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Disappearing Shrink

BY Dan Berthiaume

Shrink is an unavoidable fact of life for retailers. But by leveraging electronic article surveillance (EAS) technology that places security tags on items, retailers can minimize the frequency and financial impact of shrink.

Matthews, N.C.-based Family Dollar Stores, Inc. has been using EAS technology to reduce shrink at select high-risk locations for more than 15 years. However, about three years ago, the retailer determined that using EAS tags on higher-priced items at all of its roughly 7,900 stores would help control external shrink throughout the chain.

RF versus AM

“We analyzed the acoustic magnetic (AM) system we had been using, as well as radio frequency (RF) systems,” said Chris Nielsen, VP loss prevention for Family Dollar. “We wanted store simplification, with one EAS system running in all stores so that we could tag items at the distribution center or supplier level and take the workload off store managers to let them focus on customer service.”

After researching RF-based EAS systems to test against its existing AM-based solution, in July 2012 Family Dollar decided to run a test of the Checkpoint Systems Evolve P10 Eco EAS system at 200 stores. The pilot ran six months in some locations and nine months at others. Upon conclusion of the pilot, the chain spent time analyzing results, including factors such as cost and ROI, as well as others.

“We liked the Checkpoint ‘soft tag,’” Nielsen said. “Both the soft tag and the AM tag we were using cause an apparel item to rip when removed, lowering the resale value for organized retail crime groups, but the soft tag can also have Family Dollar branding. The AM tag cannot be branded.”

Simple, but Effective

Around the end of the second quarter of 2013, Family Dollar decided to complete work with Checkpoint on a rollout plan of the Evolve solution. Checkpoint’s previous experience in performing fast EAS rollouts at other large retailers and its national field support organization also played a role in the decision.

“We scheduled stores and picked sites where we would roll out the new EAS system first,” Nielsen said. “We partnered with our store operations team.”

The actual technology install base at Family Dollar stores is fairly simple. Items are currently tagged at store level, although once enough stores are equipped with the Checkpoint EAS system to make widespread distribution of RF-tagged items practical, Family Dollar will shift to DC- and supplier-level tagging. Most stores have two pedestals that detect tag signals and also have tuning pads at each POS station. The store’s electrical system must also be accessible, and in some instances the retailer has to bring in electrical contractors to add power outlets. No software is involved.

To date, Family Dollar has rolled out the system to 1,600 stores and plans to complete chainwide rollout by December 2014. Shrink has fallen and sales have risen at stores where it is installed. And while so far the retailer is only using Evolve for loss prevention, it could expand the system’s functionality in the future.

“The system has the capacity to be utilized with RFID for things like inventory control if we so desire,” Nielsen said.

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Retail Forecast: Steady As She Goes

BY Phillip M. Perry

Steady as she goes. That old nautical phrase, urging a firm hand on the wheel and an unwavering eye on the compass, seems apt for today’s retailers. While economic waters remain troubled, an improved economic forecast promises retailers a smoother route to profitability in 2014.

“The economy is on the verge of stronger growth, more jobs and lower unemployment,” said Sophia Koropeckyj, managing director of industry economics at Moody’s Analytics (economy.com), a research firm based in West Chester, Pa. After four years of recovery, she added, the economy has made big strides. “Business balance sheets are as strong as they have ever been, the banking system is well-capitalized, and households have significantly reduced their debt loads.”

Market Rebound

The more optimistic outlook is reflected in an anticipated rebound in the nation’s gross domestic product. In 2014 the GDP is expected to climb at a 3.1% rate, according to Moody’s. That’s good news, given that the increase for an economy in average growth mode runs at 2.5%.

“We think things should be looking up considerably next year,” said Scott Hoyt, senior director of consumer economics for Moody’s. “The economy should be significantly better not only than the past 12 months but also the past several years.”

Maybe it’s expected to increase rapidly, but the 2014 GDP number is being calculated off a pretty low base. Many retailers won’t be surprised to hear that 2013 did not measure up to economists’ expectations. Indeed, when numbers are finally tallied, the GDP increase is expected to weigh in at around 1.6% for the year, well below the anticipated 2.1% rate. The culprits: global economic weakening and governmental dysfunction — two factors that shocked consumers in 2013 but that are expected to be less important to economic activity in the months ahead.

Retail Growth

Consumer attitudes — and shopping patterns — are expected to rise in tune with the rosier economic melody.

“Core retail sales are expected to grow 4.1% by the time 2013 figures are finalized, and by 4.5% in 2014,” Hoyt said.

That’s a pretty good showing, given that average annual core retail sales grew at 4.6% prior to the 2008 financial crisis. (Core retail sales exclude volatile revenues from auto sales and gas stations.)

Keep in mind, however, that these numbers are not as high as the 4.9% figure clocked in 2012 and the 5.4% of 2011. What’s going on?

“A lot has to do with continued weak income growth,” Hoyt explained. “While we do have some job growth, there is continued high unemployment. A lot of people have dropped out of the labor force, and employers have more power to restrain wage growth.”

No rapid relief in that sluggish employment picture is within sight. Moody’s
expects the current unemployment rate of 7.3% to slowly decline to 6.8% by the end of 2014. A “full unemployment” 5.5% figure is not expected to be reached until early 2017.

Wary Shoppers

Many shoppers, to be sure, are constrained by this less-than-bright employment picture.

“Some retailers have been telling me that shopping activity tends to fall off dramatically toward the end of each month,” said Walter Simson, principal of Chatham, N.J.-based Ventor Consulting (ventorllc.com). “This seems to indicate that many people are living hand to mouth. While they are willing to spend for what’s necessary, there’s a big part of the population that has no extra gas in the tank. This pattern has to be broken for any dramatic improvement to occur in the economy.”

While employment has not fully rebounded, Simson said retailers will still benefit, on balance, from the generally improved revolving debt picture.

“Consumers have repaired their credit and are willing to put a little more on their cards,” he explained. The lighter weight of consumer debt should free up the marketplace for livelier selling.

To benefit from the economic rebound, retailers need to resist the urge to cut too deeply into labor costs.

“Shoppers are complaining about having no one to help them,” Simson said.

Store personnel, he added, must also be trained in the art of giving customers good reasons to buy. “We will not go back to the days when customers plunked down their cards unthinkingly.”

Philip M. Perry is a New York City-based business writer.

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HSN’s Retail Evolution

BY CSA STAFF

To describe the HSN of today as a TV shopping channel is both woefully dated and reductive. The company, a division of HSNi, has evolved into a multichannel leader, where digital commerce accounts for 36.8% of its $2.2 billion in annual sales.

HSN’s 24/7 shopping format, which bowed in 1981, now seems positively prescient amid the rise of e-commerce.

Bill Brand, chief marketing and business development officer of HSNi, spoke with Chain Store Age contributing writer Barbara Thau about HSN’s rebranding efforts — designed to better reflect its evolution into an interactive entertainment and lifestyle retailer — and how mobile shopping and exclusive brand partnerships will drive further growth.

Who is HSN’s target shopper today, and has she changed in recent years?

Our customer continues to be 84% female, with an average age of 55 and median income of $78,000. Additionally, 26% of our customers have an income of more than $100,000.

Our mobile customers are younger and more affluent; the average age is 48. Mobile is our fastest-growing channel and represents more than 10% of HSN’s business.

How would you define HSN’s current niche?

We are a 36-year-old brand that has evolved into a leading interactive entertainment and lifestyle retailer that is more relevant today than ever in our history. We incorporate entertainment, inspiration, personalities and industry experts to provide an entirely unique shopping experience at HSN. This sets us apart from other retail destinations.

We have become an entertainment destination for our customer. She is not just coming to us to shop — she is discovering and engaging with blockbuster movies and top music acts, playing games and socializing with her friends at HSN. We offer a level of engagement that is beyond other shopping channels.

Earlier this year, we rolled out a complete refresh of the HSN brand, focusing on everything from our website and digital channels to our packaging, direct-marketing materials and even our external advertising. We wanted the way we presented ourselves to our customers to truly reflect the shopping environment we have created — fun, social, entertaining, etc. — and we wanted that tone to be there through every step of the customer cycle: from discovery to purchase to receipt.

Our tagline says it all: ‘It’s fun here.’ It grabs consumers’ attention, tells a story and unites our current customers with our prospects.

How is HSN addressing the growing trend of product-driven philanthropy?

We started the HSN Cares philanthropic program several years ago to empower women and support families in need at a local, national and global level. It gives our organization a soul and is part of our DNA here at HSN.

Our customers have responded positively to this program. They feel they are partnering with us to be part of a larger cause.

Two of the largest organizations that we support are U.S. Fund for UNICEF and St. Jude Children’s Research Hospital. This year, for the first time, HSN, along with two of our sister brands Chasing Fireflies and Grandin Road, came together to support the U.S. Fund for UNICEF’s Trick-or-Treat for UNICEF campaign. Special Trick-or-Treat for UNICEF stores were established at HSN.com, GrandinRoad.com and Chasing-Fireflies.com. We donated a minimum of 10% of the purchase price for each Halloween item sold during Sept. 1 through Oct. 31.

Digital accounts for 36.8% of HSN’s business today. What’s driving the growth?

Some of the key drivers of digital growth are mobile and the HSN Arcade, which launched in 2011 and marries entertainment with casual games, and has hit new levels of customer engagement. We have reached more than 150 million game plays with more than 760,000 arcade members.

We also use the Arcade to promote cross-marketing initiatives. As part of our Toyota partnership, for example, we had 8 million impressions of Toyota-related promotional material on Arcade.

What about mobile? How will HSN further maximize its potential in 2014?

Mobile has been a key part of our overall business since we launched our first iPhone app in 2009. It deepens our customer relationships and enables us to tell the story behind the product.

What’s driving this growth is our ‘Favorites’ tool that connects her with what she loves and makes it extremely easy for her to shop with us. For example, when she has ‘Favorites,’ we send her push notifications from within our apps that one of her favorite brands is on sale or a ‘Today’s special.’ The alerts are personalized to her preferences.

In 2014, some specific mobile tactics include offering mobile-only exclusives for our customers across smartphones and tablets, continuing to optimize our apps and driving awareness of HSN through social media channels.

What are HSN’s key initiatives this holiday season?

We are launching the More the Merrier holiday campaign, our first HSNi holiday event, where we’ve brought together our family of eight leading lifestyle brands to showcase a curated assortment of holiday items.

We believe that the potential for growth through cross-brand marketing is enormous — and this is an important part of our strategic vision for the company.

For example, HSNi’s brands’ Ballard Designs, Frontgate, Grandin Road, Chasing Fireflies, Garnet Hill, Improvements, HSN and TravelSmith are collaborating to create the ultimate More the Merrier holiday Pinterest board, with products pinned from each of the brands. Holiday shoppers can follow HSNi’s official board to learn about the season’s top giftable items, purchase directly from the different brands and get the scoop from experts on how these items can complete their shopping lists.

HSN shopping events tied to entertainment launches are now a hallmark of your strategy. How is this evolving?

Our entertainment integration strategy has been very successful for HSN and has become a powerful marketing vehicle for the film industry.

Earlier this year, we created a specialized online boutique called Dallas inspired by the [return of the] show. The boutique was a fashion destination that offered curated looks hand-selected by the show’s costume designer Rachel Sage Kunin. This partnership created additional brand awareness for our fashion and jewelry businesses and drove customers to HSN from the millions of engaged ‘Dallas’ fans.

We will continue to look for partners in the movie, TV and the music industry that are the right fit for our brand.

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