Belk: Modern. Southern. Style… IT
In November of last year, the Belk department store chain announced a $70 million rebranding effort including a logo redesign, a new tagline (Modern. Southern. Style.) and an advertising campaign.
At the time, Johnny Belk, president and chief operating officer, said, "We’ve been working hard in recent years to establish Belk as the brand leader, not only in cosmetics, but also in dresses, shoes, costume jewelry, accessories and denim. We felt the time was right to expand our profile and realign our corporate image to better reflect the kind of stores we operate today. Re-branding happens only once in a generation, and our recent strong financial performance and balance sheet have enabled us to make significant investments in the company to position Belk for long term growth and success."
The changes Belk has made in trying to appeal to consumers beyond its traditional Southern base appear to be paying off. For the first quarter ending April 30, Belk reported a sales increase of 5.6 percent overall and a 5.7 percent jump in comparable stores. Net income was up 31.3 percent for the period.
Mr. Belk said in a May press release that the company was happy with "the results produced thus far from our investments in branding and marketing, e-commerce, departmental remodels and information technology."
That last item, IT, is where "the real action is happening" at Belk, according to a piece on the Apparel Magazine website.
According to the report, Belk made a $150 million investment to transform its IT department as part of the company’s SMART (Strategic Merchandising and Retail Technology) initiative.
Belk CIO Mike Laurenti has pushed technology to help the company engage consumers through a multi-channel approach, including in stores, online, social media and mobile.
"Social commerce is going to dominate how we interact with our customers," Mr. Laurenti told Apparel Magazine. "It starts online, on Facebook, where you engage with friends and family — you begin your purchase not by walking into a store but on a social network. How do you bring all of these technologies together and prepare yourself for a world where the consumer expects to engage with Belk the way they want to?"
Belk also has made a move with core merchandising programs for stores. Mr. Laurenti said the company was taking steps to better integrate the online Belk experience with that in its stores.
Discussion Questions
Discussion Questions: Is Belk typical/atypical of the types of investments retailers are making today in information technology? How much of an effect do IT investments have on retail chain top and bottom line performance?
Traditional department stores have been among the slowest movers into IT investments. It’s especially hard to justify the spending for a robust e-commerce site when stores are clustered regionally, compared to a national competitor like Macy’s. So it’s good to see Belk taking steps not only to grow its e-commerce sales but also to cultivate customers through new media. It’s consistent with the “modern” aspirational positioning, and it seems to be paying off in sales and profits.
Technology is the biggest bargain in retail, and programs like this that combine tech and marketing are sure to be successful. Belk is smart to reach out to customers where they are, and engage them before they come into the store.
I find it hard to believe that 18 months (since the new CIO came on board) into a 30 month Oracle Retail implementation, that IT deserves a lot of credit for improving results. There seem to be a lot of moving parts to the “Belk Awakening” and although IT may be a significant enabler, there are many other factors also contributing to the metamorphosis.
Having said that, I do find it interesting that the emphasis on social networks and online selling seems to be paying off. MTV just turned 30 years old. I can remember DJs saying music videos were a fad that denied listeners the experience of building their own mental images. I still feel the in-person experience of touching and feeling a product is important for most department store items. But maybe the newer generations have gone beyond that stage. Just as they are willing to accept the music company’s image of the music video, younger individuals may be more willing to finalize their department store purchases online.
I’m not sure where this all takes us as retail operators. It definitely makes the IT commitment more significant because it ranges all the way from the consumer to the supplier. Increasing online demand changes the way everyone along the supply chain must interact. It sounds like the Belk organization has recognized the interdependencies and is planning to address them. I am not sure that many organizations have been willing to take on the commitment to address all their processes. On one hand, you can get too many balls in the air at once so that the final results in various areas fail to integrate. On the other hand, by implementing major change while at the same time keeping the old way of doing some things, you never achieve full benefit. It will be interesting to see how Belk is doing at the end of the 30 months.
We are seeing more infrastructure-type deals like this lately. The reasons are simple–the old tangled web of applications just won’t extend any further across new channels and ways of doing business.
But quantifying an immediate ROI is always a challenge, which is how we got in our infrastructure mess in the first place. No one gives you “style points” when you do sill work on your house. You just get to have it not fall down. The same is true on replacing foundational systems. It’s irritating for users, who really don’t like change. It’s expensive, and often might take the place of a store re-model. It sucks up a lot of IT time and money.
But forward-thinking executives know they have to do this type of work to stay competitive. The consumerization of IT is the most fundamental change to hit retail since the advent of Point of Sale. New channels will continue to emerge and consumers will expect consistency across all of them. There’s just no way around it. The ROI is very indirect, and we tend to not have the KPIs in place to measure opportunity cost. But that doesn’t make it any less important to do it.
Other department stores should pay attention to Belk, and emulate their technology initiatives. As online retail revenues continue to increase every month and outpace in-store revenues, merchants need to place more and more emphasis reaching customers on their desktops, mobile phones and tablets.
If you look at two similar companies taking opposite paths on the technology front, there’s no better recent (and public) case study than Barnes & Noble versus Borders. Barnes & Noble offered their library for sale online and created their own eReader. Borders bet that people would still want to get their books in-store. Now, Borders stores are disappearing, and Barnes & Noble’s biggest competitor has become Amazon, an online marketplace.
Belk has invested their resources wisely here, and I’ll be curious to follow their trajectory over the next few years.
Integration with social media has been a buzz in retail for some time now. However, since the returns are not proven, huge investments in IT in such areas are slower as compared to other areas. Smaller investments are made, like enabling a mobile app or creating a Facebook page.
Retailers with an existing online presence are the ones expanding their horizons in social media and are investing in enabling processes, like store pick-up.
So a clustered retailer like Belk making such an investment is indeed a brave step.