Tuesday, February 19, 2013

Limited Brands technology investments paying off

As reported by the Wall Street Journal, J.C. Penney received substantial payoffs from its investment in technology, mainly from its focus on its online presence but also due to its spending on information technology and even its more “experimental technologies” [1]. These investments in IT are also part of a larger movement in improving customer service, inventory management, and product movement throughout the supply chain. Therefore, I predicted that J.C. Penney is not the only retailer investing in such beneficial IT systems. I chose to investigate another retailer to see if similar – but perhaps more recent – patterns of investment were implemented. Victoria’s Secret is owned by Limited Brands, and is widely known to have a significant online presence and extensive cataloging capabilities. With only this inkling of knowledge, I decided to explore Victoria’s Secret, their technological investments, and its effect on its supply chain. 

As it turns out, Limited Brands is, in fact, investing substantially in technology infrastructure, enhancing its inventory management, distribution centers, and point-of-sale systems with an estimated $175 million dedicated to such upgrades in 2012 [2]. According to analysts, Limited Brands had sales of $659 million in April 2012 which surpassed sale expectations and diverged from other retail chains that struggled during the same month [2]. Victoria’s Secret alone experienced an 8 percent rise in store sales by using upgraded software and utilizing data to determine which brands and products to sell [2]. 

How? For one, with continued investment in its point-of-sale system, which enables stores to respond to market changes, achieve inventory accuracy, and target certain products to specific stores. Additionally, according to Limited Brands 10-K form, “in 2012, we plan to continue to roll out new point-of-sale systems to our stores, continue to build new cross-channel functionality at Victoria's Secret and invest in international support systems” [3]. With so many types of products and brands, Limited Brands is consistently improving its inventory and distribution to allow for customers to have the seasonal selection of merchandise they desire, even when customers are located around the world.  In the past, Victoria’s Secret used Oracle point-of-sale system, an open, modern, service-oriented architecture to tailor the sale system to account for seasonal peaks in business sales, for example, during Valentine’s Day for Victoria’s Secret [4]. Having a supply chain infrastructure model focused on tailored product distribution and customers’ seasonal preferences, it is no surprise that Victoria’s Secret sales wildly exceeded analyst expectations. These successes in sales could not be achieved without investment in sophisticated information technologies that allow Victoria’s Secret to optimize its supply of products. 

Questions to consider:
  1. What other retailers or companies have had similar successes as a result of technological investments?
  2. What other resources could retailers such as Victoria’s Secret utilize in order to even further optimize its supply chain and anticipate product distribution? Consider potential data collected from programs like the Victoria’s Secret Angel rewards card, catalog mailing and orders, and targeted e-mail coupons. 
[1] Dodes, Rachel. “J.C. Penney Spends to Get Ahead on Mobile Shoppers, Other Trends.” Wall Street Journal, May 4, 2010, http://online.wsj.com/article/SB10001424052748704093204575216530311509768.html.
[2] Schectman, Joel. “IT Investments Pay Off At Victoria’s Secret, Bath & Body Works.” Wall Street Journal, May 6, 2012, http://blogs.wsj.com/cio/2012/05/06/it-investments-pay-off-at-victoria%E2%80%99s-secret-bath-body-works/
[3] “Form 10-K for LIMITED BRANDS INC.” Yahoo! Finance, March 23, 2012, http://biz.yahoo.com/e/120323/ltd10-k.html.
[4] “Tailored Solutions.” Oracle, February 2011. http://www.oracle.com/us/corporate/profit/opinion/121610-qa-196858.html.

Related reading:
Harrington, Lisa. “Retail Logistics: Open for Renovation.” Inbound Logistics, August 2008. http://www.inboundlogistics.com/cms/article/retail-logistics-open-for-renovation/.

1 comment:

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