By  on April 16, 2007

Technology is at the forefront of retail development, but companies must be willing to embrace change to benefit from these advancements, said a panel of industry experts during a roundtable discussion at WWD.

The panel was moderated by Emanuel Weintraub, of the firm that bears his name, and the panelists included: Bob Buchanan, analyst at A.G. Edwards; Vincent Quan, assistant professor at the Fashion Institute of Technology, and Joel Kaplan, president of Cuddle Time, a vendor. The experts weighed in on where technology is leading the fashion industry, how smaller players can get involved and who will come out on top.

It is retailers that are least resistant to change, like American Eagle Outfitters and Nordstrom, that do the best with new technology, Buchanan said.

After Nordstrom set up a new merchandising system about five or six years ago, the company gained a handle on the ownership of goods by door, color, size and style. In the process, Nordstrom's gross margins soared and the retailer drove its merchandise turn from 3.7 times to 4.7 times.

Buchanan said that while American Eagle's high-quality software is valuable, it is more important that the retailer has technicians who know how to use it.

Most companies stumble with technology by not investing enough in proper training, Weintraub added.

American Eagle turns merchandise at a rate of 5.4 times, twice the level of competitor Abercrombie & Fitch. Abercrombie & Fitch is turning goods 2.7 times, down from 6.1 times five years ago. Buchanan attributes this deterioration to management's lack of focus on the business process.

"[Management at Abercrombie & Fitch] has been more focused on the product and building the brand, and I think they are brilliant in that regard. But I think at some point they need to find the right person to evaluate the best software out there and make some decisions, and then also get the process aligned with whatever software they chose," he said.

By using technology to rapidly turn merchandise, retailers see improvements in sales, gross margins and expense ratios.

Retailers who are resistant to technology are only turning goods at a rate of three times or less, Buchanan said."I think the problem is, we still have a number of retailers out there, including some of the department stores, that are wedded to the old way of doing things. They are wedded to legacy systems, much of which is still homegrown," Buchanan said. "It's OK to fire an old dog who can't learn new tricks when it comes to technology."

Most apparel retailers are still only investing about 1 to 2 percent of their budget in technology, compared with about 5 percent for the rest of corporate America, Buchanan said.

Technology is like the circulatory system of a retailer, feeding the brain, heart, legs and arms and propelling them to operate, Kaplan added.

"With the consolidation of many fashion companies, doing more with less has become a mantra. The streamlining of personnel has created a greater need for systems to ease the crunch. Thus, systems have become the enabler for retailers and vendors to manage their products more efficiently; from allocation to markdown optimization to inventory management. But while these systems help, they do not replace the fashion element," Quan said.

With the industry's emphasis on numbers, buyers and planners must have strong analytical ability.

To educate these future buyers, the Fashion Institute of Technology has added more advance tools to the classroom curriculum.

Recently, FIT partnered with software firm JDA Arthur, and uses Arthur Allocation software, RAPID Planning and E3 Inventory Management applications to prepare students for the high-tech market.

It is not only large-scale retailers that can benefit from and afford the newest technology. Smaller retailers need to invest in software applications, too.

"There is a lot of cool, off-the-shelf software available from third parties and there is absolutely no reason why a small retailer, or up-and-coming retailer, such as Zumiez, can't get the best technology and put it in place," Buchanan said.

For the most part, the fashion industry, which for 20 or 30 years was underinvesting in technology, is finally catching up, the panelists said.

"Eight years ago, very few questions were being asked about technology," Buchanan said. "But now, if you read the current transcripts from Federated or Wal-Mart calls, almost half of the questions being asked are about technology and process.""My hope is there are other retailers out there that are starting to get into the technology. Kohl's may be one," he added. "We think J.C. Penney may be another."

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