The retail industry is constantly challenged to find new ways to deliver the right merchandise to each customer as quickly and profitably as possible. By dealing in volume, companies enhance profitability, but they may not consider what the customer wants and the cost of holding excess inventory. Companies that fine-tune the matching of products and consumers thus gain a competitive edge.
Since its founding 40 years ago, Famous Footwear, a Madison, Wis., chain of shoe stores with 860 locations in 49 states, has been guided by the goal of having "the right style of shoe in the right store for sale at the right price," says Mark Weerda, the company's manager for desktop computing. To implement this goal, the company must monitor the performance of each store's product mix and promotional campaigns and make rapid adjustments.
The company's Oracle database and IBM AS/400 servers contained gigabytes of detailed data from daily transactions and weekly reports, but the system had been constructed when management was more centralized and the demand for response to the marketplace was far less intense. Famous Footwear's back-office data was recorded in standardized formats and analyzed in standardized reports.
As times changed and the need to analyze data grew strong, requests for nonstandard reports overwhelmed the IT department. "We would [often] need to pull a programmer off of a project to help a user create a new analysis," which became a drain on IT productivity, Weerda says.
Unfortunately, this "firefighting" also failed to deliver the necessary information. Marketing personnel couldn't evaluate the effectiveness of every promotion and therefore missed opportunities to improve approaches. In addition, company executives found they couldn't get at granular distribution data, and that lack of knowledge produced inventory inefficiencies. One store would run out of an item while another still had a surplus of the product.
As well as the need for new reporting and analysis tools, management wanted to leverage the IT department's existing AS/400 equipment and skills. This latter requirement, says Weerda, led Famous Footwear to ShowCase Solutions Corp. of Rochester, Minn., and its strategy line of data warehousing, business intelligence and Web content tools.
ShowCase provided the shoe retailer with a data extraction system that moved key sales and inventory data to data warehouses, which could be queried using strategy's suite of ad-hoc query and reporting tools. These tools could generate new reports and support data export to spreadsheets and other desktop applications. As a result, the initial users--marketing managers and merchandisers--reported that they were able to respond more quickly to changing conditions.
Since the data warehouse allows merchandisers to track sales trends during a sale, items can be redistributed sooner so that stores don't run out and fewer items sell at closeout prices, Weerda explains. Similarly, a particular store's inventory can be optimized based on each store's history of selling a particular style or the local market's response to certain types of promotions.
The marketing department now has speedy access to detailed comparative and historical analyses to measure the effectiveness of its ad campaigns, compare sales from event to event and spot trends. Also useful is detailed customer account information that can be broken out by time of day and geographic location.
"More targeted marketing has reduced our marketing budget," Weerda says. "For example, we run fewer television ads now than in the past, because the cost of the TV ads was not offset by proportionally greater sales in certain markets." He also expects having knowledge of customers' buying histories to improve Famous Footwear's Celebrity Club, a frequent-buyer reward program, through more precisely targeted marketing.
In step with Distributors
Carl Frappaolo, executive vice president of the Boston-based Delphi Group, suggests that Famous Footwear--or other retailers--stands to realize even greater benefits by making these tools available to its trading partners. "This is the beginning of a sophisticated reporting system that should probably be integrated into a portal environment," he says. Local distributors and big-picture managers would have personalized views of centralized data. "Famous Footwear could get in the market of assembling inventory dynamically across multiple distributors or even assembling parts of shoes and brokering a manufacturer."
Weerda portrays his company as embarked on a process of continuous improvement in which no single tool or process is a panacea. "We are always trying to evaluate the response of our customers to many variables, only one of which may have been a decision based on data warehousing information," he says. But he insists that the combinations of technologies and information sources are allowing Famous Footwear to offer the best fit for the needs of its customers.