How a retailer boosted sales with customer-centric software
After more than a decade of running her own practice, Margaret Smith decided she'd rather be an entrepreneur herself than keep working as an attorney for startups in California's Bay Area and Silicon Valley.
That impulse came naturally. She had grown up in a family of entrepreneurs. Smith was also an early leader in promoting women business owners, notably as the founder of the Silicon Valley chapter of the National Association of Women Business Owners (NAWBO). In 1995, as national president of NAWBO, Smith brokered an historic partnership with Wells Fargo to establish a $1 billion loan fund specifically for women entrepreneurs, the first nationwide lending program of its kind. "That fund is now worth several billions," says Smith.
So she thought the time might be right to take a risk. Then, just as Smith was headed for the East Coast to check out an optical lab that was on the market, she heard about Domus.
A 35-year-old kitchen and housewares shop, Domus was being sold by the founding family. Smith liked the retail business' size, its volume and customer relationships. She appreciated its long-established reputation. The Los Gatos location, about an hour's drive down the peninsula from San Francisco and handy to Silicon Valley, was also a plus. She decided to buy the business.
Immediately after purchase, Smith installed some basic retail systems, which had been sorely lacking.
"When I bought the company, inventory was checked by someone walking the floor, seeing where holes on the shelf were and guessing about which products had been there," she says. That hit-or-miss method was remedied with computerized systems for payroll, inventory and fulfillment. "The inventory controls alone streamlined operations and pushed profits up 5%," she says. Smith also moved Domus online, creating an e-commerce destination.
By 2005, Smith was ready for the next phase. Working with long-time IT consultant, Martin Olson at Elypsis, a Microsoft Gold Certified Partner based in Napa, Calif., Smith wanted more sophisticated automation. Her goals included gaining deeper and more immediate access to product and customer information. She also wanted to cut operational costs.
Here's an in-depth look at how Smith went about upgrading her multimillion-dollar retail operation and how the new technology is working day-to-day.
Q. How did you decide which retail system to employ?
A. I did some research to compare the leading brands in retail systems. I asked the consultant for references of businesses that were using similar products and I called people around the country. Eventually, it came down to two programs that were running neck and neck, one being the Microsoft Retail Management System.
Q. Why did you choose the Microsoft solution?
A. Generally, I found Microsoft RMS to be user-friendly, with easy design features. It was 90% relevant to my kind of business.
Also, while I was still deciding, I learned that one of the business references running the other program happened to be in San Francisco. So I drove to the retail facility and stood there for a morning, observing clerks checking people out. The whole time I was there, they were having a great many problems, and not just clerks. The managers were also unable to solve the problems while lines of customers waited. Maybe it was just terrible bad luck or maybe some star in the sky led me to that business that day. But after what I saw, I made the decision not to pursue the other program any further. I focused on Microsoft RMS.
The other reason I went with Microsoft is because we have plans for expansion, both short- and long-term, including a new store in the coming year. This is a product that can integrate multiple store locations, which is important to me. The RMS piece also tracks the Web site.
My advice to anyone considering new systems is to call references and observe an operation using the software. That made a big difference.
Q. Was it hard to get the system up and running?
A. Installation took from July through August. My costs might not be typical because we also needed to upgrade the hardware in the front and back offices to accommodate the new system. Altogether, including new wiring, consultant fees and installation, the upgrade cost less than $75,000. If I had to estimate which cost was which, hardware and software, it was probably half and half.
Then, of course, change is always hard for employees. I had about 20 employees at the time. I also had two capable managers who'd been with me for seven years and had embraced technology all along. So that made it easy. We looked at the staff, almost employee by employee, and figured it would take six hours of training. We had employees in their late 60s and others who were 17 years old. Everyone was able to learn the technology and become proficient in a short time, maybe a day or two.
Q. How did Microsoft RMS impact your business?
A. We carry a very large inventory, with over 34,000 items on the floor, about a half-million items in stock, plus more in warehouse inventory. The system has been able to handle that inventory without any problem.
The RMS tool has a user-friendly reporting process. Employees can quickly move in and out of the database, making instant additions and deletions, with constant updates and changes. The point-of-sale information integrates with the back-office features. As chief executive, reports are important to me. I can drill down into graphs and pie charts and analyze individual departments to see top sellers and what's moving — all with just a few clicks of a mouse. I can go into the software at any moment and, in real time, see to the penny what each register has rung up.
Also, my consultant, who has a deep understanding of my business, was able to customize the Microsoft program so I can view reports the way I like. Information about inventory, for instance, is sorted into spreadsheets the way I prefer to track it. We now have easier, faster and more comprehensive reporting from the back office.
In the front of the store, the customer-information capture is a very easy feature. Even incoming clerks with no retail experience can master it with just two hours of training. This lets us capture customer history, learn what gets returned, and leverage the information. We can use our mailing and e-mail lists to offer special items to certain customers because we know their buying patterns. Before, only large stores could afford such data mining. Now, thanks to the Microsoft RMS, we also have that ability.
Q. Any thoughts for improving the software?
A. I wish the system could integrate vendor manufacturer numbers with our internal price look-up codes or PLUs. Most retailers like to see both listed on one page, but the system makes you pull each separately. I think it was an oversight.
Q. How has the system impacted your customers?
A. We have a program called "Consistency of Service," which means we want to achieve the same experience for customers every time they're in the store. If it took 90 seconds to check out the last time, we want to achieve that 90 seconds every time they return. The new technology lets us oversee that. We can track any glitches, see where the "Consistency of Service" failed and the customer was disappointed.
In addition, customers now see a lot more information on sales receipts. Instead of just price, the customer sees the exact discount, the regular price, a detailed item description, the department and clerk number and more. That gives them a high degree of confidence. There are fewer questions about price or returns.
In the summer, we run a promotion called the "Loyalty — Holiday Dollar" program. Customers get in-house currency for purchases made over the summer that can be cashed in during October and early November. We've never before been able to capture customer information from that promotion. But the RMS system enables us to track when customers cash in and, if they don't have the currency with them, lets us track it for them. It's a great customer service.
We're also able to more efficiently manage store credits and special orders.
I meant it when I said that capturing customer information is critical. Up until recently, that level of information was only available to large retailers that could afford expensive systems. Now, Microsoft RMS allows small retailers to drill down and leverage key customer information.