NEW YORK -- Retailers striving to develop strategies to propel sales into the next millennium need to do a better job of tapping into the expertise of company departments now frequently overlooked.
Specifically, it is time for buying and merchandising decision-makers to leverage the knowledge that can be gleaned from companies' financial departments to better understand market opportunities and size up the potential for generating higher profits in a broad range of product categories.
That was the message delivered by David Stover, associate partner for retail industry practice at Andersen Consulting, and Steve Beitler, senior director of financial processes and systems for Sears, Roebuck & Co., both headquartered in Chicago.
Stover and Beitler spoke at a workshop session titled "Partnering With Finance for Merchandising Success," at the Washington-based National Retail Federation's annual convention here this month.
Sears and Andersen Consulting teamed up on a re-engineering initiative that could serve as a wake-up call for retailers in many classes of trade.
With the help of Andersen, Sears undertook a major reorganization program that involved having the chain's financial department provide key information to buyers and merchandisers to help in making better informed, and more profitable, decisions.
The undertaking could serve as a model for any organization interested in harnessing the power of its financial department's capabilities, it was said.
"There is an in-house, untapped, underutilized resource available to continue business optimization efforts. It's called finance," Beitler said.
Financial department staff, often overlooked as viable sources for creative and business strategy ideas, Beitler said, are valuable to the planning and decision-making process for a number of reasons:
They have ready access to business information, a strong command of the numerical facts and strong analytical skills.
They are often also more objective than other members of the organization.
Andersen Consulting's Stover agreed. When it comes to trying to optimize product sales or business strategy, determine the effectiveness of marketing or promotional efforts and plan future growth, the financial department can provide solid, useful data, he said.
When considering the effectiveness of product lines, for example, the financial department can often help determine which products can profitably meet customers' needs, which areas have an unacceptably low return on capital investment and what options exist to reallocate capital for more rapid payback.
Tracking the effectiveness of marketing and promotions is another area in which the financial department can help, Stover and Beitler pointed out.
By asking the finance department to examine the data, marketing executives should be able to obtain answers to questions such as which markets are most responsive, which promotional items and special events may best meet the company's strategic needs and which opportunities maximize incremental gross profit.
Just because members of the financial department are able to provide this information, however, doesn't mean they are always willing to share it, Stover and Beitler both warned. Similarly, the company's merchandising and marketing "creative minds" are often hesitant to take advice from the financial department's "bean counters."
To overcome these cultural hurdles, Sears reorganized its financial department in a bid to develop "new roles and capabilities to collaborate in continuous business design refinements."
The chain also developed an economic literacy program to educate staff about the concepts of financial operations throughout the organization as well as a retail literacy program for finance department staff.
Sears also provided its financial department with models of its managers' decision-making processes. By understanding the process, the chain's financial department staff is better equipped to know when its data should be mined to assist in the decision-making.
"The overall idea is to figure out what information a finance person has that they can provide the rest of the organization to help them make better decisions," Beitler said.