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Spreading Good Vibes

BY Dan Berthiaume

Feelgoodz Inc. likes to create a customer environment that is as carefree and comfortable as its signature merchandise: eco-friendly flip-flops.

Although the company operates one store in Raleigh, N.C., its e-commerce site serves as its primary direct-to-consumer selling channel, meaning that smoothly functioning order fulfillment is of paramount importance to maintaining positive customer-service vibrations.

In the beginning, Feelgoodz outsourced fulfillment to third-party logistics providers. But in the fourth quarter of 2012, the company decided to move fulfillment processes in-house. It soon realized the true scope of the task it had taken on.

Moving In-House

“We opened our own warehouse and brought everything in-house when we made that switch,” said CEO Mark Saad. “We realized pretty quickly we had to get up to speed with the program. This included everything down to scheduling regular pickups.”

Further exacerbating the situation was the fact that Feelgoodz was moving from a mostly seasonal business focused on selling warm-weather flip-flops to a year-round enterprise that also offered closed shoes. In addition, the company, which does a large wholesale operation, was seeing increased traffic in its direct-to-consumer business.

Feelgoodz, originally founded by Kyle Brenner in 2008 and then merged with Saad’s similarly aligned eco-friendly footwear company Kinder Soles in 2011, had always used UPS for deliveries. When the company realized it needed assistance in effectively meeting the demands of a year-round consumer-focused supply chain, the company turned to the supplier for help.

“In moving fulfillment from third-party providers to in-house services, we send out shipments of various sizes,” Brenner said. “Shipping is one of the biggest costs we incur. Shipments can range from one pair of shoes to 100 pairs. UPS helped us figure out the best solution to ship each one.”

For example, Feelgoodz will generally send small shipments using UPS ground delivery. But for large shipments, the retailer often uses UPS SurePost, a hosted service where the logistics provider partners with the U.S. Post Office to help companies efficiently complete the all-important “last mile” of customer deliveries.

Delivering Something Extra

“SurePost cuts down the expense of customer deliveries,” said Saad. “It’s a great add-on.”

In addition, Feelgoodz started selling goods to customers in Canada, using UPS WorldEase international shipment service to fulfill those orders. However, the retailer leverages UPS hosted solutions to not only get deliveries to consumers more efficiently, but to turn them into high-tech marketing opportunities.

“We use UPS technology to add on branding and marketing to shipping labels for SurePoint deliveries,” Saad said. “We can add a code to the label that the customer can use for a discount on their next purchase.”

On the marketing side, Feelgoodz uses UPS to help stimulate its business.

“We can embed a QR code into the shipping label that the customer can scan to watch a video about our products,” Saad said.

Brenner and Saad both agreed that it is hard to calculate a specific return on their investment in hosted UPS solutions and services. However, in general, the retailers have no doubt about the value UPS is delivering.

“There is a significant amount of savings,” Saad stated.

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Promotional Rescue

BY Dan Berthiaume

Despite the digitization of most customer-facing communication, printed flyers are still an important promotional vehicle for many retailers. By analyzing terabytes of offer-, store- and item-level sales data for products promoted in its weekly flyers, Hudson’s Bay Company (HBC) is determining the true incremental return on printed promotions and optimizing the efficiency and effectiveness of its flyer-based marketing efforts for its Hudson’s Bay stores.

“Everyone knows printed mass communication is not the most efficient method of communicating with the customer,” said Ashley Whicher, VP marketing, HBC, Toronto, which operates 90 Hudson’s Bay department stores. “There is no customization. We didn’t have something to measure the incremental ROI of each offer.”

Getting What You Need

Whicher joined HBC about three-and-a-half years ago, coming from another Canadian retail chain that employed an off-the-shelf automated solution for determining the incremental ROI of offers in printed flyers. He quickly realized that HBC needed something similar. After about six months, he started evaluating potential solution vendors with the IT department and went through an RFP process that lasted about a year before HBC selected a custom-built solution from Saferock Retail.

Running on a virtual Oracle infrastructure, the solution enables Saferock to retrieve data from HBC servers through a multi-encrypted secure virtual link for optimization at SKU level. Data is stored on a Teradata data warehouse running on a separate physical server.

“There was a cost benefit in getting exactly what we needed from a custom-built solution,” explained Whicher. “With an off-the-shelf application there is the expense of development and ongoing maintenance and running of the system.”

Setting the Baseline

Once the hosted Saferock solution was up and running, HBC loaded more than 18 months of historical data about items featured in weekly print flyer offers.

“We determined the sales baseline,” said Whicher. “Promotions never offer a 100% return. They’re incremental.”

HBC launched its measurement of printed promotional effectiveness in the first quarter of this year. Each Friday morning, following the close of its Friday-Thursday marketing week, HBC uploads promotional data and by noon the following Monday, HBC receives data, including performance analysis by offer, incremental sales and incremental sales-driven gross margin.

The retailer uses the gross margin driven by incremental sales as the numerator to determine ROI at the offer level, as well as incremental sales lift and margin at the macro-and item-level. This allows HBC to perform comparisons, such as the incremental return of different promotions on the same item, as well as measure incremental sales driven by specific offers on specific items.

“We may repeat an offer with a lower ROI to help drive traffic,” said Whicher. “If you know in advance, you can build it into your profitability model. Obviously you can’t have every offer be low-ROI.”

Looking ahead, Whicher said HBC may use the Saferock tool to help create flyers segmented for market niches. Internally, the tool has had an important cultural impact, as well.

“We’ve changed the culture of how people look at the business,” he said. “We used to look at gross sales generation of promotions. With the tool, you can determine the baseline you would have gotten just by opening the doors and determine the actual incremental sales and margin, which are the true number.”

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Dunkin’ Donuts Brews up New Look

BY CSA STAFF

Earlier this year, quick-serve behemoth Dunkin’ Brands, which operates 10,500 Dunkin’ Donuts in 31 countries and 7,000 Baskin Robbins in 50 countries, announced its first new store design in seven years.

The new design — now in rollout mode — includes four different options. Each features variations in layout, color palette, graphics, textures, furniture and lighting, and allows for the personal taste of franchisees. An underlying theme in every version, however, is customer comfort. Some offer free Wi-Fi, others flat-panel TVs, and most provide seating geared toward a longer stay. The overall goal is to provide franchisee flexibility and underscore the company’s commitment to expanding the morning daypart to a full-day serving affair.

Dunkin’s new face won’t appear overnight. The sheer size of the Canton, Mass.-based chain dictates a more methodical pace, according to VP franchising and business development Grant Benson. Over a 12-month period, some 1,000 locations will sport the new look.

Chain Store Age senior editor Katherine Boccaccio talked with Benson about the store design, expansion plans and competitive trends. Benson, a 28-year veteran of the company, is responsible for franchise sales for both the Dunkin’ and the Baskin Robbins banners, oversees market-planning functions — which determines where stores are placed and analyzes franchisee-submitted sites — and handles nontraditional development, which puts both concepts in such venues as universities, airports, military bases and transportation hubs.

Under Benson and the rest of the executive team, Dunkin’ Donuts continues to expand aggressively, with a long-term goal to double the number of stores in the United States to 15,000 within the next 20 years. In 2013, nearly 350 Dunkin’ Donuts units will open across the country — demonstrating that, despite its size, Dunkin’ Brands still has room to grow.

How has the Dunkin’ brand evolved over the years?

Both the Dunkin’ Donuts and Baskin Robbins brands are, in a word, iconic — each with a more than 60-year legacy. Few brands are that old, and these two are truly loved and recognized by guests throughout the world. Both brands have evolved in many ways; Dunkin’ has gone from predominantly a franchisee base of smaller operators to ownership groups that handle six to 200 units. And, on the conceptual side, the brand has evolved from one that sells primarily baked goods and coffee to a powerhouse quick-service restaurant concept that is much more focused on beverages, other dayparts, and an expanded menu.

What about Baskin Robbins?

At Baskin Robbins, we have stayed true to our heritage, maintaining a small network size (meaning, the number of stores a franchisee owns) positioned in or near neighborhoods and serving as a frozen treat destination. The menu has evolved, however, shifting toward desserts such as cakes and toward more of an emphasis on beverage sales.

As part of the evolution of both banners, we have developed a combo store that merges both brands into one — which is essentially a third company concept. There are more than 1,000 combo stores in the U.S.

What was the thinking behind the new store design?

It’s not really a single new design — it’s a selection of four different designs under our ‘Fresh Brew’ concept. The offshoots allow us to play to different venues. Some are more upscale, some play better in urban versus suburban locations, and each allows for franchisee personal tastes. A franchisee can select the one most appropriate to the venue, and the design can be tailored toward location and consumer base. This is not a cookie-cutter design.

It’s critical a brand remain contemporary. Every seven or so years, we will come out with a new design that will be rolled out in all new stores and will be remodeled in existing stores. Much of the time, we are remodeling more stores than we are opening … and that’s a substantial number. In fact, more than 1,000 stores a year are unveiling a new store design — whether in a new or an existing store — which allows us to change the face of the brand and stay relevant.

How is the new design different from the current look?

The new design has an increased focused on comfort, promoting a longer stay. We have included Wi-Fi in many locations, as well as television. It’s a bit more inviting from that perspective. It’s also somewhat brighter, featuring more contemporary colors, in keeping with other brands that are known for great design, such as Starbucks and Panera Bread.

Does it have any green elements?

We’ve got some units that are fully LEED certified. We really considered how we could help our franchisees build greener stores, addressing heating and ventilation, lighting, and components such as window design and shielding.

The new design includes LED light fixtures, no VOC paints and wall tile with 35% pre-consumer recycled materials. Our franchisees have the option to select some or all of the various sustainable options and incorporate those features or materials into their stores. We will continue to build on that.

What kinds of trends are you observing in your competitive space?

We are seeing guests who have higher expectations in terms of the environment they’re served in, quality of the food and service, and the menu options. Internally, we are trending toward more unique products — such as breakfast sandwiches, lunch options and snacks. We do that so the consumer who wants it all in one place — coffee, Internet, sandwich or snack — can find that at our restaurants. Guests have increasing choices where they will spend their money and time, and they prefer not to make multiple stops.

The concepts that have the ability to flex and be more things to more people in the right environment are going to do well going forward.

From a growth perspective, particularly via franchising, brands that have a history have an edge. Dunkin’ and Baskin at 65 years old have a leg up on other, newer concepts. There’s less interest from franchise candidates in something that is a start-up or new … today’s franchise candidates are more risk averse.

There is so much growth potential for Dunkin’ and Baskin. Despite our size, we still have room for thousands of stores in the United States.

How would you describe your leadership style?

A leader is a coach — someone who is accessible and available to coach and counsel the team, and to ensure that all barriers to performance are removed. I coach, I counsel, I am accessible, and I try to be in tune with what is working and what isn’t. You have to empower your people to get their work done, and you have to listen to their feedback.

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