Customer Service Trumps Economic Concerns In Retail Strategic Planning

Providing excellent customer service is key to retail success in good economic times as well as in a questionable economy.

Although retailers may be taking a more careful approach to their business plans and IT initiatives, they are not necessarily canceling projects due to an economic downturn.

Early results from a Retail Systems Research industry study confirm that “improving customer service” is the top industry challenge noted by 59% of respondents. Only 23% – the lowest number – said the economy was their top business challenge right now.

“It would have to be a pretty significant economic downturn for us to stay with the status quo,” says Robert Fort, CIO and vice president of information technology for the Virgin Entertainment Group. “We are definitely keeping an eye on the economy, though. For example, we are holding back on capital investments across the board for the first two months of the year, so they are delayed a bit but we haven’t cancelled any projects.”


Fort also pointed out that often Virgin’s core business – CDs and DVDs – often fare better in slower economic times. “When people choose to stay home rather than go out to the movies, we benefit.”

Retail Strategies Reflect Cost Sensitivity

Even though the majority of retailers say they are not specifically focusing on the economy as their core business challenge, they still may have it in the back of their minds as they plan IT projects and business strategies. Virgin, for example, is increasing the number of self-service kiosks in stores and reducing staffing by a small percentage as a result. The retailer also is focusing more management oversight on stores’ customer conversion rates, and Fort has considered implementing task management to improve employee productivity.

Other retailers, in a variety of segments, are taking different approaches, including:

  • Build-a-Bear is slowing new store growth to focusing on existing store sales. The company also added a new position – Managing Director, Workshop Experience – to energize store associates and update the store experience. Other initiatives include expanding the loyalty program, raising awareness of a new website,, using more multi-media marketing initiatives, and putting a greater emphasis on the international marketplace.
  • Circuit City, noting a net sales decline of 4.3% in Q1 2008, implemented structural executive changes to reduce costs and expenses, while creating a new focus on simplifying business processes for store associates and simplifying the shopping experience for customers. Reduced profitability in 2007 and complaints about poor customer service prompted the retailer to lay off 3,400 employees, and then rehire some of those associates with a renewed focus on providing the best customer experience.

IT Projects Streamline Business Processes

To improve brand loyalty and streamline business processes, retailers are implementing a number of IT initiatives, according to research from AMR Research:

  1. Retail Planning: 57% of retailers plan to invest in retail planning systems, “to more effectively capture demand signals and respond with more accurate financial, assortment, allocation and pricing strategies,” says AMR.
  2. Replenishment and Inventory Optimization: 53% of retailers expect to add or improve replenishment planning and inventory optimization in 2007 “as an important means of sensing and responding to consumer demand,” AMR reports. Returns management also becomes a priority as more cross-channel shoppers want to purchase online but return in-store.
  3. Merchandise Management: 48% of retailers planned to improve merchandise management in 2007.
  4. Product Lifecycle Management (PLM): 13% of retailers surveyed in the annual AMR/NRF IT Budget Study said they would implement PLM in 2007. “PLM supports retailer efforts to efficiently create and deliver new products to market,” according to AMR.

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