CASE STUDY: ROSS-SIMONS

Coordination, Not Integration… Not Yet, Anyway With 11 stores, a four-year-old Website, and an annual catalog circulation of about 70 million, jewelry, gifts, and tabletop items marketer Ross-Simons is working hard to maximize the synergies of its multiple channels – at least on the marketing side. Yet as vice president of marketing Rick Isenberg admits, the Cranston, RI-based company still has some work to do when it comes to integrating its databases and management systems.

For instance, Ross-Simons’s catalog management system, Zircon, by Peabody, MA-based Zircon Co., is fully integrated with the Web. Its retail management system, ASC, however, is not connected to the other divisions. Therefore, if a customer telephones the catalog’s toll-free ordering line, customer service representatives can’t tell from the caller’s order history whether her or she has shopped from any of the Ross-Simons stores. Similarly, customers of Geary’s, the upscale gifts cataloger/retailer that Ross-Simons acquired in 1997, cannot access its bridal registry online; they have to visit or call the Beverly Hills, CA, store.

Isenberg says back-end integration is a priority for the nearly $300 million Ross-Simons; it’s just not as high a priority as maintaining the company’s growth while staying true to the brand. After all, Ross-Simons’s unique selling point is its low prices. “We sell merchandise at up to 70% off retail,” Isenberg says. The cost of a state-of-the-art integrated order-processing and fulfillment system could make it more difficult for the company to offer such good deals, he says.

Indeed, true integration can cost hundreds of thousands of dollars, though “determining how much a full systems integration would cost is difficult to gauge,” says consultant Stan Fridstein, president of Westlake Village, CA-based Synapse Infusion Group. “It depends on the complexity and age of your legacy systems,” he says.

Then, too, integration involves retraining staff and rewriting policies. “Integrating your systems requires more than just a software package,” says Bob Betke of Richmond, VA-based operations consultancy F. Curtis Barry & Co. “It affects your entire business practices and rules,” he adds.

“We all want to improve the capabilities of our systems,” Isenberg says. “But at what cost? If we go out and buy a state-of-the-art system, does that mean we have to raise our prices? That would cut into the philosophy of what we do here. We all want to get to utopia, but are we there yet? No. But we’re gaining on it.”

Ross-Simons started as a single store in Providence, RI, in 1952. Today the company has three retail stores in Rhode Island, and one each in Northbrook, IL; Boston; Atlanta; Short Hills, NJ; Raleigh, NC; and Tyson’s Corner, VA, and two outlet stores each in Kittery, ME, and Warwick, RI. The company, which also mails about 5 million Geary’s catalogs three times annually, launched its core catalog in 1981 and its Website in 1997. Ross-Simons’s Internet revenue jumped 366%, from $1.5 million in 1998 to $7 million last year, and Isenberg estimates that online sales could top $20 million for 2000, a 1,233% increase. In comparison, store and catalog sales have been growing 10%-14% a year. The catalogs account for two-thirds of sales, the stores for 25%, and the Website for 8%.

Ross-Simons manages its retail division separately from its direct business, which includes the Internet. “I look at the Internet as nothing more than high-speed direct marketing,” says Isenberg, who joined Ross-Simons in September after working with women’s apparel cataloger Chadwick’s of Boston and collectibles marketer Franklin Mint. “It makes sense to keep [the catalog and the Web] together, especially as the Internet business will only get bigger.”

But while the retail and direct divisions each have their own president and budget, Isenberg frequently strategizes with Jack McDevitt, the vice president of retail operations, to cross-promote the channels. Recently, for example, Isenberg suggested including Ross-Simons’s Web address on all store ads.

In December, Ross-Simons planned to insert a full 80-page catalog in every Sunday newspaper distributed where Ross-Simons has retail presence. Intended as a store traffic driver, the catalog was to include an ink-jetted message indicating the nearest store location and a promotional dot whack declaring, “Buy more, save more.” Says Isenberg, “Who knows if it will work, but I wanted to be aggressive in telling customers that we want them to visit our stores.”

Isenberg is looking forward to building the Internet business through, among other things, affiliate marketing programs with SchoolPop, which brings together online retailers and consumers to raise money for local schools, and Dash.com, an online portal. Ross-Simons compensates affiliates with a percentage of the sales from customers who came to Ross-Simons via the affiliates. “Those marketing programs are a no-brainer for us,” Isenberg says.

Ultimately, the company hopes to cut costs by reducing the frequency of catalog mailings to Web buyers. Still, “the reality is that a $3,000 piece of jewelry still looks better on the printed page than on the Internet,” Isenberg says.

Another reality is that Ross-Simons must weigh investments in infrastructure – such as connecting its retail and catalog management systems – against the likely short-term bite into the bottom line, especially now that it has an outside majority owner. In July, New York-based Freeman, Spogli & Co. acquired a majority share in the company. (Chairman/CEO Darrell Ross, the son of company founder Sidney Ross, remains the largest individual investor.) “You have to remember this was a family-run catalog business just two years ago,” Isenberg says. “But slowly we’ve begun to change the culture here.”

Merchandise managers seeking systems support have a hard enough time finding the right solutions for single-channel applications, let alone support for a multichannel environment. The range of merchandise management systems that can handle retail, catalog, and the Web is indeed limited, but it is growing. It helps that a few major vendors of retail systems – including Retek and SVI – have acquired catalog management systems that feature robust merchandise management modules. Below, a brief roundup of some of the major multichannel systems.

ARTHUR ENTERPRISE SUITE FROM JDA The Arthur applications guide retailers through the full life cycle of their merchandise decision-making process, from space and inventory planning through merchandise allocation and analysis, and it provides a single point of reference across the retail supply chain. But although JDA positions the product suite (with modules for planning, assortment planning, allocation, and performance tracking) for catalog and e-commerce merchandise management as well as retail, it doesn’t meet the specific demand-forecasting requirements of catalog merchants.

E3 Although E3 has a full complement of tools for demand forecasting, forward buying, and distribution and store replenishment, here again, there is no specific attention paid to how catalog and e-commerce demand environments differ dramatically from retail demand dynamics.

RETEK Retek, which bought the Hightouch system now known as the Customer Order Management and Logistics module, has historically focused on the apparel, jewelry, footwear, and grocery vertical markets. It has a massive suite of merchandise forecasting, planning, buying, and distribution modules, all of which are geared to the retail market, although it does allow retailers to link retail, catalog, home shopping, and e-commerce sales data. The system, currently being used by retailers such as Ann Taylor, Brooks Brothers, and Fogdog Sports, is available on a subscription basis to all of Retek’s “retail.com” members. Retek is making it a true multichannel merchandise management system that automatically records and analyzes inventory results using a stock ledger, updates the open-to-buy budget and supports a marketer’s day-to-day buying and selling activities.

SVI SVI, which acquired the MarketPlace Solutions catalog management system and is now known as SVIDirect, offers a full range of merchandise management tools, including modules for forecasting, purchase order management, import tracking, distribution center and store receiving, allocation, transfers, replenishment, price management and physical inventory. A data warehouse module called “The Eye” provides a common data reference. But none of these tools address catalog forecasting and merchandise management.

RETAILDIRECT solution, formerly Renaissance, from GERS, has a viable catalog systems presence, but its robust PlanAlyst tool (including forecasting, assortment planning, graphical performance analyzer, and new product modeling modules, among others), is for retailers only.

RETAIL.DOT.COMMERCE from CommercialWare, comes with an option to use Buyer’s WorkMate from IT Resources. Buyer’s WorkMate, whose biggest user is Saks Fifth Avenue, helps merchandise managers order the right quantities of the right merchandise, based on historical sales rather than allocation decisions. An Assortment Planning module is also available to get down to the color and size level. The system treats a catalog as just another store, however, without special consideration for its different demand patterns.

Catalog-specific solutions While most of the multichannel management systems available tend to be retail driven, a few are specifically geared to catalog marketing:

IF/SO, a PC-based system from Forerunner Solutions, is also built on a strong foundation of statistical algorithms specifically designed to meet the needs of catalog merchandise planners. Using sophisticated curve-matching and analysis functions, IF/SO employs statistical risk modeling to translate specific vendor requirements and historic item-sales profiles into purchase suggestions to help you determine the best mix of investment in your preseason buy and your in-season rebuy. IF/SO also has a proprietary “risk optimizer” that recommends optimal purchase quantities, taking into account the costs of overbuys vs. underbuys.

FORECAST superscript *21, an Oracle-based system from Direct Tech, consists of a demand-planning module and a purchase-planning module. Demand planning forecasts total demand by book and by season. Purchase planning takes into account inventory on-hand, committed, and projected, including returns. Forecasting can be by units or by revenue, and demand curves are available at multiple levels from top category through SKU. Catalog users include Plow & Hearth, The Pleasant Co., and Current, which helped develop the system.

THE MARKETING AND MERCHANDISE PLANNING AND CONTROL SYSTEM, from Galvin & Associates, was originally developed for Talbots. Running on the IBM AS/400, it offers a broad range of modules, including marketing planning, purchase-order management, custom queries, inventory management, material-requirements planning, and item planning. It is the more comprehensive than IF/SO and Forecast superscript *21 but also more difficult to use.

INTEGRATED BRAND MANAGEMENT SYSTEM (IBMS), from Connectrix Systems, manages forecasting and allocations, takes care of the initial product design tasks required for manufacturing items, and handles all tasks associated with manufacturing, purchasing, and receiving. The catch? IBMS was developed exclusively for apparel marketer J. Crew, and although it was about to go on the market this past fall, plans are now on hold. But J. Crew may spin it off in late 2001 under the aegis of a major software company.

EVANT Evant has introduced a merchandise management solution specifically for online businesses, including inventory planning and forecasting, merchandise management, and decision support. The applications are for any company in the supply chain, creating a new sales channel via the Web.