Mid-Market All Stars

By  Debbie Hauss — July 27, 2006

Not intimidated by their mega-sized Tier 1 brethren, the following 10 small-to-midsize (SMB) retailers are achieving impressive marketplace success and growth in year-over-year sales and revenue gains. Beginning with a strong retailing concept, these retailers are taking their initial success to the next level by building up their brands, expanding into new geographic areas, fine-tuning business processes, and investing in IT as a key enabler of critical initiatives and goals.

It seems hard to conceive of an $800 million to $900 million retailer as being in the small-to-midsize category, so we have capped the upper end at $750 million and the lower end at $50 million. Although this is a wide revenue range, it is generally considered that above the top bracket retailers tend to operate as market-dominating, resource-rich giants who lead by example. Below the bottom bracket, retailers typically have no need to invest heavily in IT infrastructure and functionalities.

However, retailers between the SMB brackets have several essential characteristics in common. Typically, they feel the need to invest in advanced IT systems to achieve bottom-line efficiencies and competitive advantage. Also, while they have resources to devote to these initiatives, they are typically more constrained than top-tier retailers and so require highly cost-effective IT products and strategies.

Although this years 10 Mid-Market All Stars span a wide spectrum of retail verticals and revenue categories, they all share an accelerating pace of competitive pressures and ever increasing demands to satisfy rising shopper expectations. And they are all meeting these challenges extraordinarily well. Congratulations to everyone on this years list of leading SMB retailers.

Charlotte Russe grows in malls

This mall-based specialty apparel retailer added 48 stores in 2005, up to 408 from 360, and increased sales by $44 million to $603 million. Offering value-price apparel and accessories targeted to women in their teens and twenties, Charlotte Russe plans to continue expanding its presence in the mall segment, possibly up to 700 stores, with the help of its well-run IT department.

In 2005, the Charlotte Russe IT team completed three major implementations: replacing its merchandising, planning and allocation systems; introducing a new data warehouse system; and improving business integration capabilities, reports Ed Wong, vice president, IT services. The company also selected AT&T for networking services in 2005. The deal, part of a larger, three-year, $2.3 million contract Charlotte Russe has with AT&T, s a new Internet Protocol (IP)-based networking infrastructure that will provide secure, high-speed connectivity and data transfer, as well as a range of domestic voice and professional services.

Charlotte Russes IT mission is a simple, yet effective one: Our goal is to provide technology solutions and services with speed, Wong says. In 2006, he adds, the company will replace its store systems.

Network overhaul accommodates Town Shoes expansion

This 80-store, Canada-based shoe retailer has been growing in terms of store count and volume at an average annual rate of 10 percent in each of the last five years, reports Peter Gerhardt, CFO. Our plan is to continue this rate of growth until our real estate opportunities dictate otherwise. Gerhardt describes the Town Shoes mission as follows: Our current IT mission is to offer exceptional customer service by ensuring that we get the right shoes into the right stores at the right time and by making the customers in-store and cash-and-wrap experiences more pleasant and efficient than any other retailer.

The Town Shoes IT department was busy in 2005, overhauling the network infrastructure, upgrading the network operating system from NT to Windows 2003, and installing a new security system. The existing infrastructure was put in place in 2001 and the company has grown by 61 percent in terms of revenue since then. The number of users and demands placed on the systems and storage infrastructure increased accordingly. The overhaul should allow us to continue to grow at that rate for the next five years, says Gerhardt.

Also, in 2005, Town Shoes integrated its merchandising system with a new third-party logistics provider. The company has outsourced approximately 80 percent of our warehousing and distribution locations, and during the year we switched providers, Gerhardt explains. The move necessitated interfacing our vision merchandising package to a PKMS platform. The project spanned six months from initial scope definition to final implementation. We experienced a seamless transition during our busy back to school period. The retailer also automated the companys sales audit process in 2005.

In 2006, Gerhardt plans to introduce electronic loyalty and gift cards to consumers, complete a POS upgrade and improve the inventory management system. hibbEtt hits home run Hibbett Sporting Goods is on a winning streak, with a net sales increase of close to $63 million in 2005, up to $440.3 million. The company also increased comp store sales by 5.6 percent and earning per share 38.6 percent in fiscal year 2006. The Alabama-based retailer also has increased the number of stores to 549 from 482. Hibbett caters primarily to small town sports enthusiasts in 22 southern states. The company sells sporting equipment, footwear and apparel. Hibbett Sports stores, its flagship chain, are located primarily in malls and strip centers.

Hibbett hits home run

Hibbett Sporting Goods is on a winning streak, with a net sales increase of close to $63 million in 2005, up to $440.3 million. The company also increased comp store sales by 5.6 percent and earning per share of 38.6 percent in fiscal year 2006. The Alabama-based retailer also has increased the number of stores to 549 from 482. Hibbett caters primarily to small-town sports enthusiasts in 22 southern states. The company sells sporting equipment, footwear and apparel. Hibbett Sports stores, its flagship chain, are located primarily in malls and strip centers.

Hibbetts IT department is focused on serving the overall needs of the company, says Chuck Adams, CIO and vice president of distribution. Our mission is to effectively integrate business processes, data and technology to enable the decision-making needed to maximize shareholder value. This s creating a foundation on which to plan, develop, implement, operate and maintain the systems needed by the business.

In 2005, Hibbett implemented JDA merchandise management, Retail Ideas and Arthur Planning Suite, including the Business Process Assessments. The company also upgraded to Lawsons financial system and created an in-house system to match onesies shoes. We created a system to match onesies with mates, thus adding 2,188 pairs of saleable shoes to our inventory that otherwise would have been shrink, states Adams.

In 2006, Adams plans to continue the implementation of JDAs suite of products, replace store POS PCs to enable migration from Windows NT to Windows 2003 and implement the Accruent Lease Administration System.

Growth forces Jos. A. Bank to double DC capacity

With 158 percent growth in store openings from 1999 to 2004 and plans to add 200 more locations to its 300-store portfolio in the next three to four years, upscale mens wear retailer Jos. A. Bank is a prime candidate for growing pains.

But smart planning particularly in distribution has nipped many potential headaches in the bud. Its new distribution center (DC) not only doubled the companys DC floor space but also improved the procedures and flow of its distribution processes. The benefits have spilled over into other areas of the business, such as merchandising and product development, and allowed Jos. A. Bank to move forward confidently with its growth strategy.

Jos. A. Banks newest 280,000-plus-square-foot DC, dubbed DC2, provides capacity to accommodate the chains growth up to 580 stores. DC2, which came online in January 2005, augments distribution capacity of an older DC, which the firm recently upgraded. Even though the two DCs are carrying hundreds of percents more inventory, the company is operating them for about two percent more salary, Gary Merry, CIO, recently told Apparel Magazine. This efficiency already is helping the bottom line. The company came in $500,000 under budget last year for its DCs because of improved efficiencies.

Anchor Blue completes turnaround

At approximately $400 million in revenue and growing, Anchor Blue youth clothing stores are making a successful turnaround after a company buyout in December of 2003.

With the goal of growing the business from 170 stores to 500 and potentially going public in 2007, Anchor Blue CEO Michael Bush has made a commitment to improving operations through a significant investment in IT. The company spent between $2.5 million and $5 million on an Oracle/Retek implementation with the expectation of at least a one percent increase in revenue as a result.

We are carrying something on the order of $30 million to $40 million in inventory at any point in time, says Bush. We are doing roughly $400 million in revenue so I think about return on investment in terms of the fact that I need to have better merchandising and better systems capabilities to give me a one percent increase in my revenue. That would be a pretty sweet thing and I think the probability is pretty high.

Anchor Blue, which operates 170 Anchor Blue youth clothing stores and 84 Levis and Dockers outlets under the Most name, purchased the entire suite of Oracle Retail products in December 2004, after the company was purchased in a buyout from Sun Capital the previous December. In the first phase, in November of 2005, we rolled out the merchandising system, says Richard Space, CIO of Anchor Blue. The second suite, including POS, demand forecasting and ProfitLogics product lifecycle, was purchased in November of 2005 and will be rolling out in July or August of this year.

Z Gallerie grows both clicks & bricks

This privately held, $200 million home furnishings and accessories retailer continues to succeed through innovative storefronts and growing Internet sales. In 2005, the company opened nine stores (four of which were in new states). Total sales increased almost 17.5 percent while comp sales were up almost seven percent, and Internet sales were up more than 100 percent, reports Howard Kolodny, director of IT.

Z Galleries IT focus is basic but effective: We strive to improve the customer experience in a multi-channel retail environment, by providing an easy-to-use software/ hardware solution, notes Kolodny.

IT initiatives in 2005 were focused on meeting the needs of an expanding business. A major application and server upgrade for our core systems allowed us to handle holiday traffic in stores this year with increased performance, funcationality and availability, Kolodny says. We also simplified the mechanism for delivering restricted Internet access to stores. The initial application this supported allowed us to improve the inventory process and deliver state-mandated training to personnel in stores.

Moving forward into 2006, the IT team at Z Gallerie will look at the network infrastructure. We are planning to both introduce new applications and upgrade existing applications, says Kolodny. These efforts will impact a diverse cross-section of our business, including planning and merchandising, human resources, accounting and store systems.

1-800-FLOWERS clicks with customers

Dont let the name fool you. This growing multi-channel retailer is in the business of selling a lot more than flowers, and successfully, exemplified by the companys 11 percent increase in revenues in 2005, up to $671 million from $606 million.

In 2005 the retailer grew its brands from six to nine, with the addition to Cheryl & Co., a cookie and baked goods retailer, the Winetasting Network in Napa, and Wind & Weather, a specialty gifting company. With these additions and continued growth in its core areas, the business expanded to 3.3 million new customers in 2005.

Focused on best-serving its customers and business processes, the mission of the 1-800-Flowers IT department is almost militaristic: Our mission is to enable the business to be flexible and nimble, and to support continuous growth through IT and business strategy alignment, as well as: To Protect and Serve, says Enzo Micali, CIO.

IT achievements for 2005 run the gamut from workforce management to services oriented architecture (SOA). We added a Yantra workforce management system and Oracle for manufacturing without adding to IT costs, notes Micali.

More technology advancements are in store for 2006, including: migrating systems to achieve open software platform standardization in the areas of order capture, distributed order management, warehouse management, inventory and manufacturing, Micali explains.

Holt Renfrew dresses for success

With double-digit sales increases in 2005, this private, Canada-based clothing retailer is using technology to help advance the business. We are here to assist the company in achieving its strategic goals by providing advice and solutions that are robust, delivered in a timely and cost-effective manner while maintaining the reliability of our existing operations, states Anne Hodkin, director of IT.

In 2005, the company completed Customs Self Assessment Certification for goods crossing the border between Canada and the U.S. This was a joint effort of IT, the distribution center, the finance department and our brokers, notes Hodkin. The retailer also improved its time and attendance system with a full rollout of a system from Workbrain. In the next phase of the project, Holt Renfrew will deploy Workbrains Labor Forecasting and Schedule Optimization to ensure that the right store associates are scheduled to service shoppers.

Also, in 2005, Holt Renfrew implemented a SAN/NAS system for backing up all store data to a central site and across to a second site, eliminating the need for tape backup in the stores and improving the data lines to the stores, according to Hodkin.

In 2006, the retailer is upgrading the POS system to meet PCI compliancy and take advantage of the chip and pin technology, says Hodkin. Other planned 2006 implementations : upgrading the CRM system; upgrading to remote purchase order entry; and expanding data warehouse capabilities. In the midst of all the IT activity, the company is opening a new, state-of-the-art, 125,000 square foot store in Vancouver.

Zumiez builds industrial-grade branding

Growing at a rate of 30 percent annually in sales, Zumiez achieved a 13.7 percent comp-store sales hike in 2005, and an estimated 30 percent jump in earnings per share, according to Brenda Morris, chief financial officer of the Everett, Washington-based chain.

The specialty retailer bills itself as being like a Pac Sun, but more trendy, with sales of surf board supplies in addition to apparel and featuring an industrial look, Morris says. Zumiez opened 2006 operating some 117 stores in a diverse geographical arena, including Texas, New Jersey, New York and California, and plans to open 42 more units by the end of the year. Similarly, the fast growing operator projects sales to jump from about $150 million at the beginning of the year to some $180 to $200 million by years end, Morris says. The company also just completed an (IPO) initial public offering in May.

IT at Zumiez is lean but effective. The company employs only five full-time associates in its information technology department, but that structure is more than enough to support the type of fast growth other companies with far larger IT staffs crave. The company operates on the same POS system it has had since 1990, though that may change soon. It has a centralized data server, a Windows desktop environment, a Linux open source operating system, and an open-to-buy tool integrated to the back end to help evaluate selling trends and swap out merchandise while it is hot.

The quick growth retailer also is using VOIP, a loss prevention application, a merchandising system (also implemented in 1990, according to Morris), and financial reporting and accounting software, among other current systems. Looking forward, Morris cites distribution, global sourcing, business intelligence optimization and dashboard, imaging and document management tools, and allocation and replenishment for great attention and possible upgrade.

In terms of specific store attributes and technology initiatives that Zumiez credits for its steady and successful growth, Morris cites areas the company has especially embraced. In terms of attracting the teen audience, the stores are designed to have an interactive environment, an industrial look with concrete floors and open ceilings, an organized chaos look and a deep rooted passion for active sports lifestyles. Zumiez also makes sure its staff understands what serving its customers entails: all store managers receive training three times a year at what Morris terms Zumiez University.

FreshDirect delivers the goods

The tagline says it all: Our food is fresh, our customers are spoiled. FreshDirect, a multi-channel grocery retailer, has taken the online grocery ordering segment by storm, with estimated 2004 sales of $100 million, revenue growth of more than 30 percent year after year, one-year sales growth of 20 percent and one-year employee growth of 73 percent.

The FreshDirect IT department plays a key role in the companys success. Our mission is to provide a reliable support infrastructure for plant and storefront operations to provide FreshDirects customers the best online shopping experience possible, says William Anderson, vice president, technology operations.

In 2005 FreshDirect completed a number of technology implementations including migration to VOIP, movement of the content management system to a custom application built on open source tools, and migration of the customer service call center to Symposium, reports Anderson. In 2006 the company is using Kronos tools for human resources, scheduling, time and labor and absence management and is planning to re-engineer its plant network, implement CDP to provide improved system resiliency, and implement a marketing data warehouse.

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