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Retailers look to KM to drive business

This article appears in the issue January 2009, [Vol 18, Issue 1]
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In this difficult economic climate, retailers face more daunting challenges than ever. Many are using knowledge management solutions to help improve sales and their bottom line. The tools help retailers in such areas as managing inventories, driving marketing programs, targeting and retaining customers, and providing superior customer service.

Longo Brothers Fruit Markets is a family-owned, full-service chain of 16 grocery stores in the Toronto area, complete with fresh produce, large butcher areas and other offerings. Managing inventory is a key to profitability for Longo’s, as it is with other grocery store chains.

Longo’s tried to control inventory through its enterprise resource planning system, but encountered numerous problems. John Charleson, director of IT and supply chain management for Longo’s, explains, "The solution we had had a lot of issues with data integrity. We have a lot of different systems within the company, and it’s important to maintain the integrity of the data between the different applications."

For example, shelf pricing and register pricing are contained in two different applications, but changes on the shelf (e.g., short-term sales) weren’t always reflected accurately at the cash register, leading to price checks, longer waits in line and dissatisfied customers. "Having the ability to change the pricing in a timely manner is the key to being successful," Charleson says.

The inventory system wasn’t integrated either, causing the stores to run out of stock. That problem was aggravated by the chain’s online ordering system, which allows customers to order over the Internet and receive goods shipped directly from a store, not from a central warehouse.

"When a customer comes by the store looking for something or wants to order online, it’s important that we have it," Charleson says. "With the old system, we didn’t have any visibility into our inventory. The system we had was a work in progress when we bought it, and it just didn’t work in our world."

The grocery business is different than other retail sectors due to the high quantity of items and fast price changes. Longo’s, for example, has 20,000 different SKUs (stock keeping units), with regular price changes.

Company officials decided to purchase Tomax’s Retail. net suite, which is designed to manage the retail continuum, integrating different backend systems to provide a comprehensive management system. Now all Longo’s has to do is enter price changes one time and the system automatically coordinates shelf and register (and online) pricing. Similarly, when a customer buys an item, the inventory adjusts, helping to minimize the chances of running out.

"What we have now is accurate information people can rely on," Charleson says.

Tracking customer contacts

While Longo’s focuses on fresh foods with limited shelf lives, Overstock.com specializes in just what the name implies and, more specifically, liquidations. Since all orders and customer interactions are online or via phone, an efficient contact center is essential to the business.

But Overstock.com’s legacy customer service application couldn’t track customer contacts with the call center, says Stormy Simon, the company’s senior VP of marketing and customer care. So when a customer called about a return, an incorrect order or some other issue, if the agent taking the call couldn’t resolve it, customers had to repeat the information when they were transferred to a supervisor or when they called back if the situation wasn’t resolved with the first call.

Agents tracked all calls on spreadsheets, but then had to remember to follow up with the warehouse or with other parts of the company, or call back customers if necessary. A large percentage of the follow-ups were missed, according to Simon.

Knowing that good customer service was essential to further growth, the company contacted RightNow Technologies, which offers on-demand customer relationship management solutions. By using RightNow technology, Overstock. com was able to concentrate on its core competency—selling merchandise—while employing the solution to track customer contacts from the beginning through resolution.

Overstock.com uses the application in the company’s contact center. When a customer communicates with the contact center via the telephone or e-mail, the application captures all pertinent information, which stays with customer information in the company’s database. The application automatically provides prompts for the next step, so follow-ups occur as expected.

Since adding the technology, Overstock.com has improved response times, first-call resolutions and customer satisfaction, according to Simon.

Retaining customers

While Overstock.com seeks to boost customer loyalty through enhanced customer service, Drug Fair (drugfair.com), a drug store chain based in New Jersey, focuses much of its customer retention efforts on its loyalty card program.

"The value in a loyalty program isn’t from the card itself, but from the information [a retailer] can gather through the use of the card," says Larry Aronson, president and CEO of Cartwheel LLC, the third-party firm that handles Drug Fair’s loyalty program.

Loyalty card users tend to buy more than the average shopper, and when they receive targeted incentives, they are likely to add to their purchases on a net basis, Aronson explains. For example, if a loyalty cardholder receives $5 off a $50 purchase, he or she is inclined to spend much more than $50.

But for such a program to be effective, the company needed a database and the ability to analyze the data to segment shoppers and to determine shopper-buying habits, Aronson says.

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