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9/25/2007 Paula Rosenblum, Managing Partner
Moving Past the World of 'Not Exactly'

We don’t think retailers are being disingenuous when they say they strive for customer-centricity, and retailers have more ability to inspect what they expect. But do they?
 
A couple of days ago, I went shopping for a new office chair.  
Was the cashier smiling? Not exactly. She took my order slip, gave it to a stock boy and walked away so she wouldn’t have to interact with me while we waited for the chair to arrive. When the chair came back, she returned, scanned the item, and quietly muttered “Would you like some help taking that outside?” I said “Actually, I would.” Too late. She was on to something else. Did she really offer me help? Not exactly. Now this is a small thing – a customer-centric initiative that was failing. But this same surly cashier had another “not exactly” moment – that was much greater cause for alarm.
 
A different cashier was checking out a customer and needed 5 singles so she could give him change. She asked “my” cashier if she’d bring her 5 singles so she could finish the sale. My cashier ignored her, much as she’d ignored my request for assistance. I watched cashier #1 try to figure out what to do. The register drawer was already open. The sale was half-consummated. She couldn’t close the drawer, but she couldn’t finish the sale. She spent about 3 minutes trying to figure out how to get the drawer almost closed, and finally butted the handheld checkout scanner next to the drawer and walked across the floor. I looked at the other customer, and we shook our heads. Nodding toward the wide open cash drawer I asked him “Want to go to Bermuda?” We laughed…we were both honest, and she returned with her 5 singles and he went on his way.
 
 
A Digital Video Surveillance Moment
What we have here are examples of performance management opportunities. The lack of a smile might not have triggered the business intelligence engine of a Digital Video Surveillance system, but the open cash drawer certainly would have.  If, in fact, the “Smile” initiative had been a corporate mandate, at least the cameras might have seen that labels had been affixed to the registers. Even if video cameras couldn’t see the register, the managers could have been required to confirm placement of the labels through a task management system.
 
The smile issue was small but irritating. The open cash drawer was stunning. Loss Prevention remains an intractable problem….and for the most part retailers have the tools available to manage it. Eighty-two percent of the first 55 respondents to our Loss Prevention survey said they use video surveillance to manage this problem at least some of the time. Are they using this technology to its full benefit? What can we say? Yup – “Not exactly.” 

Have a story to share?
 
keywords:

9/20/2007 Nikki Baird, Managing Partner
What Future For Pricing Solutions?
DemandTec went public last month, debuting at $11 per share and closing the day at $9.09. The stock has hovered around $10 per share ever since. Is this it for pricing solutions? Have they reached their peak – is the DemandTec IPO the sound of pricing solutions jumping the shark?

I don’t think so. First, there are a lot of reasons why DemandTec’s share price has languished, starting with the fact that the company has yet to turn a profit. Tech companies are also only just starting to jump back into the IPO waters after a long dry spell, so it’s unsurprising that investors are a little gun-shy.

Pricing solutions have been around for a while now – I well remember the 2003 NRF Big Show when you couldn’t get within 2 aisles of the ProfitLogic or KhiMetrics booths, because retailers were stacked 10-deep trying to get in to learn how price optimization was going to help them recapture margin. Fast forward four years, and that’s potentially a lot of retailers who have implemented pricing solutions in their business – leading to a market that could be reaching a saturation point.
 
The mechanics of price optimization really haven’t evolved much – all retailers need some aspect of the full price lifecycle, whether initial price setting, continuous base price setting/key item management, promotion optimization, or markdown optimization. The degree of need, and the accompanying requirements, change by retail vertical, but the basics remain the same. However, the role that pricing plays in a retail organization is still evolving, and that leaves a lot of room for the pricing solution market.

Pricing solutions are far from peaked – even though the capabilities that come in these solutions have historically been more sophisticated than most retailers are capable of taking on, the opportunities to expand both the use of pricing solutions within retailers, and the footprint offered by solution providers shows there is still a long way to go.

What do you think?


keywords: Price Optimization, Price Management

9/7/2007 Posted by Paula Rosenblum, Managing Partner
Retail Metrics that Matter: Is the Retail Method of Accounting Obsolete?
This week I'd like to talk about the core of many retailers’ financials:  the Retail Method of Accounting.

Why talk about this today?  The following news item was published by the Associated Press:  “The Securities and Exchange Commission (SEC) said Wednesday that Saks Inc. has agreed to settle a lawsuit that Saks Fifth Avenue understated sales to some vendors and didn't record markdowns properly, inflating its earnings.”  On the surface, this seems to be a straightforward case of individuals misleading their vendors and Wall Street.  But delving a little deeper, it’s quite possible to understand that this malfeasance  was made possible by the Retail Method of Accounting.  And it begs the question – in the 21st century, isn’t it time retailers shifted to the cost method accounting?

You might be asking, “Why does a technology research analyst care what form of accounting we use?” The answer is, because the Retail Method of Accounting came into existence because of a LACK of technology, and is obsolete because of the PRESENCE of technology.   In the age of Sarbanes-Oxley, this analyst is amazed that this method of accounting is still considered “GAAP”.

It’s Time to Change
The Saks story just points out the obvious.  In an era when we talk about the supply chain as a “glass pipeline”, we take payments from customers’ fingerprints and mobile phones, pass sales information along to our vendors for replenishment purposes, and talk about creating one-on-one promotions, shouldn’t we also account for our merchandise with the precision our technology allows?  It’s hard converting, that’s obvious, but it’s also hard to get sued by vendors, who actually DO keep score of what they sold us and how much we paid.

This is my opinion.  What's yours?  Our current survey on Loss Prevention says that over 30% of retailers still use the Retail Method of Accounting.  Is a changeover to cost accounting too hard?  Too complex?  What do you think?
 
 
 
keywords: Retail Method of Accounting, Retail Metrics

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