When Anna’s Linens decided to implement SAP BusinessObjects, the national home furnishings chain created a central department to oversee the business analytics that proved essential in deciding which stores to keep open in a down economy.
It wasn’t easy, but the process has been a success, according to Chief Financial Officer Neil Watanabe. Instead of having select individuals in each department who might only deal with reports on a part-time basis as originally planned, the company now relies on a small team of experts steeped in both finances and analytics. That department, known as the management information office, makes sure everyone is playing off of the same consistent page when it comes to business intelligence (BI), he said.
“We’ve found that if we put the expertise in [one department], then they can be more efficient, get to the data quicker and make sure it’s coming off of the right files,” Watanabe said.
Anna’s Linens implemented BusinessObjects Edge Standard XI R2 back in 2007. The company had previously been pulling its sales and operational data into Excel spreadsheets, which didn’t exactly work for the Costa Mesa, Calif.-based firm, according to Watanabe. Different departments were getting their own reports, and results varied. Errors were common.
Company officials decided on BusinessObjects, saying the technology was the best way to consolidate data coming from various sources as well as provide the kind of dashboard reports they were looking for.
As part of the deployment, Anna’s Linens created a new department within its finance organization. The group’s first task was to work with groups composed of Watanabe and other executives and business users across the company, have them scrutinize all of the reports Anna’s Linens had in its arsenal, and decide what should stay -- and what needed to go.
“We tried to consolidate and eliminate where there was replication and duplication,” Watanabe said. “We developed new reports that would allow for better visibility and consistency of information, and eliminated [multiple] reports when we could provide one.”
The company also brought in some outside consultants to work with IT and the management information office in helping design the reports and create the architectural backbone for the system. Once the system was up and running, IT backed out completely, and the new department took over.
Up and running
Now, when data comes from sources the Excel spreadsheets pulled from -- ranging from point-of-sales registers, to the company’s payroll system, to its JDA ERP system -- it’s collected in one central point.
Watanabe and other executives at Anna’s Linens get weekly and monthly dashboards as well as Crystal Reports summarizing business activity. Daily reports are sent to each of the individual stores on an automated basis each day, measuring everything from traffic to conversion rates, to what mix of items were being purchased. That data is used to make the necessary payroll and sales adjustments, and to hold managers accountable, Watanabe said.
“Until you dashboard this out, you can’t really see the disparity between stores and locations,” he said.
Slowing retail growth
When Anna’s Linens began using BusinessObjects, the company had 250 stores in total and was adding stores at a steady pace. But the worsening economy meant that strategy was no longer feasible.
“We had to slow down our growth,” Watanabe said at the recent National Retail Federation convention in New York. “We needed to look at our portfolio of stores and focus on profitability, ensuring that we were growing our business, not just through increasing units and increasing new stores, but by making the stores that we had more profitable.”
At the same time, Watanabe said, moving forward also meant taking a few steps back by closing out stores that weren’t profitable enough -- or were losing money outright.
To make things more complicated, Watanabe said Anna’s Linen’s includes “economic kickouts” in all of its leases, and that allows it to back out of a lease within the first five years if the store doesn’t meet certain sales goals set by the company.
“We can terminate the lease, take our marbles and move to a better location or a better site,” Watanabe said. That means that the company has to make decisions regarding a particular site’s future more frequently than most other companies, he said.
“With that kind of dynamic happening every month of every year, you obviously need tools to make that decision,” Watanabe said.
The chain began to look at the profitability of each store, looking at a variety of economic indicators including not only sales, but also how much traffic a store was getting, how many people were actually making purchases, what they were buying and how much profit they were making off of each sale. The company also looked at how much each store was spending on payroll compared with how much traffic that store was getting.
That gave executives an insight they hadn’t had before, Watanabe said. “Until you can dashboard this out, you really can’t see the disparity between stores and locations.”
All in all, Anna’s Linens closed about 50 stores, including five in Michigan, a one-time powerhouse in the auto industry. In that case, BusinessObjects was able to show the company that even if sales did increase at those Michigan locations, they wouldn’t make enough money to be profitable.
“There’s a lot going on with the auto industry, [and] we just did not see where that was going to recover anytime soon,” Watanabe said.
Back to where they were before, but better off
While the company ran a loss in 2008, it has since returned to profitability by doubling revenues in 2009 and 2010, according to Watanabe, who declined to provide figures for the private company. The company now has 267 stores in total, just ahead of the 250 stores it had in 2007. The benefits of better analytics extend beyond just adding 15 more stores, Watanabe said.
“We’ve been opening stores, but we’ve also been closing stores. So part of the process of business analytics, and business intelligence, is that while our store count has stayed relatively neutral over the last couple of years, we’ve really cleansed our portfolio,” Watanabe said.