SEARS’ NEW WAY TO MANAGE THE MIX
Byline: Denise Zimmerman
NEW YORK — Sears, Roebuck & Co. will flip the switch next month on new technology geared to tailor assortments to local markets and optimize individual store sales.
The system, which Sears has been developing for two years, is scheduled for its first test run in the second week of October. The last pieces of computer code required to launch the program are currently being finalized, and by late November or early December, up to five product lines — two in apparel and one each in hardware, home furnishings and appliances — could be on the system.
“Based on what happens at that point and if all goes according to plan, our intention is that this will become our new assortment planning process in 1998,” said Jim Mergott, director of assortment planning development.
Though he declined to discuss sales goals in detail, Mergott did indicate successful implementation of the system could increase sales by a minimum of 1 percent. Sears generated sales of $38.2 billion in 1996 and is the second largest chain in the U.S.
“We will have an increase in sales, driven by improved in-stocks, by investing inventory dollars in the items that sell market by market. We’ll improve our turnover by eliminating dollars that have been invested in products that don’t belong in stores, and we’ll reduce markdowns,” he said.
A less tangible, though still critical benefit of the system, he said, is that it gives staff a powerful tool for making assortment planning decisions on a store-by-store basis.
The project is the result of a mandate from Sears’ chairman and chief executive officer, Arthur C. Martinez, to make the company more locally focused.
“We wanted to develop a system that would enable buyers and planners to do a better job of making the decisions, store by store, as to what belongs in those stores and also what doesn’t belong in those stores,” he said. “We know [the track record of] their decisions today. We want to give them better information so they make more right decisions.”
Many retailers, such as Sears, in the past have relied upon historical data to shape allocation plans, such as what sold in the year-ago period. Now they are demanding better information. Sears’ new system is capable of developing a “future sales plan” that takes into account historical data but also factors in other variables.
“We are not using last year’s history as our sole decision point anymore. We are building into this system the capability of taking last year’s history and modifying it based on forecasting, the capture of lost sales and input from our vendors and district merchants,” he said.
“We are focusing on potential sales, as opposed to ‘What did I do last year and I’ll take a guess on what I think I can do next year,”‘ he said. The future sales plan is highly detailed by item, stockkeeping unit and store.
‘The ability to manipulate last year’s history to build a future sales plan is a giant step for us. We never had that capability.”
The first test of the system, beginning in mid-October, will involve two product lines: apparel and hardware. The next test phase, in late November or early December, would expand the system to a second apparel line, HomeLife home fashions, furniture and appliances.
Mergott noted that a compelling new data variable Sears will incorporate into the assortment planning process is sales opportunities lost due to stock shortages as well as demand for product Sears does not carry. Stores have had the ability to capture this data at the point-of-sale since mid-March.
“When a customer comes in and tells us they were looking for a product we don’t have, we now have the capacity, at the point-of-sale, to capture that and have that data go directly to our buying teams — or, depending on what the system told us, transmit it directly back into our stores for action,” he said.
Store associates, when ringing up a sale, are encouraged to ask shoppers if they found everything they were looking for. If a customer didn’t find something, then the cashier enters into the point-of-sale the stockkeeping unit numbers for items not found.
“It can get fairly complex in some cases, for example, because the customer may come in and want an item we’ve never carried before. The associate needs to know what number to put into the register, and that can get a little difficult,” Mergott said. However, by fully leveraging this capability, Sears for the first time will be able to determine a demand for products it does not even carry.
Mergott said this capability, and others being developed to refine the assortment process, will bring Sears closer to its goal of becoming highly focused on specific market needs. He said technology is playing a major role, but enhancing processes and training are also essential.
“What we realized early on is that if you are going to make the stores more market specific, one of the major things you have to address is assortment,” he said. “For this to be successful, we need to fully define the process, redefine roles and responsibilities, in addition to developing a system to support that process.”