Insights Turn Into Profits

CRM provides a bookseller with the data it needs to stock shelves with quick-selling, high-margin products.

Customer relationship management (CRM) software is usually billed as a tool to help companies better understand their customers. But in the case of WH Smith PLC, CRM helped the international bookseller better understand itself and how it turns a profit.

WH Smith wanted to get a grasp on customers' buying patterns, anticipate trends and more carefully align inventory to maximize profits in its 1,200 U.K.-based stores. So Trevor Dukes, the company's head of information strategy, last fall worked with a team that included store managers and central office executives to install a Web intelligence CRM system from McLean, Va.-based MicroStrategy Inc.

The goal was to cut the amount of paper shuttling back and forth between stores and the corporate headquarters in Swindon, England, and give store managers greater insight into what is happening in their own stores and throughout the WH Smith network.

Before, "we had only been able to monitor sales and stock at the central office, and senior store managers were sending us tons of paperwork about their stores," Dukes recalls. The communications process was grinding to a halt, and information was out of date once it was organized and put into reports. In addition, while directives from headquarters about promotions or incentives did make their way to each retail outlet, there was nary any integration or insight about the most profitable items among the more than 60,000 CDs, books, games, stationery and gifts the stores offer.

At WH Smith, with sales last year of $3.9 billion and profits of $188 million, this meant a rethinking of responsibilities and roles for store managers vis-a-vis the central office executives. "What shores up success for managers in the field is if they are clearly profit-focused and have tools to get visibility and confidence about making merchandise and stock decisions," notes Ian Rowley, a 22-year veteran and area manager for 20 stores.

But the issue, according to Dukes, was how to share information about what was profitable in one store with managers in other stores. Before the new system was implemented, there was no way to share this information.

The new Web-based CRM system begins generating reports in template form from the time a customer makes a purchase in a store. Sales and inventory data is sent from each retail location to a central data warehouse that store managers can access via an intranet. The Web version will be rolled out this year. The software tools available to managers include report templates and wizards so managers can get customized views of inventory based on criteria such as highest-margin items ranked by sales.

A Clearer Picture

Barrie Stewart, manager of the WH Smith store in Dunbartonshire, Scotland, says he can now see which specific products in the store are selling well, badly or according to expected trends, allowing him to take appropriate action. "It allows me to ask several questions, such as, Is the performance down due to poor display standards, poor stock availability or incorrect location?" Stewart says. Other questions he can ask include, Is the product right for this store? Does it provide enough profit from space allocated, or could another product's space be enlarged or a new product brought in to provide better profit for the space?

This kind of granular information is one of the highlights of using any CRM system to gain greater return on investment. But the information available from a CRM system still needs to be acted upon, and the best, most timely information is of little use unless the corporate strategy aligns with what the customer data is revealing, says Bob Moran, an analyst at Aberdeen Group Inc. in Boston.

For example, store managers with comparable demographics and sales volumes can see shifts in customer buying from store to store as well as from week to week, but they need the go-ahead to act on the data.

Stewart says he gives key information to store employees about which specific products sell the most and which are the most profitable. This ensures that the staff will display best-selling products in key areas with high display standards and well-maintained stock levels. "They are aware of higher profit margin products which can be sold as add-ons or displayed adjacent to best-sellers or in fast-flow areas," Stewart explains. Store personnel can also feed back information or ideas to managers, such as out-of-trend sellers or local opportunities that can generate more sales and profit.

Before the CRM system was implemented, store managers had no way of identifying the most profitable products, so they couldn't allocate their time to profitable lines. Now, if a store manager sees that a book is selling well, he can move it to the front window and push the CDs that aren't selling so well to a lower display area.

"It is all about maximizing your store's layout," says Rowley, adding that because he's armed with data from the CRM system, he can see how sales are being produced and whether those sales are actually generating profits.

"Our stores tended to be very sales-driven, as many retail environments are, but the store personnel didn't know what products were driving the profits," he says. Now, Rowley says, the stores' staffers know that displaying high-margin products such as branded stationery or books will produce a better yield on the store's overall inventory.

"We can track specific items, and if we see that a high-margin book is selling particularly well in, say, a tourist location, we can add a display at a shop that has high tourist traffic to try and take advantage of that information," he notes.

The CRM system is also able to match actual buying information about customers at the point of sale, giving greater depth to information in the customer data warehouse. "The marketing people can really see trends from individual customers," Rowley says.

Eventually, WH Smith will be able to tie individual e-mail promotions to in-store activity. "If we see that you bought books in one particular subject, such as Asian cooking, it isn't a far cry to imagine that we can let you know that a new Asian cooking book or an in-store promotion is about to launch," notes Dukes.

For now, though, Dukes says he's happy that individual stores can compare performance based on customer demographics and regional preferences as well as different displays.

Dealing With Demand Swings

WH Smith also is using information from the CRM system to make the company's inventory distribution more flexible so it can accommodate real-time demand changes.

"When we see one store selling out of a particular item, we can shift inventory from a store where it isn't selling as well and take advantage of customer demand," says Dukes. To derive maximum benefit from CRM, corporate support is necessary from other business processes such as stocking and distribution, he adds.

Training in-store personnel how to access the central data warehouse and generate relevant reports on inventory items took place prior to the crush of the 2001 holiday shopping season.

"Using the CRM system is a skill in itself," says Stewart. "The more PC-literate manager will find the tool easy to use, whereas the pre-PC generation may view it as a task to learn that takes up valuable time which could possibly be better spent elsewhere."

The CRM system was put together in a short amount of time, with a prototype in August 2001 and a pilot in September, followed by the October rollout. Dukes would have preferred more time to "get the consistent education across to a larger number of stores," but even he was distracted during December. During the height of the holiday season, Dukes was in the stores unpacking boxes and stocking shelves.

"It gives me greater credibility to be working with the people who use the CRM system and a better understanding of what they need," he says.

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