Click on the link below or scroll down for this month’s top headlines and tekservePOS analysis and tips.
• Salvaging ’09 Through Inventory Management, Handheld Apps
• Virgin’s Outsourcing Smarts
• Strong Sales Uptick in Christmas Week Recap
Salvaging ’09 Through Inventory Management, Handheld Apps
By Deena M. Amato-McCoy
During the 98th annual NRF Convention & EXPO held in New YorkCity early this month, many retailers openly discussed howout-of-stocks further impacted a difficult 2008 holiday shoppingseason. While many still feel the fallout from OOS merchandise,retailers can reclaim a portion of that lost sales volume by tweakingmerchandising operations at store level.
Four weeks into 2009, the industry continues to dust itself off froma dismal holiday season -- one of the worst in retail history. Besidesreducing on-hand inventory levels to compensate for lower shoppervolume, “many retailers tried to salvage the shopping season byslashing merchandise prices to spur sales,” Frank Riso, seniordirector, retail solutions, Enterprise Mobility division, Motorola,Holtsville, N.Y., said at the show. “Store level staffs were reduced,and fewer people were available to service shoppers.”
Based on these factors, 23% of shoppers reported they were unable topurchase an item they wanted while shopping in stores this holidayseason. Similarly, 34% of these shoppers said they couldn’t find theproduct because of OOS levels.
These statistics are from the “Annual Survey of Holiday Shoppers,”released by Motorola. The study was based on 2,300 U.S., Canadian andU.K.-based holiday shoppers.
OOS scenarios are not new to the retail industry, and there are manyculprits. Historically, retailers have been challenged with integratinginventory management with movement data as merchandise turns atpoint-of-sale. Similarly, retailers struggle with how to masterperpetual inventory.
“Retailers also have a history of developing systems piecemeal. Thenthese all operate independently and inventory often doesn’t reflectsales at POS,” Brendan Lowe, VP, North America, Aldata Solution,Atlanta, said at the show.
Some new issues are also challenging chains. “As people continue tocut back their spending during the recession, retailers are shorteningtheir business cycles,” noted Brian Kilcourse, president, RetailSystems Research, Miami.
There is less consumer demand and retailers want less investmenttied up in inventory. “Simultaneously, it is imperative to be moreresponsive to consumer demand,” he said. “The period of time to orderand deliver merchandise to store level is getting shorter and shorter,and they hope that merchandise moves faster once it is at store level.”
Chains that are not already armed with the proper inventorycontrols, however, are subject to OOS situations. Then there is theimpact of the credit crunch.
“Retailers are conducting less short-term borrowing to buyinventory,” Kilcourse reported. “This translates into less merchandisebeing purchased from manufacturer partners, and less inventory for saleat store level.”
Retailers have their work cut out for them, but there is hope. Thefirst step is to transition to more real-time inventory-managementsystems and integrate them with front-end systems.
“Retailers need visibility into inventory, starting with what isordered up through the point it is sold, and this needs to be in nearreal time,” he said. “Until this happens, there will always be OOSlevels.”
What’s worse than an actual OOS situation is when the retaileractually has the merchandise in store. Poor task management ormerchandising processes cause merchandise to be placed in the wronglocation, or sit unpacked in the back room. By deploying intuitivehandheld units at store level, this problem can be remedied.
By empowering store employees with mobile handheld units connectedto enterprise applications, retailers are in a better position topinpoint merchandise, and support a better shopping experience.
“Retailers need to learn to do more with fewer resources, and handheld applications support this theory,” Riso said.
“They keep associates in tune to inventory levels and locations,without taking their attention away from shoppers,” he said. “Retailersadding these solutions will learn how to drive top-line revenues.” -- TechTalk Tuesday, Jan. 27, 2009
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For even more insight on the challenging new year, read the right-hand column by John Pruban, president of tekservePOS
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Virgin’s Outsourcing Smarts
By Deena M. Amato-McCoy
The debate between outsourcing IT solutions vs. managing systemsin-house is alive and well. But for Virgin Megastore, Los Angeles,outsourcing has proved itself to be the viable option.
Many companies argue that they choose to run systems in-house sothey can keep their arms wrapped tight around their proprietary data.This also forces retailers to become experts in all aspects of thatsystem’s management, operation, maintenance and security. When it cameto managing its e-commerce operation, however, Virgin Megastore didn’twant to leave its viable shopping channel to chance.
“We chose to outsource the entire site,” explained Robert Fort, VP, IT, CIO, Virgin Entertainment North America.
The entertainment retailer used to have an agreement withAmazon.com, which hosted and managed the chain’s site. Besides paying ayearly royalty to the company, “we didn’t have enough control over thelook and feel of the site,” he said.
In 2007, Virgin struck a deal with Baker & Taylor, a Charlotte,N.C.-based provider of books, videos, music, games and services, justin time for the critical holiday shopping season. In addition totapping the company as a wholesaler for its books, games, CDs and DVDs,Virgin also partnered with B&T to host its Web site.
The third-party company uses service-oriented architecture thatbundles and reuses software to control all content changes, managenetworking bandwidth, and process and encrypt credit-card payments forVirgin. “The agreement also gives us control over all content,” Fortexplained. “The SOA model also provides a better total cost ofownership for us, as it gives us more profit out of the channel.”
Since Virgin does not operate any distribution centers, it relies onB&T’s vendor-managed inventory program to control and coordinateall inventory and order fulfillment between its consumers and majorsuppliers.
For example, as consumers place an order, B&T manages theprocessing, picking, order fulfillment and inventory replenishment.Then suppliers are responsible for drop-shipping merchandise toconsumers. “This operation keeps our internal inventory costs low,”Fort said.
As Virgin adds new features to its Web site, outsourcing will surelyplay a role. “As we move forward and expand our Web presence, we willdefinitely weigh out how outsourcing can help us reach our goals,” Fortreported. -- TechTalk Tuesday, Jan. 13, 2009
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As retail IT departments continue to find creative ways to enhancethe customer experience with less money and smaller staffs, outsourcingIT solutions is gaining momentum. While Virgin Megastore is outsourcinge-commerce, many retailers are turning to outsourced options for helpdesk support and POS maintenance and repair.
“We live in a climate where the pressure for retailers torespond to the needs of the business and, more importantly, thecustomer is massive,” explains John Pruban, president of tekservePOS.“At the same time, the amount of resources in terms of people, capitalbudgets or operational expenses are stalled or shrinking. Outsourcingopportunities will grow during this time, but it’s critical that theright outsourcing relationships are developed and chosen. Justtransferring a process in the ‘same old way’ to an outsourcing companymay provide some financial benefit but not of the type truly needed. Apartner must be challenged to deliver ‘out-of-the-box’ solutions thatare innovative and deliver true bottom-line results. And, at the sametime, the retailer must be open to alternative approaches to thechallenges they are facing. If both parties come to the table with theright mix of cooperation, a dramatic bottom line return with improvedefficiency and service is possible.”
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Strong Sales Uptick in Christmas Week Recap
New York City (December 31, 2008) -- In a spot ofgood news for the nation’s beleaguered retailers, retail sales rose astrong 21.2% for Christmas week (Dec. 21 to Dec. 27) compared to thesame period in 2007, according to ShopperTrak’s retail sales estimate.Total U.S. foot traffic, however, for the week fell 4.9% compared tolast week, ShopperTrak reported.
The downturn in year-over-year traffic was slightwhen compared to the dramatic traffic declines retailers haveexperienced so far this season, the report said. On a week-over-weeklevel, shopper traffic showed a significant increase as the 2008calendar shift allowed more of a boost from procrastinating shopperslooking for deeply discounted items and last-minute deals on Monday,Tuesday and Wednesday.
Additionally, Dec. 26, a day ShopperTrak anticipatedwould be the third best-performing day this season, provided amuch-needed traffic lift as consumers took advantage of post-holidaysales and began redeeming gift cards.
The 2008 calendar shift significantly helpedyear-over-year performance (+21.2%) as more consumers shopped Monday,Tuesday and Wednesday in 2008 as opposed to the days leading into SuperSaturday in 2007 (Dec. 20 and Dec. 21). But last week’s strongweek-over-week performance highlighted the fact that many consumerswere waiting for discounted items and exploded onto the scene justprior to Christmas — and on Dec. 26 — to redeem gift cards and searchfor post-holiday sales, according to ShopperTrak.
“Annually, we see a boost just prior to Christmasfrom procrastinating shoppers and that trend continued last weekdespite the various economic pressures on the American consumer,” saidBill Martin, co-founder of ShopperTrak. “Both the traffic and salesresults of this past week indicate efficient shoppers were focusingtheir retail visits to stores offering value for their money withdeeply discounted items, which we’ve seen throughout the 2008 season.”
Despite Christmas week’s strong performance, Martinindicated ShopperTrak’s holiday-season forecast has been adjusted to a2.3% retail sales decline with a significant 16.0% traffic decline.Initially, the company predicated a 0.1% retail sales increase with a9.9% dip in total U.S. foot traffic.
“We expect retail performance will dive over thenext couple of weeks as retailers stop offering deeply discounted itemsand sales, and traffic levels return to seasonal low points followingthe holidays,” Martin said. “Looking ahead, retailers will most likelyneed to get creative to avoid the struggles most analysts havepredicted in Q1 as the current economy continues to influence consumerbehavior and shopping patterns.”
