Wilsons Leather stores get fresh merchandise onto the sales floor 70 percent faster than at this time last year because of inventory scanners introduced four months ago.
As the company presses its turnaround strategy, speed to shelf and overall store execution will be keys to reversing negative same-store sales trends.
“It’s a great move and it had to be done,” said Eric Beder, senior vice president at Brean Murray, Carret & Co., a New York investment bank. He said the “tremendous” volume of price changes Wilsons makes at the store level demand that it be more efficient.
Without the scanners that most stores use to automate inventory receiving and pricing, Wilsons employees relied on manual processes that chief executive officer Michael Searles called “frighteningly time-consuming, frighteningly tedious.” Equally disturbing, he said, employees didn’t seem to mind.
“I was beyond stunned,” Searles said during an interview at headquarters here.
Five months after joining Wilsons The Leather Experts, Searles used an earnings call to announce that 430 stores would be equipped with scanners within 100 days — by September 2005. Then it was Jeff Orton’s turn to be stunned. As Wilsons chief information officer in charge of technology, Orton got word of the $1 million project and its aggressive timetable when Wall Street did.
“I had people in my office immediately [asking] ‘How are we going to do this?'” Orton said. He joked that company executives are paying closer attention to earnings calls these days, lest they miss out on crucial news.
Searles admitted the tactic was meant to dramatize the change he represents after the departure of predecessor Joel Waller, who was Wilsons ceo for 21 years and is now ceo at The Wet Seal. Searles said he wanted to bypass all the hand-wringing that comes with technology investment decisions.
“I find that once you make a declaration with an inability to retract it, the company stops debating about ‘Should we, shouldn’t we, can we?’ and it becomes, ‘Oh my God, we’ve got to.’
“We said we were going to do it in a very short time frame and it involved a different part of the organization leading the charge, which has never happened in this company,” Searles continued. “It was the IT group that was going to lead us to this promised land and not the merchants and marketers.” IT delivered the job on time and on budget.
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Wilsons isn’t in the promised land just yet. Sales are down 9.8 percent year-to-date, to $398 million, and comp-store figures slid 12.7 percent in January, according to a statement released Feb. 2. Still, Searles said gross margin is up more than 2 percentage points compared with the prior-year period.
“Some of that [gain] is through more opportunistic purchasing,” he said, “and some is through the efficiency of our markdown process” enabled by the wireless scanners, which are from Symbol Technologies and use the Microsoft Windows CE operating system.
A time-and-motion study by Ernst & Young found that Wilsons’ scanner-based markdown process was 70 percent faster than its manual system. In addition, scanners improved markdown activity accuracy levels from 65 percent to 95 percent, Searles said.
Pricing and markdown optimization initiatives are on the horizon this year. Wilsons is testing Expert Pricing software from JDA Software.
Wilsons has such high expectations for the impact on clearance that it will discontinue a 27-year tradition beginning this year. The Wilsons Leather Warehouse Sale, held at the local fairgrounds each October, cost the company $120,000 to market and generated $2 million in a week’s time. “Gone. Done,” Searles said of the liquidation event that drew chartered buses of bargain hunters from out of state.
“This was a huge undertaking,” he said, “and the reason it existed is the inefficiency of the system: Absent scanners [caused] us to wind up with a package of product that was so bad that we had to move it out of stores into a one-time annual event to get rid of it.”
Scanner-based receiving enables employees to get new merchandise out to the sales floor the same day it arrives, rather than lingering in the back room two or three days as it had before scanners were introduced.
“Speed to floor is critical,” he said. “By getting it to the floor faster, I can get a read faster and reorder either from overseas or domestically faster.”
Searles said the impact of scanner technology is obvious, but the benefits of the project extend beyond store walls. He said giving the IT department the spotlight it never enjoyed before should inspire others in the organization to try and make a positive impact in their own departments.
“My message is that there are other critical aspects of our business that can make us a better company that lie outside the realm of ‘merchandising knows all, does all’ focus.
“This will become the first of many other initiatives that make the nonmerchant part of the company feel that they have a stake in the outcome of the company as opposed to being invisible soldiers whose fate rises and falls on the skills of the merchants,” he said.