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Reitmans’ IT Transformation

BY By Deena M. Amato-McCoy

Much has changed at Reitmans (Canada) Ltd. over its 85-year history as the company has grown into one of the country’s largest fashion retailers, whose seven banners operate a total of more than 950 stores. But what hasn’t changed is Reitmans’ mission to remain nimble and responsive to consumer demand and customer service. When an aging legacy-based operating system threatened to halt growth across its enterprise, including ordering, fulfillment, merchandising and assortment planning processes, Reitmans decided to transition to an open platform that could support its overall supply chain and help to optimize operations.


Over the past five years, the company launched an overhaul of business processes and systems, which it internally refers to as the Supply Chain Optimization Retail Enterprise program, or SCORE. The mission is to improve efficiency and create a foundation for continued growth. This includes a new focus on the deployment and integration of best-in-class retail applications to streamline enterprise-wide processes and eliminate errors and redundancy.


Reitmans broke the effort into two parts. The supply chain optimization (SCO) vision centers on providing the distribution center with the tools needed to improve efficiency and service levels to stores, while the retail enterprise (RE) division focuses on improving retail and merchandising processes to increase efficiency and inventory visibility. 


The company chose to tackle the SCO piece first, believing this would provide the company “the greatest value as a whole,” said Diane Randolph, CIO, Reitmans, Montreal, during a presentation at the Oracle Retail CrossTalk conference earlier this year.


The company’s warehouse remains at the core of the SCO project. While its outbound operations are completely automated, inbound processes remain manual. By transitioning to the integrated suite of Oracle Retail Merchandising, Planning and Supply Chain Optimization applications, Reitmans will strengthen its purchasing and replenishment, inventory and finance, and pricing and promotion operations. The functionality of a new Oracle user interface will orchestrate workflow to help users make better business decisions. 


“We are looking forward to being more efficient in our distribution center and the opportunities that brings,” Randolph said. “The solution provides our head office teams with greater visibility into data, which is going to allow them to focus on better ways to service our customers.”


One of the key elements that will initially impact the company will be the ability to do better price promotions.


“Today, that needs to be executed at stores,” Randolph said. “Being able to manage this process at the head office will give greater efficiencies to the buyers, marketers, stores and, ultimately, our customers.”


The company completed the first phase of the implementation, which included the integration of the platform with warehouse management, supply chain intelligence, labor management and its vendor compliance program, earlier this year. 


“This is considered the ‘foundation’ stage,” Randolph explained. “It includes transitioning all data from an older Retek merchandising system to the new operating system. With the database populated, it can now support the warehouse and retail management systems.”


Initially, this phase will help Reitmans streamline its e-commerce fulfillment, just-in-time pre-allocation and vendor collaboration operations. E-commerce went live in the first division of stores in June, and the second division began supporting e-commerce this fall. 


“Vendor collaboration and pre-allocation will also be live by the fall,” Randolph reported. “The entire warehouse will be live on the new platform by the end of December.”


During the next phase, the company will focus on integrating the enterprise’s invoice matching, price management, trade management and financials processes. It expects to complete this phase by August 2012.


The final phase, which will follow immediately, will involve rolling out all new functionality to all seven banners, and switching off the functionality of its existing Retek operating system. At this point, the retailer will be able to provide its stores more visibility into inbound shipments.

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Perfect Storm for Apparel Retailers

BY Craig R. Johnson

With gloomy consumer sentiment surveys reflecting dysfunction in both Wall Street and Washington, stagnant GDP growth, stubborn 9% unemployment and the ongoing housing slump, most experts are calling for a conservative holiday season.

But the American shopper? She begs to differ, at least when it comes to apparel, for herself and her family. Certainly, clothing was run through the wringer in the recession, as demand plunged 8% from its peak annual levels of 2007, bottoming in 2009. This year, apparel is suffering the further indignity of seeing the first cost inflation in decades, as cotton prices peaked at record levels in March.

Although apparel bounced off the bottom in 2010 with a 4% year-over-year rebound, sales still lagged pre-recession levels. But for the first nine months of 2011, apparel sales were up almost 6% over 2010, with little if any let-up during back-to-school. Although historically back-to-school is an imperfect predictor of holiday sales, full-year apparel sales in 2011 will, at the current pace, finally breach the sales levels achieved four years ago.

So despite the dour consensus outlook, apparel is on track for its best Christmas since 2006, if not ever. Five factors are driving apparel’s comeback:

• Pent-up demand

After four years of outfitting her kids but scrimping on herself, women are finally freshening their wardrobes — since you can accessorize that schmatta just so many times. 
Men, notorious for making that suit or sport coat last one more year, are returning to the haberdashery, with men’s clothing sales up about 9% year-over-year.

• Muted price elasticity

Although many retailers are now passing through most — but not all — of the cost increases, evidence to date shows little demand destruction. By Customer Growth Partners’ estimates, apparel price elasticity ranges from 0.6 to 0.8, indicating that average price increases of 10% will reduce demand by only 7%, netting a 3% revenue boost.

• Discretionary spending rotation

Through 2007, the twin drivers of discretionary retail spending were home improvement projects and consumer electronics. Both sectors remain about 11% below their 2006 to 2007 peaks, freeing up almost $50 billion in annualized demand that is being redeployed, largely at fashion or outlet malls instead of The Home Depot or Best Buy.

• New technology

Although not always visible on runways, apparel technologies have made great strides in recent years, from Lululemon’s nylon and no-sew seaming innovations to “heat-tech” styles from FAST’s Uniqlo. The advances have enabled higher price points and margins, and consumers have not objected — since the merchandise is a “materially” better value.

• Fashion excitement

Last but not least, fashion is, after all, a fashion business, and apparel has finally doffed recession-era boring basics to enter a new creative cycle. Consumers are seeing innovation in everything from beauty and fragrance to designer excitement at post-recession, savvy-shopper prices, in retail formats from fast fashion to once-dowdy department stores. Doubters need only witness Macy’s Lagerfeld collection full-price sell-through, Target’s website-crashing Missoni blow-out, or Kohl’s high-profile J.Lo and Marc Anthony launches, to understand that newness is back big time.

In short, well-managed apparel merchants will enjoy a positive perfect storm this holiday season. Continued pent-up demand, recession-originated cost controls, fashion innovation and moderate cost inflation — combined with modest price elasticity — augur for strong earnings leverage in the holiday quarter.

Craig R. Johnson is president of Customer Growth Partners (customergrowthpartners.com), a consulting and research firm serving the retail and consumer industries. Founded in 2001, CGP also conducts both proprietary and public forecasts of holiday, back-to-school and full-year retail sales.

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Focus on: E-commerce


BY By Samantha Murphy

Christmas may be right around the corner, but retailers can still do a lot in the final weeks leading up to the big day by making last-minute tweaks that can impact how and where consumers shop this season. Thanks to the flexibility of the Web, e-commerce, mobile and social networking channels are rich with opportunities for retailers to lure shoppers in and keep them coming back for more.


U.S. consumers are expected to be cautious with their holiday spending this year, as 72% expect their gift giving to be “controlled” in 2011, according to Accenture’s annual consumer holiday shopping study. Discounts, sales and prices are still top-of-mind this holiday season, with 40% of consumers saying an item being on sale is the single most important factor in their decision to purchase.


Lauren Freedman, president of Chicago-based the e-tailing group inc., said that companies can cash in on shoppers who are looking around for the best deals by making small additions to marketing strategies. For example, it’s key to reinforce value proposition through email campaigns. 


“Retailers should send emails to shoppers that promote value, such as touting 300 gifts for under $25,” Freedman said. “Make it very simple for budget-minded customers by packaging that information before they have a chance to navigate away.” 


Research shows that email marketing is still an effective way to drive traffic and sales to sites. According to data from a study conducted by Petaluma, Calif.-based e-commerce solutions provider MarketLive, shoppers are indeed receptive to receiving emails from retailers, with 39% wanting it weekly and 13% wanting it up to six times a week. In fact, 8% are open to daily emails from merchants.


Meanwhile, the majority of consumers said they are most likely to respond to emails this holiday season if they include free shipping offers (80%), sales and markdowns (79%), and coupons (73%). 


With many consumers reading email on mobile devices these days, Freedman noted that messages should be easy to read on smartphones and provide a direct link to a retailer’s mobile site. From a mobile site design perspective, retailers should display familiar logos that fit well on screens so shoppers know they’re on the right site. In addition, pages should be simple and uncluttered, allowing consumers to navigate through products and find the information they need. 


Finally, the mobile checkout process should have as few clicks as possible to make sure shoppers don’t get frustrated and navigate away. 


“There are still some big challenges for retailers in the mobile category,” Freedman said. “Smartphone usability isn’t always seamless, and shoppers need to feel comfortable when making a purchase. Make it easy on shoppers by keeping mobile sites simple and playing up the convenience factor.”


Once shoppers have made their way on to e-commerce and mobile sites, it’s the retailer’s duty to ensure they find what they need and get all of their questions answered. Even pages that retailers often overlook can be utilized during the holiday season to make a difference.


“The customer service page is often a place for missed opportunity,” Freedman said. “Take advantage of that real estate by touting gift cards, providing a calendar with shipping cut-off dates and always list contact information.”


Retailers also should be well aware of the major online shopping days of the season. Ranking second to Cyber Monday, “Green Monday” — the second Monday in December — is the most popular day for online shopping. The first Monday in December ranked third, followed by “Free Shipping Day,” which falls this year on Friday, Dec. 16.


“Those that offer free shipping — even if it’s just for a promotional period — should definitely get that information out as much as possible to target audiences,” Freedman said. “People love free shipping, and it helps retailers better compete during the holidays.”


Finally, consider two-dimensional quick response (QR), which gives consumers access to related digital information on the Web. When an image of a QR code is captured by a quick-response scanner or mobile phone camera, the user’s device is directed to a website where companies provide shoppers more information about products and services. 


“Retailers can use QR codes in stores by placing them next to products or tout them in catalogs and newspaper circulators,” said David Javitch, VP marketing for New York City-based Scanbuy. “It takes about a minute to create a QR code, so if merchants have content to link a code up to, it’s a no-brainer and very fast way to reach customers.”


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