FINANCE

Retail Performance: A Blueprint for Better Sales

Mar. 1, 2006

Delivering the right customer experience is critical to driving sales. According to AMR Research, 70 percent of buying decisions are made only after a customer is inside the store.¹ And research by the Economist Intelligence Unit shows consumer expenditures on health, leisure, education, and services, as well as on food and clothing, increasing by 7.7 percent in the next two years.² Consumers, writes the Economist, are going for the experience.³ Companies that provide a poor one will lose out.

Successful retailers don’t just spot trends. They use them to shape the customer experience, from staffing down to signage. Enter IBM Cognos Performance Blueprints—preconfigured data models that help retailers align store operations with high-level strategy—and drive better financial performance.

A co-ordinated approach to planning

Delivering the best customer experience is a priority for boutiques and global chains alike. Unfortunately, most retailers often use the same approach to plan store operations—disconnected, departmental-level spreadsheets that rarely reflect strategic corporate initiatives like store remodeling, offering a new product line, or building an in-store café.

Ineffective planning creates a disconnect between store operations and corporate-level plans for market share, growth, and customer satisfaction. This can result in lower margins, reduced sales, and a less satisfying consumer experience. Departments, divisions, regions, and channels can also be disconnected; and consolidation of siloed plans is time-consuming and error-prone.

The IBM Cognos Store Operations (P&L) Planning Blueprint solves this problem. It was built using Cognos Planning—financial software that lets retailers build top-down strategic plans and integrate them with bottom-up budgets and forecasts.

A new way of working

For Finance, enterprise planning presents a new way of working. IBM Cognos Planning is a Web-based, high-participation solution for modeling, planning, budgeting, and forecasting. It lets financial and retail management define the process, models, and content required to meet financial targets, and then distribute pre-populated, Web-based templates to regional or store-level contributors across the organization. It helps chains achieve consistent operating performance through highly collaborative, real-time planning.

By integrating with Cognos business intelligence, the solution provided by Cognos, an IBM company, also lets retailers publish reports and conduct analysis based on sales, margins, item movement, labor cost, advertising spend, and other key controllable costs.

The first of its kind

Store Operations is the first in a series of retail blueprints to be developed by the Cognos Innovation Center for Performance Management.™ The Center develops solutions for business that help cut costs, streamline processes, boost productivity, enable rapid response to opportunity, and increase management visibility.

“Aside from the obvious productivity improvements to be realized from using IBM Cognos Planning; the real value lies in the alignment, integration and measurement of store-level plans and actions with overall company-wide objectives,” says David Axson, founder and president of consulting firm The Sonax Group and an advisor to the Innovation Center.

Based on best practices

The IBM Cognos Store (P&L) Operations Blueprint provides a best-practices platform for store revenue and expense planning for primary areas including finance, store and channel operations, merchandising, and marketing. Corporate can use it to identify and manage store attributes like store format, location or square footage, and recommend standards for key expenses like staffing. At the store level, managers understand benchmarks and can plan local initiatives like promotional programs or limited-time offers.

“Cognos has partnered with a large number of global retail chains to help deliver improved store performance,” says Patricia Waldron, director of retail industry solutions at Cognos, an IBM company. “These valuable relationships have enabled us to develop significant thought leadership in the retail industry.”

More time for analysis

In most retail organizations, planning cycles are long and tedious. What often develops is planning in silos, where each department (finance, operations, merchandising, marketing) completes its own bottom-up planning. This makes it difficult for the company to keep pace with changing consumer needs, trends, and shifts in the marketplace. In a fast-moving industry like retail, these bottlenecks can mean the difference between a bonanza and bankruptcy.

IBM Cognos Performance Blueprints connect departments and drive continuous collaboration. In place of re-keying or copying data from one spreadsheet to the next, users can simply click from one integrated plan to the next to see allocations, actuals, variances, and other key performance data.

This gives Finance more time more time for analysis and rolling forecasts. What emerges is a dynamic business that adapts quickly to trends, new consumer demands, competitive challenges, and changing markets—from corporate right down to the storefront.

Summary

The customer experience is one of the most powerful tools the retailer has. The one that can align their storefront – and the experience it conveys - will be the one that wins out in the end. IBM Cognos Performance Blueprints are the ideal way to jump-start the process.

Find Out More

Sources

¹Robert Garf, Sriram Thodla, Joyce McGovern. Transform Your Stores: Enhance Customer Interactions with Advanced Selling Technologies. AMR Research. June 27, 2005.

²Economist Intelligence Unit, The World In 2006.

³ibid.

$35m

What the typical Fortune 1000 company could save each year by moving to an integrated planning system.

– Source: The Hackett Group