Retailers are looking to technology to reduce expenses, improve operations and boost customer spending, even as the economy eats away at their already slim profit margins.
Specifically, retailers are investing in software such as enterprise resource planning (ERP), supply chain management and customer relationship management (CRM), according to a new report from AMR Research Inc. in Boston. The research firm estimates that retailers will spend 15% of their IT budgets on application licenses in the coming year. Of that allotment, 35% will go to ERP, 17% to supply chain management, 15% to CRM and sell-side e-commerce, 11% to Internet procurement and 23% to other applications.
For a $1 billion retail company, that translates into roughly $3 million spent on application licenses, and another $2 million for software technology.
Burlington Coat Factory Warehouse Corp. recently made its first CRM move with customer service software from San Mateo, Calif.-based E.piphany Inc. to field e-mail inquiries from Web site visitors.
With the E.piphany software, customer service agents can keep up with a greater volume of messages than they could with the old system, which was essentially a single e-mail in-box, said Ginger Atwater, director of e-business at the retailer.
The E.piphany software collects and stores customer information in a central repository — instead of myriad e-mail folders — so Burlington Coat Factory representatives can view a customer’s history while responding to an inquiry. Reporting tools will help discover business trends, such as an increase of late-shipment complaints. Targeted marketing campaigns also are on tap for the retailer.
Prior to the E.piphany buy, Burlington Coat Factory didn’t even maintain a database of online customers. Now the Burlington, N.J.-based retailer is moving toward a corporatewide CRM strategy.
J. Crew Group Inc. in New York is also using software to get a handle on its vast customer data sources. The retailer developed a 500GB data warehouse with Bellevue, Wash.-based data-mining software vendor digiMine Inc. Key to J. Crew’s strategy is that digiMine software crunches data drawn not only from online transactions, but also from store and catalog sales.
The pooled data is used to glean product affinities, such as which belt customers most often buy with which pants. J.Crew then uses the information to suggest complementary products to its Web site visitors.
The retailer so far can’t quantify how much its new suggestive-selling techniques are increasing customers’ average order size, but the system appears to be doing its job, said Jayson Kim, senior director of Web marketing applications at J. Crew.
Sidney, Neb.-based Cabela’s Inc., another “bricks and clicks” retailer, focused its IT expenditures most recently on software that makes it easier for online shoppers to find items.
Cabela’s sells 110,000 hunting, fishing and outdoor products on its Web site. Items such as Pflueger fly reels, Abu Garcia rods and Kahles binoculars are prime candidates for being misspelled by online shoppers. But newly deployed portal-infrastructure software from Sunnyvale, Calif.-based Verity Inc. will let the site handle such misspellings — for example, directing a visitor to a selection of Pflueger reels rather than responding with a “No match for: Flueger” message, said Tim Miller, director of Cabelas.com.
With Verity’s K2 Catalog portal software, customers get more accurate responses to their keyword queries, along with thumbnail product images. Suggestive-selling features and synonym support — so “fishing rod” and “fishing pole” will yield the same search results — are in the works.
Cautious Experimentation
Last year, dot-com flameouts took the pressure off traditional retailers to keep up the pace for new technology adoption set by Internet-only retailers in 2000. In general, IT spending today is aimed at optimizing existing resources rather than experimenting with new technologies.
Experimentation isn’t gone, however. For example, Redmond, Wash.-based Eddie Bauer Inc. added 27 streaming videos to its site last month. The 30- to 45-second video clips let online visitors see products from different angles and hear about their features.
But rather than invest in the infrastructure to support video traffic, Eddie Bauer outsourced the project to Seattle-based streaming video services provider Vendaria Inc., which created the videos and is hosting them on its Vendaria Envision platform. Software embedded in the Eddie Bauer Web pages detects which browser, operating system and media player a visitor is using, as well as a visitor’s connection speed. The software then retrieves a compatible video file from Vendaria’s site.
Outsourcing Has Little Risks
By outsourcing, Eddie Bauer kept its investment to a minimum, says Brian Walker, group manager of development services at Eddie Bauer’s e-commerce division. Each video cost $1,000 to $2,000 to produce, and Vendaria charges 16 to 24 cents per video viewing. Even if the experiment fails to increase online spending, Eddie Bauer won’t have much to write off.
Kawasaki Motors Corp. in Santa Ana, Calif., also managed to add new marketing and customer service features to its Web site while keeping down expenses. The company used e-commerce software it had in place from Chicago-based Click Commerce Inc.
The recreational vehicle manufacturer doesn’t sell motorcycles or all-terrain vehicles on its site — for those, consumers need to go through one of Kawasaki’s 1,500 dealers. But it does sell accessories such as clothing, bags and vehicle covers.
For the holiday shopping season, Kawasaki created Web pages and e-mail campaigns featuring “accessorized” vehicles. They display a motorcycle, a jet ski, all-terrain vehicles and a utility vehicle dressed up with as many add-ons as possible.
Kawasaki also added an area online for customers to retrieve personalized content. Customers can look up specific parts and view diagrams. They can also track purchases, receive service bulletins and access warranty information by vehicle or hull identification number.
Consumers can’t purchase parts online; they need to go to a dealer to procure the parts needed. But particularly for the do-it-yourself owners, seeing the parts diagrams is a popular feature, said Roger Peterson, vice president of information systems at Kawasaki.
By: Ann Bednarz