58 million of costs and charges relating to contract settlement fees, restructuring and other charges.

Still, sales were trending up at last year’s end. Net sales gained 15.8% to $5.7 billion. In the full fiscal year, net sales advanced to $13 billion, up 15.2%.

Comparable-store sales for the Toys “R” Us’ U.S. division gained 0.6% in fiscal 2006, and that represents the division’s first comps increase in six years. Comps at Babies “R” Us were up 4.8% and those at Toys “R” Us international were up 2.6% for the fiscal year.

Jerry Storch, chairman and ceo of Toys “R” Us, said the company is “pleased with the strides we made in fiscal 2006 to improve at all levels of the organization and reposition the company for profitable growth over the long term.”

He said the company’s new management team has been focusing on executing a strategy that would turn the retailer into a global toy and baby products authority.

“This translated into higher overall sales, positive comparable-store sales, improved gross margins and strong operating earnings growth for the 2006 fiscal year,” Storch asserted. “The key to our strategy has been improving the customer shopping experience in our stores. We are accomplishing this by delivering a more compelling merchandise selection, better service and a cleaner and more comfortable shopping environment.”

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