Reverse Outsourcing

With a population of 1.2 billion people, a growing number of whom have a deep appreciation of top U.S. and European designer brands as well as the resources to buy them, India is emerging as a high-end fashion market.

The Collective, a “super premium men’s lifestyle” concept store in Bangalore, has precisely the merchandise assortment to attract those customers. The 20,000-sq.-ft. store, the first of several planned for Southern Asia, opened in November featuring top names such as Hugo Boss, Versace, Ted Baker and Church’s footwear.

What is decidedly unexpected is The Collective’s choice of Port Washington, N.Y.-based Kliger-Weiss Infosystems (KWI) to provide the store’s retail information systems in merchandising, point of sale, planning and customer management. Isn’t that some form of reverse outsourcing?

“Large retail organizations are more comfortable if they have those systems in house,” says George Santacroce, CEO of The Collective. “But for a start-up organization, it makes a lot more sense to outsource those functions.”

Santacroce, a native New Yorker with 38 years of wholesale and retail experience in international markets, now resides in Bangalore, the nation’s third-largest city and an area often referred to as India’s Silicon Valley. While the issue of whether or not to outsource all those systems was settled quickly because of Santacroce’s past dealings with KWI, there is still the matter of reaching back through multiple time zones and an international dateline to meet his software requirements.

“The reality is that the expertise in India, in terms of software, is not on the retail side,” he says. “It’s ironic that India is known for software and its technical development, but not in retail.”

The Collective is one of a handful of retail concepts operated by Aditya Birla Nuvo, part of the Aditya Birla Group that generated $28 billion in revenue during its most recent fiscal year. More specifically, The Collective is part of the Madura Garments segment, with the initial concept expected to evolve into a men’s, women’s and home lifestyle store. Over the next three to five years, it plans to add eight to 10 more stores in India and other key markets in Southern Asia. Stores in Mumbai and Delhi are scheduled to open later this year.

As he pushed to meet his opening day deadline for that first store, Santacroce says some issues surfaced with his initial choice of software provider, a large, North American-based company. He chose to withdraw from that development project and switch to KWI “because of the time and cost demands [on The Collective] to help with the implementation, which involved higher costs and distractions.”

Best-of-class functionality
The KWI implementation took 120 days from start to finish, “but we went live in India with 70 to 80 percent functionality in just 90 days,” Santacroce says. Another advantage of working with KWI, he says, “is that you end up getting best-of-class functionality in POS, CRM and inventory management. And KWI wrote all the interfaces for SAP financials, warehouse management and for the incredibly complex Indian tax code system.”

Another point of differentiation is what Santacroce characterizes as KWI’s “value-added services.”

“Rather than simply providing basic data, KWI takes the additional step of doing the analysis of that data which allows for quicker problem-solving and the ability to act on that research,” he says. “For example, we use the CRM piece, but they also do the basic analysis of shopper trends. We can then slice and dice that data for our direct-marketing programs.”

On the LP side, KWI prepares automatic daily sales audits. “If they see an aberration, they can identify it for their clients,” Santacroce says. “They can pin down the exception to the date, time and register and identify the transaction.”

KWI president and CEO Sam Kliger has been part of the company’s senior management for more than half of his life, having dropped out of college at 19 to develop a retail management system.

The private company enjoys annual sales of between $20 million and $30 million. “We’ve never had to borrow a penny, and our average annual growth rate over the years has been 14 percent,” Kliger says. “We are loath to grow too quickly because we have to be able to serve our clients,” which include United Colors of Benneton, Liz Claiborne, kate spade, Swatch, Kenneth Cole, QVC and Michael Kors.

Being competitive
“Ten years ago we would spend half our time getting clients to trust us with outsourcing,” he says, “but now everybody is outsourcing to be competitive.”

KWI’s typical client is a specialty retailer with fewer than 250 locations. Larger operators already have an IT department and an infrastructure, “and they will not get rid of that infrastructure to go to me,” Kliger says. “But if I sign up a company with one to five stores and they grow to 250 and 300 stores, we can deal with that” expansion of scale.

The Collective project required “an incredible effort to get them up and running in such a short period of time,” he says. “We closed the deal on July 15 and they were up and running by November 1.” Kliger’s company spent 1,000 hours modifying its system “to handle the arcane tax laws in that country, which has very specific laws about moving merchandise around different states.”

The secret to his company’s success,” Kliger says, “is that the CEO knows how to sell and knows the system. I wrote it.”