Merchandising
Retail
Intelligence
Mark Healy
Senior Director
Merchandising
Operations
1
About The Home Depot
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Founded 1978 in Atlanta, GA.
World's largest Home Improvement Retailer
2,055 Stores in US/Canada/Mexico
Expansion into China
2005 Revenues: $81 Billion - US
Approximately 345,000 associates
Enterprise Strategy 2000 - 2010:
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–
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Enhance the Core
Extend the Brand
Expand the Market
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Home Depot Growth 2006 - 2010
• 400-500 new store openings over the next five years
• Significant growth in services business and Home Depot Supply, 25 national
service programs throughout At-Home Services division, including flooring,
fencing, roofing, cabinetry and a host of other interior and exterior services
• Enterprise strategy to enhance our core with innovative merchandise and
new categories; to extend the business through new stores, new formats,
services and channels; and to expand the market into new areas and
geographies
• Direct-to-consumer channels, through homedepot.com, new up-scale
catalogs like 10 Crescent Lane and Paces Trading Company
• Platforms for growth, designed to take advantage of a nearly trillion-dollar
market opportunity: $200 billion U.S. do-it-yourself market - $110 billion
services market (representing the labor component) - More than $250
billion international do-it-yourself market - More than $410 billion
professional market
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Home Depot Merchandising
• Decentralized 22 years - 10 Autonomous Divisions
• Centralizing last 5 years - 3 Divisions, 245 Markets
• 11 Merchandising Departments
• 1,405 Sub Classes
• Over 355,000 Active Stock SKU’s
• Over 1 Million Special Order Items
• 104 Category Merchants
• 15 year old legacy core merchandising systems
• Microsoft EXCEL & ACCESS had been our best friend for
making merchandising business intelligence decisions
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Merchandising Business Intelligence
Business Intelligence
Merchandise Performance Management
Financial
Planning
Cluster
Optimization
Assortment
Management
Revenue
Planning
Promotion
Planning
Space
Planning
Vendor
Collaboration
Internal Collaboration: Reconciliation Between Plans, Exception Detection and Alerting
Demand Demand
Statistical
Demand Demand DemandDemand Statistical
Demand
Forecasting
ForecastingForecasting Analysis Analysis ModelingModeling Forecasting
Profiling
Attribute
Intelligence
Product Attribute Intelligence
Customer Attribute Intelligence
Exception
Management
Forecast
Performance
Store Attribute
Intelligence
• Create/Adjust Annual, Quarterly, Monthly Merchandising Financial Plans
• Create, Optimize Category Clusters
• Review Existing, Adjust and Monitor Category Assortment Plans
• Plan, Optimize Everyday Retail Price
• Plan, Optimize Clearance/Markdown Retail Price
• Vendor Collaboration - Micro Space
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Business Intelligence/ERP Space
• Dominated
by companies
<$200M
• Software
•
•
market leaders:
Had not been serious contenders in
retail market
During 2004 more attention to the
retail market
• 2006
Market still fragmented;
but has been some consolidated
• Still
not a viable single solution
of High Scalability and
Sophistication
• Retail
Market requires deep
domain expertise
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Business Intelligence Strategy
• Original 2002 Business Intelligence decision recommended 3
different tools:
– Merchandising Financial/Assortment/Space Planning (Marketmax)
– Price Markdown Management (ProfitLogic)
– Everyday Price Optimization (DEMANDTEC or khimetrics)
• Decision had following ramifications:
– Each tool has different user interface
– Each tool has a different data model where we would duplicate Sales
and Inventory data
– Each tool would yield different results
– Each tool must be purchased or leased separately with annual
maintenance fees
– Each Tool requires Merchant/Planner Retraining
• Was there an opportunity to purchase a consolidated product
with one common user interface and one common data model? 7
SAS Acquires Marketmax
Acquisition
Acquisition of
of Marketmax
Marketmax
gives
gives SAS
SAS the
the leading
leading
position
position for
for business
business
intelligence
intelligence software
software
in
in the
the retail
retail sector
sector
“Take one quiet market leader in business
intelligence (BI) applications, add a high-profile
purveyor of integrated planning applications and a
new dedicated retail industry practice in early 2004,
and mix well. What do you get? New software
leadership with enormous reach and the resources
to march across global retailing…”
Scott Langdoc of AMR Research. (Source: SAS Acquires Marketmax: Analytics With Retail
Apps Is a Combo Retailers Should Jump At, October 7, 2003)
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Why SAS Revenue Optimization?
• With SAS purchase of Marketmax, opportunity exists to
purchase a consolidated product with one common user
interface and one common data model
– Fewer Interfaces for Merchants/Planners to learn
– Fewer data models for IT team to integrate
– Fewer versions of the truth (sales/inventory)
– Less hardware expense
– Fewer annual maintenance fees
• Marketmax/SAS great Industry and Home Depot history
• Commitment of SAS Executive Leadership and Project Team
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Why SAS Revenue Optimization?
• Industry leading cost analysis capabilities with more than
5,000 customers
• Proven industry leading statistical modeling and optimization
capabilities with more than 17,000 customers
• Pricing solution that provides a price testing module to create
pricing variations to determine true price elasticity
• Pricing solution that can provide integrated store and
customer specific pricing recommendations
• Highly scalable architecture
• Integrated reporting and business intelligence
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Product Life Cycle Management
Assortment
Strategy
Assortment
Plan
Merchandise
Financial
Plan
Strategic
Business
Plan
Clearance
Markdown
Pricing
Pre-Season
Proactive
Product Life
Cycle
In-Season
Reactive
Market Level
Promotional
Markdowns
• Everyday, Promotional & Clearance
pricing are tightly integrated with
SKU/Item
Merchandising Financial Planning,
Plan
Assortment Planning - Management
Micro/Macro
& Micro Space Planning
Space Plan
In Season
Assortment
Decisions
Market
Retail Price
Changes
• Integrated suite provides one icon
for the users to access
• The integrated application yields
better data user adaptability
Revenue Optimization, an integral part of the Product Life Cycle
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Home Depot & SAS Relationship
• Developed Launch Partner Agreement:
– Home Depot Business Rules
– Home Depot Historical Data
– User Interface Design Inputs
– Stress Testing/UAT Testing
– Analytical Calibration
– Defect Identification/Resolution Process
– Executive Steering Committee Meetings
•
Proof Of Concept - Clearance Markdown
– 3 Categories, 6 Control Markets, +100 Clearance SKU’s
– 3 Merchants, 6 Benchmark Markets, same + 100 SKU’s
– POC Software proved an 11.8% higher Revenues than benchmark
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SAS RRO Deployment Plan
Ap06
May 06
Jun 06
Jul 06
Aug 06
Sep 06
Oct 06
Nov 06
Dec 06
Jan 07
Feb 07
Mar 07
Apr 07
May 07
Hardware Department
Lighting Department
Flooring Department
Install and Deploy SAS Software Release 2.2
Deploy to Remaining Departments
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Price Planning Organization
• Implement pricing strategy
• Pricing process owner (initial,
regular, promotion & clearance)
• Pricing analytics owner
• Ensures Merchant service &
support
Director
Pricing
Manager
Competitive
Shop Process
Manager
Pricing Analytic
Pricing
Analysts
Pricing
Analysts
Pricing
Analysts
Building
Materials
Hardlines
Decor
Business
Statisticians
Pricing
Supervisor
Western
Pricing
Supervisor
Pricing
Supervisor
Northern
Southern
Field Coordinators
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Merchandising Architecture
Business Intelligence
Merchandise Performance Management
Financial
Planning
Cluster
Optimization
Revenue
Planning
Promotion
Planning
Space
Planning
Vendor
Collaboration
Internal Collaboration: Reconciliation Between Plans, Exception Detection and Alerting
Demand Demand
Statistical
Demand Demand DemandDemand Statistical
Demand
Forecasting
ForecastingForecasting Analysis Analysis ModelingModeling Forecasting
Profiling
Attribute
Intelligence
Assortment Execution
SAP
Assortment
Management
Product Attribute Intelligence
Retail Execution
Customer Attribute Intelligence
Markdown Execution
Exception
Management
Forecast
Performance
Store Attribute
Intelligence
Promotion Execution
Purchase Order
Execution
Merchandising Data Execution / Master Data Management
Enterprise Data Warehouse
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Thank
You
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