DSW continues to invest in IT, devoting 25% of its Q1 CapEx to enhancements in three areas, including supply chain, customer service and omnichannel. The retailer has also begun to reap the benefits of its size optimization system that was implemented in mid-2012, which will eventually allow it to be smarter in allocating sizes by store.
Capital expenditures for the first quarter were relatively flat to last year at $19.8 million, of which $14 million was for opening and remodeling stores and the balance for IT projects.
In the first quarter, DSW increased its in-stock rates by size. This is one measure of the effectiveness of the size allocation improvements the retailer is making. As a result of the system, the retailer will ultimately be able to improve regular price sell-through rates and lower markdown rates.
In the supply chain area, DSW continues to improve assortment planning, which will improve by-store assortments relative to end use, fashion, price point and brand. This initiative is large and will be in development through 2014 with benefits not beginning until 2015.
There are also two systems enhancements that will improve the customer experience. E-certificates will allow the retailer to electronically retrieve customers' unredeemed reward certificates at the point-of-sale, eventually doing away with paper certificates rolled out in two-thirds of the retailer's 376 stores. It will be in all stores by the end of the year.
Later this year, DSW will upgrade its point-of-sale system to enable transactions on mobile devices, electronic retrieval of customer receipts and sending electronic receipts to customers. "We believe these enhancements will also improve the customer experience," said Michael MacDonald, CEO of DSW on a recent call with analysts.
There are also two omnichannel initiatives underway. In the second half of this year, the retailer will activate its charge-send system, which allows it to find a wanted shoe from the fulfillment center or a shoe regardless of whether the customer is shopping in a store or online. All stores will have shipping capability and the footwear will be shipped free of charge, resulting in fewer lost sales and happier customers.
The other omnichannel project is a dropship system that will allow DSW to offer customers footwear styles that are actually housed in its suppliers' warehouse. This allows for an expanded assortment without an investment in the inventory or the space to support that broadened assortment. The first vendor will launch on dropship by the end of the year.
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