Magazine Article | May 1, 2002

Expand Network Capabilities

Source: Innovative Retail Technologies

$2 billion K B Toys built a transaction switch into its frame relay network, enabling it to manage more than just credit authorizations for its 1,300 stores.

Integrated Solutions For Retailers, May 2002

In the beginning, parents hope their children will remain young forever; as they get older, both sides of the parent/child relationship strive for independence. The road to true autonomy could be a long one, accompanied by some pain points along the way. K B Toys could relate to the adolescent growing pains of its customers when Big Lots (formerly Consolidated Stores) sold K B Toys to an internal management team in December 2000. Wanting to focus more on its position in the close-out merchandise market, Big Lots acted as parents eager to begin a new life as empty nesters. But, instead of retreating into a state of separation anxiety, K B Toys embraced its newfound freedom and began taking steps toward self-reliance.

At first, the toy retailer couldn't make a clean break; some ties remained. Like a child who stops by the house with a basket full of dirty laundry in tow, the toy retailer was still relying on its former parent company for credit card authorization. Electronic payments from K B Toys' 1,300 stores channeled through a transaction switch that was housed at Big Lots' headquarters. The switch acted as a translation, receiving, and sending unit for the stores' payment transactions. Since the toy retailer didn't operate the switch, it had to pay additional transaction fees to Big Lots. Consequently, K B Toys wanted to install its own transaction switch. The company recognized, however, that the benefits of an in-house switch increased significantly if K B Toys replaced many of its dial-up connections with frame relay. The frame connection would create a dedicated WAN (wide area network) resulting in faster transaction times, real-time data polling, and flexibility to add new applications such as electronic gift cards.

Frame Relay - Dedicated To Fast Transactions
When Keith Porter, director of store systems at K B Toys, had to convince his company to install new transaction technology, he had to look beyond immediate solutions. Porter could see that the retailer needed to replace its dial-up connections with frame relay for long-term success, but it wasn't an easy sell. Many retailers hesitate to switch to frame relay WANs because it could cost some almost twice that of existing dial-up connections. The expense might cause initial sticker shock, but a continuous frame connection provides WAN functionality that offsets the cost.

In K B Toys' case, each time a store needed to access credit authorization information from a bank, it had to dial Big Lots' transaction switch to send and receive the authorization and then return it to the store. This dial process took up to 20 seconds for each transaction. A dedicated connection, such as frame relay, is always on and allows the retailer to conduct data transmission at a much faster speed. Once frame was installed, K B Toys decreased its credit transaction time to less than 5 seconds. A faster-moving checkout was a frame relay perk, especially for a toy store at Christmastime, but that alone wasn't enough to justify the cost of frame. So, K B Toys looked closer at what a dedicated WAN connection could provide the company as a whole.

The Trick Is To Trickle Poll
In 2000, K B Toys installed RTS (Retail Transaction Switch) from AJB Software (Toronto) at its headquarters in Pittsfield, MA. Composed of two midrange Compaq servers, both running a Windows NT operating system, RTS uses software from AJB to manage all store transactions. "The two boxes split the transaction load by store, but also back up each other. There is enough capacity in each server to handle the whole chain," Porter said. In each store, an AJB software module called WANSUPP (wide area network support) sits on the in-store controller and integrates with the POS software. WANSUPP acts as a gateway from the POS to the transaction switch and back again. "Once we installed RTS, we could get rid of our in-house polling software," Porter said.

Before frame, credit card processing was the daytime function of K B Toys' retail WAN, and at night, the dial-up line was the company's link to store sales. "Because only one dial-up phone line connected a store to the transaction switch, that line was reserved for credit/check/gift card authorization transactions during the day. If we tried to poll the stores [collect and download store data] when they were open, we risked interrupting possible payment transactions," Porter said. "At night, we used separate polling software at our headquarters to dial into each store to upload data. We also downloaded information such as price changes or e-mail at night." But this wasn't the most timely or efficient way to track store sales or send information to its managers. With an always-on connection to its stores, K B Toys can access sales information in real time - a process known as trickle polling. In the past, if K B Toys wanted to know how many Tickle Me Elmo dolls were sold in a particular store, it had to wait until the end of the day to gather sales data. With real-time access to stores, replenishment needs are known immediately, which allows buyers to react quickly to consumer demand.

Flexible Network Makes For Flexible Future
With the in-house transaction switch and frame relay in place, K B Toys continues to build more functionality into its WAN. The toy retailer will be ready to completely abandon Big Lots and process 100% of its authorization transactions solely through RTS in June 2002. Complete independence requires the retailer to establish direct frame relay connections to each credit authorization service. "It was a process we started last year, but couldn't complete before the 2001 holiday season. Each credit processor relationship is a mini project with individual requirements. We couldn't sever our ties with Big Lots until those connections were complete," Porter said.

One project that RTS made possible was working with Stored Value Systems (SVS) (Louisville, KY), a subsidiary of Comdata and K B Toys' gift card database vendor. The toy retailer wanted to install a gift card program in time for the 2000 holiday season, but K B Toys' legacy POS software made adding new gift card functionality difficult. K B Toys avoided having to make extensive programming changes to its POS software by installing the AJB gift card module at the store level. The module recognizes the transaction request as a gift card, directs it to RTS, and then to SVS. There the card is activated or the amount is verified based on the card database. Since AJB had the gift card module already programmed, the retailer was able to activate the program within months. "We could remove all authorization logic from the store platform and have it separate in the AJB module," Porter said. The module that is in place will remain even when K B Toys replaces its legacy POS software with a 360Commerce solution later this year.

With frame relay and transaction switch technology, K B Toys has taken control of its own destiny and, in turn, its network. In the future, all of the company's payment and authorization transactions (including its Web sites) will use RTS. Frame relay will open more opportunities for K B Toys such as streaming Web content and sharing store inventory and sales information among its stores and Web sites. And, once the stores are ready to install debit transaction pin pads, an AJB module will easily direct those transactions to RTS, as well. "Frame relay along with a central switch were two important pieces of the puzzle. Speed and bandwidth help any enterprise, but having the central switch to manage all the traffic is also important," Porter said. Together the two network pieces formed an internal infrastructure that enabled the retailer to control data movement and accomplish both immediate and future technology goals.