Efficiencies of Scale

By  Debby Garbato — January 01, 2008

Most high school kids dream big but come up small with homegrown business endeavors: Their garage band never gets beyond the driveway or their best painting adorns the bathroom of an uncle's summer house. Some do make a few bucks selling decorated T-shirts or crafts. Eventually, they move on to adult pursuits.
 
Steve Shore and Barry Prevor did not. Their youthful passion for selling sports logo T-shirts has spanned more than 20 years. Today, it is a key component of Steve & Barry's, a 260+ store specialty apparel chain that has been growing 50 to 100 percent annually and opening about 70 stores every year. Over the next 10 years, the company plans to more than double its store base.
Stores average 60,000 square feet and are located in nearly 40 states. In product, they offer far more than the licensed sports apparel that the duo initially sold at flea markets and in college towns.
 
But Steve & Barry's private label merchandise is still aimed at its core young adult customer. And everything is still priced under $20.
 
"Our growth curve looks like a hockey stick in recent years," says Michael Beller, chief information officer for the Port Washington, NY-based company. "Our growth has been accelerating and has expanded in many directions. We are now on a number of business and technology plans to support our continued growth and scaling challenges."
 
Scaling challenges relate largely to vastly expanded store and SKU counts. Current technology systems (along with some manual processes) do not encompass all pertinent applications. They also do not interface at the granular levels that a larger retailer requires, says Beller.
 
With an eye towards end-to-end integration, Steve & Barry's licensed a suite of applications under SAP in June 2007. SAP for Retail products will provide control and visibility into three key areas: POS, supply chain execution and an umbrella of applications that fall under merchandise planning. Steve & Barry's will begin implementing the new software during 2008.
 
"For the future, we are looking at continuing to improve efficiency throughout our company," adds Beller. "The more you can share information with regard to timeliness and completeness, the more efficient you become. Implementing an endto- end integrated solution is a cornerstone to our overall business strategy. SAP supports many of the initiatives we are undertaking. It is not a coincidence that we began doing this at the same time as other new projects."
 
The SAP software is replacing proprietary systems. In many instances, the retailer had to combine the information generated by one system with that of another to achieve desired results. "With proprietary technology, you end up expending a lot of effort knitting together the various systems, be they financial, POS or supply chain execution," notes Beller. Steve & Barry's, which is privately owned, would not divulge the cost of the SAP system or provide other financial information.

MORE NEW CLOTHES

Intensifying SKU management is a major part of the Steve & Barry's growth story. But the retailer has layered on so many apparel categories that, without the right tools, it could be out of stock on key items or be stuck with excess inventory at the end of a season.
 
"In recent years, growth has come in two flavors, company volume as well as depth and breadth of assortment," says Beller. "Now, our assortment covers men, women, kids, and babies and crosses all demographics. From an IT perspective, we need to handle increased volume and a diverse set of products and initiatives. In terms of allocations and replenishment, there are that many more factors to take into account."
 
Today, cotton-based T-shirts, sweats and other college and university team-licensed sports apparel comprise about 20 percent of Steve & Barry's total product mix. These unisex products have historically had high male appeal. In addition to children's, other newer areas include additional men's categories as well as women's, accessories, intimates and footwear.
 
SKU intensification began five years ago. The pace picked up in 2007 with the launch of two celebrity lines. Steve & Barry's unveiled Sarah Jessica Parker's Bitten sportswear in June, followed by Amanda Bynes' dear and Venus Williams' EleVen in August. The Bitten line represents the retailer's largest single launch in terms of SKU count, says Beller. The 2007 introductions were preceded by the Stephon Marbury collection of 200 athletic and lifestyle-oriented apparel items for men, women and children.
 
Products come in a wide range of sizes and colors. Women's garments, for example, often range from XS to XXL (tops), 0 to 22 (bottoms) and 5 to 11 (footwear). Most apparel specialty retailers focus on S to XL, 6 to 16 and 6 to 9 or 10.
 
"We entered the women's and children's business a few years ago," says Beller. "But we were not trafficking anywhere near the scale and scope we are today with our celebrity partnerships. This host of rollouts is part of our growth strategy."

BETTER VISIBILITY SAP's

merchandise planning software will play a key role in helping to manage all the SKUs that Steve & Barry's now offers. Gary Sugarman, Steve & Barry's chief operating officer, labels this part of the SAP package "the biggest piece in terms of resources."
 
The new software will allow the retailer to better manage pricing, examine historical sales and market demographics and link ordering and replenishment data to the warehouse. That warehouse is a year-old, two million square foot automated facility in Columbus, OH. It replaces a manual, 440,000 square foot distribution center.
 
"Objectives involve reducing time to market, improving assortments and reducing inventory inaccuracies with reference to size and color and in stock levels," says Sugarman. "The warehouse management part affords better visibility and better capabilities throughout the supply chain. These considerations are part and parcel to being more efficient." Financial information, transaction management and purchasing capabilities also are part of merchandise planning.
Installation of the merchandise planning component will begin in the second quarter. Sugarman says plans are already in place to implement product lifecycle management and supplier relationship management around the first quarter of 2009.
 
On the point of sale side, Steve&Barry's will install SAP software in a handful of stores beginning this quarter. By generating more granular data, the retailer can distribute product in a more pinpointed way and increase speed to market. "Our stores are in nearly 40 states and there are significant differences from market to market," says Sugarman. "This is reflected in our product mix. But these issues can be better addressed with the streamlined functionality of SAP. POS data will help us with the next step while allowing us to plan for the future."
 
Workforce deployment, the third part of the SAP package, revolves around labor scheduling. It is tied to POS software so that high customer traffic periods can be recorded and accommodated by appropriate staffing levels. Workforce deployment also involves talent and recruiting management. Candidate information is pooled so it can be shared among store managers and the corporate office. Candidates also will be able to apply for jobs online. Steve & Barry's will begin using workforce deployment during the second quarter.
 
"We want to become more efficient as far as recruiting and retaining top talent," says Sugarman. "We want to manage the process in terms of evaluation and being able to follow the applicant through the whole thing. SAP will help us do that."
 
Across the board, Beller and Sugarman also are looking at Steve & Barry's longer term technology needs. Already, they envision using SAP to enhance how the company ships and tracks products. They also are exploring online merchandise selling. As for new stores, Steve & Barry's literature says there are "hundreds more" in the pipeline.
 
"Integrated solutions will deliver tremendous value going forward," says Beller. SAP is about a business, a technology and a strategy. It will be ongoing. It's a question of what functionality and capabilities we deliver every year to support our learning and continuing evolution."
 
Regardless of what directions Steve & Barry's eventually goes in with SAP, every initiative will support the retailer's core mantra of streamlining efficiencies and passing savings on to young consumers.
 
"People want a magic answer that explains how we sell everything at our low prices," says Sugarman. "It's the little things that allow us to create that environment. Everything we do operationally, strategically and philosophically has to do with keeping costs down. IT isn't a strategy; it's part of our business." RIS

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