SMB Feature: 3-Part Plan for SMB Success

Vans survived its money-losing skate park operation but it serves as a stark reminder that bolstering customer loyalty is a risky proposition, especially for small-to-medium sized businesses (SMB). Despite well-known failures, recent research and anecdotes from SMB retailers indicates that the customer experience reigns supreme and aligning it closely with business processes is the way to fend off Tier 1 competitors focused on price points. Highly customized IT applications power the customer experience mandate, especially for SMB retailers like Room & Board.

"We approach the retail world with a very unique perspective," says Betsy England, systems and technology manager, Room & Board, a privately held home furnishings retailer. "For us it's less about the selling and more about the customer experience." England says her company doesn't invest in technology for technology sake, opting instead to hunt down IT applications that fit their needs, which are few and far between.

"They might retain the underpinnings of what we need but even for a solution like SAP, we had to develop a front end for our stores while maintaining the integrity of the source code," says England. "We wanted one system that we were always working with and had up-to-date information about our customers. We're still using SAP ERP, but we had to put our own spin on the front end."

England says Room & Board uses most of the basics of the SAP enterprise system like ordering, finance, warehouse and inventory management, but the customized front end supports her company's customer experience mandate as design associates work more efficiently with customers around exchanges, returns and other needs.

Choosing Technology Carefully

"Technology Investment Decision in the SMB," a September 2006 report from investment banking firm Cronus Partners, indicates that today's SMB retailer is more focused on not making the wrong decision rather than making the right one, since the margin for error is much smaller. "The current POS investment cycle is a good example of this, with larger retailers currently entering the declining investment phase of the cycle while the SMB sector is still in the middle of the inclining phase of the cycle," says the Cronus report.

Godiva Chocolatier has invested heavily in the POS space in the last 18 months, some of which includes Fujitsu's GlobalSTORE functionality, according to Don Gould, director, information technology, Godiva Chocolatier. Gould says his POS systems needed to be refreshed to handle speedy transaction times during the holiday selling season.

"We have small footprint stores so it's nice to get customers in and out quickly," says Gould. "Technology helps us do that. We're currently building out this new infrastructure ,so it's paving the way for new activities."

Gould believes a rising number of SMB retailers are beginning to understand the lifecycle of the technology they invest in. "They don't just buy [technology] anymore and keep it until it breaks and needs to be replaced. You have to keep this stuff current and you have to keep it refreshed," says Gould.

Speedy Customer Service

Like Godiva, Sportsman's Warehouse also prides itself on delivering speedy, yet helpful, customer service. The sporting goods retailer sells everything from G.P.S. units and guns to fishing, camping and hiking equipment, a product mix that requires specific knowledge that its employees can convey to customers. Hiring and retaining key knowledgeable staff that are friendly and can communicate this information to customers is key to the retailer's success.

"We hire knowledgeable employees that can really contribute to a customer's experience within our store," says Mike Van Orden, CTO, Sportsman's Warehouse. "Within our product mix there are many technical specifics. We appreciate that customers want to make an educated purchase and we try and facilitate that with employees who are fully trained in the products within their department."

Van Orden says technology plays a huge role for his company in today's competitive market which is why its IT strategy ties directly back into the company's overall goal of extraordinary customer service. "Our technology had to be developed from the ground up in a cost-effective manner, starting with our WAN," says Van Orden. "We needed a high speed WAN that could transfer information real-time to our corporate office. This WAN would also be utilized to support our employees remotely."

In response, Van Orden tapped Lightstream Communications to help facilitate communications needs nationally, regardless of carrier. With the WAN in place, Van Orden says his company is better able to support store employees quickly and efficiently. Cisco Systems VoIP solution for direct extension dialing was implemented across the network, thus bringing Sportsman's Warehouse long distance charges to zero at each store location. Sportsman's Warehouse also has the ability to stream its digital video back to the corporate office. "Buyers can actually look at their departments to verify they are merchandised correctly and see that customers are being attended to," says Van Orden. "These tools allow us to continue to grow at a phenomenal rate yet maintain a relatively small IT staff and still support our employees."

Investing in Hardware

Findings from the 2006 Retail IT Budget Benchmarking Study, conducted by AMR Research and the National Retail Federation reveals a planned increase of 11 percent in hardware maintenance spend, primarily to upgrade aging store systems, most notably POS. "Although retailers are slowly replacing store hardware, increases in maintenance are still diverting budget dollars from more strategic initiatives," says the report. In addition, retailers plan to spend seven percent more in 2006 than in 2005 for their total IT budget, which comprises the line items of IT operational costs, IT depreciation expenses, and total labor costs. "The total IT budget growth is extremely positive, especially when one compares it to the 2.52 percent growth that was projected in last year's study, which reflected planned spending from 2004 to 2005," says the report.

The IT strategies of Room & Board, Godiva Chocolatier and Sportsman's Warehouse are on target to support their customer-centric missions, according to Jeff Smith, Accenture. "Quick turnaround and attentive service is how SMB retailers are differentiating themselves from Tier 1 competitors," says Smith. "They understand that they're not going to beat the big guys on price, and surviving on impulse traffic alone is too difficult."

From a tech perspective, Smith says big shops like Oracle and SAP need to scale down their offerings in an effort to offer the "right size solution" for SMB retailers.

Smith says it's also imperative for SMB retailers to become "the destination," or the primary purpose of a shopping excursion, a strategy that builds loyal customers. "You can still be located on a mall and be a destination," says Smith. "But the days of 'Joe's General Store' are over."

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