HBC puts IT smarts into its merchandising strategy

Hudson’s Bay Co. (HBC) is rolling out a series of SAS software products to help it turn product pricing and promotions from an art to a science.

The Canadian retailer, which operates The Bay, Zellers and Home Outfitters nationally, will be able to manage product pricing region by region, store by store, based on customer shopping habits and preferences, said the company’s vice-president of finance Steven Richardson.

HBC began deploying the SAS Merchandise Intelligence suite this month with a view towards improving its inventory and pricing management in 2007.

The three major products in that suite are: Revenue Optimization, Merchandise Planning and Merchandise Forecasting.

Revenue Optimization suggests “the ideal price at which to promote products, which point they should be marked down and basically come up with the optimal price based on customer demand,” explained Lori Schafer, vice-president of global retail practice for Cary, N.C.-based SAS Institute Inc.

Merchandise Planning guides “the assortment of products that HBC carries in each of its banners and better targets the customers that shop those banners,” added Schafer, while Merchandise Forecasting predicts overall customer demand.

The suite is designed to help the retailer design more effective promotions for its products and set more effective pricing around those promotions. In the past, that aspect of retail management “has been an art form within the organization,” said Richardson.

“Basically what we’re looking for is to perform more efficiently, which would allow us to control costs relating to inventory and cash management.”

More and more retailers are turning to predictive software, said Dalan Bronson, operations, merchandising and managing principal in the Montreal office of analyst firm the J.C. Williams Group.

Prior to joining the firm, Dalan worked for a large Canadian retailer for 14 years. “We used to make decisions based on intuition probably much more often than they do today,” he said.

“The whole exercise of supply chain inventory management . . . it’s so critical that you get it right, you need to have metrics to assist you in making those decisions more and more than ever.”

Better inventory and pricing analysis might have helped a failed retailer like Eaton’s, he said, but department stores are a dying breed. There are only two major department stores left in Canada – The Bay and Sears – and both are losing ground to Wal-Mart, he said.

The fiercely competitive nature of the industry is forcing companies to innovate in order to keep up, he said. But business intelligence and analytics will only take a retailer like HBC so far. “Unless they do many other things, like look at their whole strategic direction, this alone will not bail them out.”

Over the past few years, HBC has revamped much of its technology, starting with a landmark partnership that included vendors like Microsoft, Oracle and Cisco. More recently, HBC implemented a system called LIDS (Listed Inventory Database System), based on Microsoft SQL Server technology, to help it manage stockroom inventory in Zellers stores.

Richardson said that the SAS software and LIDS share a “complimentary” relationship, but did expect any data to be exchanged between the two systems.

Comment: info@itbusiness.ca

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