Victoria's Secret Prepares for Growth


After the upcoming holiday season, Victoria's Secret will take the first steps toward launching its e-commerce business on a cross-channel on-demand platform from partner n2N Commerce, a company formed by a former Limited Brands employee, Ruben Pinchanski.


n2Ns first job will be to rebuild the web and catalog operations of the Victoria's Secret brand, before moving to other Limited divisions, and finally spinning off as a full-scale commercial product available to the wider market.


The n2N solution, which will replace a 15-year-old IBM mainframe and a string of proprietary solutions spanning order management through fulfillment, will allow Victoria's Secret to interact in real-time with its customer. It will enable a much higher level of personalized selling, while creating greater consistency across the company's three channels and providing a more efficient stream of information.


Apparel recently checked in with Sharen Turney, president and CEO of Victoria's Secret, to learn more about the project. In the following excerpts from that interview, Turney shares some of the details of the implementation and how she expects the new system to improve the company's overall business.


Apparel:  What were some of the company's concerns about its former system that led to the partnership with and implementation of n2N?


Turney: Our mainframe and all of the proprietary systems we'd built were pretty robust, and very specific to our business' needs, so there were pros and cons of moving to a new system. It was a huge undertaking. But technology is changing, and we realized that over the long term, our current system would not allow us to move quickly in technology, or to grow like we needed to. It was a very cumbersome process. Additionally, the system required a lot of maintenance.


Apparel:  Can you describe the partnership you have with n2N, and how it developed?


Turney: When we started we said: 'ÃÆ'‚¬¹Ã"Okay, we have a few of choices: We can actually take a whole new system and tear it apart and rebuild it ourselves. We can bring some different people together in a consortium. We can consider people in the service business.'

We did a lot of due diligence and found that a hybrid of the three is necessary to really deliver. Most of the service providers, for example, have built systems to serve smaller-volume businesses. As a direct, $1.4 billion, very profitable business, we needed to find someone that could handle our scale.


We didn't want to take it on internally; it's a big, big project that can distract you from the fundamentals of your business. [n2N CEO] Ruben Pinchanski at the time was working for Limited Brands Direct, and his knowledge of the issues, and much brainstorming and hard work by many of us at the company, eventually led to the idea of n2N.


Apparel:  Could you provide a few details about the capabilities and limitations of the Victoria's Secret Direct (VSD) business prior to the start of your current implementation?


Turney: When you're on a mainframe, you have what I call Basic 101 capabilities: search capability and navigational capabilities by category, sub brand, designer. So the forward-facing piece to the consumer was a basic web site format.


We did not have the capability to get into related selling, such as: 'ÃÆ'‚¬¹Ã"In the past you bought red sweaters, so if you like red sweaters, you might like blue denim.' To do anything of the sort required a very manual process, whereby the marketing folks had to query the system to get that information. Our new system enables us to automatically accumulate that data on the fly.


Even our search functionality wasn't as sophisticated as the competition's or other companies that were moving out their own technology.


Another difficulty with our previous web site was bringing up new 'ÃÆ'‚¬¹Ã"windows.' To change a web site in August and give a new face to it in September, for example, was a very cumbersome process. Also, you could not change part of it without changing all of it.


Apparel:  From a multi-channel perspective, how did the face of VSD online differ from that of VSD call centers? Did call center employees have access to the same information as was presented on the web site?


Turney: We grew up as a catalog business first, and then we adapted e-commerce, which helped us to develop one forward face in terms of focusing on excellent customer service.


We have a world-class call center, and we applied some of the lessons from that to our web site. But the big miss in our call centers today is that they still run old green screens, which don't provide the capability to view the web and follow along with your customer.


So even though the data across the two channels is consistent, only a very small percentage of our customer service reps are actually online and able to shop along with the customer. Giving everyone the ability to do that is a huge opportunity for us. The new technology will allow us to be more seamless and helpful to the customer.


Apparel:  Likewise, how did the face of VSD differ from the presentation at Victoria's Secret retail stores, in terms of product offerings, promotions and the like? What challenges did this pose?


Turney: From a product perspective, we are virtually 100 percent aligned across our stores, catalogs and e-commerce, when it comes to our core offerings such as the bra, panty, swim and sleepwear categories, the truly intimate business.


Also, within like product, we try to stay aligned with our promotional strategy to keep it seamless for the customer, although there are times where there are differences by channel, and differences by media.


For example, if you're going to send a CRM [customer relationship management] piece out for the stores, it may direct the customer to come into the stores and get a free panty, whereas the e-mail may or may not have a drive-to-store message.


Up until eight years ago, the direct/catalog business and store business were two totally separate entities. They did not even carry the same product. Then we moved to a brand strategy, and over the past three or four years, we've become maniacally focused on the 360-degree view of stores, e-commerce and catalog that provides a holistic view to the customer. We have a lot of passion about that.


As far as products outside of our core offerings, we carry products in the direct business that the stores do not carry. We have a $500 million direct apparel business that we don't have in the stores, and probably won't. We also have a shoe business that's in the catalog and e-commerce business that's not in the store business.


Apparel:  Will the new system help you better manage those diverging areas? How will it enable you to provide online and contact center customers with some of the personal touches available in a brick-and-mortar store?


Turney: Yes. The new system is an on-demand system. And because of the way it's constructed, it's going to be easy to get in and upgrade and change things on a much more frequent basis.


We're very excited about the personalization engine, which enables us to personalize the shopping experience for the customer in real time. Once we are live with the new technology, all of the call centers will be converted from their green screens, so whether it's a catalog or web customer, it will all be very interactive, and will provide a lot of suggested selling.


The checkout process, too, is much better within the new system.


As far as the stores go, today you can't go into the store and order direct, but that is a service we hope to provide to our customers in the future.


Apparel:  From a behind-the-scenes perspective, how will it provide you with a more comprehensive view of your customer?


Turney: There are many multi-faceted pieces of data that will be gathered with the new technology, to include shopping patterns. For example, if you have the tendency to buy x, it will lead you to buy y. The system will provide 'ÃÆ'‚¬¹Ã"buckets' of like propensities, i.e. if you like handbags, you may like shoes, if you like shoes, you may buy handbags, if you buy Pink panties, you might like a Very Sexy bra.


All of those pieces of information about real people's actions are kept in a database. Then, the system provides algorithms to help analyze that data and put it into useable chunks of information. All of this is done automatically.


Apparel:  How, if at all, do you expect to be able to push the analytical data gathered from your system further into the organization to make decisions earlier in the product development cycle?


Turney: We do that today in a very manual way because we do have a lot of this information in our database. But now it will be so much faster. Instead of having to query things, all you have to do is type in what you want and it will spit it back out.

We will always try to be great shopkeepers, working to understand what the customer wants. And we will always try to be predictors, because the consumer wants you to be out in front of her.


Apparel:  Could you tell me about the implementation timetable for the entire project, and your overall goals for the solution?


Turney: [This summer] we were in a testing phase and [now] we're working on a soft launch which will begin after our holiday season.


One of the other complexities of this implementation is that we just opened up a new distribution center (DC), increasing our capacity from 650,000 square feet to 1 million square feet. All of this technology has to be connected into the new DC as well.


We'll follow that with a fully loaded launch for the e-commerce piece, slated for early spring. Probably within another nine to 12 months, we'll complete the implementation of the entire new order management system, the back-end piece.


Eventually, the n2N solution will be rolled out to all of our direct businesses. Currently, we outsource Bath & Body Works Direct. That's one of the purposes of the new DC '" it gives us about 40 percent more capacity and gives us the capability to bring that in-house.


Apparel:  Could you identify your three top goals for the project?



Turney: To make sure it goes live on time! Seriously, we want to build a platform that gives us the maximum flexibility for us to bring up new concepts, add new businesses and grow the Limited Brands Direct business, which is one of the largest direct businesses today in our product category. We hope to double that business in the next five years, which the new system will allow us to do. (For the company's current sales figures, see chart below.)


Apparel:  What challenges have you encountered, if any, so far in your testing and implementation process? What has been the company's experience from the perspective of change management?


Turney: You know, it's interesting. The teams have really worked very closely together in terms of change management. Everybody is pretty excited about how much more efficient everything will be.


As far as the testing goes, there've been the normal glitches, but nothing major. One of the biggest challenges of moving away from a home-grown system is learning to think differently about the new or different capabilities that aren't exactly what you had before. For example, the methodology we used in the past to calculate our [promotions] is a little bit different, but allows us to do something more efficient and effective. There has been a lot of debate around this new process.


So in terms of letting go of our safety net and taking a risk on something new, that's probably been our biggest cultural challenge. But I've been very pleased to see how everybody has been embracing this.


Apparel:  As I understand it, the n2N solution will be made available to the larger market after it is completely up and running with Limited Brands. Can you tell me how you expect the software to be rolled out to other large multi-channel retailers, and if you have any concerns about sharing the technology with competitors?


Turney: It's a huge opportunity for the industry. Today, many people are hosted by IBM. Technology is not a differentiator '" it's how you use that technology, and how you apply it to your own business, that matters. That's how we view it. For those things we identify as very proprietary, we will say: 'ÃÆ'‚¬¹Ã"That's VSD's, not n2N's' and that line will be very clear.


I think it's a wonderful opportunity for larger companies, like us, to be able to go live with a technology that will support their size and scale, and replace their old mainframes. They'll have the opportunity to personalize some things with much more ease.


Overall, we're very excited about the implementation. It's going to add a lot of value to our business. We're very dedicated to it. We've got a lot of people focused on it, and I think it is going to set us up for growth for the future.


Jordan K. Speer is senior editor of Apparel. She can be reached at [email protected].


What is n2N?

Cambridge, MA-based n2N Commerce is a provider of an on-demand cross-channel technology platform that was launched with $30 million in financing from Limited Brands and investment firm General Catalyst Partners.


The concept for the business developed out of necessity: Limited Brands was experiencing growing pains as its size made it increasingly difficult to own and operate its own e-commerce technology, said Ruben Pinchanski, CEO of n2N and former executive vice president of Limited's web operations. Thus was n2N born.


The company operates independently of Limited Brands and has partnered with several technology providers, including Allurent, Demandware and ChoiceStream, to develop the on-demand platform.


The new company's first job is to replatform the web and catalog operations of Victoria's Secret, followed by Limited Brands' other direct businesses. It subsequently plans to serve other large, multi-channel retailers, helping them to move from home-grown and multi-vendor applications to its single, on-demand system.

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