Inside a Victoria’s Secret or Express store, a manager or a co-manager might say, “We’ve got to ‘go green.’”
They’re not talking about changing the color palette. They’re talking in code about reaching a sales goal.
At many of the stores operated by Limited Brands, the register screens turn green when the sales plan is reached on a work shift. Be it a one-, two- or four-hour shift, the workers like to see green.
“Any associate can pull it up and see it,” said Jon J. Ricker, president and chief information officer, The Limited Technology Services. “When they make it, everybody celebrates. It’s a simple cue to help them know they were successful. It provides a lot of positive motivation.”
It’s part of Limited’s technology program involving proprietary performance management and labor scheduling systems, new POS registers, traffic counters and experimental “wireless stores” at a handful of locations. The strategy helps the central office and store managers devise staffing schedules, position top-selling employees in peak periods, examine conversation rates, provide better service, see real-time information on how stores perform and react fast to meet sales objectives — by the hour and by the shift. But the overall objective is to provide the kind of shopping experience customers want.
“It’s all about enabling a new set of operational processes with the technology,” Ricker said. With the labor scheduling, “I didn’t realize how useful that would be. It sounds simple, but the average store schedules staff based on availability, not planning.”
At the $9.5 billion Limited Brands, there isn’t a technology strategy in the conventional sense. Limited officials describe technology as enabling quicker checkouts, motivating staff, providing smarter staffing and having merchandise that’s visible and not buried in storage, to make shopping easier and more efficient. “We have done a lot of research and analysis to understand what customers expect, brand by brand,” explained Mark A. Giresi, senior vice president and chief stores officer. “We’ve talked to our best managers and our best associates to come up with a fundamental understanding of what the key levers are that drive the most consistent, high-quality customer experience in our stores every day. That is the overarching objective.
“Then we developed an operating strategy, which is supported by technology that gives us immediate information, minute-to-minute, so managers can make smarter decisions on the resources they want in the store.”
After the analysis, which began in 2000, “We implemented the strategy and the technology this past year in all of our Victoria’s Secret stores, probably half in Express, and this year, we’ll do the balance of Bath & Body Works. The fundamental point is that technology is not a strategy as such, technology is just an enabler.”
All Victoria’s Secret and Victoria’s Secret Beauty stores, a total of 1,011 units, have the basic store technology system (POS, back office controller, integrated traffic counters and performance management reporting tools). About 400 Express stores have those same tools, and the balance will likely be completed over the next 18 months. There are a total of 985 Express units.
The 1,621-unit Bath & Body Works chain has the basic POS and back office controller in all but 80 stores. This year all stores are upgrading the operating system to Windows 2000, installing the same Victoria’s Secret and Express performance management tools and installing automated labor scheduling.
Currently, the traffic counters, from ShopperTrak, are in every Victoria’s Secret store, close to 400 Express stores and almost 40 of Bath & Body Works’ larger stores. They’re linked to the registers to determine conversation rates.
All Limited Brand stores use the proprietary labor scheduling tools, which are automated at the home office level and then sent to stores, which manually schedule associates into the appropriate shifts.
The Limited Stores division, which hasn’t been growing like the other divisions, does not have any of these systems or tools yet.
Giresi further described the strategy as a combination of “practices and systems” to insure that stores are in-stock with goods on the sales floor, not in the storage rooms and have reporting capabilities that each day reveal what products need to be replenished.
The labor scheduling system has helped to position “the right person, in the right place, in the right time, doing the right things.” Yet initially, managers were skeptical. They typically thought they knew the traffic patterns and felt no technology would be able to figure out staffing better than they could, even though the technology is based on a wealth of transaction data, staffing histories, traffic counts, analysis on how many customers one person can serve to deliver the best customer experience in the most consistent way, and proprietary calculations mixing all that information, as developed by Limited.
Using the labor scheduling tool has really boosted results, according to Giresi. He recalled that over a year ago, for the first day of the Victoria’s Secret semiannual sale at a store in Los Angeles, the tool determined that this particular store needed 50 percent more shifts. “They followed the tool, and they completely blew away their numbers,” Giresi said. “Then the manager told me, ‘I would have never known I needed this many people.’ They were understaffed the prior year based on the analysis we did, and the staff wasn’t scheduled appropriately at peak hours. They doubled the staff at the early-bird hours and saw significant financial returns as a result of that.”
With the performance management system, stores can quickly adjust the staffing because managers can readily see how their store is performing against the sales goals, by looking right on their register screens. For example, if a two-hour segment was supposed to yield $2,000 of business, and after an hour and a half there’s $1,600 in transactions, the staff knows it needs $400 in the next 30 minutes in order to make plan for that shift. Each store has a customer service leader, or a shift leader, on the sales floor who is accountable for making the plan for that shift. They now have the tool to show them they need to make $400 within the half hour, which in the case of Victoria’s Secret would probably mean eight transactions in that time frame, since the average transaction is about $50.
The performance management tools also provide a read on the expected traffic coming into the store. So with all that information at their disposal, managers can adjust the staffing to provide the correct level of service, and also coach the staff on selling, but it requires quick action to meet the goals.
“We’ve taught our people how to use the tools and how to analyze the data to come up with correct action plans to drive the most profitable business,” Giresi said. The plans could involve bringing an associate from the back room to the sales floor, to sell or replenish stock, or moving someone from the selling floor to a cash register, or adding shifts. Limited has established training tools that teach managers the steps they need to consider to make the sales plan. “It’s like a menu of actions that they could take under different circumstances. It’s a simple, handy checklist,” Giresi said.
While certainly moving forward on technology for improving the top line, historically Limited Brands has not jumped on the latest tech crazes. It’s not into merchandise optimization, with includes automating the markdowns, and with the Internet, the strategy has been to be a fast second, not first out of the gate. Victoria’s Secret is sold online, but the other divisions are not. It could be a year or more before Express and Bath & Body Works sell in cyberspace.
“VS.com has been extremely successful,” said Ricker. “We built it so we can easily replicate it when we are ready to bring other brands online. We are moving to full integration with the brick-and-mortar side. The next brand to come online is being discussed. We haven’t made a decision on the timing yet. We have learned a lot and we have the opportunity to apply that to other brands right out of the box. We have a set of empirical data that very few companies will have in that space. We know how to drive large transaction loads on the Web site, integrate marketing events with sales events, such as fashion shows.” Considering that different products will be sold and different financial objectives will be established when the next Limited brand goes online, there are still “a lot of boxes that have to be checked before we are ready to move forward.”
However, Ricker added, “In some spaces, by design, Limited is a leader. We took a lot of time and effort to divide our technology suite into two buckets: commodity and competitive.” Commodity means systems for general ledgers, ringing transactions, processing credit, polling sales data at the end of the day — more standard stuff.
Competitive or more tailored systems include POS that integrates traffic counting and goals and the labor scheduling tools. New registers were jointly developed with Limited, Microsoft, NCR and NCR’s software division, called RCS. The registers are based on the NCR Dynakey system.
“The new register environment is intuitive, so a new associate can self-teach quickly,” Ricker said. “With the old system, it took several weeks or months before an associate got proficient. Now in 15 minutes, they can be ringing transactions. We based it on a bank ATM. It looks a lot like one. It’s graphic and very intuitive,” Ricker said, adding, “We want to integrate the store experience with technology in a way that is seamless and seems totally natural. You don’t see any investments by this company that aren’t explicitly aligned with the strategic direction of the brand and the enterprise.”
Asked how much Limited Brands spends on technology, Ricker replied: “As a percentage of revenue, we’re in the middle of the pack. We believe you can spend 5 percent of revenue and gain nothing, or spend 1 percent of revenue and gain a lot. The middle of the pack in retailing is generally 1 to 2 percent” of revenues. “We have been pretty stable with that by being able to drive more technology into ‘large change’ programs and drive down the maintenance and steady-state costs. In essence, we have been able to self-fund more projects by driving steady-state costs down.”
That includes creating common systems across divisions, such as an enterprise-wide human resource system for issuing paychecks, promotions, recruiting, benefits and the like, which has been a major initiative. The fewer systems Limited has, the less complexity there is and the easier it is to maintain, share information between divisions and cross-pollinate talent, since executives utilize the same software and hardware.
“We closed out [the year] at about the 65 percent common mark,” Ricker said. Over 80 percent of the company could be on common systems eventually. However, Limited could never get to 100 percent, due to the diversity of its products. Particularly tight controls are required with certain BBW products that contain alcohol or other materials with regulatory requirements.
On the general retail management side, such as stock ledgers, Limited divisions utilize the Island Pacific suite of software. On the planning side for both apparel and personal care, Limited utilizes the JDA Arthur planning and allocation systems. For replenishment, the company uses E3 for both the apparel and personal care divisions.
In addition, the company has chosen to “redesign the way we bring product to market,” Ricker said, through new systems that are geared to help plan and allocate merchandise and ultimately reduce markdowns. “We think there is more of a return this way, rather than an after-the-fact application of an optimization tool. We have done a lot of work and study in this area. We are looking at new ways to plan, new ways to allocate and a more integrated way to bringing things up front in the process, faster, so we can respond much quicker to market reads on new products and shrink our cycle time. We believe we can produce a higher-value result working in that space versus the optimization space.”
Shrinking the cycle time entails several elements, including a much more collaborative working system that is automated and smooths the work flow. For example, several constituencies should be kept in sync on any product launch or product develop activity. “This work is insured by having all those involved have all the information available on real time — the design folks, the finance people, the manufacturing, sourcing and logistics folks,” Ricker said. “It’s not only the computer system, but all of the processes that the computer system underlies. We are in the process of developing some prototypes that will be operating in 2004 to prove the theory of the case. We’ve done a lot of the work in the last 12 months designing it, to optimize the work-flow system. It could be the automated transfer of specifications to factories, or people on the procurement and sourcing side looking at a purchase order and work order process for getting goods manufactured.
“Certainly on the logistics side, you need to look at when to begin organizing preplanning capacities, such as making sure you’ve got enough air freight, or [enough] boats to move product. You may not know all the specifications on the number of units or types of programs, but you can start working with suppliers to pre-design that capacity by the calendar.” He said it’s a matter of thinking through the workload process, up- front preplanning to move the process faster and more precision on what gets shipped by land or sea.
At the store level, the Victoria’s Secret flagship in New York’s Herald Square has emerged as “a real technology incubator, as well as a significant stores system process incubator,” Ricker said. “It’s a completely wireless store.” He explained that the POS operates on a wireless network, with registers that transmit sales data every night back to the home office, and mobile POS configured to process credit-card transactions, gift-card transactions, open new credit accounts, or preprocess transactions so there’s less time taken at the wrap desk, where lines can be long. They work on the persistent network connection online, instead of dialing into a credit authorization provider.
The store for the past three months has been testing this “line-busting’’ technology. To preprocess a transaction, an associate scans items using a mobile point of sale, from Symbol Technologies, also known as an “m-pos.” What’s viewed on the m-pos screen is the same as on a register screen.
On crowded days, such as the Victoria’s Secret semi-annual sale period, the line-buster is stationed at a table not far from the wrap desk. After the items are scanned, the customer receives a receipt that isn’t itemized. The line-buster can also dismantle the security tag, and customers are watched carefully to see that they don’t head straight for the door, instead of to the checkout line.
Meanwhile, the information gets automatically uploaded at the register so by the time the customer gets there, all the associate behind the counter needs to do is scan a bar code on the receipt, and the customer then gets an itemized receipt. The procedure cuts down the time at the wrap desk by two to three minutes or by 30 percent on average per transaction, making for faster-moving lines. The line-buster technology, while capable of completing transactions, is primarily being used for preprocessing transactions. There are less than 10 Victoria’s Secret stores currently testing the handheld mobile POS.
There are other advantages to the wireless technology. Registers can be easily relocated, depending on the traffic, the season, and selling events.
“We are very anxious to get wireless technology rolled out so we get some experience in learning what it takes to operate a large-scale distributed wireless environment, 24/7,” Ricker said. That will be helpful when RFID technology becomes mainstream, he added.
Ricker doesn’t expect to see large-scale implementation of RFID anytime soon at store level, though, but believes there could be major changes on the supply side in three or four years. “We have to work on getting the cost of the [RFID chips] down, develop worldwide standards and successfully combat questions on information security. If you have a garment with an electronic device, how do you know that it gets turned off when customers leave the store? You want to make sure there is no encroachment on personal security. Some of the toughest discussions have been in that area.”
But at Limited, there’s a mind-set to preplan.