Magazine Article | April 1, 2002

Global Growing Pains

Source: Innovative Retail Technologies

With diverse brand name stores in 45 countries, LVMH Fashion Group got a handle on its POS (point of sale) and inventory management by standardizing software behind the scenes.

Integrated Solutions For Retailers, April 2002

If your retail company plans to remain in one country, cater to one native culture, hire only English-speaking employees, and accept only U.S. dollars, then you can stop reading this article right now. And, you may as well forget about ever joining the ranks of retailers like Wal-Mart, Ahold, Eddie Bauer, and Staples.

Still reading? Okay.

Since you haven't turned the page yet, you are obviously the type of executive who can see that retail isn't focused on ethnocentric product assortments or confined to the borders of a native country or region. Regardless of whether your retail objective is as grand as building stores in Hong Kong or just expanding to a neighboring country, it is important to maintain universal POS (point of sale) and inventory management systems that can manage different brand assortments, currencies, and languages.

Double Duty: Diverse Countries And Brands
When luxury retailer LVMH Moët Hennessy Louis Vuitton (Paris) began to create an IT architecture for the 720 retail stores in its Fashion Group, its approach had to extend across 45 countries. "Don't consider international expansion as just another IT project. Technology is not complex. People are complex," said Thierry Chrin, retail project manager at LVMH Fashion Group (FG). "When you have people belonging to different brands, businesses, and countries, it is not easy to have them agree on common processes." But it was common processes that LVMH needed the most.

Known for brand names such as Louis Vuitton, Fendi, Donna Karan, Kenzo, and Celine, LVMH has made a business out of buying luxury brands and the stores that sell them. This business tactic has made it a leading retailer in the growing luxury market. Appealing to diverse cultures, however, has left LVMH with equally diverse technology systems and retail processes. The luxury retailer is divided into five retail groups, with the Fashion Group contributing 28% of LVMH's $10.9 billion in sales (2000). In an effort to control the costs of international operations, the retailer wanted each brand that falls under the LVMH FG umbrella to adopt universal back end business practices. On the other hand, it was very important for each brand to maintain its identity on the front end. LVMH chose to begin its system upgrades in its largest and most lucrative group. Thirteen brands are included in LVMH FG, but since they don't all sell the same merchandise, they all don't run the same kind of business. For example, Louis Vuitton specializes in leather accessories such as men's and women's handbags and has some product lines that have been around since the early 1900s. But Kenzo, a ready-to-wear fashion retailer, has only one season to sell its merchandise, because no one wants to buy last year's high-fashion skirt. So, as the company looked to replace its POS and inventory management systems, LVMH FG needed to be mindful of each brand's individual business needs on the front end, while still maintaining consistent back office processes.

A Single Solution With Front End Flexibility
After a six-month selection process, LVMH FG chose to work with Raymark (Montreal). The vendor's POS and inventory management software called Xpert-Series offered LVMH FG an enterprise-wide retail solution that was built with international retailers in mind. Xpert-Series is a client/server-based retail management system operating on a Windows platform and using Microsoft's SQL database management system. Since the software is based on object-oriented programming elements, LVMH FG can activate and deactivate certain functions depending on the business. "All stores will run the same software, but it will be customized differently for each brand," Chrin said. "For example, the discount policy is not the same from brand to brand. At Louis Vuitton, the word discount doesn't exist. For any other brand, there can be different discounts according to the situation."

Although the stores will look different to its luxury customers, many of the back office processes, such as reordering merchandise, will be done in the same way. "Managing inventory should not differ even though each store is dealing with its own brand. This was a huge change for some people within the stores, but when LVMH FG looks at its overall inventory stock, it will know that everything was computed the same way," Chrin said.

Conquer Divisions One Level At A Time
In addition to managing the needs of its diverse brands, the luxury retailer needed a system that could unite the differences of 45 countries. Raymark's software allows LVMH FG to define a group of stores by region, taking into account both currency and taxation issues.

Sales and customer data is collected and stored at multiple levels (store, country, and zone) before it is all consolidated at LVMH's Paris headquarters. For example, all American sales information (according to brand) is consolidated in New York (a country-level database). At the same time, the information from Canada is consolidated at the Canadian headquarters. Then the Canadian and American sales figures are replicated into the North American database and converted into U.S. dollars (the zone level). All of the North American zone information is then replicated to the main LVMH headquarters located in Paris. As confusing as it may seem, there is a method to this database madness. "It is important to have each database working in only one currency. When we consolidate the country level databases, we need to convert everything to the same currency; otherwise we are trying to compare apples to oranges," Chrin said. At each zone level, the figures are converted into either Euros or U.S. dollars based on fixed exchange rates so that the company can have a global view of its stores.

With so many divisions, LVMH FG has tried to centralize its systems wherever possible; one such area is tax refund. "Tax refund regulations are different from country to country. For example, if a U.S. citizen spends more than 200 Euros while shopping in France, they are entitled to a 15% tax refund upon leaving the country," Chrin said. "Since tax policies vary by country, refunding is a complex issue, and most retailers are managing it manually." LVMH FG chose to automate the process by working with Global Refund, a worldwide tax refund processor. LVMH FG integrated tax software from Global Refund with its Raymark software, which automatically prints a tax refund form for the customer if they desire to claim their purchases at customs before they leave the country. "Because the regulations are different in each country, we would have to write multiple programs to interface with each country's system," Chrin said. "Global Refund provides the same software across countries. This way we have only one interface and Global Refund customizes the software for each country."

LVMH FG found Global Refund to help with the diverse tax refund rules, but dealing with credit card payment processing isn't as easy. Due to the diverse methods of electronic payment throughout the world, LVMH FG cannot consolidate its payment processing. "In Europe, credit cards have smart card chips, Americans use magstripes, and in Hong Kong we have to get the credit card machines from the local bank," Chrin said. "The goal will be to find some regional solutions for as many countries as we can."

Break The Language Barrier
LVMH FG also divides its databases according to language, which is important when collecting and using customer information for CRM (customer relationship management) initiatives. Raymark's software allows LVMH FG to store data in any different character set. LVMH FG chose to use the Western alphabet, Chinese simplified, Chinese traditional, Japanese, and Korean as its current language sets. Each character set also accounts for differences in addresses and postal codes for each country. Each country's software is programmed so that everything, from the POS screens to the clothing description on a customer receipt, is in the native language of the employees and the customers. Each country level database maintains customer information in that country's native language, so that each brand can use Cognos data warehousing tools to send promotional mail to its local customers. Chrin said there is no need to translate that customer information into one language at the Paris headquarters like it does sales transactions because the company communicates directly to customers only on the country level.

Within the next two years, LVMH FG will have all 750 stores in its fashion and leather group running Xpert-Series on IBM SurePOS hardware. Once the universal infrastructure is in place among countries, it will become easier for the luxury retailer to add new brands to its groups. Not all international retailers have to balance diverse brand identities like LVMH FG, but their struggles of global retailing are much the same. Today's technology solutions have made a global marketplace a reality.