Building E-Commerce a Key Focus of Pier 1's $200M CapEx Investment

Pier 1 Imports has been a latecomer to the online world, but the retailer is putting significant resources in place to make up for lost time. A three-year, $200 million capital expenditure plan will focus on building the retailer's e-commerce business, and Pier 1 projects this channel will contribute at least 10% to its total revenues within five years.

The retailer is not ignoring technology in its brick-and-mortar channel, where it plans to invest in a new point-of-sale system, upgrade analytics capabilities and add new software for labor optimization. Pier 1 has set a goal of achieving sales of $200 per retail square foot within three years.

The $200 million budgeted represents a significant increase: Pier 1's CapEx spending for fiscal 2010, which ended February 27, 2011, was approximately $31 million. Averaging the $200 million over the coming three years means Pier 1 is more than doubling its CapEx budget on an annual basis.

"Reinvesting capital into our business to improve our competitive position both in store and through e-commerce is what this is all about," said Pier 1 CEO Alexander Smith during a recent conference call. "First, as we evolve into a best-in-class multichannel retailer, we will continue to invest in our entry into e-commerce."

Site Visits Up 15%-20%

Early investments have already begun to pay off, according to Smith, who listed the retailer's online achievements:
• Incremental visits to its website are up 15% to 20% since this time last year
• Improved search engine optimization and better look, feel and content on the site
• 15% of visitors use the site's in-store merchandise availability function, introduced in October 2010, to locate merchandise at their local Pier 1 store.

Pier 1 is making ongoing improvements to its online services. "Our site-to-store e-commerce initiative called Pier 1.2Go is in full test mode with a family and friends program today," said Smith. This program allows customers to order and reserve merchandise online and then pick up and pay for it in stores. "We will test regionally in May and plan to fully launch Pier 1.2Go on our website in late spring," he added.

The retailer's next phase of e-commerce, Pier 1.2You, will enable customers to "fully purchase merchandise online from our site and allow flexibility for multiple delivery options," said Smith, adding that this functionality would be introduced in early summer of 2012.

"Once we have full online e-commerce functionality live by next summer, our assortments will, of course, grow," said Smith. "We have many, many opportunities to extend the reach of our well-loved Pier 1 Imports brand through both category expansion and new categories which are not currently part of our assortment. Within five years, we foresee our online channel contributing at least 10% of revenues."

New POS System Planned

Non e-commerce investments over the next three years will include a new point-of-sale system. "The key investment return will be our ability to gain real-time visibility of our customers and provide for seamless transactions across our multichannels, no matter where in the channel the transaction has occurred," said Smith. "This is a distinct advantage for our store teams when interacting face to face with our customers."

Other technology investments will include replacement of legacy systems, enhancing current systems to improve analytics and adding new software for labor optimization, "which will drive customer conversion whilst reducing payroll costs," Smith added.

For related content see: Pier 1 Continues Winning Ways through Merchandise Optimization

Pier 1 Taking Measured Steps Back into Online Sales