Borders Group Merchandising

1
Borders Group Merchandising Distribution

• Phil Ollila
• Vice President
• Merchandising

2
Key Points

• Organizational structure
• Career opportunities
• Merchandising Mission/Strategies
• Inventory Management
• Distribution Logistics
• Consumer Measures
• Subject/Category Analysis
• Marketing Sales Strategies
• Plan Execution
• Questions

3
(No Transcript)
4
Career Paths
Vendor Liaison
Marketing Coordinator
Buyer
Divisional Merchandise Manager
Marketing Specialist
Director
Assistant Buyer
Vice President
5
Merchandising Mission

• To provide Books, Music, Video and supporting
  items to the Borders Books and Music and
  Waldenbooks chains.
• Merchants will source and distribute the
  right product to the right place, at the right
  time, and in the right quantity, to satisfy the
  customer at the lowest possible cost.

6
Merchandising Strategies

• Optimize inventory for sales, margin, profit and
  customer satisfaction.
• Dynamically source product based on sophisticated
  business rules that consider conditions including
  cost, delivery time, and lost sales.
• Leverage inventory from all channels with a ship
  from anywhere to anywhere philosophy that
  minimizes levels of poorly invested inventory.

7
Merchandising Strategies

• Pursue deal buying and special offers where the
  cost / benefit is favorable.
• Buyers and the expert system will customize the
  selection for each store.
• The expert forecasting system will optimize
  inventory levels on new products.
• Merchants will source new product lines for
  enhanced overall sales profit.

8
Merchandising Strategies

• Develop and implement case packs that provide
  operational efficiency (i.e. display ready
  pallets).

9
Title Inventory Average
Borders
131,668 Average Book Titles per store
Waldenbooks
22,500 Average Book Titles per store
10
Title Inventory Average
Borders
33,628 Average Music Titles per store
11
Title Inventory Average
5,350 Average DVD VHS Titles per Borders store
12
Inventory
at retail in (000)
Total
Books
Multi
Other
Turn
1,446,000
958,000
387,000
101,000
1.55
Borders
558,000
443,000
Walden s
N/A
115,000
1.64
13
Average Book Titles Reviewed vs. Purchased
Reviewed
Purchased
Borders
Borders
225,715
153,082
Waldens
60,783
41,564
14
Average Multimedia Titles Reviewed vs. Purchased
Music
Reviewed
Purchased
Borders
66,134
42,927
DVD VHS
Reviewed
Purchased
17,134
13,031
Borders
15
Average GS and other Titles Reviewed vs.
Purchased
Reviewed
Purchased
Borders
Borders
8,707
2,596
Waldens
7,948
2,399
16
Distribution Logistics
17
Distribution / LogisticsMission

• To provide a global distribution network that
  maximizes customer service while minimizing
  supply chain cycle times and distribution related
  costs.

18
Distribution / LogisticsStrategy

• Maximize flexibility and response time by
  efficiently and effectively fulfilling any item
  to any location upon notification of demand.
• Maximize each facilities productivity in terms of
  cost per unit and output per period (the more the
  better).
• Strategically locate the minimum number of
  necessary distribution facilities to reduce
  inventory and capital investment and improve
  product flow cycle times.

19
Distribution / LogisticsStrategy

• Support real time visibility at the SKU level
  throughout the various stages of the supply chain
  to
• Customers
• Merchants
• Suppliers

20
Distribution Facilities
Existing Network
Our current Network is comprised of 10 facilities
and over 2 million sq. ft. of space.
Summarized below are the primary functions of
these facilities
Borders Flow-Thru
Serves as a cross-dock facility for Borders.
Also carries 5000-6000 titles of overstock. Uses
cell processing.
Walden Replenishment
Serves as replenishment centers for Waldenbooks.
25,000 SKUs are carried (7500 are common to both
chains). Uses a sortation system .
21
Distribution Facilities
Reverse Logistics
LaVergne handles book returns for both Walden and
Borders stores. Columbus handles multimedia
returns for Borders stores
Multi-Media
(705) Columbus handles distribution for all
Borders stores for music and video products
Remainders
(701) Ann Arbor handles distribution of remainder
product to all Borders stores and Outlet stores.
This center will close in early 2002 and the
function will be absorbed in Mira Loma (west
coast stores) and LaVergne (east coast stores)
22
Borders Domestic Distribution Network
23
Consumer Measures(Building The Plan)
24
Consumer Measures

• Consumer measures are used for both the
  distributor (retailer) and its suppliers to
  determine if the consumer related goals and
  strategies are being achieved by the plan.
• Examples are
• consumer satisfaction rating.
• percentage of target consumer/household.
• purchase occasions and dollar purchases (market
  share), average units per transaction.
• average revenue per transaction, store traffic,
  etc.
• - The Partnering Group

25
Sources of Consumer Data

• Borders Group Market Research
• Focus Groups
• Exit Interviews
• Publisher and Vendor Research
• Intercept Interviews (Microsoft Press)
• Shared Research and Expense

26
Sources (continued)

• Point of Sale Information
• Credit Card Transactions
• Preferred Reader Transactions
• POS Results
• Market Share Data
• Bookscan
• GAP Analysis
• Publisher Comparisons

27
Gap Analysis

• Borders Group will aggressively use Gap or
  opportunity analysis to review market share
  opportunities by brand, subject and title.
• Borders/Waldenbooks sales comparisons
• Buyers compare sales of individual titles at
  Borders and Waldenbooks, weekly, monthly and
  seasonally for opportunity.
• Frontlist Evaluation
• Evaluate first day, week, month sales on New
  Release with publishers to make sure Borders
  Group is maximizing share.
• Publisher Backlist Reviews
• Identify Titles where Borders Group leads or
  chases the market.

28
Bookscan Data

• Bookscan Definition of Market
• Represents 65 of the market, excluding food and
  drug channels, book clubs, and used book stores.
• Data estimates the grossed up total market
  sales each week.

29
Bookscan Data (continued)

• Market share by title and segment by DMA
• Opportunity to track either internal or external
  marketing effort.
• Waldenbooks and Borders share data by category.
• Will help determine focus categories and share
  opportunities.
• Data Ranges from Individual Title performance to
  segment/subject/category to total market.

30
(No Transcript)
31
(No Transcript)
32
(No Transcript)
33
(No Transcript)
34
Subject / Share Analysis
35
Subject / Share Analysis
36
Growth Categories

• Cooking Borders Waldenbooks
• Bookscan Market Share 10.5 Share v. 9.4 for
  Co. 5.1 Share v. 5.8 for Co.
• Season to LY 69.3 v 65.7 85.4 v 57.4
• (Beating LY by 5.1) (Beating
  LY by 32)
• to Plan 60 v. 57.1 (Plan) 62.5 v 59.2
  (Pl.)
• (Exceed plan by 5) (Exceed pl. by 5.2)
• Relative Profit Potential 1.03 (Cooking) v 1.11
  (company average)

37
Growth Categories (continued)
Observations - Borders relative share is greater
than total market share Waldenbooks lags
slightly. - Borders and Waldenbooks are beating
plan and last year. This category is on the
rise. - Profit v. total profit is lower than
company. Actions - Capitalize on Borders
dominance - Use Gap analysis to ensure title
base is sound for Waldenbooks - Review all
vendors for profit contribution.
38
Internal External Brand Comparisons

• Today Borders Group works with brands (travel,
  test prep, reference, computer books, Maps,
  etc..) to drive profit by asking brands to
  compete within their category on price and
  marketing allowance.
• Key factors for Brand Support by Borders Group
  are
• Margin or Price Comparisons
• Space Allowance and Co-Operative Advertising
  Participation
• Market share
• In addition to Price and Space Allowance new
  factors like sales per foot, market potential,
  and total brand profitability will be more
  aggressively reviewed.

39
Marketing to Drive Sales

• New
• Bestsellers
• Key Themes (Holiday)
• Key Categories
• Value
• Themes
• Media Event

40
(No Transcript)
41
(No Transcript)
42
(No Transcript)
43
(No Transcript)
44
(No Transcript)
45
(No Transcript)
46
(No Transcript)
47
(No Transcript)
48
(No Transcript)
49
(No Transcript)
50
(No Transcript)
51
(No Transcript)
52
(No Transcript)
53
(No Transcript)
54
(No Transcript)
55
(No Transcript)
56
(No Transcript)
57
(No Transcript)
58
Marketing to Drive Footsteps

• Brand Awareness
• Bounceback/Coupon
• Grand Opening
• Advertising Placement
• Internal Marketing (Inside Borders)

59
(No Transcript)
60
Key Focus Categories for Summer/Fall 2001 at
Borders Group

• Growth
• Cooking
• Romance Maintenance
• US History Art/Architecture
• Religion Science Fiction
• Audio Challenges
• Self Help Computer Books
• Business/Finance

61
Executing The Plan
62
Trend Analysis
GMROI
Product Identification
Turnover
Net Sales
Gross Sales
Discounts
Contribution
63
Merchant Role Responsiblity

• Daily Review of Sku level performance
• Weekly Review of category performance trends
• Monthly Review of Market share
• Monthly Market(ing) forecast
• Bi-annual Financial Forecast

64
Category Scorecard

• Retailers Are Changing The Way They Keep Score

Emerging Scorecard Measures
Historical Scorecard Measures

• In-stock Stores
• GMROI
• Market Share
• Consumer Satisfaction

• Sales
• Gross Margin
• Inventory

65

• The best merchants observe the market,
  anticipate demand trends, and develop strong
  internal external relationships.
• Merchants must have strong financial skills, a
  category vision, and a thick skin.

66
Key Points

• Organizational Structure
• Career Opportunities
• Merchandising Mission/Strategies
• Inventory Management
• Distribution Logistics
• Consumer Measures
• Subject/Category Analysis
• Marketing Sales Strategies
• Plan Execution
• Questions