SUPPLY CHAIN

Modern Conveniences

BY Deena Amato-mccoy

On the surface, baby boomers and Generation Y may not seem to have similar shopping habits. As chains take a closer look however, they realize that both consumer groups are demanding simpler and more personalized shopping experiences.

By working with technology partners to deliver the tools that will provide convenience, simplicity and service during shopping trips, chains can restructure their retailing strategies and build loyalty in a saturated marketplace.

This message was delivered during the session, “Technology Innovation: What’s In-Store for the 21st Century Shopper?” at the inaugural World Retail Congress, held in Barcelona, Spain, March 28-30, 2007.

The event, sponsored by eMap, London, welcomed more than 1,000 senior-level retailing professionals from 50 nations, including delegates from Brazil, China, Dubai, France, Germany, India, Japan, Kuwait, Russia, South Africa, Spain, Sweden, Switzerland, the United Kingdom and the United States.

The recurring theme throughout the conference was that the retail landscape is more complex than ever. New retailing markets are evolving, more products are being introduced and, of course, new chains and retailing formats continue to hit the scene. In addition to these issues, consumers are demanding more personalized service.

“Complexity takes energy and time,” Marian Salzman, executive VP, for New York City-based advertising firm JWT Worldwide, said at the closing session, “Tomorrow’s World: What Will the Future Hold?”

“Shoppers’ lives are already complex. They are looking for ways to master the complexity and expedite their lives,” she added. “This includes simple solutions that are in line with their preferences.”

Dr. Jörg Heistermann, managing director, KarstadtQuelle and karstadt.de, Essen, Germany, said these solutions must cater to consumers’ preferred brands and shopping styles.

“Consumers are the boss,” he said during the technology session.

“The shopper wants an experience that is better, quicker and cheaper,” he explained. “That has forced us to make more of an effort to deliver what they want, when they want it. And we need to do it in a convenient way.”

The number of shoppers demanding this service continues to grow—especially as consumers have more access to technology.

For example, the Internet has become the go-to shopping solution to research merchandise before making a purchase. In fact, the Internet is expected to influence approximately 50% of total retail sales (both online and offline) by 2010, according to JupiterResearch, New York City.

While retailers expect a technology-savvy group like Generation Y to contribute to these statistics, they are learning that baby boomers are also becoming empowered by solutions such as the Web.

“In Europe, the 18- to 25-year-old shopper category, and consumers over 55 years old, said convenience and simplicity are top priorities during their shopping trips,” Dr. Mark Dorgan, European retail partner, Fujitsu Services Holdings, London, said during the technology session. He added that multichannel retailing strategies are fueling this consumer demand.

“Ten percent of retail sales in the U.K. happen outside of the physical store. By 2008, experts predict this level will increase to 25%,” he said. “Multichannel [retailing] is here. The only way for retailers to compete here is to integrate channels and customer-facing solutions.”

While this strategy sounds easy, many retailers struggle with how to make it work.

“Retail operations have not changed much in the last 100 years,” Dorgan noted.

“Stores still have a basic layout and little has changed regarding operations,” he added. “If we want to deliver more personalized attention to shoppers, basic retailing systems need to catch up. The industry needs real-time visibility within the supply chain, on-demand services, and better inventory management. Luckily, today’s technology provides an explosion of possibilities.”

Customer contacts: Understanding and communicating with consumers is the first step to embarking on these opportunities, followed by delivering personalized service across multichannels, according to the panel.

“Shopper dialogue is a prerequisite. This goes beyond just talking with consumers,” KarstadtQuelle’s Heistermann said. “This includes linking the store and home-shopping channels through technology.”

Heistermann speaks from experience. By combining its Web presence and loyalty program, KarstadtQuelle already delivers personalized dialogue to multi-channel shoppers.

“Our online platform offers product recommendations which are based on shoppers’ online and offline [loyalty card-based] buying behavior,” Heistermann recently told Chain Store Age. “Soon, our Web site will report the number of units of an item available in a particular store. This will make consumers’ store visits more productive.”

These types of programs are also getting a boost from the proliferation of broadband and wireless networks, as well as ubiquitous consumer communication devices.

“Consumer devices support a variety of applications, including mobile marketing via text messages and e-mails, as well as cashless-payment options,” Lory M. Yeakle, senior VP, global brand and marketing, Visa International, San Francisco, said during the technology session. “These devices deliver more intelligence to shoppers, and they are another way to create a unique shopping experience.”

While innovative ideas obviously abound, retailers need to stay focused when choosing the right mix of customer-facing solutions. Since these technologies must appeal to shoppers and still fit into existing retail strategies, many chains are undoubtedly feeling overwhelmed. Yet, they don’t have to.

“Clearly, technology will help retailers deliver a more unique, personal experience,” Yeakle said. “They can ensure what will work by collaborating with technology partners.”

Chains should take stock in their aspirations and their customers’ needs, Yeakle explained.

“Then they should bring this list to solution providers and ask how the company might address this in five years,” she said.

Then the team must work together to outline the best way for the retailer to achieve its goal.

“It is the goal of the technology solution provider to work with retailers to map the customer journey, whether it is in stores or online,” added Dorgan.

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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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Weekly Retail Fix

BY CSA STAFF

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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