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Fanatically Focused

BY Dan Berthiaume

Retail at its core is a pretty straightforward industry. Regardless of a retailer’s vertical, sales channel(s), customer base, or any other distinguishing characteristic, at the end of the day the goal is pretty much the same. Jay Omdahl, VP enterprise resource planning for online sports merchandise retailer Fanatics, sums it up succinctly: "Get the best product at the right time to the right place."

However, as most retailers know, achieving that straightforward goal can be a very complicated process. And when a retailer’s business model includes supporting the e-commerce operations of six major professional sports leagues, major sports media brands such as ESPN and NBC Sports, and more than 200 professional and collegiate teams, as well as its own stores and e-commerce site, giving customers what they want when and where they want it suddenly becomes even more of a potential challenge.

This is the enviable but tricky situation Jacksonville, Fla.-based Fanatics deals with every day. From its humble beginnings in the mid-1990s as a small store in a Jacksonville mall specializing in merchandise relating to the Jacksonville Jaguars NFL team, Fanatics has ballooned into an online giant. Along with its own e-commerce site, it supports the back-end operations of numerous sports entities’ websites.

Since its founding, Fanatics had relied on a RetailPro ERP system. However, in 2008, the company realized that its evolution into an omnichannel retail entity that also managed back-end ERP activities for numerous third parties meant an upgrade in ERP functionality would be needed.

"We needed the ability to look at how to plan, present and control products to a vast array of customers," Omdahl explained.

After a careful review of enterprise retail solutions from various companies, Fanatics decided to implement Microsoft ERP technology. An advantage was that the retailer was already using other Microsoft tools, such as Excel, Word, Windows, SharePoint and Outlook.

"It’s technology people see multiple times a day," Omdahl said. "It all fits together pretty nicely."

Furthermore, Fanatics wanted to "make a change and not a re-change" on its new ERP platform, meaning the company sought scalability, extensibility and the ability to diversify the solutions it would run on the platform as the business grew and changed.

In 2009, Microsoft worked with IT project consulting firm Junction Solutions to build a prototype of a platform based on Microsoft Dynamics AX retail ERP solutions, such as finance, AP, AR, and inventory planning and forecasting. Omdahl said the platform supports "typical ERP tasks," including management of business processes, data and transactions, and Fanatics has steadily expanded the platform’s functionality as the business has continued growing in the past few years.

According to Omdahl, Fanatics is receiving several specific benefits in getting customers the products they want, when and where they want them, as a result of employing Microsoft Dynamics AX solutions.

"It’s easier to make website changes and put them in a container and then build on those changes inside the container with rare ‘ripple effects’ on other parts of the site," he added. "We were also able to implement a product zoom feature, which required high-resolution product photos as pixelated photos don’t sell well."

Omdahl said successfully enacting the product zoom feature required creating a lot of "pictures, data, flags and settings in the right time and right place" on both the front and back ends, which Dynamics AX allowed Fanatics to accomplish with minimum fuss. Other customer-facing omnichannel benefits include the ability to email customers about the brands and products they are interested in (on an opt-in, cookie-based basis) and a "user-friendly, intuitive" online experience.

"Customer satisfaction scores are going up all the time," Omdahl added.

Internally, Fanatics employees also find the ERP system intuitive to use, and Dynamics’ natural interface with a common underlying SQL server database foundation further eases making front- and back-end site changes when necessary. Based on its success with Dynamics AX ERP solutions, the online retailer is considering implementing sales and marketing solutions from the Dynamics CRM product line in the future.

Ultimately, Fanatics is achieving the basic end goal it set out to accomplish when it first investigated Dynamics AX technology five years ago.

"Customer experience management comes up in conversation around here several times a day," Omdahl noted. "We want to give customers the products they want, not the products they’ll return."

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A Brave New World

BY Michael Fickes

Remember when retail gurus used to say that when it came down to it, retail strategy was all about location, location, location? Location still matters, but not as much as it used to. With the explosion of online retail, brick-and-mortar retail strategies are changing. But it’s not just location that has receded in importance. Price and selection don’t matter as much anymore either.

Strategic changes are rippling through the retail world today, driven by the interplay between brick-and-mortar and online retail.

What changes? Here are three:

  • Traditional retail differentiators don’t work anymore.
  • Brick-and-mortar retail stores are adopting strategies used by online stores.
  • Online strategies and brick-and-mortar strategies are merging into focused, powerful retail strategies.

Retailers that don’t tailor business models and strategies to emerging realities will find themselves in a tailspin, according to a recent report from Deloitte Consulting LLP entitled, "A Race to the Bottom: How to survive in the new retail environment."

The study makes it clear that in today’s marketplace competitive attributes such as price, selection and location are being reconsidered as noted competitive differentiators. Translation: Price, selection and location are less important, today.

"Product and service have become the real differentiators," said Rod Sides, a Deloitte principal and co-author of the study.

Price used to be a key differentiator, but now many other retailers can match low prices.

"You don’t have to be the lowest price," Sides explained. "But you have to be competitively low. A consumer might reason that it’s worth a 5% premium on a $50 item to get it now, instead of waiting a day or so for an online shipment."

Competitive pricing remains important to making a sale, but it won’t differentiate a product or retailer like it used to.

Even vast selection doesn’t differentiate anymore either. The reality is products spanning entire aisles in big-box stores can’t compete with online’s endless aisles.

Then there is location.

"Location is important for brand building, but a customer can buy a product anywhere, anytime without a store," said Thomas F. Quinn, a principal with Deloitte and co-author of the study.

Today, successful retailers differentiate their brands with products and service. Consider Apple.

"Apple is driving the new normal in retail," Sides said. "If there is one concept today that a majority of our retail clients are trying to emulate, it is Apple."

For Apple, retail strategy is all about products and service. The Apple brand stands for innovative, distinctive products, from the iPod to the iPad. It also stands for service. Excellent service in Apple’s physical stores and digital stores drives sales in both venues. Premium products and premium service enable Apple to charge premium prices.

Upscale department stores have always combined high-end products with excellent service. Today, that excellent service includes filling online orders from stores near buyers. Shipping is less expensive and faster, two customer service benefits. Sometimes customers come to the store to pick items up, another customer service benefit that also holds down store costs.

"A number of upscale department stores now pull inventory from stores to fill online orders," Quinn said. "Many of our clients today are trying to duplicate that."

It’s more complicated than it looks. It adds complexity to buying decisions and the way products are allocated among stores and distribution centers. It also requires material handling crews in stores to receive, rack, pick orders and ship merchandise.

"Upscale department stores understand that customers want exclusive products and excellent customer service that includes getting products to online customers fast," Quinn added. "These stores are making that work. As a result, price isn’t as big a pressure point for them."

Most retailers don’t have exclusive products and the financial ability to pay for excellent service. But they can still find a strategic balance — and they should start searching for it now. According to the Deloitte report, brick-and-mortar retailers need to better leverage their operating base if they want to remain competitive.

"In a lower-cost operating model, a retailer must ensure that incremental dollars invested in labor or real estate have value," Sides says. "One strategy might be fewer, smaller stores and more distribution points."

That helps to rebalance real estate investments. Fewer, smaller stores cost less, as does distribution real estate. The stores would build the brand and drive online sales. Service comes from swift delivery of online orders.

"You can’t be in the middle," Sides said. "You can’t have a high-cost structure and an undifferentiated value proposition, because then you will be forced to cut prices to make sales. And that’s the race to the bottom."

Michael Fickes is a contributing editor to Chain Store Age.

The interplay between physical stores and online is driving strategic changes throughout retail.

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Clicks & Bricks

BY Marianne Wilson

Technology is revolutionizing the way consumers shop, both in stores and online. Here is how one retailer is working to bridge both worlds.

British retailer Marks & Spencer is taking a giant leap forward in its goal to becoming a multichannel leader and merging the worlds of physical and online shopping with the opening of its new concept store in Amsterdam.

The centerpiece of the 5,000-sq.-ft. space — which marks the company’s return to the Netherlands after a 10-year absence — is an "E-Boutique" dedicated to womenswear.

The shop features what the retailer calls "the world’s first virtual rail," a display that seamlessly integrates digital rails with physical rails of clothing. It is made up of three stacked 46-in. video screens and three physical rails, with each holding about 50 items of clothing. The display will showcase the latest trends and be updated every six weeks.

Shoppers can place orders for free delivery to the store through in-store order points (photo left) or with iPad-equipped associates. Or they can make purchases via their own mobile phones, using the store’s free Wi-Fi. Customers can also "shop to go," choosing from the edited selection of fashions that are available to buy in-store on any given day.

"The Netherlands has embraced online shopping — customers adore the ease and convenience of buying clothes this way, which is why we were determined to return with our very latest multichannel thinking," said Laura Wade-Gery, executive director e-commerce multichannel at Marks & Spencer. "The E-boutique … allows us to offer our latest fashion collections from a much smaller footprint."

The rest of the store is dedicated primarily to food and beverages, ranging from sandwiches, salads and wines to M&S’ signature prepared meals and groceries.

The Amsterdam concept shop is just the beginning of M&S’ push into the Netherlands. The company has also launched a new Dutch website, and plans to open a full-line store in The Hague in 2014, and a flagship in Amsterdam by spring 2015.

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