From November 2007

By M.V. Greene

REI, the world’s largest outdoor gear and clothing retailer, is mining the depths of business intelligence to remain near the top in customer service.

Business intelligence (BI) gives organizations the tools to look inward by examining operational data and moving quickly to adjust to market conditions and customer expectations.

“It gives you the ability to identify things differently on a regional or store basis where you can have greater refinement,” says John Strother, director of inventory and logistics for merchandising at the Sumner, Wash.-based retailer. “You can identify where your business is not as strong in a particular product category down actually to a store level or a regional level. This gives you an earlier insight. It’s about the speed of decision making and the ability to react more quickly.”

REI uses BI to generate store, Internet and catalog performance results for all of its merchandising functions, including managing product selection, inventory analysis and quality assurance.

The goal, Strother says, is to put the power of BI in the hands of individual user groups, tailored for that user – whether it is the CEO, buyers, store-level employees or vendors. Simply, “the quicker you can react to an inventory shortfall or an excess inventory situation, the better effect you will have,” he says.

Three years ago, REI migrated to a system from Seattle-based SeaTab Software, deploying its PivotLink Embedded Business Intelligence on-demand tool to store managers, corporate users in departments that included finance, marketing and human resources and more than 100 of its largest vendors.

For the large-volume suppliers, REI is able to increase communication by providing them with vendor scorecards that segregate data on returns, invoice accuracy and on-time delivery.

REI dropped its previous BI vendor in favor of PivotLink because of enhanced pricing efficiencies, Strother says. PivotLink does not require seat licenses for individual users and the software resides on the user’s desktop; licensing fees assessed by the previous BI vendor made it cost-prohibitive to expand the system for internal use or roll it out to outside suppliers, he says.

Hosting and maintenance
REI was able to fund 80 percent of the start-up costs for the PivotLink launch with what it was spending on maintenance fees for the former system, Strother says. Additionally, SeaTab operates PivotLink on a service model through which it assumes hosting and maintenance responsibilities.

PivotLink seamlessly monitors sales and inventory on a weekly basis, highlighting problem areas much more easily than in the past, Strother says.

“In the case where a product was outstripping your demand, it gave you early insight into that situation so you could either get more of that product or adjust some of your upcoming orders,” he says.

“In the case where items were not selling up to plan, then the reverse would happen: either orders would be cancelled going forward, or we would take additional markdowns on that item. And then we could examine the sales rates after we’ve taken those markdowns to see how well that was doing.”

Women’s gear had been a segment of REI’s business focused almost entirely on apparel sales. Using PivotLink, REI was able to analyze granular data based on assortment and performance at the store level and adjust merchandising and marketing to make smarter business decisions.

That insight showed increased demand and activity for more customized product offerings like sleeping bags and backpacks. As a result, the women’s segment grew from 30 percent to 50 percent of overall sales.
“It gave us good insight into how much that business was growing and where we needed to pay attention,” Strother says.

REI also uses PivotLink for quality assurance for returns analysis. Initially, REI utilized the tool to analyze the reasons for the return of products associated with more dangerous outdoor activities, such as rock climbing. Over time, the quality assurance analysis has become part of the culture for all products, Strother says.

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