The business of retail is becoming increasingly more complex, and the competitive landscape has forced more retailers to adopt multi-channel sales. Customers want to be able to order on the web, and place phone orders and visit your Web site just to see your product selection.

The challenge is to coordinate and manage the technology required to effectively run a multi-channel retail operation.

First, develop a five-year plan. With that in hand, you can see how your current technology meets your present needs, and project the changes you anticipate making to your business over the next five years. This review should be an annual exercise, since things can change dramatically from one year to the next.

Questions to consider when developing your five-year plan:

• Are you opening another store or any off site sales?
  
• Do you want to launch a full e-commerce Web site?
  
• Are you looking at the right information?
  
• Do you wish to implement a true customer loyalty program?
  
• Do you need to create an easier customer shopping experience?
  

Opening Another Store
A system that meets the needs of a single store is not necessarily a good solution for multiple stores. You will now be managing inventory, money and customers from multiple locations. Access to information on each store and from each location is critical. The ability to transfer product and generate purchases for multiple locations is important. Will your system communicate between locations via dial up or wide area network (WAN)? Are DSL lines available at each location? If you plan to offer gift cards, how do you track them? These are just a few of the critical considerations that must be answered when developing your plan.

Full E-commerce Web Site
Most stores have Web sites that provide information about the store, directions, shopping hours and special events, but retailers are recognizing the web as an opportunity to grow their business. The real growth this past holiday season was in online sales, which were $19.6 billion, up approximately 25 percent from a year ago.

Here are some of the key questions to consider before you launch your web store:

• Will your web store be fully integrated with your brick-and-mortar store inventory?
  
• When a customer places an order on the web, can that order be imported directly into your system?
  
• When you enter a new item into your inventory, can you publish that item directly on your web store? When will your inventory be updated to reflect sales from the web?
  
• How will you market your web store?
  
• Do you have the space to process, ship and track orders?
  
• What is the cost for designing, launching and hosting the web store?
  

Launching a web store takes planning, but the dramatic and continued growth of web sales can’t be ignored as an opportunity to grow your business.

Launching a Customer Loyalty Program
Customer loyalty is a complex issue that requires constant monitoring and is the most vital factor to your sustained growth. Customers hold all the cards: They decide when they will no longer shop at your store. However, if you collect customer sales data, it can provide valuable information that can level the playing field.

Loyalty programs have traditionally been designed to reward customers once they reach a certain dollar or quantity threshold. “Buy 10 cups of coffee and get the eleventh cup free.” In many cases, that is simply subsidizing a purchase that in all probability would have happened anyway, without the reward.

The new concept of loyalty programs is to capture relevant data so that you can identify your best and most profitable customers. Then you can plan mailings and offers to interest them in more product categories. Most importantly, you can identify customers that you are at risk of losing, based on their past and current shopping frequency.

You can still have a reward based on purchase levels, but the key is to promote additional sales and create other reasons for them to come back to your store. Customer retention is the biggest factor contributing to sustained growth. On average, stores lose 30 percent of their customers every year. You need to give customer loyalty and customer retention the same scrutiny as your inventory.

Look at the Right Data and “Pay Yourself First”
Determine your net profit goal first, so that you can calculate the markup you need to achieve your goal.

Five percent is a reasonable net-profit, but your net profit goal may vary, depending on whether yours is a non-profit institution or a privately owned for-profit business.

In any case, to begin you must understand all of your actual operating expenses — which again, will vary depending on your organization.

An important cost is your percentage of total markdowns/discounts required to get rid of the “duds” on your shelves.

From these cost numbers, and with your profit percentage in mind, you can calculate the overall average markup you will need to charge to reach your profit goal.

You also need to study your inventory turns. For example, if you have three turns per year, your average monthly sell-through should be 25 percent. More turns per year are desirable — but are limited to the amount of time you have available to purchase inventory. If you are understaffed, you will have to make do with fewer turns.

Numbers become a critical part of your long-term plan. Choose the numbers essential to help you spot problems quickly, and chart them on a spreadsheet by month. The result is a quick reference guide showing how you are doing.

Some of the critical numbers to chart monthly are: sales, gross margin, number of transactions/average ticket, inventory turns, discounts/markdown and operating expenses.

Creating an Easier Customer Shopping Experience:

• Recognition at the point of sale of your best customers
  
• Easier return policies because you can recall the original sales receipt
  
• Special order processing
  
• Offer specials to people based on their purchase history
  
• Notification of sales before public announcement
  
• Check cashing privileges
  
• Loyalty program

As you can see, the concept of a five-year plan deals with issues that are both technology and non-technology related. But the fact is that technology is no longer an option. Today, a retail business cannot function efficiently or profitably without systems and technology. By updating your five-year plan annually, you will be forced to look at last year’s results. You will have to evaluate your business model and examine your options for future growth.

Only then can you make an intelligent decision on the technology upgrades you will be needing — and only invest in technology that provides features and benefits relevant to your plan.

Dick Calio has been involved in retail technology for 25 years, the last seven as a consultant at R. J. Calio Consulting, LLC. He has been personally involved in the installation of more than 500 systems, and can be contacted at (860) 644-7956, rcalio@snet.net or www.rcalio.com.