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What’s going on with the Shared Services concept?

December 27, 2010

The recent global economic downturn has left its mark on the retail industry and marketplace. As global companies emerge from the recession, CXOs of various Fortune 1000 companies across the globe representing the consumer-packaged goods, retail, quick service restaurants and other sectors have passionately articulated a common set of needs: to leverage their scale, to be truly global and to use their information as an asset. These needs have led to an increased interest in a global shared services model. CXOs want to use this recovery phase to drive global shared services to consolidate, define and possibly centralize key functions and services in the company to help leverage efficiencies of scale globally, reduce costs and deliver competitive advantage.

Shared services is an innovative service delivery model to provide administrative, support and maintenance services of enterprise applications to multiple customers delivered by a common pool of resources around-the-clock that could include employees, consultants, infrastructure, technology, reports, transaction and processing services,etc. The interest is there, but the concept can sound complex. The understanding, or lack of understanding, of the shared services concept often impede companies selling shared services internally, although the model has been employed successfully and has benefitted many companies.

Once you have decided that the shared services model is a good course for your company to take, the biggest challenge is gaining support from management. Convincing the boardroom to sell the shared services concept internally can be intimidating and most often, unsuccessful. Advocates that take up the shared services mandate are faced with skeptics that have a counter-argument ready. Most of these companies are grappling with three key questions: What does it mean to be a truly global company with global shared services? How do they convince their board on the vision, scope, nature and benefits of this strategy? How can they begin?

When they think of shared services, they often think of the potential challenges – external perception from customers that support is not exclusive or unique, change management, the cost to implement such strategy and whether or not this model would achieve immediate benefits, unique local practices in different regions and countries and how they would change in a global shared services model, local staff and their continuity, etc. Every cost saving business case is met with an alternative that ultimately puts the initiative on the back burner. For instance, one country head of a global beverage company explained that while his board loved the business case of immediate cost savings, once the topic of organizational change was brought up, the discussion was stopped short.

One approach that has worked for several companies is abandoning “shared services” all together. What they’ve done is deliver the concept by replacing the “shared services” label to “business enablement initiatives” or “platforms.” It may sound strange, but many advocates have succeeded in selling the idea to the company board by using this approach. For example, one CPG company we worked with looked at a completely non-traditional process – marketing – for which to create shared services. They set up a standardized technology platform for all their digital marketing needs and a “factory” of talented individuals who followed strong processes and methodologies that would help increase reuse and improve speed to market for their brand managers each time they wanted to launch an ad campaign. The creative ad agencies involved loved the model, and the metrics have helped this company demonstrate the power of shared services to the top line of the company. The critical win here is that the team never called this a “shared service,” but promoted it as a new “platform” that they wanted to adopt. Another company that set up a global shared service helping their front-line business development teams all over the world centralize administrative activities, called their initiative “Enabling the Sales Force.”

In summary, the recession and the recovery we are now experiencing has only strengthened the case for shared services to be an important initiative. There are numerous benefits to shared services. Those that have achieved some extent of truly global shared services are enjoying fantastic benefits of large cost savings, improved speed to market, better business user experiences of these services and more aggressive adoption of the model. In fact, the president of a highly successful CPG giant publicly explained that with shared services his company has saved more than $500 million, integrated acquired companies faster than usual, made their value chain more efficient, flatter and simpler, and now moving to digitize that value chain end-to-end.

Shared-services champions are creating momentum within their companies by using business-enabling initiatives to further prove that shared services have a strong business case across most company processes. For most companies, traditional approaches to internally sell shared services in the boardroom are difficult and they have to resort to new, innovative methods. That can be as simple as leaving out the “shared services” in your shared services initiative.

For more information, visit: http://www.retailingtoday.com/article/shared-services-boardroom-dilemma?ad=apparel-accessories

Need financing for your supply-chain?

December 27, 2010

No matter what the politicians in Washington are saying, the United States is married to China. And, this relationship has been nearly 40 years in the making. Ever since Nixon visited China, the United States has become more and more reliant upon low-cost Chinese goods. Indeed, according to The United States Trade Representative, the United States imported nearly $300 billion worth of goods from China in 2009 alone. To the extent an economic recovery in the United States depends on consumers spending at retail, the ability of U.S. importers and retailers to secure financing with respect to goods manufactured and exported from China is of critical importance.

While we all wear Chinese clothing, watch Chinese TV, and listen to Chinese manufactured mp3 players, the basic paradigm of financing imports from China has changed dramatically over the past two decades. What once was a transaction based upon letters of credit and payment upon shipment, is today a constant struggle between U.S. importers and their Chinese manufacturers/suppliers. Importers want to pay later in the process, sometimes as long as three months after the goods are shipped, while suppliers understandably want to be paid as soon as possible.

However, Chinese-based banks are hesitant to accept open account customer credit risk and in the current economic climate exporters are demanding payment as soon as possible after the goods are shipped to the United States. In some cases, due to slim margins and raw material price volatility, Chinese producers ask for deposits even before product leaves Chinese ports.

For retailers and importers, managing trade finance risk has never been more important due to persistent margin pressures and consumers unrelenting quest for value, a key component of which is price.

Historically the financing was assumed by large banks and factors such as CIT. Today these banks have either left the business, curtailed lending to only large, investment grade companies, restricted leverage, or have not changed fast enough to understand the new dynamic and offer the products that importers as well as exporters need to keep the retail supply chain functioning efficiently, effectively and without delay.

This new financial paradigm is only one side of the problem facing importers and exporters. On the other side of the equation is the consolidation in the American retail, apparel and furniture sectors. This consolidation has increased importers’ buying power, forcing Asian suppliers to use open account terms when financing trade with their U.S. clients. Because of this increased clout, importers not only are putting pressure on their suppliers to trade on open accounts, but also to pay as slowly as possible. Today, it is not uncommon for the order-to-cash cycle to be between 120 and 150 days from the date the purchase order is placed in China. This timeframe puts a significant financial strain on the supplier who typically desire payment when goods are shipped.

To help solve this tension between importers and suppliers, non-bank lenders have entered the marketplace. Non-bank lenders are not subject to the strict requirements that often limit the amount of unsecured credit banks will offer to many in the retail supply chain.

It’s why Capital Business Credit, a supply chain finance company historically focused on working with importers and their U.S.-based retail customers, decided to launch a new division called, CBC Trade Finance. Our objective was simple: to address the unmet needs of suppliers and importers in a complex and dynamic marketplace. The model is simple. CBC buys Chinese exporter’s receivables at the time of shipment, paying the supplier as soon as the goods leave for the U.S. The importer then negotiates with CBC a timeframe to pay the invoice – up to 120 days.

As the global economy improves, China and other manufacturing countries like Vietnam, Pakistan and Bangladesh will continue to produce the majority of goods sold in the United States. The ability for U.S. importers to secure incremental financing and to satisfy the demands of foreign exporters and manufacturers is critical not only to the success and working relationship between importers and supplier/manufacturers, but also to an eventual and sustainable economic recovery.

For more information, visit: http://www.retailingtoday.com/article/hidden-risk-imports

Blizzard may increase post-holiday sales online

December 27, 2010

New York City — Sunday’s east coast snowstorm disrupted sales throughout the entire area and disrupted one of the busiest shopping days of the year.

Sections of New York and New Jersey got as much as two feet of snow over the past few days, keeping many shoppers at home. Spending may shift into January, Marshal Cohen, chief industry analyst at Port Washington, N.Y.-based NPD Group, told Bloomberg on Monday.

“Look for sales to be repeated by retailers. They’re going to be more aggressive,” Cohen said.

The day after Christmas is one of the five busiest shopping days of the year, and it may take retailers two weeks to capture sales lost yesterday, Cohen told Bloomberg. At the same time, shoppers may lose their enthusiasm as the holiday season wanes, he said.

For some retailers, however, the storm brought benefits. Home Depot and Lowe’s Cos. sold out of snow blowers and shoppers bought more shovels and ice melt, Craig Johnson, president of New Canaan, Conn.-based Customer Growth Partners, told Bloomberg. The storm also likely will give online sales “a slight bump” on Sunday and Monday, he said.

The Standard & Poor’s 500 Retailing Index dropped 3.16 points, or 0.6%, to 508.67 at 10:39 a.m. EST on Monday. The index had gained 25% this year before Monday, compared with a 13% increase for the S&P 500, according to the Bloomberg report.

Consumers may temper their spending if the storm’s aftermath stalls shopping for several days and the frugality of New Year’s resolutions kicks in, Michael Dart, the San Francisco-based head of private equity at the New York consulting firm Kurt Salmon Associates, told Bloomberg.

New York City had 18 inches to 20 inches of snow by 7:30 a.m. local time Monday as the storm’s center shifted north and east, commercial forecaster AccuWeather said. The National Weather Service issued blizzard warnings for Boston and into Maine.

For more information, visit: http://www.chainstoreage.com/article/blizzard-hurts-retailers-post-christmas-shoppers-stay-home

Online 2010 holiday winners emerge - Walmart, Target, Best Buy

December 22, 2010

Walmart, Target and Best Buy attracted record levels of customers to their websites during November, according to data released this week by the online measurement firm comScore. Retailers have come to expect a surge in traffic to their sites as the holiday approach and during November that proved to be the case and then some.

Walmart and Target both experienced a 44% increase in the number of unique visitors to their sites during November when compared with October. The surge pushed Walmart to the 20th spot on comScore’s ranking of the top 50 U.S. online properties with a total of nearly 52 million unique visitors, while Target landed in the 27th position with nearly 40 million unique visitors. The number of visitors to Best Buy’s website grew at an even faster 75% when comparing November to October, which gave the company 28 million unique visitors and a 41st ranking on the comScore top 50 list.

“As the holiday season kicked off in November, Americans were quick to take advantage of retailers’ early promotions and saving in crossing a few items off their shopping list,” said Jeff Hackett, EVP comScore Media Metrix. “Cyber Monday, the Monday after Thanksgiving, came in as the heaviest online spending day on record in the U.S. which contributed a strong portion of traffic growth at retail and coupon sites.”

While Walmart, Target and Best Buy advanced their position on comScore’s top 50 list dominated by the likes of Yahoo, Google, Microsoft and Facebook, Amazon.com remains king of the retail hill. It attracted roughly 84 million unique visitors during November, placing it 10th on the top properties list.

The November figures are impressive when compared with October, but less so when compared with November 2009. In fact, unique visitor growth on a year-over-year basis has moderated somewhat, with Walmart, Target and Best Buy posting increases of 5%, 2% and 7%, respectively. Amazon.com’s unique visitor growth increased 8% when compared with November 2009.

For more information, visit: http://www.retailingtoday.com/article/online-2010-holiday-winners-emerge?ad=apparel-accessories

Post-holiday promotional push begins

December 21, 2010

With only a few days to go until Christmas retailers are already positioning themselves for post holiday success by touting promotions to capitalize on gift card redemptions. Target and JCPenney this week announced special incentives that begin the day after Christmas when both plan to open at 7 a.m.

Target said it planned to offer free shipping on certain online purchases and would extend store hours until 11 p.m., while JCPenney said is employing a similar strategy, featuring more than 100 doorbusters in a 48-page sales circular. Those who can’t wait until the day after Christmas can visit jcpenney.com to begin shopping the post holiday specials on the retailer’s website where free shipping will be offered on various items.

“Target makes shopping fun, fast and festive for our guests throughout the holiday season,” said Target merchandising VP Nik Nayar. “Most holiday gift cards are redeemed in our electronics department so we are gearing up for great deals on some of our guests’ favorite products such as video games, TVs and cameras.”

According to JCPenney, the day after Christmas is quickly becoming the retailer’s second busiest sales day after Black Friday.

For further information, visit: http://www.retailingtoday.com/article/post-holiday-promotional-push-begins?ad=apparel-accessories

J.C. Penney Ends ‘Big Book’ Catalogues

October 21, 2010

J.C. Penney Co. Inc.’s transition from “Big Book” catalogues to “look book” mailers is now complete.

The Plano, Tex.-based retailer ended its Big Book catalogue earlier this year. J.C. Penney will still be in the print media business, but the new books will become “specialty in-store” mailers showcasing select fashion looks or must-haves to encourage consumers to shop in-store or online. The traditional catalogue format featured everything in a particular category.

Speaking last month at the Telsey Advisory Group’s Consumer Conference, Myron E. “Mike” Ullman 3rd, chairman and chief executive officer of Penney’s, told attendees, “Our strength ended up being a limitation at some point. Our being in 77 different catalogues, [speaking] to a lot of narrow audiences — frankly, it tied up a lot of inventory and got us kind of supporting multiple businesses that probably weren’t necessary.”

Penney’s catalogue dates back to 1963 and grew to a $1 billion in 1979, according to Penney’s.

Walter Loeb, former retail analyst and head of the consulting firm that bears his name, said, “This is the end of an era. Penney’s was great with their catalogue and it is the last of the cataloguers getting out of the business. Given the economic environment, it is probably more profitable for them to use the Little Red Book format as a marketing tool.”

“We made approximately 25 catalogue mailings in 2010, which was less than we’ve had in previous years as we’ve been replacing our traditional ‘big book’ catalogues with more focused cross-channel marketing pieces sent to customers on a targeted basis,” a Penney’s spokeswoman told WWD. “We mailed seven Women’s Little Red Books in 2010 and we’ll increase to nine to 10 in 2011. We mailed five Men’s Matters of Style books in 2010 and we’ll increase to six to seven in 2011.”

Shoppers who relied on the catalogues for their purchases can either go to jcp.com or contact a Penney customer care center, which will input the order through the Web site.

One source familiar with the change said increasing printing and postage costs “would soon be a considerable drag” on the retailer’s business. In addition, the catalogue operation had its own inventory system that was not connected with inventory at the stores or at jcp.com. Another source said the move will allow the retailer to better manage inventory and allocation levels for its stores and Web site.

The spokeswoman noted that one new feature online is the ability to input a zip code to find out if an item is available in a nearby store.

Analysts Predict Tough Holiday Season

October 8, 2010

A sleepy September rounded out an uninspiring back-to-school season, as shoppers held off on purchases until the last minute — and laid the groundwork for a highly promotional holiday.

Analysts and other experts preparing for Thursday’s reports on September same-store sales from major retailers believe the heavy-handed promotional cadence established this year during b-t-s will carry into holiday. This would appear to make it virtually certain that the robust gains of the first half, achieved against anemic prior-year results, won’t carry into the second six months of 2010 in regards to sales, margins — or profits.

“The 2010 holiday shopping season will be spectacularly unspectacular for many consumers, but that will suit retailers who remember well the turbulence of holiday ’08,” Janet Hoffman, managing director of Accenture’s retail practice, said Tuesday, adding that her firm’s data suggest consumer spending will be flat versus last year.

That’s slightly good news compared with the debacle that was 2008, but not great news when stores recall the halcyon days of 2007 and earlier.

The importance of Black Friday may also be diminished this year, as retailers “maintain their discounts” throughout the season rather than “focus on activity” around the day after Thanksgiving, said Hoffman, noting that shoppers are choosing to shop online more.

However, two retail industry associations weighed in Tuesday with holiday forecasts that, while conservative, predicted better results than last year.

The National Retail Federation projected a 2.3 percent gain in total sales to $447 billion, while the International Council of Shopping Centers forecast a 3 percent to 3.5 percent increase in comparable-store sales at chains and a 2.5 percent rise in general merchandise, apparel, furniture and other categories, or GAFO, sales.

The forecasts are tempered by the unemployment rate sticking at 9.5 percent, and declining confidence in the economy and increased savings among consumers.

The bright side — especially with respect to the bottom line — is that retailers are able to do more with less, according to Matthew Shay, president of the NRF.

“They’ve found ways to operate innovatively in terms of inventory control, having the right mix, promoting and pricing,” he told WWD. Shay also said while there’s still going to be plenty of promoting during Christmas, in many cases it will be preplanned with markdowns that still generate profits. “It’s a more sophisticated approach.”

In addition, Shay said that b-t-s numbers were slightly better than expected, that there’s some pent-up demand among consumers who have been saving and paying down debt, and that apparel and electronics could have a decent season and appear to be driving the business currently. However, the stubborn unemployment rate “gives consumers pause.”

While cautiously managing inventories, some retailers could get caught short on certain items, Shay noted. “The challenge is how to manage out-of-stock versus excess inventory.”

NRF’s 2.3 percent forecast for holiday, defined by the association as sales during November and December, is slightly lower than the 10-year average holiday sales increase of 2.5 percent, but a marked improvement from last year’s 0.4 percent uptick and dismal 3.9 percent holiday decline in 2008.

“Though the retail industry is on stronger footing than last year, companies are closely watching key economic indicators like employment and consumer confidence before getting too optimistic that the recession is behind them,” Shay said.

Michael Niemira, chief economist and director of research for the ICSC, also sees more good than bad as holiday approaches.

“The key story is that the retail recovery continues and that bodes well for the upcoming holiday shopping season,” he said. “Additionally, we expect holiday hiring to improve moderately over last year and overall employment growth to improve as well, which in turn should support increased spending.”

If the holiday forecast of 3 to 3.5 percent is hit, it would be the largest since 2006.

Meanwhile, while expectations for September results are modest — Thomson Reuters projected an average comparable-store sales increase of 2.1 percent for the month — the numbers could provide something of an upside surprise. That was the case Tuesday when Walgreen Co. reported that same-store sales for the month, expected to decline 1.3 percent, came in 0.4 percent ahead of September 2009.

According to SpendingPulse, which estimates total U.S. retail sales made by cash, check or credit card, apparel sales improved 3.8 percent in September, buoyed by a 2.3 percent rise at children’s apparel retailers and a 7.9 percent jump at teen retailers. Women’s apparel sales slid 0.2 percent, while sales at men’s apparel retailers declined 3.4 percent.

Michael McNamara, vice president of MasterCard SpendingPulse, said the positive sales at kids’ and teen retailers could be attributed to the highly promotional b-t-s climate. If September is any indication, even if consumers spent more, they were likely to favor retailers offering promotions as many stores turned to discounts last month to rouse thrifty, budget-conscious shoppers of various age groups.

Brean Murray, Carret & Co. analyst Eric Beder said September results were “not a disaster” and will “confirm that the current retailing environment will be one of low growth and high Darwinian competition.”

However, competition remains heated in the teen sector, and he expects American Eagle Outfitters Inc. to revise third-quarter earnings guidance downward since discounts deepened “as the month dragged on.”

But Weeden & Co. analyst Amy Noblin said she expects AEO to upwardly revise guidance, as the retailer took fewer markdowns than anticipated.

The promotional tug-of-war over consumer dollars was more heated between Abercrombie & Fitch Co. and Aéropostale Inc., she said, while retailers like Gap Inc. used heavy discounts to clear inventory. Gap Inc. promoted “fairly heavily” because of weightier inventory, Noblin said.

Needham & Co. analyst Christine Chen is concerned Gap’s Banana Republic unit, which has promoted at 40 percent off to drive sales, may have overdone it and put itself at risk of brand deterioration. “They have trained the customer to want that sale,” she said. “The merchandise is not a disaster, but it’s clearly not amazing enough to pay full price.”

Such discounting not only makes it hard to retrain the Banana Republic customer, but it also pressures rivals J. Crew Group Inc. and AnnTaylor Stores Corp. Aggressive promotions may be around for a while, as comps become more difficult and consumers purchase closer and closer to need. And while inventories seem to be in better shape than a year ago, there’s still the possibility that retailers, anxiously awaiting consumers come holiday, will pull the promotional trigger earlier, according to Weeden’s Noblin.

“There’s a valid need for market share gains,” she said. “We expect holiday 2010 to look a lot like back-to-school 2010.”

Markets rallied around the world Tuesday as Japan’s central bank moved to support the country’s economy and the U.S. service sector showed signs of strengthening. The S&P Retail Index advanced 1.9 percent, or 8.40 points, to 462.95, as the Dow Jones Industrial Average gained 1.8 percent, or 193.45 points, to 10,944.72, inching closer to the 11,000 level not seen since May 4.

For further information, visit: http://www.wwd.com/retail-news?module=tn#/article/retail-news/sept-discounts-provide-preview-of-holiday-3328797?full=true

Specialty Retailers Add Jobs

October 8, 2010

WASHINGTON — Specialty retailers added jobs in September while department stores eliminated positions, the Labor Department said Friday.

Specialty retailers added 2,500 jobs to employ 1.39 million in September. Department stores eliminated 2,100 positions to employ 1.49 million. General merchandise stores, which include department stores, added 1,300 positions to employ 2.95 million.

In the broader economy employers cut 95,000 jobs in September, driven in part by the elimination of a significant number of temporary census jobs. Unemployment remained unchanged at 9.6 percent.

Deeper in the pipeline, textile mills making apparel fabric cut 500 jobs to employ 121,900. Textile product mills, which make mostly home furnishing and industrial fabric, added 200 jobs to employ 122,200. Apparel manufacturers eliminated 900 workers to employ 163,100.

For further information, visit: http://www.wwd.com/retail-news?module=tn#/article/business-news/specialty-retailers-add-jobs-3333146?navSection=retail-news

Jones Apparel Group Changes Name

October 4, 2010

Jones Apparel Group is changing its name, slightly.

As of the end of October, the company will go by The Jones Group, reflecting the company’s brand portfolio, which includes not just Jones New York, but also Nine West, Anne Klein, Rachel Roy, Robert Rodriguez and Stuart Weitzman.

Its stock ticker, JNY, will not be changed.

“This new name embraces Jones’ heritage while signaling our vision for the future,” said Wesley Card, chief executive officer. Card said the company is well positioned to take advantage of its expertise in apparel, footwear, jeans, jewelry and handbags.

“With these resources, we can not only cultivate our existing brands to their full marketplace potential, but also discover and nurture new brands and design talent into high-demand, global branded businesses,” Card said.

Jones has $133 million in cash on its books and a history of acquisitions. This summer the company snatched up Stuart Weitzman.

For further information, visit: http://www.wwd.com/business-news?module=tn#/article/business-news/jones-apparel-group-changes-name-3324779?navSection=business-news

Kohls Opens 21 Stores

October 1, 2010

One day after J.C. Penney Co. Inc. revealed plans to open new stores, Kohl’s Corp. said it unveiled 21 units in 15 states on Wednesday. Kohl’s said the new stores will add 3,000 jobs in Alabama, California, Florida, Illinois, Kansas, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Nevada, New Mexico, New York, Ohio and Pennsylvania. The move comes at a time when many retailers are curtailing growth or developing smaller store formats.

Kohl’s on Wednesday also opened a new customer and operations center in San Antonio for its charge card business and kohls.com, which saw a 38 percent jump in revenues last year. Kohl’s operates two existing customer service and operations centers in Corsicana, Tex., and Menomonee Falls, Wis., where the company is based.

So far this year, Kohl’s has opened 30 stores, bringing the total units to 1,089 in 49 states.

Both Penney’s and Kohl’s are remodeling stores with an emphasis on fashion. Kohl’s is targeting 85 stores for facelifts this year, a 66 percent increase from 2009.

The fourth-largest department store chain in the U.S., Kohl’s sells national and exclusive brands aimed squarely at middle income shoppers, including Levi’s, Nike, Adidas, Simply Vera Vera Wang, LC Lauren Conrad, Elle Contemporary Collection, Dana Buchman, Candie’s and apt. 9. The retailer in June moved to a larger design office at 1400 Broadway in Manhattan with 60,000 square feet compared with the 20,000 square feet of the former office. Kohl’s said the new office would help accelerate its strategy for private and exclusive brands.

In August, Kohl’s reported second-quarter earnings of 84 cents a share, compared with the year-ago period’s 75 cents, yet cut its full-year guidance to $3.57 to $3.70 a share. Penney’s returned to profitability from a year-ago loss, earning 6 cents a share in the second quarter, but reduced its full-year guidance to $1.40 to $1.50.

For further information, visit: http://www.wwd.com/retail-news?module=tn#/article/business-news/kohls-opens-21-new-stores-and-a-new-customer-service-and-operations-center-3310743?navSection=retail-news