In Tough Times, Love Your Customers
To attract shoppers, online retailers and brick-and-mortar stores are doing a little shopping of their own—for IT equipment and software.
Recession-weary retailers, in an effort to gain a competitive edge, are investing in new point-of-sale (POS) technologies and Web applications to improve customer service and enhance the shopping experience. They’re also implementing software to forecast sales and improve inventory levels. The results include cost savings, higher profits and assurances that they have the right amount of inventory to meet customer demand.
“The mantra for this year is ‘customer-centricity,’” says Leslie Hand, research director of IDC’s Global Retail Insights. “Retailers are focused on reducing costs where they can, but a lot of their attention is on creating a better customer experience.”
For online stores, it means adding new features, such as customer product reviews or one-page checkouts, to make purchases faster and more convenient. For brick-and-mortar stores, the trend is to integrate Wi-Fi access and computing devices, such as touch-screen kiosks, to better engage customers and assist them with their shopping.
At apparel or electronics stores, touch-screen kiosks allow customers to access product catalogs to comparison shop. If items are sold out at the store, customers can order them at the kiosk and have them delivered to the stores or to their homes, Hand says. Some supermarket chains are experimenting with mobile handheld devices that provide coupons and alert customers to sales. Others provide bar-code scanners that allow customers to scan in items as they shop, which speeds up the payment process.
From a distribution perspective, global companies with more than 10,000 employees rank inventory optimization as their top supply chain IT investment, according to IDC’s Manufacturing Insights. Inventory optimization software allows businesses to forecast demand and better manage their inventory, says Simon Ellis, practice director of supply chain strategies at Manufacturing Insights.
“Supply chain planning has made enormous leaps forward, and inventory optimization has driven significant savings for those who have adopted it,” Ellis says.
Worldwide retail IT spending is expected to grow 2.4 percent, from $81 billion in 2008 to $83 billion in 2009, while supply chain management spending in the manufacturing sector is expected to reach almost $3 billion in 2009, a 4.5 percent increase from 2008, according to IDC. Attractive prices, high-quality products and good customer service are critical. But to boost sales, retailers can turn to technology to differentiate themselves from the competition, Hand says.
“Retailers are always looking to innovate,” she says. “[Retail technology] does something that makes the customer think of a vendor differently and positively, which is especially important in this current economic environment.”
The following three businesses have taken advantage of e-commerce applications, POS technologies and inventory optimization software, respectively.
Overhauling Online Strategy
To succeed, online retailers must take their cue from Amazon.com, says Andrew Knight, director of e-commerce at Case-Mate, a Tucker, Ga.-based company that specializes in smartphone and laptop cases. That means creating fast-loading Web pages and offering customer-friendly features like “1-Click” checkouts, customer product reviews, and recommendation engines that analyze purchases and give recommendations to cross-sell and up-sell products.
“People are familiar and comfortable with ordering on Amazon,” says Knight. “If you don’t do it as well or better than Amazon, they will just go there.”
Knight joined Case-Mate this spring and immediately overhauled the company’s Website and online marketing strategy to increase sales. The big players in e-commerce applications are IBM and ATG, but Knight chose startup ShopVisible because it met the company’s needs, including good search engine optimization (SEO) features, at a fraction of the cost.
The e-commerce software gives Knight full control of HTML tags and descriptions, allowing him to fully optimize the site for search and drive traffic. The result is higher placement in search engines when people search for cases.
“So much of our traffic comes from searches,” he explains. “Paid search is expensive, so any traffic we can get naturally is a huge bonus.”
Case-Mate’s new Website, launched in April, features customer product reviews, which help shoppers make purchasing decisions. Knight also sped up the checkout process, reducing a multiple-step process to one page. Customer credit card information and shipping addresses are stored, so repeat customers don’t have to rekey the data each time.
The company previously lost sales as customers abandoned their shopping carts with each additional step in the checkout process. “By simplifying the process, we hope to improve the conversion rates,” he says.
Knight is also taking advantage of social networks, including Twitter and Facebook, to market products, communicate with customers and offer promotional giveaways. He also posts YouTube videos to showcase the company’s products.
With the new Website, Knight is optimistic about the company’s online prospects. While retail sales are still Case-Mate’s bread and butter, he expects to rake in between $1 million and $3 million in online sales this year. “We have a large opportunity to grow the online business,” he says.
Enhancing the Point of Sale
Other retailers must deal with “in line” challenges, as in waiting in line. That’s the case at MainGate, an Indianapolis company that sells merchandise at racing and other sporting events. For this retailer, speed matters.
MainGate sells T-shirts, caps and other merchandise at 150 events a year, including IndyCar and National Hot Rod Association races, where attendance numbers in the hundreds of thousands. Shoppers buying souvenirs despise long lines, so to keep them happy, the company must keep the checkout lines moving fast. To do that, MainGate standardized on all-in-one POS devices and software.
The Pioneer StealthTouch-M5 POS units are computers with built-in touch-screen monitors and magnetic stripe readers for debit and credit cards. They are more user-friendly than regular PCs, resulting in faster transactions and better customer service, says David Schultz, MainGate’s POS administrator. “The touch-screens improve efficiency and increase the transactions per minute,” he says, adding that with touch-screens, cashiers don’t have to fumble with keyboards and mice.
The POS software also helps speed up transactions. Six years ago, MainGate used software that required cashiers to go through five or six screens per transaction. Now, the company uses Microsoft’s Dynamics Retail Management System (RMS) 2.0 software, which allows cashiers to ring up customers on one screen.
The POS devices have three peripherals attached to them: a Metrologic Voyager USB handheld bar-code scanner, an APG USB cash drawer and a Star receipt printer, which attaches via a serial cable. Schultz says he buys all his POS equipment from technology reseller CDW.
MainGate uses wireless cards from a cell phone company to connect the POS units to the Internet and to process debit and credit card payments. Each merchandise tent is connected to a trailer with a network jack and switch that allows six POS units to connect to the Internet. For security, MainGate deploys SonicWall’s Network Security Appliance (NSA) 240, which offers a firewall, anti-virus software, and spam and packet-filtering capabilities. Each trailer houses a server that runs Microsoft Dynamics RMS 2.0 to manage transactions.
Schultz, whose company also manages retail stores as well as e-commerce sites for clients—including several NFL teams—says Dynamics RMS 2.0 allows MainGate to produce detailed sales reports for clients. It also tracks inventory and provides real-time sales information, which can alert managers at events to restock items that are about to sell out.
“During slow times, we can take inventory, see that there’s a run on ear plugs or certain T-shirts and hats, and get more from reserve,” he says.
As for the future, Schultz is considering implementing kiosks at retail stores, where people can go up to a computer and shop. “We strive to maximize sales and provide excellent customer service,” he says, “and the more avenues we have for customers to purchase products, the better.”
Jeffrey Carlisle’s job at SKF USA is to ensure that both its direct customers and its distributors are always stocked with the right amount of inventory. The Lansdale, Pa.-based company, a subsidiary of Swedish manufacturing giant SKF Group, makes bearings, seals and lubrication systems for the automotive and industrial markets. The parent company has more than 100 manufacturing plants and 15,000 distributor locations worldwide.
For the past two years, Carlisle has used Demand Solutions’ supply chain management software to forecast its U.S. sales and to tell manufacturing plants what products to make and in what quantities. The software allows him to improve the company’s inventory turnover, while reducing its excess inventory.
“It’s critical for the sales team and the factories to communicate effectively on what the future holds and how much we need to make,” says Carlisle, director of forecasting and market analysis. “The main objective is having our products available to our customers without having excess inventory.”
Previously, the factory managers made educated guesses on how many products to make based on the previous year’s sales. With Demand Solutions’ Forecast Management software, Carlisle inputs the sales expectations for each product with historical sales data, and the software runs through algorithms to forecast demand.
With the vendor’s Sales & Operations Planning software, Carlisle is able to link the sales forecasts with the manufacturing process. Based on the forecasts, the four U.S. factories know how much they need to produce.
The technology tracks actual sales and production at the factories, and produces detailed monthly reports on how well the sales teams and factories performed. It shows, for ex-ample, if a factory was expected to produce $1 million worth of a certain product but only produced $800,000 worth. The same is true for sales teams that underforecast or overforecast sales, Carlisle says.
The software enables the sales and factory teams to collaborate, and it helps with accountability, he adds. Having monthly planning meetings, at which managers revise expectations as market conditions change, helps the company optimize its inventory levels and save money, Carlisle reports.
The software paid for itself in three months, he says. SKF’s senior management is so impressed by the technology’s ROI in the United States that Carlisle is now implementing the software companywide, including at SKF’s European plants. Good communication between the sales and factory teams is key, he says.
“We’re talking [up front], rather than waiting after the fact, when it becomes a blame game,” Carlisle says. “Everyone is involved, and we’re all in this together.”
Clearly, good communication among retailers, distributors and customers is essential to success, and that kind of collaboration is enabled by technology.