Retailers Sold on ITBy Dennis McCafferty | Posted 2010-10-12 Email Print
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Retail and distribution companies once viewed IT as a way to improve supply chain management and store operations. These days, they use technology solutions to manage relationships with customers, vendors and business partners.
The essential premise of running a successful retail or distribution business is a simplistic but time-proven adage: To make it, you gotta sell things that people want to buy. But the formula for getting products to a customer requires constant market research, product development, testing and effective distribution.
Similarly, demand continues to rise for technology solutions that better enable retailers to pursue those tasks. Enterprise IT spending among retail businesses is expected to increase to an estimated $151.2 billion in 2011, up from $142.4 billion in 2009, according to industry researcher Gartner.
Twenty years ago, many retail and distribution companies viewed IT mainly as a way to improve efficiency in supply-chain management and store operations. Now, they are using tech solutions to better understand and manage relationships with customers, vendors and business partners, as well as their internal data, according to Barry Brunsman, Chicago-based head of the National Information Technology Solutions team at Alvarez and Marsal Business Consulting.
“Ultimately, retailers need to understand what factors are driving a positive customer experience,” says Brunsman, who was vice president of IT strategy/enterprise architecture at Target before joining Alvarez and Marsal. “It’s not necessarily the products on the shelves that are driving purchase decisions; it’s the shopping experience.”
Here’s a look at four retail and distribution companies that have pursued these IT solutions to better manage their enterprise: e-commerce, virtualization, software as a service (SaaS) and cloud computing.
E-Commerce: a Dream Option
It’s difficult to be a sports fan without encountering Dreams, a company that sells a Johnny Unitas Baltimore Colts throwback jersey for $124.99, an L.A. Lakers 2010 championship T-shirt for $17.99 and a framed autographed photo of Dale Earnhardt Jr. standing in front of his #88 Amp car for $297.99.
The challenge, however, is that these products are sold online under three different brands. The site for the store, Field of Dreams, sells the Unitas jersey. The Lakers T-shirt is available through FansEdge, and the Earnhardt photo can be bought at the Mounted Memories site.
After Field of Dreams, based in Sunrise, Fla., launched three decades ago, it became widely identified with those seemingly ubiquitous Field of Dreams stores in shopping malls. Then, the dot-com explosion in the 1990s fueled a huge period of growth that continues today, as Dreams has acquired more than 70 different sports memorabilia companies to command a major e-commerce presence.
“We’ve expanded greatly, and we continue to do so today,” says Bob Hitchcock, who, as vice president of product development for Dreams, oversees all e-commerce, software development and back-office applications projects. “We started out strictly by launching sites for players such as Pete Rose and John Elway. They wanted a site for themselves and were interested in selling their merchandise there as well. So we did that for them, and then we turned our attention to larger, more syndicated online companies that sell sports items.”
At first, the e-commerce platform wasn’t suited for such expansion. “We’d use independent code and databases for each retailer site,” Hitchcock says. “That took a lot of time, and it wasn’t scalable. We’d sign a large client, and it could take six weeks before we could get the site up and running.”
The company turned to Amadeus Consulting, which provided a new e-commerce syndication platform to support and integrate all online sites with a unified customer database, multilayered navigation on a Microsoft.NET platform, enterprise-level architecture and multiple payment processors. Today, sites are ready to run just two days after acquisition, instead of the several weeks it used to take.
In addition, the company is now able to achieve sales levels that it couldn’t before. For example, FansEdge.com received nearly 16,000 online orders totaling more than $1 million on a single day during the winter holiday shopping season. Revenue from online sales overall has increased from $4 million before the integrated solution to more than $50 million after it was launched.
“We gained a lot of knowledge through this platform that can be used to grow our e-commerce sales,” Hitchcock says. “We have a dual hierarchy. Some customers think of themselves as buyers of jerseys or T-shirts. They’re not really that interested in the sports team or player. But other customers are diehard fans of the Yankees or Cowboys—or some other team or player—and they want merchandise that reflects their passion.
“We’ve always had two different kinds of customers coming to us from two different directions. This platform allows us to reach all those customers and bring them to the point of sale in a fluid, uncluttered way. We can get them more quickly to where they want to shop.”