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From Home Furnishing Business

A Look Ahead

By Home Furnishings Business in Retail Technology on April 2007 With a few exceptions, the furniture industry hasn€™t lived on the cutting edge of speeding product to consumers, so it€™s no surprise that a lot of furniture stores trail retailers in other sectors such as consumer electronics, apparel and appliances when it comes to adapting the latest and greatest technology for their business.

That said, more and more retailers are putting information systems to better use in their operations, and automation vendors say technologies are on the way that while not always brand new, haven€™t been used as much in furniture stores to date as in some other sectors.

There are a number of areas where furniture retailers can expect technology enhancements within the next year or two, but some already are givens in other industries.

€œThe furniture industry is so far behind what€™s going on for technology that the leading edge is several hills beyond the horizon,€ said Russell Higgins, a principal with Myriad Software in San Diego. €œWhat we€™re looking at in the next couple of years is not €˜new€™ technology by any stretch of the imagination.€

What to Expect

Myriad is concentrating on product development for Web sites, enhancing retailers€™ role as service providers.

€œRetailer Web sites are a big area companies like ours are going to have to develop tools for,€ Higgins said, noting that retailers€™ use of the Internet reflects its tech status relative to other industries. €œMost retailers don€™t even want to put pricing on their Web site, much less sell there. I think they€™re going to face pressure, not just from other sectors, but also in furniture from people like Pier One, Crate & Barrel and Restoration Hardware who are selling furniture on the Web.€

A retailer should know whether a customer in the store has visited its Web site, and get ready for a generation that expects more response and access via the Internet.

€œAt a minimum, consumers are going to want to be able to go in (a Web site) and create a shopping cart or do some sort of room planning,€ Higgins said.

Higgins said retailers can expect more applications to automate many aspects of customer service.

€œWhat do people want to know about their purchase? When it arrives at the store and when they can expect delivery,€ he said. €œRetailers should be able to let them know when the goods arrive at the store from the manufacturer. It€™s an event-triggering mentality that generates an e-mail to the customer.€

Creating a €œseamless€ flow of information among and between systems is a key development area at San Diego-based Escalate Retail, said Roy Martin, product manager.

€œFolks are looking to increase and enhance the customer experience,€ he said. €œWe hear people talk about that all the time, but what that means relative to technology is creating a seamless environment for all ways they actually have that experience. For example, a customer might buy something on the sales floor, return it on the Web, or exchange it through an in-store kiosk. Information should flow seamlessly among all those.€

That demands a common services layer in the system.

€œWhat are all the bits and pieces that need to be tied together and how do I integrate them?€ Martin said. €œIn the past that was a simple file transfer, or sometimes keying a Web sale, for example, into the store€™s main information system. Create a layer that indicates what needs to be transferred.€

Loyalty programs, especially tech support for €œWeb malls€ in which retailers team up for a shared Web presence, is another area of interest for Escalate.

€œIt might be consumer electronics and furniture retailers, for example,€ Martin said. €œThat loyalty should transfer between retailers. If a shopper needs a television and the furniture to go with it, those points can go to either retailer.€

Room-planning software that integrates manufacturers catalogs and electronic data interchange will be a priority, said Larry Stark, chairman of Colorado Springs, Colo.-based Profitsystems.

€œEveryone doing any sales training is pushing room planning and selection up to and including computerized planning,€ he said. €œIf you€™re doing room planning, that indicates you€™re doing a lot of special orders, which is the most profitable type of business. With special orders, you don€™t have any dogs€”whatever product€™s been ordered has already been sold.€

Stark noted that techology that combines merchandising and EDI right when consumers make their decision lessens the potential for buyer remorse. Seamless interplay among various systems also is a focus at Profitsystems.

€œWe look at our expertise (in) inventory and accounts receivables management, but the main thrust of our development today is tightening our integration to other applications to the point it seems like one system (to the user) for processes such as GPS routing, EDI and manufacturers€™ catalogs.€

Ren Baker, president of CDS Solutions in Lancaster, Pa., said technology to build sales force productivity has great potential, especially for small to mid-size retailers.

€œIt€™s about identifying who the customer is and how to market to the right customer at the right time. Can we start to predict when people buy, what they want to buy, and how is the best way to market to them in the future?€ he said. €œIt€™s all about capturing minute transaction details and mapping information from outside furniture, such as leveraging data from private label lines of credit as to when they buy furniture and what sorts of offers they respond to. Personalized one-to-one marketing. ... That€™s a gold mine when it€™s done right, but you need databases, transaction histories and (leverage) that into business rules that drive the sales force.€

The increased amount of product hitting retailers€™ docks directly from overseas will influence their technology investment, said Gloria Walsh, product marketing manager for Mt. Arlington, N.J.-based Storis Management Systems.

€œWith everybody buying by container, people have a lot more concern now about importing items and freight and how it€™s handled and what€™s the best way they can manage that in the system (in terms of) customer expectations,€ she said. €œWhen you deal with a domestic warehouse, sometimes you could get things in a week or two, but with a container that€™s going to take eight weeks. If the shipment runs late, you€™re not just disappointing one customer. There may be 30 customers who are linked to that container. The access to that information and managing that is critical.€

Mark Van Winkle, director of sales at Storis, said retailers are looking for more e-commerce capability.

€œThere€™s also CRM packages, contact management€”they€™re always looking to do that more efficiently,€ he said.

Walsh added that those functions are very important to small stores.

€œIf they don€™t have a big advertising budget, if they€™re sending out a circular or a coupon or some sort of a promotion, they want to be sure they can track everybody who comes into the door to track how successful this promotion was,€ she said. €œDid it work? How many people came in, what sales increased, what zip codes increased based on our mailing? Having robust contact management and reporting systems can enable you do do that.€

Areas Affected At Retail

How will these technologies affect retailers in specific areas of their operation, such as inventory control, merchandising or delivery?

Escalate€™s Martin said seamless communication among selling tools such as the Web and kiosks and between customer-generated and internal information will change the retail landscape.

€œWe may be forced to a more mobile POS environment where we€™re using PDAs and handheld computers to receive alerts,€ he said. €œIf you want to create that ultimate experience for the customer, you€™ll have to spend some money on devices. Fortunately, the prices on things like tablet computers and PDAs are coming down. Because people must be more mobile in order to not only react but also be proactive on things such as instant alerts on product outages, you should be able to schedule delivery and service on the sales floor.€

With more choices for GPS delivery and routing systems, retailers have an opportunity trimming costs in that expense-intense function, said Stark at Profitsystems.

€œIf a store is already profitable, any little increase in sales or efficiency has a huge effect on the bottom line,€ he said, adding that the average store has a 3 percent profit margin. €œBut once you get past break even, you get 25 percent on each sales dollar, not 3 percent. The same is true for reducing your expenses.€

New applications for EDI and radio-frequency identification embedded in products will affect logistics and inventory management, said Myriad€™s Higgins.

€œRight now we do a great job with EDI, but I think companies like ours will have to extend that to the transportation system when you consider the impact of off-shoring,€ he said. €œAre all those plants overseas online in real time with EDI? My understanding is that a lot of information has to get rekeyed, and it€™s important because the manufacturer is a point of information access for retailers ... Now there€™s not only truck transport to deal with, but also the high seas issue.€

Down the road, watch for permanent chip technology built into every product.

€œIt will probably be perfected in the grocery business first to the point where you bring your cart to checkout and you immediately have your entire purchase rung up€ with a single scan, Higgins said.

That kind of technology, in furniture more applicable to receiving and inventory tracking, would require a big critical mass in furniture on both retailers€™ and vendors€™ parts.

€œEveryone has to hold hands and start to play the game at the same time for it to make sense,€ he said. €œIn a lot of sectors, the retailers got so big that they could make the rules that manufacturers had to meet to do business with them. In the furniture industry, it was traditionally the other way around, and I can tell you retailers have felt the pain as a result.€

Baker at CDS believes retailers will be stocking less and focusing on customer relationships, diverting investment in warehousing and inventory to the merchandising side.

€œThe ones who are driving change in the industry are going to force this separation,€ he said. €œTechnology has never been a differentiator, it€™s a tool to drive success. It won€™t make or break a retailer.€

Baker predicted that eventually, smaller retailers could look to larger counterparts as distributors.

€œAs those companies move away from having to stock everything ... a lot of their wholesale activity will happen through larger retailers who have the big warehouses and systems selling to smaller retailers,€ he said, noting what€™s already happening in sectors such as appliances. €œThe large guys will do almost no special orders because the transaction costs too much. Part of this isn€™t in our control, but determined by the customer. Home furnishings will follow the path of every other retail sector€”you€™re going to see some Darwinism here.€ HFB

Senior Editor Jo Fleischer contributed to this report.

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