The following case study/profile was originally published by BI Review. For similar industry implementations and profiles please visit BI Review's Web site.
Dennis Hernreich leads a multi-channel strategy at Casual Male Retail Group
Aligning sales channels is a challenge for any business but particularly so in retail where direct (Internet and catalog) and brick and mortar outlets square off with disparate technology, supply and distribution models. Add an environment that includes acquisition and brand extension and you have a daunting task built for a busy chief operating officer.
Meet Dennis Hernreich, EVP, COO and Chief Financial Officer at Canton, Mass.-based Casual Male Retail Group, the largest seller of big and tall men's apparel with operations in the U.S., Canada and England. COO and CFO are very big hats to wear at the same time, but it's working for Hernreich. Casual Male reported FY2006 sales of $467 million with all important comp sales up 9 percent, making for 13 straight positive quarters. If there a single advantage to owning both roles, it might be the ability to knock on your own door when you have an idea. "I have a team of people helping me, but in my case being CFO really lets me to get into corners I couldn't otherwise," Hernreich says. "I can bring about change on the operational side, in marketing, pretty much every aspect of the business except buying. I'm an idiot when it comes to style."
Hernreich joined Casual Male in 2000 on the heels of CEO and President David Levin's arrival. Both were assigned by board Chairman Seymour Holtzman to turn around a stale business. Casual Male was then Designs Inc., its principal holding operating Levis and Dockers outlet stores. "We were working with a brand we did not control and wasn't necessarily up and coming," says Hernreich. Meanwhile, shoe retailer J. Baker was headed to bankruptcy in 2001, had divested most of its businesses and was left with a weak balance sheet - and a big and tall fashion chain called Casual Male. "We saw an under-managed, over-expensed and under-invested brand that pretty much owned its segment. Put all that together and we knew we could really take the company places." Designs Inc. dropped the outlet business, rounded up $170 million and was off and running in early 2002. The time since has been spent improving infrastructure and pruning expenses but primarily reinventing brand merchandising, marketing and store presentation, the means by which Casual Male approaches its customer.
Casual Male Retail Group operates 520 retail stores, including two dozen that came with the 2004 acquisition of Rochester Big & Tall. Like the parent brand, Rochester operates busy online and catalog channels, but caters to more upscale buyers. The group operates other direct channel outlets, including LivingXL, the company's first stab at a lifestyle brand extension. Across the businesses, Hernreich's challenge is to create a consistent shopping experience for customers, and it's here that things get complicated. While financial reporting could be consolidated fairly easily, Hernreich lives more in a world of marketing and merchandising. "The post-merger challenge is to bring the practices that you have excelled at to the company you just bought in a quick enough time period so you don't lose control," he says. "There's a transition between the time the acquired people start giving up what they are doing and the people here start taking over what other people used to do."
The direct and brick-and-mortar sides of the business operate on separate technologies, with the retail side depending on applications from JDA. "At the time we went with JDA there was no multi-channel solution where one platform could operate both our retail stores and our direct business," Hernreich says. "It is developing now but I'm not even sure there is a viable solution that is ready for us today."
Hernreich had no choice but to develop the direct channels independently. For catalog and Web, Rochester and other acquisitions didn't have the reporting capabilities Casual Male did, so to establish common KPIs Hernreich turned software-as-service provider Oco. The proposition would be to retrieve, integrate, cleanse and host data from multiple systems with a common reporting and analysis framework. "We were able to do that at Rochester Direct in just six weeks because Oco did all the work," Hernreich says. With everyone working off the same reports and dashboards, the result was better inventory buying decisions, better Web and catalog production and improved product placement in both.
While the direct business has grown 25 percent or better for the last three years across several properties, channel integration with the flagship brick-and-mortar business is still under way. "I can say a lot more integrated decisions are being made than there were three years ago," says Hernreich "But it's obviously inefficient that we are working with two platforms and two inventories, so we have made our plans." Next year, direct and retail inventories will be combined via technology from supply-side vendor Manhattan Associates, which will also handle fulfillment. In anticipation of combined purchase orders, retail and direct buying responsibilities have been consolidated among key people at Casual Male.
Sizing the Customer
That last step - consolidated buying among a group that understands the full range of Casual Male's customer base - was no small feat, but without it, supply side improvements would be for naught. The only common demographic among Casual Male customers is that they are male, big, tall or all three. "We don't have a target demographic, we have a segment that comes from all walks of life, all age groups and lifestyles," Hernreich says. "We'll build loyalty as long as we provide the wardrobe they're looking for."
That requires understanding where customers live, the market segments they populate and the lifestyles they lead. On the demand side, Casual Male is counting on a CRM solution enhanced by retail specialist QuantiSense to enable a multi-brand, multi-channel contact strategy by sorting out the population in a combined database of direct and retail customers. Eighteen months into the plan, Hernreich is starting to see benefits that are more about behavior than complex marketing. "It has been incredible to see and understand the cross shopping going on between brands and channels. Understanding customer behavior is completely important to understanding how to communicate with them."
Hernreich found it amazing that catalogs wound up in places he'd never thought they'd be, meaning that he was underestimating the ROI of printing. Along the same lines, the company didn't know that catalogs drove shoppers to retail stores as much as to Web sites. "We were surprised that direct and Internet shoppers are less resistant to going to stores than the other way around." With that in mind, Hernreich saw that sending fat catalogs to retail customers wasn't necessarily the best investment. "Our catalog does a great job of presenting what we do and offer, but maybe there is a less expensive way of talking to retail shoppers that also opens new channels to them. This learning is going straight into our evolving marketing strategy."
The information is helping Casual Male test kiosks for a more dynamic shopping experience. If a customer can't find his size in a store, a clerk in the same store will ship the order direct. Data is also being gathered for store planning that will adjust assortments in locations as little as 10 miles apart. Different neighborhoods simply dictate the need for this, Hernreich says, and given Casual Male's various brands and locations, it is a sensible solution to pursue.
Because he is the CFO, Hernreich doesn't have to deal with squabbling over cannibalization across channels. The "decider" is the bottom line. "We want to make it convenient for our guy to shop us any way he chooses and we make that known in the company." The lesson Hernreich offers is that technology is an enabler of core expertise, not a 10-year plan to get to Mars. "The barriers to entering our market are the practices that make us the best at managing sizes and assortments in ways our competitors won't tackle. The worry today is not success, it's how successful we can be."
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