Barneys: You’ve Gotta Have a Plan

1/10/2011
For more than 80 years, Barneys has been a New York City landmark, its name synonymous with elegance and taste. The company has gone through several ownership changes, moved its renowned Manhattan store uptown and added 30 more stores in other cities without ever losing its distinctive character. Today, though its stores are all still U.S.-based, it is 90 percent owned by Istithmar World, a subsidiary of the Dubai government-owned Dubai World. Its 10 flagship stores specializing in established European designers and 21 “co-op” stores featuring up-and-coming designers for the younger market are supplemented by 13 outlet stores, several restaurants, an online store and two warehouses that hold seasonal events.

As the company grew, merchandising became more complex. A team of 15 handles all the merchandising and assortment planning for stores, outlets and warehouse events, working with 80 to 90 buyers and their assistants throughout all the divisions. The process is made more difficult by the fact that no two stores are alike. They are not only of different sizes, but, because they are located throughout the United States, they also reflect the specific climate and fashion sensibility of each city. “We definitely look at our competitors and at the type of clientele for each store,” says Lucille Celis, vice president for merchandise planning. “We do a lot of customer profiling. … We have very detailed store-by-store briefings with merchants.”

Over time, the planning process became unwieldy. Plans resided in a web of Excel spreadsheets. “Data integrity was a big issue,” Celis says. “Everything was linked, and those links would corrupt.” As a result, planners spent two-thirds or more of their time untangling data inconsistencies and had little time left for thinking strategically.
 
Bringing planning up to date
Several years ago, when the company’s transactional systems were upgraded to newer platforms from the legacy mainframe systems, the merchandising department began looking for planning tools that could be integrated with the new systems. After reviewing several offerings, the company settled on QuickAssortment from Toronto-based Maple Lake Ltd.

QuickAssortment’s most compelling feature was that it was comparatively easy to use. Basic functions — planning by store or department level, for example — were intuitive and simple to learn. “We saw some tools with too many bells and whistles,” Celis says. The Barneys team also appreciated that QuickAssortment was Windows-based and fast – and, of course, that it covered all the essential functions the team was looking for.

QuickAssortment uses data from MI9, the new merchandising system, which is fed into it on a weekly basis. This alone has saved the planners enormous amounts of time. The MI9 data stream is the “one version of the truth,” and planners no longer have to reconcile incompatible versions. Using historical data for the prior two years, planners can examine sales, markdowns and profitability for any product group in any time period and develop goals that will yield a better balance between sales and inventory.

Give and take
Planners set targets for product classes (t-shirts, for example) or for brands, not for individual items. They review preliminary goals with buyers before the buyers set out on their seasonal shopping trips to Europe; for a short time, they even open the system to buyers to enter tentative open-to-buy numbers. Then the system is locked again, the planners make whatever changes are justified by the needs of particular stores, and the merchandising department issues its corporate open-to-buy numbers as well as store-level buy plans. After the numbers are finalized, buyers can print out reports to take with them to Europe — they still want paper when they’re doing store walkthroughs, Celis says.

According to Celis, there is always give-and-take between planners, who study historical profit margins, and buyers, who operate from a more intuitive sense of what customers want today. “It’s a very iterative process,” she says. Buyers work within the higher-level plans when they make decisions about individual styles.

Once the season is underway, the planning department follows the results to see how well actual results mirror the plans. “The system helps us identify and support winners,” Celis explains. Planners perform open-to-buy analyses throughout the season, reacting quickly if levels are above or below expectations. For products ordered monthly, such as cosmetics, this allows buyers to increase or reduce their orders. Designer clothing, however, is usually ordered a year in advance. Except in rare situations when a discount or return is possible, adjustments for such items are likely to involve markdowns that will reduce stock levels to plan.

Conversion challenges
In converting to the Maple Lake system, Barneys also redefined its merchandising hierarchy. Planning is useful only if the planned categories are meaningful, so the planning team took a hard look at its categories and considered how to make them more meaningful. In some cases, this involved elevating classes to departments, a higher level in the hierarchy. The transition was a painful one — it made comparisons to historical data very difficult — but in the end, it was worthwhile because it highlighted opportunities the company had previously missed. “Certain brands were hidden within departments, so we weren’t optimizing them,” Celis says. “Now they stand out on the open-to-buy and they’re visible from the corporate standpoint.”

Transitioning users from the infinitely flexible Excel-based system to a rigorous database environment — a necessity if planners were to produce reliable numbers — was yet another hurdle to overcome. Even though Barneys chose the Maple Lake application because it was relatively uncomplicated, the learning curve was far from trivial, and the change was anxiety-provoking for some of the staff. Celis solved the problem by hiring an administrator whose sole job was to become expert in QuickAssortment and help others learn to use the system effectively. “Having that person there every day —especially for Year One — was important,” she says. “We were able to address a lot of issues without calling the help desk all the time.”

Benefits of assortment planning
QuickAssortment is used by retailers of widely varying locations and sizes, from fewer than 50 stores (like Barneys) to more than 3,000 stores. Overall, in its experience with this diverse client base, Maple Lake has found the tool helps retailers lower inventory, increase sales, improve turns and raise margins. Though Celis agrees the application definitely has all those effects, she says that precisely measuring its impact on Barneys’ ROI is impossible due to the drastic changes in the luxury retail environment over the last two years.

However, there is no doubt that QuickAssortment has made Barneys’ planners more productive — they can produce plans in a much more timely fashion than they could in the past. Even more important, the department’s role has changed. Instead of simply getting the numbers to match up, planners now have a strategic impact on the business. They “have ownership of their plans and their businesses,” as Celis puts it. Ultimately, she was able to convince the planners that the ability to affect the company’s direction and profits was worth the pain of learning the new system and new procedures.
 
With a major success behind her, Celis has started thinking about other functions that might benefit from a similar overhaul. “I’d love to get into allocation,” she muses. “That would be a great enhancement to feed back to the plan. … There’s more potential we could maximize, and technology could help us advance it faster.”

Masha Zager is a New-York-based Apparel contributing writer specializing in business and technology.


systems at a glance

Bill of lading and costing: SDI Group
Core merchandising systems: MI9 Merchant (MI9)
Financial systems: Dynamics and Forecaster (Microsoft Great Plains)
Logistics: Warehouse Management Systems (MI9)
Merchandise planning: QuickAssortment (Maple Lake Ltd.)
POS: Tradewind (MICROS Datavantage)
Price management: MI9 Merchant (MI9)
Reporting: MicroStrategy (Microstrategy)
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