Retail Industry

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Posted in the local news forum here.

[fgeorge]

Rust Report 27 Nov 2009

The Jeanswest retail chain has begun using a cloud-based loyalty system provided by Australian company Loyalty Technology (LoyaltyTech). The solution was based on a system provided by Responsys to support a range of customer interactions by adding CRM and enhanced back-office reporting, explained Matt Hampshire, managing director of LoyaltyTech. LoyaltyTech

[Jo Vincent]

URL: The 24-Hour Supply Chain -- Supply Chain -- InformationWeek

The 24-Hour Supply Chain

7-Eleven depends on store managers for the accuracy of its 'centrally decentralized' system
By Steven Marlin
InformationWeek
January 26, 2004 12:00 AM (From the January 26, 2004 issue)

When Hurricane Isabel struck on Sept. 18, wreaking havoc throughout the Northeast corridor, some residents in Annapolis, Md., and suburban Baltimore could take heart from at least one thing: Their local 7-Eleven stores would have plenty of supplies on hand. That's because Pinto Soin, who operates four stores in the area, had been following the storm's path and his own intuition. A 7-Eleven Inc. franchisee for 13 years, Soin upped his orders for the stores he operates in residential areas, which he knew would be inundated.

This is one example of the key role 7-Eleven's store managers play in what CIO Keith Morrow describes as the convenience-store chain's massive "centrally decentralized" supply chain. A data repository provides store managers with information on what's selling, but the managers use their own on-the-spot knowledge of the neighborhood to make final ordering decisions. "We could never predict a busload of football players on a Friday night, but the store manager can," president and CEO Jim Keyes says.

This approach lets 7-Eleven combine the management efficiency and purchasing clout of a national chain with the entrepreneurial feel of a mom-and-pop store. By adding local control of the ordering process, 7-Eleven takes the opposite approach to Wal-Mart Stores Inc.'s much-heralded replenishment supply-chain model, in which products are automatically reordered once stocks fall below a certain level.
A highly centralized approach could never work in a convenience-store environment, Soin says. "You can't do it on a national level; it has to be done at the store level, based on your location, geography, and knowledge."

The convenience-store chain emulates Wal-Mart in other ways, though. As with its large-retailer brethren, business technology lies at the heart of 7-Eleven's strategy. "Technology has given us the ability to understand what's selling in every store, item by item and hour by hour," Keyes says. "Technology has transformed us."

That transformation starts with each purchase. No sooner has a customer paid for a newspaper and coffee than the transaction is on its way to a data center in Dallas, to be stored and analyzed along with those of the 6 million other U.S. customers who visit the chain's outlets each day. 7-Eleven tracks purchases at the store, regional, and national levels and quickly provides that analysis to managers at all levels.

The company uses technology to tighten links to its suppliers, as well. With $33 billion in worldwide sales, it's able to negotiate on price with major name-brand manufacturers such as Procter & Gamble Co. It also has the clout to cut product and merchandising deals, whether that's working with South Beach Beverage Co. to develop SoBe energy gum or with Anheuser-Busch Inc. to design a refrigerated single-serve beer dispenser.

With 3,300 franchise-owned stores and 2,500 company-owned stores, 7-Eleven easily outdistances other convenience-store chains such as Couche-Tard Inc., which operates 2,000 Circle K stores in the South and Southwest; Casey's General Stores Inc., with 1,800 stores in the Midwest; and The Pantry Inc., with 1,400 stores in the Southeast.

When Hurricane Isabel struck on Sept. 18, wreaking havoc throughout the Northeast corridor, some residents in Annapolis, Md., and suburban Baltimore could take heart from at least one thing: Their local 7-Eleven stores would have plenty of supplies on hand. That's because Pinto Soin, who operates four stores in the area, had been following the storm's path and his own intuition. A 7-Eleven Inc. franchisee for 13 years, Soin upped his orders for the stores he operates in residential areas, which he knew would be inundated.

Most of 7-Eleven's IT staff is focused on high-end analytics and data modeling, CIO Morrow says.

This is one example of the key role 7-Eleven's store managers play in what CIO Keith Morrow describes as the convenience-store chain's massive "centrally decentralized" supply chain. A data repository provides store managers with information on what's selling, but the managers use their own on-the-spot knowledge of the neighborhood to make final ordering decisions. "We could never predict a busload of football players on a Friday night, but the store manager can," president and CEO Jim Keyes says.

This approach lets 7-Eleven combine the management efficiency and purchasing clout of a national chain with the entrepreneurial feel of a mom-and-pop store. By adding local control of the ordering process, 7-Eleven takes the opposite approach to Wal-Mart Stores Inc.'s much-heralded replenishment supply-chain model, in which products are automatically reordered once stocks fall below a certain level.

A highly centralized approach could never work in a convenience-store environment, Soin says. "You can't do it on a national level; it has to be done at the store level, based on your location, geography, and knowledge."

The convenience-store chain emulates Wal-Mart in other ways, though. As with its large-retailer brethren, business technology lies at the heart of 7-Eleven's strategy. "Technology has given us the ability to understand what's selling in every store, item by item and hour by hour," Keyes says. "Technology has transformed us."

That transformation starts with each purchase. No sooner has a customer paid for a newspaper and coffee than the transaction is on its way to a data center in Dallas, to be stored and analyzed along with those of the 6 million other U.S. customers who visit the chain's outlets each day. 7-Eleven tracks purchases at the store, regional, and national levels and quickly provides that analysis to managers at all levels.

The company uses technology to tighten links to its suppliers, as well. With $33 billion in worldwide sales, it's able to negotiate on price with major name-brand manufacturers such as Procter & Gamble Co. It also has the clout to cut product and merchandising deals, whether that's working with South Beach Beverage Co. to develop SoBe energy gum or with Anheuser-Busch Inc. to design a refrigerated single-serve beer dispenser.

With 3,300 franchise-owned stores and 2,500 company-owned stores, 7-Eleven easily outdistances other convenience-store chains such as Couche-Tard Inc., which operates 2,000 Circle K stores in the South and Southwest; Casey's General Stores Inc., with 1,800 stores in the Midwest; and The Pantry Inc., with 1,400 stores in the Southeast. Indirect competitors include single-store companies, which account for three-fifths of the nation's 132,000 convenience stores, ac- cording to the National Association of Convenience Stores. There are also 100,000 combination convenience-store gas stations.

In convenience retailing, where a quarter-point increase in sales volume can spell the difference between success and failure, 7-Eleven holds its own. December 2003 sales were $901.0 million, an increase of 6.7% over December 2002. For all of 2003, U.S. same-store sales increased 3.2%, versus a 3.1% increase for 2002.

The crown jewel of 7-Eleven's operations is its proprietary Retail Information System, through which store managers place orders, do bookkeeping tasks, and receive reports that enable them to track sales relative to other 7-Eleven stores in the area. Because retail sales are weather-dependent, the system provides store managers with weather forecasts as well.

The system collects data from point-of-sale terminals and transmits it in real time to a 7 terabyte Oracle data repository operated by EDS. Using analytics software from Business Objects SA, the data is sifted for clues about customer demand, more-effective pricing schemes, and possible product innovations such as the recently added Diet Pepsi Slurpee. The system provides store managers with daily, weekly, and monthly sales tallies upon which to base their orders. For fresh-food items, which are ordered daily, managers base orders on that day's sales from the previous week, taking into account factors such as the weather.

The system connects stores to McLane Company Inc., 7-Eleven's primary wholesale distributor, and to the commissaries and bakeries that provide fresh-food products. McLane, which was owned by Wal-Mart until last year, when it was sold to Berkshire Hathaway Inc., built the data warehouse that lets it, 7-Eleven, and key suppliers view the same sales and shipment information. "There's quite a bit of information sharing," says Ruel Athey, VP of customer service at McLane Information Systems. "We work closely with 7-Eleven and the suppliers to come up with the most efficient distribution process we can."

Independent distributors of Anheuser-Busch, Coca-Cola, Frito-Lay, Pepsi, and other brand-name products accept orders electronically or verbally. 7-Eleven requires its company-owned stores to use the electronic system; franchisees don't have to, but most do, Athey says.

Store managers enter orders into workstations or handheld computers by 10 a.m. daily. By 11 a.m., orders have been consolidated by EDS and dispatched to 7-Eleven's suppliers. The consolidation process takes place four times a day, once for each time zone in which 7-Eleven operates. Orders for fresh-food items are aggregated at 7-Eleven headquarters and transmitted to third-party commissaries and bakeries, which prepare them for delivery the next day by one of the company's 22 distribution centers around the country.

The idea of relying on store managers for intelligence dates back to 7-Eleven's origins as an ice-dock operator 75 years ago; when refrigerators began replacing iceboxes, the company asked customers what items they'd need for their new appliances. As the company grew and prospered, it began exporting its concept abroad. Today, overseas licensees operate 10,000 7-Eleven stores in Japan, 3,400 in Taiwan, and 6,000 in other countries; earlier this month, the company approved plans to expand into Beijing and surrounding provinces.

In the 1970s, 7-Eleven began to move away from its roots. In an effort to become vertically integrated, it acquired an oil company, Citgo, and began operating its own dairy and produce farms. Keyes, who began his career with the company at that time, recalls that the move backfired miserably. "We were great retailers but terrible refiners and dairy farmers."

By the early 1990s, the company realized its error, shed Citgo and other ancillary businesses, and focused on becoming "virtually integrated." Instead of owning aspects of production, it would work with suppliers to create and fulfill customer demand. Keyes took the virtual integration concept from Japan, where companies traditionally work in tight partnerships, opening their books to each other to a degree unheard of by American companies. When executed correctly, the concept can pay huge dividends; the key is to think synergistically, with the parties contributing to the value chain and sharing in the results.

7-Eleven's ambitions extend beyond convenience-store fare. With new VCom Inc. terminals installed at 1,000 stores, the company provides financial services and E-retailing to in-store customers. The VCom units, designed and built by NCR Corp., combine ATM capabilities with nonstandard features such as verifying cash deposits, dispensing coins, cashing checks, and providing money orders. Last month, 7-Eleven added E-retailing features allowing customers to buy products from retailers such as 1-800-Flowers, eBags.com, and TopWebBuys.com. The goal is to have two kiosks in every store, Keyes says.

For a company that has staked its future on technology, 7-Eleven is decidedly not bleeding edge. It sees itself as a retailer, not a technology company. For instance, because it doesn't have to track pallets of cargo, it has adopted a wait-and-see approach with radio-frequency identification. Once it becomes feasible to place RFID chips on products such as cigarette cartons, 7-Eleven will need to rethink its model and probably expand its use of business technology. "If you think storing every sales receipt from 6,000 stores and 6 million customers is a challenge, wait until you start capturing data in real time on an item-by-item level," Morrow says.

Even without RFID, 7-Eleven is a shrewd user of technology, which accounts for a third of its $375 million capital budget.

7-Eleven's seven-year contract with EDS lets it buy IT services on demand, scaling up and down as business needs dictate. It buys financial and other business applications from Oracle; Keyes has lobbied Oracle CEO Larry Ellison to integrate various product lines to make it easier for 7-Eleven to centralize management reporting and maintain a single data repository. 7-Eleven, he told Ellison, wants to be "the role model for a Microsoft-type suite for a [multibillion-dollar] corporation."

The bulk of 7-Eleven's 150-person IT staff is devoted to "higher-end analytics and physical and logical data modeling," Morrow says. Their chief goal is to ensure that new products coming out of 7-Eleven's research-and-development labs, such as the Diet Pepsi Slurpee, find a receptive audience among its 6 million daily customers.

Indirect competitors include single-store companies, which account for three-fifths of the nation's 132,000 convenience stores, ac- cording to the National Association of Convenience Stores. There are also 100,000 combination convenience-store gas stations.

In convenience retailing, where a quarter-point increase in sales volume can spell the difference between success and failure, 7-Eleven holds its own. December 2003 sales were $901.0 million, an increase of 6.7% over December 2002. For all of 2003, U.S. same-store sales increased 3.2%, versus a 3.1% increase for 2002.

The crown jewel of 7-Eleven's operations is its proprietary Retail Information System, through which store managers place orders, do bookkeeping tasks, and receive reports that enable them to track sales relative to other 7-Eleven stores in the area. Because retail sales are weather-dependent, the system provides store managers with weather forecasts as well.
The system collects data from point-of-sale terminals and transmits it in real time to a 7 terabyte Oracle data repository operated by EDS. Using analytics software from Business Objects SA, the data is sifted for clues about customer demand, more-effective pricing schemes, and possible product innovations such as the recently added Diet Pepsi Slurpee. The system provides store managers with daily, weekly, and monthly sales tallies upon which to base their orders. For fresh-food items, which are ordered daily, managers base orders on that day's sales from the previous week, taking into account factors such as the weather.

The system connects stores to McLane Company Inc., 7-Eleven's primary wholesale distributor, and to the commissaries and bakeries that provide fresh-food products. McLane, which was owned by Wal-Mart until last year, when it was sold to Berkshire Hathaway Inc., built the data warehouse that lets it, 7-Eleven, and key suppliers view the same sales and shipment information. "There's quite a bit of information sharing," says Ruel Athey, VP of customer service at McLane Information Systems. "We work closely with 7-Eleven and the suppliers to come up with the most efficient distribution process we can."

Independent distributors of Anheuser-Busch, Coca-Cola, Frito-Lay, Pepsi, and other brand-name products accept orders electronically or verbally. 7-Eleven requires its company-owned stores to use the electronic system; franchisees don't have to, but most do, Athey says.

Store managers enter orders into workstations or handheld computers by 10 a.m. daily. By 11 a.m., orders have been consolidated by EDS and dispatched to 7-Eleven's suppliers. The consolidation process takes place four times a day, once for each time zone in which 7-Eleven operates. Orders for fresh-food items are aggregated at 7-Eleven headquarters and transmitted to third-party commissaries and bakeries, which prepare them for delivery the next day by one of the company's 22 distribution centers around the country.

The idea of relying on store managers for intelligence dates back to 7-Eleven's origins as an ice-dock operator 75 years ago; when refrigerators began replacing iceboxes, the company asked customers what items they'd need for their new appliances.

[admin]

Australian Financial Review
TUE 25 MAY 2010, Page 30

Harvey Norman in system overhaul


By: Brian Corrigan

Harvey Norman has finally kicked off an information technology transformation program that will replace all of its core business systems over the next five years but has again made it quite clear that there are no immediate plans to embrace online retailing.
Project Reload, which is expected to cost in excess of $50 million, was originally expected to start early last year but was shelved because of uncertainty created by the global financial crisis.
Harvey Norman has now finished training IT and business staff who will work on the first stage of the project, which will focus on replacing merchandising and supply chain management systems in 245 stores across Australia, New Zealand, Ireland and Northern Ireland over the next three years.
This will replace home-grown and other legacy systems that chief operating officer John Slack-Smith told the annual CeBIT conference in Sydney yesterday had served the company well during "a period of under-investment" in technology.
The retailer is expected to spend most of this year designing and building a solution based on technology from German software maker SAP.
This includes business intelligence technology designed to make better use of the huge amounts of customer data it collects.
US-based retail technology specialist Ciber has been appointed as systems integrator for the SAP project, beating off competition from Fujitsu and IBM.
Once that work is completed, attentions will turn to replacing financial, point-of-sale and other business systems to enable a multi-channel sales strategy that embraces online sales.
Company chairman and major shareholder Gerry Harvey has historically been a vocal critic of technology investment, especially when fielding questions about plans to take the business online.
The lack of an online strategy has been a concern for investors in the face of growing competition from web-based competitors that have much lower overheads and higher profit margins.
Mr Slack-Smith cited national broadband network research that estimated more than half of Australians research products online once a week and will make a purchase every month.
However, he said online retail would not be a focus for the company until it had worked through the business transformation program.
"Today we have next to nothing in the way of revenues that we drive from online technologies," Mr Slack-Smith said.
"Over the course of the next three years, on the basis that change will never occur as quickly as people will have you believe, we won't see much change in regard to that."
Looking further ahead, he said online would provide "wonderful and exciting" opportunities to complement its core business.
Mr Slack-Smith said consumers were better informed than ever before thanks to the internet, which was challenging for retailers and had been a factor in Harvey Norman's decision to invest in improving systems and processes.

[admin]

The Australian, Edition 1 - All-round Country
TUE 27 APR 2010, Page 028

Retailer's `engine of growth'



By: JENNIFER FORESHEW


The Reject Shop needed new systems to support its vision of 400 stores and chose SAP for the job

CAST STUDY
The Reject Shop
PROBLEM: The existing QQQ CRMS retail system was not suitable to meet the retailer's growth plans
PROCESS: CIBER Australia implemented SAP IS Retail
RESULT: A more comprehensive retail system to support growth to 400 stores. It offers greater visibility on businesses processesand allows it to integrate merchandising, finance, management, IT, marketing, logistics and property departments.

WHEN discount variety retailer The Reject Shop asked suppliers to propose a new retail technology environment, it insisted they do their homework.
The company set a request for proposal (RFP) with more than 20 questions, considered hard problems in retail, for potential suppliers to solve.
``It was a bit like an exam,'' said The Reject Shop's chief information officer Darren O'Connor. ``We gave it to who we thought were possible suppliers of software in this area and two declined immediately.''
That left three suppliers, with two pitching SAP and a third a different software company.
``We basically removed the sales people from the process and it went straight through to consultants who knew the software to complete the RFP. We ended up with quite a high quality response,'' said Mr O'Connor.
The Reject Shop operates 194 stores Australia-wide and employs 2700 staff. It runs a sophisticated technology environment including 3G, IBM servers and storage, Microsoft Windows and BizTalk, as well as a mobile computing fleet.
The retailer decided in early 2007 to replace its existing QQQ CRMS system with a more comprehensive retail system and integrate its merchandising, finance, management, IT, marketing, logistics and property departments.
Mr O'Connor said the new retail system was required to support planned growth to operate 400 stores nationally. The retailer aimed to open about 20 new stores each year. ``We believed that it (CRMS system) would be limiting our growth somewhere beyond 200 stores,'' he said.
The Reject Shop, which has an IT team of 23, opted to go with Australian specialist retail IT outsourcer CIBER due to its expertise in delivering large-scale SAP retail solutions and the good cultural fit between the two businesses.
``In retail, one of the fundamental things you have to do is replenishment calculations, which is work out what stock to send from distribution centres to stores, Mr O'Connor said. ``We were struggling to complete those calculations overnight due to the architecture of CRMS. SAP provided a more scalable platform to complete that sort of activity.''
CIBER Australia's implementation of SAP IS Retail supports 90 staff across seven operational disciplines, with plans for further strategic capabilities this year. The users are at The Reject Shop's store support centre at Kensington, Melbourne. It also has a national distribution centre at Melbourne Airportand a new centre in Queensland.
``They (CIBER) went from pre-project planning all the way through to post-implementation support and we now have them for some of the projects that we are considering,'' Mr O'Connor said.
The SAP retail technology environment project was completed in May 2009, taking just on a year. It was delivered on budget and on time, during a suitable business cycle for the retailer.
``In my view, this is an engine for growth,'' he said. ``It also provides a much more comprehensive visibility on business processes for us. So that could be overseas purchasing, local purchasing, analytics on sales, and visibility on financial areas.''
He said the project was a strategic investment and had delivered what it was meant to.
``We have seen, for example, those replenishment calculations now take less than an hour.
``The technology as such is not a handbrake on the business.''
The total project cost was more than $6 million, including all SAP hardware, SAP licences and the costs of implementing the project.
``The sophistication that is in it is supporting the distribution centre that we have got currently in Ipswich, Queensland,'' he said. ``Straight away we have used the functionality within it to be able to cater for that second distribution centre.''
The new environment also has allowed The Reject Shop to scale more easily.
``So overseas purchases are now much more streamline, the costs are much more visible and there have been significant benefits attached to that,'' Mr O'Connor said.
``The information flow coming out of it has much greater integrity attached to it.

[admin]

Australian Financial Review Australian Financial Review, Edition 1
TUE 27 APR 2010, Page 34

Zooming in on the retail trade


By: Brian Corrigan

Automated retail outlets tick a lot of boxes for big-name brands and retailers, writes Brian Corrigan.
The global financial crisis was a painful experience for most people associated with the retail industry but, for one entrepreneur who cut his teeth in Australia before taking his latest idea to Silicon Valley six years ago, the carnage only validated his business model.
New Zealand born Gower Smith is founder and chief executive of ZoomSystems, a company at the forefront of automated retail.
At first glance, his ZoomShops might look like a high-end version of something you'd buy a Coke from, but he bristles at the use of the term "vending machine". He compares the concept of automated retail to ATMs in the banking industry or self check-in for the airlines.
To his mind, they are a new channel of distribution that combines the convenience of online shopping with the instant gratification of traditional retail.
"It's a very small retail store because it has product on display, it has a branded presence, and you can swipe your credit card to get your product and walk away with it," Smith says.
Smith says major brands like the Zoom concept because it gives them an additional retail channel that offers complete control of product display, as opposed to sitting on the shelves in a store they have no control over.
He already has some big brands and retailers buying into the vision. If you want to buy an iPod in a US airport, for example, a ZoomShop is the only way to do it. Skin care brand Proactiv Solutions, which usually sells direct to consumers, uses Zoom as its only retail channel in Japan.
US retail giants Macy's and Best Buy use ZoomShops to sell a range of consumer electronics equipment including iPods, digital cameras, navigation systems and headphones. Recently added retail partners include beauty brands The Body Shop and Sephora.
ZoomSystems now has more than 1000 automated retail outlets operating in the US and Japan. Smith says it will enter "another large market" before year's end and has plans for further international expansion in 2011. He is coy about the prospects of entering the Australian market but admits he used a recent visit to meet with potential partners and get the conversation started.
That the concept is attracting a lot of interest in Australia and elsewhere is partly thanks to the impact of the financial crisis. Bar a nominal set-up fee, there are no capital costs in setting up a ZoomShop because brands or retailers are charged a monthly rate.
"The recession actually helped our business because we are a disruptive low-cost business model," Smith says. "The marketing budgets of product brands were slashed, as were the capital budgets for retailers to open new stores.
"There are 1.6 million retail establishments in the US with more than 24 million employees. A ZoomShop costs less than a single employee over the course of a year."
That's not to say that Smith is predicting a future where automated retail becomes the norm, but he does see a niche for supplying product to savvy consumers who know what they want and seek instant gratification.
"Today's consumers know what they want," he says. "They want a fast, easy and convenient way to get access to product and trust themselves to use technology to make their lives easier. We facilitate that trend."
In 2007, Zoom was named the second-fastest growing IT and software company in Silicon Valley. Smith says it has been growing its business at a compound annual growth rate of 90 per cent over the past three years. It recorded positive earnings before interest, tax, depreciation and amortisation last year and expects to do so again this year despite investing heavily in technology to help it continue to scale up. But being in the black is not the major concern just now.
"The industry is growing so rapidly that the board is focused on market growth more than profitability," Smith says. "We have much more demand for our services than we can manage and that's a concern."
As with any growing market, competition is on the way. Smith says start-ups have quickly found that there's much more to the concept than just putting products in a machine because most of the smarts are in the analytics and central management systems that reliably keep its outlets stocked.
More serious competition is likely to come from bigger businesses that see the opportunity to branch out into automated retail. Smith says players like Coinstar and NCR, which already operate DVD rental kiosks, have expressed an interest in entering the market. He reckons they are about three years behind at the moment but doesn't rule out the possibility of partnering with them at some stage in the future.
"You can't create a billion-dollar industry and expect to keep it to yourself," he says.
Before leaving for Silicon Valley, Smith was involved with a handful of start-ups in Australian including ComputerLand, which distributed Apple computers.
He is proud of the technology he created here, including some very significant intellectual property from early patent filings that are crucial to the ZoomSystems proposition, but says he had to relocate to Silicon Valley in order to attract talent and capital.
To date it has attracted funding in excess of $US100 million, although it hasn't always been easy. In September 2008, he arrived in New York with his chief financial officer for a final round of equity financing. Lehman Brothers collapsed the next day and the global economy went into a tailspin.
"We were getting a great reception to the story but it was very difficult to raise capital and a lot of companies just didn't get funded," Smith recalls. "But we delivered against plan right through that period and found that the business model was really resilient. We didn't lose any clients and consequently there was a great deal of investor support."
The focus for Smith and his team now is to put the brakes on and grow the business at a more modest annual rate of 50 per cent for the next two or three years.
"If we can do that, we believe we'll be in a great position to take the company public," he says.

[admin2]

Cross post to an interesting article on web data collection is here