POS Security Priorities
Catering to a high-profile customer base may be profitable, but it also forces Toronto-based Holt Renfrew to ensure that it secures all customer data collected and processed at point-of-sale. Two initiatives—one new and one old—are helping the high-end department store chain to uphold this promise.
Holt Renfrew is a 10-location, privately held department store chain that markets merchandise from many prestigious brands and designers. This assortment, and Holt Renfrew’s concierge and personal-shopping services, make the chain a top choice among an elite shopping base.
That’s why Holt Renfrew leaves nothing to chance when collecting customer information at POS. To securely manage the transmission of this data across its enterprise, it uses a virtual private network (VPN), a private data network that uses a public telecommunication infrastructure, such as the Internet. The chain maintains data privacy by using a tunneling protocol and security procedures.
Holt Renfrew doesn’t rely solely on this security tactic however, especially as more chains become targets of data breaches.
“We already operate in a secure landscape when it comes to processing sensitive customer credit-card information,” said Anne Hodkin, the chain’s director of IT. “Besides encrypting data as it moves across our network, we don’t store credit-card information, such as expiration dates or tracking information. This makes it difficult for hackers to recreate card data.”
The chain is also currently transitioning its operations to comply with the PCI (payment card industry) standard, network security guidelines regulated by an industry group comprised of companies including MasterCard, Visa, American Express and Discover Card.
“We are currently testing our encryption efforts and plan to be compliant by the end of June,” she added.
Pinpointing security: On a daily basis, Holt Renfrew handles other sensitive customer information, including shopper profiles. During the checkout process, this data is transmitted to a database where it is stored for analysis by personal shoppers and marketers. Thus, the retailer knew basic employee authorization methods were not enough to protect this sensitive data from store-level tampering.
By transitioning to a biometrics-based system from Digital Persona, Redwood City, Calif., Holt Renfrew gained a new way to identify associates.
Holt Renfrew is using fingerprint authentication to create a user-unique audit trail that monitors employee access to POS terminals.
Within two weeks, the chain seamlessly integrated Digital Persona’s Software Development Kit (SDK) within the chain’s Tradewind POS software from Datavantage Corp., Cleveland. Digital Persona’s fingerprint readers were integrated with the chain’s POS hardware.
As employees register, they are prompted to place their thumb on the fingerprint scanner. Within seconds the print’s data points are digitized and stored in a dedicated database.
At the start of their shift, registered employees scan their thumb on their POS unit’s print scanner. Once the software’s algorithms detect and authorize the associates’ identity, they are granted access to the POS network.
Holt Renfrew initiated the biometrics-based system approximately three years ago. Besides identifying associates as they log into the network, the system enables the retailer to securely audit employee transactions. The system also ensures that tokens such as keys, cards or passwords can no longer be shared among associates.
Today, the chain supports 500 fingerprint scanners at store-level. The solution is not being used at headquarters.
Biometrics could provide another level of security for the chain as the company explores the potential of a wireless telecommunications network.
“As we explore the idea of a wireless network, we might consider biometrics for PC authentication of remote associates,” Hodkin explained. “While this is not in the works, it could be a viable solution down the road.”
Weekly Retail Fix
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.
Weekly Retail Fix
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.”