Magazine Article | March 1, 2005

One Network 5,089 Stores

Source: Innovative Retail Technologies

$4.7 billion RadioShack invested in a DSL (digital subscriber line) network to deploy training tools. Now, sales are up and connectivity costs are less than half that of frame relay.

Integrated Solutions For Retailers, March 2005

Our success or failure depends on the performance of our sales associates. With that incredibly simple yet inherently important thought, executives at RadioShack, the company with all the answers to its customers' consumer electronics questions, went looking for some answers of its own. The $4.7 billion specialty electronics retailer could see large disparity in the average sales ticket amount from one sales associate to the next. Research into the matter led to a revelation that made perfect sense. More seasoned, knowledgeable associates performed better and made more and higher sales than their less experienced colleagues. That might sound like an obvious case in a retail environment where sales require a high level of customer-associate interaction. But what wasn't so clear was the answer to the next logical question the company faced. How would it reach 30,000+ associates at nearly 5,100 corporate-owned stores with the tools to help them raise their selling standards?

Training In Retail: The Never-Ending Story
For retailers, associate training is a perpetual prospect, thanks to high rates of employee turnover. This fact is even more evident in specialty electronics retailing, where knowledgeable store-level associates are a sales necessity, not a luxury. Factor in the logistical challenge of training more than 30,000 associates at nearly 5,100 geographically dispersed stores, and suddenly manual, classroom-style training loses its appeal as a viable option. Besides, even your smartest associates can't possibly be expected to retain knowledge of a high-tech, ever-changing product line from a monthly, or even weekly classroom experience. RadioShack knew that, when pressed on the sales floor, its associates needed to be armed with product knowledge in nearly-instant, encyclopedic fashion. Ron Cook, VP and CTO at RadioShack, offers the retailer's robust wireless business as an example. RadioShack is a leading provider of both Sprint and Verizon wireless packages. The wireless service packages and hardware the retailer sells have this in common with RadioShack's employee base - they are many and constantly changing. "A real driver of the need for instant product information at the store level is the tremendous cellular business we do. We needed the ability to access package and product information in real time online. We also needed the ability to sign customers up online, rather than having to go through call centers to get customers subscribed," he says.

DSL Network Enables Application Deployment
Dial-up connectivity limited to a server in the back room of each store made access to product information and online subscription services for such things as cell service difficult. The dial-up network operated in typical batch transaction processing and polling fashion, but deploying centralized applications beyond POS reporting was a pipe dream. As the company adopted a more service-oriented product line and sales approach, it realized a need for centralized applications and high-bandwidth connectivity at the store level. RadioShack executives began dreaming of bigger pipes. "Initially, we chose a frame relay network," says Cook. "At that time, VPNs [virtual private networks] and DSL [digital subscriber line] were relatively new and unproven, and DSL didn't have the footprint it does today." With more than 5,000 stores, however, the cost of frame relay connectivity, which can easily soar past $250 per connection, caught up with RadioShack. The prospect of moving to VPN technology using the Internet and DSL, which would cut connectivity costs in half and give stores up to six times the bandwidth, looked appealing.

RadioShack contracted with broadband service aggregator MegaPath Networks, which today reaches close to 90% of its stores. Cook says 75% of stores fall within MegaPath's own DSL footprint. "In some of our stores where DSL is not available, MegaPath procured ISDN [integrated services digital network] lines, or we maintained our frame relay connections," says Cook. "The advantage of contracting with an aggregator is avoiding the cost and hassle of managing individual agreements with every local broadband carrier we use." For a nationwide enterprise the size of RadioShack, the total number of broadband carriers used could easily number in the hundreds.

IT Initiative Leads To Sales Improvements
While the motivation for many retail store network upgrades is customer service (i.e. to enable faster transactions at the POS), Cook stresses that RadioShack's prime objective was to empower its employees. Its tagline, "You've got questions. We've got answers.", is its credo to better serve customers through informed associates, and the distribution of information at the store level is central to this mission. With its new network as the conduit, RadioShack built an intranet portal called Answers Online, a data clearinghouse that provides associates with on-hand information to address virtually any customer request. The portal also features training tools and communicates corporate sales goals and metrics.

With information like product and warranty data and customer purchase history in a central location, the company virtually eliminated dependence on its call center as a clearinghouse of such information. Each store has many interfaces to Answers Online, including the retailer's Windows XP-embedded POS units, the back room server station, a sales floor kiosk, or any Web browser. These access points can also tap in to the more than 60 network-deployed applications the company has adopted since going live with MegaPath.

Answers Online also features tips, pointers, and product applications, as well as tools such as RadioShack's Battery Finder, a solution that helps associates identify and recommend proper batteries from the myriad the company offers. "This application lets associates instantly cross-reference batteries with their appropriate applications and find the right match for whatever oddball product a customer may have," explains Cook.

Early on in the Answers Online implementation, the retailer noticed that heavy users of the tool had better sales performance than nonusers. Of course, this improvement has become increasingly difficult to track as Answers Online becomes more prolific among its salesforce.

User Adoption Cuts Communication Cost
RadioShack took some creative steps to bolster Answers Online usage rates, steering associates toward the intranet and away from ancillary sources of information. For one, it discouraged long-distance phone calls, which weren't as necessary now that associates had a central online repository of information. Next, it removed some applications and data that had previously only been accessible from its POS system and made them available exclusively at Answers Online. This way, associates are provided a single version of this data, eliminating duplicate data entry on the back end and contradictory information from disparate sources in the stores.

According to Cook, Battery Finder, customer ticket lookup, warranty verification, the previous day's store performance results, and product availability are among the most-used features of its intranet. The top 10 network-deployed applications at RadioShack, he says, generate in the neighborhood of 5 million hits per month. But the real killer app for connectivity there is e-mail. The retailer uses Novell NetMail for e-mail at stores, which has become the primary mode of communication between district and regional managers and store associates. Cook says e-mail has dramatically reduced the expense of intra-company phone calls and faxes.

Welcome To The ROC
While RadioShack's network initiative sought first to empower employees, it's clearly found a means of cutting connectivity costs as well. Those cost savings reach beyond the store level and into the ROC (RadioShack Operations Center), the company's play on the NOC (network operations center) acronym. The ROC, located at the company's brand-new riverfront campus in Fort Worth, TX, is staffed by 18-20 of what Cook calls some of the best, brightest $12-$15 per hour employees at RadioShack. What's the catch? That's pretty good cash for a college kid. "We man the ROC primarily with college interns who are studying IT and love to work in this high-tech environment," he explains. "We get phenomenal work out of them. They monitor the network, detect outages, field calls, help store associates troubleshoot problems, and reset routers," says Cook.

With the buzz around managed network services and considering that RadioShack's network provider is a leader in the space, why doesn't the retailer outsource this function? "In a word, scalability," says Cook. "The problem with the cost of managed services goes back to our footprint. We have nearly 5,100 company stores, and the per-site service cost isn't scalable in most cases," he explains. Most managed network service providers won't offer discounts for high-volume accounts because it doesn't make business sense - it takes the same amount of work and service to support a store regardless of how many a retailer runs. That's why the mid and small markets are such hallowed ground for managed service providers - the typical number of stores in those markets, coupled with their inability to build and staff their own NOCs, make them prime candidates for managed services. In RadioShack's case, even if its high site volume scored it a price break, chances are good that no managed services provider could beat its current deal. Cook claims that RadioShack manages its network in-house for less than 1/3 the cost of outsourcing it. Of course, in the event of a physical line break or any other network problem that goes beyond the scope of the retailer's ROC, service calls are escalated to MegaPath's customer service department.

Build The Applications, Find The Bandwidth
Cook says the biggest challenge he faces now is the demand from stores for even more bandwidth - primarily for consumer purposes. "Now that our associates have access to network-deployed internal applications in the stores, there is much interest in exploiting it for consumer-centric purposes such as demonstrating the Internet services we offer, including Vonage's consumer-grade VOIP [voice over Internet Protocol] solution." One problem with sharing the corporate network with consumer-focused applications is potentially excessive bandwidth usage that could slow mission-critical applications. Security is another consideration - giving the public at large an interface to the corporate data tunnel might invite a breach of network security. "Another commercial DSL line in each store to handle these other applications would be ideal, but cost prohibitive. Perhaps adding less expensive consumer-grade DSL lines is the answer, but it will take a real killer consumer app for us to justify the cost," Cook says.

In the meantime, the retailer's commission-based sales associates are enjoying the powerful sales tool they've been given, and RadioShack executives are enjoying the results. "You can't spend an inordinate amount of money on connectivity infrastructure per store when you have this many small-revenue sites," says Cook. "We've found a good balance that's performing well for us."