Mid-Market All Stars 2005

Mid-sized retailers leverage IT to spur growth

All Stars by the Numbers

514.11 - Average 2004 sales in millions
320 - U.S. IT spending in billions by SMBs*
303 - Average number of stores
44 - SMB's percentage of total IT spending*
25.4 - Average percentage of sales growth
7 - Number of retailers with more than 20 percent
sales growth

*Source: Forrester Research

Mid-sized retailers share many of the same challenges that tier-one retailers do. Leading solution providers have begun to recognize this, as evidenced by the push by companies like American Express, Cisco and IBM to provide affordable and powerful tools to the small to mid-sized retail markets. Now, more than ever, mid-market retailers have access to solutions that can help better integrate processes and applications internally and externally, and enable them to quickly respond to changing opportunities on demand.

We define mid-market retailers as having sales less than $1 billion and more than $50 million. To be considered an all-star, these retailers must also be experien-cing double-digit sales growth. The following 10 retailers have fused businesses and IT initiatives in areas such as supply chain execution, merchandise planning and other key processes to produce impressive results in both the financial and customer satisfaction arenas.

Omaha Steaks
2004 Sales: $362 million
Growth: 23%
Stores: 560

Since 1917, Omaha Steaks has provided premium steaks and other gourmet food to consumers across the U.S. As a mid-market specialty meat retailer, the company is currently experiencing heavy growth in its traditional catalogue, brick-and-mortar and B2B promotional sales channels but, the fastest growth has been in its online retail channel.

In 2004, Omaha Steaks experienced a 23 percent increase in online sales. Omaha Steak's IT strategy has been instrumental in helping facilitate this heavy growth. Most recently, the company has made great strides to create an optimal e-commerce experience for its online customers. With the help of IBM business partner eOneGroup, the company integrated its front-end Web systems that controlled inventory, warehousing and distribution. Using a combination of IBM AS/400, xSeries and iSeries hardware as well as eOneGroup's eOneCommerce supply chain software, Omaha Steaks can now provide customers a real-time view of inventory, delivery dates and account information. This has armed the company with the IT infrastructure needed to successfully launch A La Zing, an Internet-only subsidiary that delivers complete meals.

2004 Sales: $960 million
Growth: 22.9%
Stores: 100

Fossil is a design, development, marketing and distribution company that specializes in consumer products predicated on fashion and value. With products sold in more than 90 countries through department stores, specialty retail shops and the company's own e-commerce Web site, Fossil relies on a diverse workforce of more than 3,600 employees including store managers and staff, distribution center employees and field merchandisers.

After continued growth, the retailer's distribution center outgrew its legacy time and attendance system, and had a limited system for tracking employee time and attendance in stores. In order to fix the problem, the retailer implemented software from Kronos' Workforce Central suite. It has been able to accurately track time and attendance for all its hourly employees using an integrated time and labor system. A Web-based workforce employee application simplifies management of employee time and attendance at the stores, while Workforce TeleTime provides a reliable method for field merchandisers to report their hours while on location. Fossil also uses the Kronos 4500 Touch ID biometric terminals to collect data from employees in the distribution center.

Paradies Shops
2004 Sales: $300 million
Growth: 20%
Stores: 400

Paradies Shops has approximately 400 stores in 61 airports in the United States and Canada servicing 500 million passengers annually. Paradies operates newsstands, gift shops, specialty stores and licensed merchandise outlets for organizations such as the PGA Tour, CNBC News and the Big Ten Conference. For the past ten years the retailer's revenues have grown by 144 percent.

To help drive this growth, Paradies implemented GERS' Merchandising, Inventory and POS solutions beginning in 2001. Newly optimized replenishment, distribution and product assortment have enabled Paradies to increase inventory turns by 25 percent, improve sell-throughs and ensure everyday in-stock positions. With pricing strategies varying widely by geographic location, incorporating deal pricing initiatives enables Paradies to maximize profits by geographic area, realize higher margins, and get optimal return on inventory investment.

The solution provides the retailer with a networked system that allows store employees to quickly process transactions. The simplified training required on this system has accelerated the productivity of store personnel while its ease of use allows associates to quickly move customers through checkout, a key to successful airport retailing.

Sharper Image
2004 Sales: $647.5 million
Growth: 23.7%
Stores: 150

Sharper Image sells its products through a network of about 150 stores, as well as online and though a monthly catalog. The merchandise mix includes electronics, personal care items, recreation and fitness accessories, travel goods and more. It sells products from other manufacturers including Bose, Casio and Philips, but is increasingly focused on selling its own, higher-margin, Sharper Image branded items.

The Sharper Image has enjoyed significant growth in its Internet business over the last several years, with year over year growth of nearly 50 percent each of the last three fiscal years. This is compounded by sales increases in its stores and catalog businesses. While enjoying such growth, the retailer was overburdened with responsibilities of application code development and maintaining application and infrastructure operations. Technology from Totality has helped the retailer successfully scale and grow its e-commerce environment. Through line-of-business service level agreements, real-time operational visibility and proactive systems management, Sharper Image can guarantee customers will always be able to enjoy all www.sharperimage.com's shopping and purchasing conveniences.

2004 Sales: $734.9 million
Growth: 33.4%
Stores: 560

Aeropostale is a mall-based specialty retailer of casual apparel and accessories that targets both young women and young men aged 11 to 20. The company maintains complete control over the proprietary brand and responds quickly to trends by designing and sourcing all of its own merchandise.

Currently, Aeropostale products are sold exclusively in its 560 retail stores located in 43 states. In an effort to drive further growth by providing multi-channel retailing, the retailer recently selected GSI Commerce for an e-commerce solution that includes Web site design and development, managed hosting, merchandising and order management, product fulfillment and customer service. Aeropostale's e-commerce initiative opens a multi-channel retailing opportunity by providing a convenient, full-line online shopping experience for its core customer base. The retailer's Web store is scheduled to launch during the third quarter of 2005.

2004 Sales: $729.3 million
Growth: 14.6%
Stores: 300

Guess? designs, markets, distributes and licenses casual apparel and accessories for men, women and children that reflect the American lifestyle and European fashion sensibilities. The company's products are sold through three primary distribution channels: including Guess? stores, a network of wholesale accounts and the Internet.

As a result of technology now in place, sales representatives receive weekly e-mail reports on customers' best-selling items. Allocation tools were simplified to focus on presentation profiles for basics and fashion merchandise. The company went from carrying $144.2 million in inventory at year-end 2000 to $83.5 million in 2003, and inventory levels dropped another 15 percent in 2004. Guess?'s latest project involves creating "virtual warehouses" to help cement accountability on both the wholesale and resale sides of the business. The company is evaluating other technologies including a common database for garment designs and materials, which suppliers could access to eliminate errors from relaying information from E-mail or fax; a workflow engine with deadlines and business processes, and design and manufacturing data that ties into the Guess? ERP platform and its Manhattan Associates warehouse-management system.

2004 sales: $434.2 million
Growth: 15.5%
Stores: 285

Brookstone is a product development and specialty retail company that operates 288 Brookstone brand stores nationwide and in Puerto Rico. Typically located in high-traffic regional shopping malls, lifestyle centers and airports, Brookstone stores feature unique and innovative consumer products. The company also operates five stores under the Gardeners Eden brand, and a direct-marketing business that consists of three catalog titles €” Brookstone, Hard-to-Find Tools and Gardeners Eden €” as well as e-commerce Web sites.

In an effort to improve visibility into its growing retail operations, the retailer recently selected Evant Planning solutions to optimize store performance. The technology is designed to help the retailer enhance planning and forecasting capabilities, as well as increase its ability to adapt to in-season demand changes.

Le Gourmet Chef
2004 Sales: $72.8 million
Growth: 61%
Stores: 53

Le Gourmet Chef is a specialty retailer of kitchenware, packaged gourmet foods and decorative housewares. The store concept features the integration of these categories into a multitude of home entertainment-based themes. This merchandise strategy is carried out in a store environment designed to be warm, enjoyable and relaxed. The store environment matches the casual lifestyle favored by Le Gourmet Chef's customers.

The rapidly growing chain of high-end kitchen retail stores, has grown in size by more than 100 percent in two years, due, in part, to ShopperTrak's customer traffic counting technology. By using video instead of motion sensing technology, ShopperTrak's Orbit is able to distinguish between incoming and outgoing traffic, count side-by-side traffic and eliminate erroneous data often caused by baby strollers and shopping carts. Additionally, the solution features real-time monitoring and delivery of data and connects to a modem or LAN for direct data polling. This information enables Le Gourmet Chef to compare store-to-store performance and quickly respond when trends begin to develop at a particular site.

Urban Outfitters
2004 Sales: $548.4 million
Growth: 29.7%
Stores: 110

Specialty retailer Urban Outfitters offers a variety of lifestyle merchandise to highly defined customer niches through Urban Outfitters and Anthropologie stores in the United States, Canada and Europe, in addition to Web sites, catalogs and Free People, the company's wholesale division, which sells product to approximately 1,100 specialty stores, department stores and catalogs, as well as through one Free People store.

Despite a challenging retail environment, Urban Outfitters has continued to see a rise in earnings, posting record sales for the third quarter, as well as an improvement in margins. In order to help maintain its growth, the retailer recently extended its contract with Island Pacific, which includes an unrestricted license agreement for a Merchandise Management System running on an IBM iSeries platform. The system provides a comprehensive solution for management of core retail processes and supports all operational areas of the supply chain. The retailer also recently selected NSB's Connected Retailer Planning and Allocation solutions to support its ongoing growth and strong profit performance. The solutions help Urban Outfitters better understand supply and demand for its products, allocate effectively to stores and increase profitability for the business.

Casual Male
2004 Sales: $352 million
Growth: 10.4%
Stores: 515

Casual Male Retail Group sells branded casual wear, dress wear and suits. It is the largest retailer of big and tall men's apparel with retail operations throughout the United States, London, England and Canada. It operates 493 Casual Male Big & Tall stores, the Casual Male e-commerce site, Casual Male catalog business, 13 Casual Male at Sears-Canada stores, 22 Rochester Big and Tall stores and a direct to consumer business.

Two years ago Casual Male developed a turnaround strategy that included reducing operating expenses, updating its systems infrastructure to enable more efficient operations, improve inventory management, provide capability to micro-manage store merchandise assortments, and otherwise better manage in-stock positions by size and update merchandise assortments to fulfill the wardrobe needs of its broad consumer base. In order to make the turnaround successful and have the supporting technical foundation, Casual Male implemented JDA Software and Manhattan Associates Warehouse Management as the foundation for inventory planning, replenishment and distribution. Additionally it selected NSB's POS and Customer Relationship Management applications, which will be integrated and updated in real-time. Sales reps will be armed with PDAs that will tap into CRM (customer relationship management) data via a wireless LAN and enable visibility into a specific customer's history. Thus, it will be able to give personalized service as well as reward its most loyal patrons in real-time.

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