Retail Reinvention

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Retail Reinvention

By Adam Blair - 09/08/2011
It would be easy – very easy, in fact – to get caught up in the information technology aspects of the transformation taking place at Belk. The 300-store department store chain is investing $150 million over three years to, among other things, replace its entire suite of merchandising systems and create a common data framework for the enterprise; upgrade its point-of-sale and other store systems while adding up-to-date workforce management tools; and tackling e-commerce to create a truly customer-directed omni-channel shopping experience in its stores as well as remotely via mobile channels.

But to view all these as IT initiatives is to seriously understate their scope and scale. What’s really going on is nothing less than a complete transformation of Belk’s business, led by and continuously involving the company’s top tier of executives and creating unprecedented business-IT partnerships at every level. And the common goal of it all is enhancing virtually all the interactions customers have with Belk.

“The overarching theme of the transformation is delivering new business capabilities, ones that will ultimately lead to a better shopping experience for customers,” says Mike Laurenti, Belk’s executive vice president and CIO. “Part of the mission statement for this transformation is around how the customer segment is changing, and positioning ourselves to change with it.”

Belk has been making all kinds of changes, in ways that are making one of the nation’s oldest retailers (founded in 1888) seem like one of the newest. The transformation initiative, which was announced late last year and officially kicked off this spring, follows close on the heels of the company’s first major re-branding effort since 1967. Belk, which operates in 16 Southern states, inaugurated both a new corporate logo and a new tagline: “Modern. Southern. Style.”

The transformation initiative has enthusiastic support from the top executives at the privately owned company, including president and COO Johnny Belk and president for merchandising and marketing Kathryn Bufano. In fact, the strong business sponsorship and the partnering of business and IT people (in some cases joined by a consultant) is a consistent feature of the entire initiative, and is critical to its success, according to Laurenti.

And while it is truly a business-led initiative, IT is providing the tools to make it happen – which has meant Laurenti has had to ramp up both the in-house IT staff and the use of third-party resources and consultants. “From a Belk perspective, we doubled the size of the IT department, going from about 50 ‘badged’ IT employees to 100, and also expanding our professional services spend,” he notes.

Starting ‘Smart’
The transformation is divided into three segments. Belk is focusing first on its merchandising systems, dubbing this part of the effort “Project Smart.” There’s already been significant progress in this area: Belk recently announced its selection of the Oracle Retail Merchandising System, and the retailer will also be using SAS applications for functions including demand forecasting, size/pack optimization and financial planning. Belk has acquired the software and is “beginning the work around remapping our business processes and configuring the software, with plans to go live with it next year,” says Laurenti.

The POS will be the next major focus area, along with new workforce management tools for labor scheduling and budgeting; e-commerce will be the third element. Project Smart accounts for approximately $60 million of the $150 million total investment, with the POS and e-commerce systems taking up the lion’s share of the remainder.

While the actual work will progress along a carefully constructed roadmap, Belk’s strategic approach foresees the many ways all these systems, solutions and applications will need to be interconnected. “This fall we begin the strategy work around both our store systems and e-commerce, which means determining what the omni-channel shopping experience will look like in the department store channel during the next five years,” says Laurenti. “We’ll be starting this work by defining the technology capabilities around mobility, the mobile shopping experience, the Web and integration with the various store systems.”

Matters of the Heart
Belk’s decision to focus first on its merchandising systems is easy to understand. “From a retailer’s perspective, merchandising is the heart of what we do,” says Laurenti. “It’s about getting the right product in the right store at the right time, but it’s also about getting the data and architecture around it right. We have to get the right foundation in place around allocation, replenishment and item setup, and also get one common version of the truth. Then we can leverage all of that for other business capabilities, both in our stores and through e-commerce.” So in addition to its core merchandising systems, Belk is also building a master data management capability along with an enterprise service bus “that will help us move data around the organization and to other systems,” says Laurenti.

Another reason Belk is focusing first on merchandising is that many of its existing systems are not up to the tasks of a 21st-century retailer. “Merchandising, planning and allocation had previously been under-invested, with tool sets that were obsolete or very manual and time-intensive,” says vice president of merchandising operations Clay Parnell. “Many parts were still spreadsheet-driven and were running on mainframes, so there was code running every day that was 30 years old.”

Parnell adds that the commitment needed for the kind of full-scale replacement that’s taking place is certainly there now. “Belk is willing to invest the time and money to get it done; it’s a huge business opportunity,” he says. For example, Project Smart will help Belk grow its private label business, particularly in the apparel and home goods categories.

“As with most companies, our private brands are a major profit generator, but today we have limited capabilities of what we can produce offshore versus domestically, based on systemic limitations,” says director of merchandising and logistics John Armbrecht. “There are also limitations in assortment planning, space planning, purchasing activities, allocation and replenishment that are all being addressed by Project Smart. It’s about taking off the handcuffs and allowing our business to move forward at an accelerated pace, and with greater capabilities,” he says.

Intense Localization
Amy Wooden, executive vice president for merchandise planning and operations, sees tremendous opportunities as Belk continues to refine and localize its product assortments. Prior to the current transformation project, Wooden was involved with Belk’s Project Impact, which (among other accomplishments) cut the retailer’s 1.3 million active SKUs by 50 percent.
“We implemented an assortment planning tool that allowed us to handle our assortments by door, by vendor and by category of goods, and it’s paying off,” says Wooden. “Our business isn’t good by accident; we invested to get it.”
Wooden sees additional opportunities for Belk to localize assortments using multiple variables for each store, what she calls “localized with an intensification.” So in addition to demographic factors such as the ethnic or racial composition of a store’s customer base, the intensification would take into account the store’s location near a beach, or in a mountain climate or a college town. Thus, “it’s not just an assortment for ‘a warm climate’ but ‘a warm climate with a University of Alabama campus and 30% African-Americans in the trade area,’” she says.

Prepping for Omni-Channel
In addition to refining merchandising and assortment, this ground-up transformation is giving Belk the opportunity to rethink the entire shopping experience from the customer’s point of view. Among other things, that means the store becomes a true part of an omni-channel shopping experience.
“The customer doesn’t think in terms of ‘POS’ versus ‘e-commerce’ versus ‘mobile commerce’ – the customer just wants it to work, and expects it to be there,” says Jeff Kish, senior vice president of solutions delivery. “So we’re not just viewing this as a POS replacement but as an in-store channel opportunity, and we believe mobile commerce [involving customers’ mobile devices] and in-store mobility will play a part. We’re looking for the right tool for the right interaction; it may be a very different interaction at the cosmetics counter than it is in sportswear.”

While Belk’s plans for in-store technologies are still being discussed, possibilities include in-store text messaging to send targeted offers to a customer’s mobile device; mobile-enabled POS; and tablets that “offer the ability to deliver very rich content that can be shared between a sales associate and the customer,” says Kish. The technologies Belk chooses will likely be
supported by in-store WiFi, he adds.

“We’re also moving to the next generation of Belk’s e-commerce platform, and thinking of it as a multi-channel commerce engine, rather than separate silos of ‘POS’ and ‘e-commerce’,” Kish adds, noting that the various touchpoints will be supported by rich customer information and targeted marketing efforts.
“Historically, e-commerce has been about ‘Here’s our website, and we set the rules as to how we present things,’” notes Kish. “We’d like to spin that around and allow customers to choose how to interact with us, for instance through social media or opting in to receive text messages. We would like to find out how customers want to interact with us and then enable that, which is very different from traditional retailing.”

Like the other Belk executives, Kish views the entire transformation as a unique opportunity for the retailer to reinvent itself. “We’re committed to this overarching transformation, and we have an advantage compared to retailers that are trying to bolt these capabilities on or shoehorn them into existing systems. We have the opportunity to step back and architect it the right way, from the ground up.”