Retail: Specialty Merchandising<br>Fast Payback From Small ProjectsRetail: Specialty Merchandising<br>Fast Payback From Small Projects

"Category killers" is what AMR Research's director of research Pete Abell calls them: specialty retailers that concentrate on dominating specific markets, from selling wallpaper and copper tubing to sneakers and baseball caps. These specialists use the Internet to connect and collaborate with customers and suppliers. They use it to educate potential customers, market new products, and build customer loyalty; to streamline business transactions with partners; and to provide new services to suppliers, especially smaller ones.

Specialty retailers also are following the current trend in software acquisition: small projects and quick return on investment.

During the last year, home-improvement chain Lowe's Cos. Inc. expanded the functionality of its LowestLink private business-to-business exchange to provide more information and services to its suppliers, especially smaller ones that can't afford more expensive EDI technology. "The Internet has facilitated a richer information exchange between Lowe's and its suppliers," says Steven Stone, Lowe's VP of IT strategy.

LowestLink lets smaller suppliers make Web-based inquiries and automated payments, reducing the number of calls to the company's accounts-payable clerks. Lowe's IPNet also lets suppliers use Web-based forms to enter invoice information, reducing the processing costs and time for payment to Lowe's, Stone says.

Shoe retailer Footstar Inc. uses the Web to fortify customer relations among its nearly 600 Footaction and Just For Feet shops, CIO Joseph Caracappa says. Footstar's Web sites have become "a major vehicle for building customer loyalty" toward the company's shoe chains, Caracappa says. More than 40,000 visitors use Footstar sites daily to review footwear and fashion trends, reserve future products, get special deals--and buy products.

AMR analyst Abell predicts that in the next 12 months, specialty retailers will continue a trend toward tackling smaller IT projects, such as price-and markdown-optimization software installations, that are comparatively less expensive and get a much quicker ROI than "big" IT projects of the past, such as enterprise resource planning.

Footstar CIO Caracappa agrees. "Projects such as price optimization and supply-chain forecasting give fast payback," he says, "and don't cost as much."