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When Even the Girl Scouts are Multichannel …

BY Nikki Baird

The first weekend in March ended the availability of Girl Scout cookies for the year. But what made this year different from the last 90 years of the institution’s existence is that, for the first time, the Girl Scouts leveraged their online presence to help sell cookies. Not only could shoppers “meet” the cookies through their online profile on MySpace, they could enter their ZIP code on the Girl Scouts Web site (www.girlscouts.org) and find where a local troop would be selling cookies.

Yes, technically what the Girl Scouts are doing doesn’t fully qualify as “multichannel” retailing. While they aren’t actually selling the cookies online, they are making good use of the Internet to drive local purchases, something that’s critically important to the local troops who depend on cookie sales to raise money.

Interestingly, there are still many retailers that are not making the most of a multichannel presence. In Retail Systems Alert Group’s recent report, “The Highway To MultiChannel Retailing,” 23% of store-based retailing respondents reported that they still operate only the store channel.

While there are certainly segments for which online selling is not an option (grocery retailers, for example, still struggle to define an e-commerce strategy) retailers with no experience in multichannel retailing face a steep learning curve as consumer demand for a multichannel experience starts to creep up on them:

Store-only retailers just don’t buy into the multichannel consumer concept. Thirty-two percent of store-only retailer respondents said they were unconcerned with increased cross-channel consumer behavior compared with only 13% of store-based multichannel retailers. Also, 39% of store-only respondents were unconcerned with increased multichannel expectations from their customers, as opposed to only 10% of their store-based multichannel counterparts.

Store-only respondents also seemed to believe their differentiation is secure: Thirty-seven percent reported that they were unconcerned with price competitiveness as a driver for multichannel retailing vs. 20% of their store-based multichannel peers.

Store-only retailers worry more about the wrong multichannel challenges. Since they’re not tapped into the multichannel consumer mind-set, store-only retailers don’t have the guidance and experience they need when they are ready to start leveraging the online channel. As a result, they worry about the wrong things.

While both store-based multichannel and store-only retail respondents were concerned about single-data stores across channels (49% vs. 50%, respectively, rated it “very important”), multichannel retailers were much more worried about distributed order management (69% vs. store-only 43%), and content and product information management (52% vs. store-only 25%).

Store-only retailers, on the other hand, worry more about how to make it work physically. Forty-four percent of these respondents rated transportation and returns-management systems as very important compared to 30% of their store-based multichannel counterparts.

If you evaluated an online presence even just a couple years ago and found it wasn’t worth it, you may want to reopen that decision. The RSAG multichannel report found that nearly 80% of retail winners (those that outperformed their peers in comparable-store sales growth) operate in multiple channels, vs. only 50% of retailers who performed worse than average.

After all, if the Girl Scouts are figuring out how to leverage multiple channels, shouldn’t you?

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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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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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