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Business intelligence helps Toys R Us build 600 pop up stores a season

Ian Grant

The global toy store Toys R Us will open 600 new stores, and shut as many again this season. Most will take just two weeks to open their doors from when the lease is signed.

Toys R Us is leading the retailing trend to 'pop-up' stores. These are stores that are take advantage of cheap or even free rents in malls and high streets desolated by the fragile economy in the US. Next year Toys R Us will expand its pop-up programme in Europe.

The ability to do this began several years ago and was driven by the CEO. The company had to work out how to do it, Joe Young, senior director for sales and operations planning (S&OP) at the toy store, told delegates at the Teradata Partners conference in San Diego last week.

"We had to stop doing what came naturally and start doing what worked," he said.

The natural path involved silo-ed information, politicised control of data and relationships, poor or neglected relationships with key partners, and a lack of communication, he said.

In addition the toys sector is marked by decreasing product life-cycles, faster product development, increasing lead times, more channels to market, economic constraints, and consumer uncertainty about the future which is leading to a decline in impulse purchasing.

"On the other hand, mall owners welcome anchor tenants like Toys R US because they know they're going to get paid," Young said.

In addition, they know that the firm attracts customers. This means Toys R Us can drive a hard bargain on rentals, but then must be fast to take advantage of situations that can arise overnight.

Toys R Us tested the concept last year by opening and shutting 90 stores within a season. That proved so successful it will expand the programme to 600 stores in the US this year, and export it to Europe in 2011.

Business intelligence

What give Toys R Us the ability to do this on the scale it does is a fantastically fine-grained understanding of all the elements that go into such deals, and the relationships and dependencies between them all.

Key to making it work is getting Toys R Us and its business partners to "think vendor to shelf", Young said. This required co-ordinating and optimising the entire supply chain down to the finest detail.

Young said key to success with the pop-up stores is the "cadence" or regularity with which the business runs. "It's when this stops that there's disruption," he said.

With the CEO's support, Toys R Us' sales and operations planning division built a Teradata-based master data management system that operationally reflects what business units wanted.

The system optimises the supply chain so that, for example, store managers can trade off and decide excess stock and consequent mark-downs against stock-outs and lost sales. This means information flows are optimised for the business rather than for IT or functional efficiency, he said.

"But those tools are there, building up from a point of sale foundation through product assortment, financial planning and forecasting into space planning," he said.

An early victim of doing what works was geeky favourite price optimisation. "We abandoned it because it didn't engage enough with the business," he said.

Team characteristics

Young stressed how important face-to-face meetings were in driving change. Although his department sometimes 'infiltrates' business unit meetings, it never leads the conversation, except to keep it focused and aligned with overall corporate strategy.

In addition, all meetings they attend should lead to decisions and actions. "This is very important," he said. "We won't go to meetings that don't have a decision coming out of it."

His people were there to provide a single version of the truth, reliable information, and common ground that everyone understands, he says. "We are not the business owner, just the facilitator," he said.

"S&OP's credibility and overall corporate alignment depends on us being in the business rather than alongside it," he said. This meant working with business units to co-ordinate activities across time-scales that vary from daily to seasonal.

As a result, the key personal attribute he looks for in his staff is sociability. "We need people who like people," he said. "They must want to help, not just be doers. And they must be persistent in going after what the other guys really want.

"And because of this, a sense of humour is really helpful. There is so much at stake that an ability to keep things light is so valuable. Otherwise it can get really dismal."


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