Retailers worldwide are expecting Santa to be a little less jolly this year. Economic pressures are squeezing retailer profits and stock prices as consumer’ fears dampen the season’s good cheer. Margins dip as stores add a long list of loss leaders to bait skittish customers and then slash prices on the rest of the stock to ensure those same customers leave the store with an actual purchase in hand. With both Scrooge and the Grinch ruling Christmas this year, few retailers are expecting anything shiny to appear by New Year’s.
Some retailers will weather the season’s storm, of course, but shelter is not likely to be built from a fantastic seasonal sale or a dazzling display of savvy merchandising. Instead, refuge will be found in higher operating efficiencies, swift and personalized customer management, and real-time competitive intelligence. Enter the CIO and the high-tech Hail Mary.
Case in point: James Lance, senior vice president and CIO of Bon-Ton (NASDAQ: BONT). The retailing giant operates 281 stores, including twelve furniture galleries, in 23 states in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergner’s, Boston Store, Carson Pirie Scott, Elder-Beerman, Herberger’s and Younkers nameplates and, under the Parisian nameplate, stores in the Detroit, Michigan area. The stores offer a broad assortment of brand-name fashion apparel and accessories for women, men and children, as well as cosmetics and home furnishings.
Lance, like many CIOs, is faced with a career -making or –breaking conundrum: how to increase the benefits of technology without investing any more money in it.
“IT is a significant cost center and is called upon to assist in managing costs and enabling productivity improvements to cope with lower sales expectations,” he explains. “IT is also a consumer of capital resources. Capital plans tend to be longer in term. Equipment replacement and projects may be delayed as a result of the downturn. Inevitable cycles in the economy reinforce the need to operate IT efficiently and to thoroughly understand the fixed and variable costs of service delivery.”
That situation is pretty universal and certainly difficult to reconcile, hence the need for Hail Mary plays.
Integration and opportunity
Lance says his most pressing concerns in reaching the company’s goals are:
1) Developing and promoting collaborative systems development processes that lead to innovation and business agility, characterized by focused requirements gathering and clear accountability for expected outcomes;
2) Ensuring that technology investments deliver the expected return on investment and effort;
3) Securing technology infrastructure and information assets from an ever growing list of threats;
4) Transitioning the skills of IT staff and business unit management to expand the use of business process improvement techniques and to leverage information assets through the use of business intelligence/analytic methods to improve business performance; and
5) Developing better data management capabilities to curb information sprawl.
It’s not that Lance had been resting on his laurels prior to the economic meltdown. Previously, the Bon Ton Stores IT group successfully completed two systems integrations supporting acquisitions which doubled the number of store locations twice, and increased sales volume by nearly five times to 3.5 billion dollars. The first integration was completed in fourteen months, and the second was accomplished in less than 12 months.
The second integration was more complex. The technology portfolio of the acquired company had to stay in place to avoid potential business risks associated with changing systems before the 2006 holiday season – a mere six months from the closing date of the transaction. Lance says the technology platform was replicated updating components wherever possible. Existing Bon Ton stores and distribution centers, along with the new stores, distribution centers, and corporate offices were moved to the new systems portfolio to ensure that merchants could manage inventories at all locations as a single company.
“Integration projects present an abundance of opportunity for an IS team – new systems, new people, and throw in a little schedule pressure makes for a character building project,” laughs Lance.
The team used the next few months to stabilize and document systems, and focused on business synergies expected from the combined business. “Now our attention is focused on developing the skills and processes to support business transformation initiatives aimed at optimizing business process and implementing supporting systems and technologies that enable improvement in both the quality and performance of the business,” he says.