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Value City moving to update '60s lo-tech

Value City is overhauling its antiquated data systems — some of which date back to the 1960s — in an effort to better gauge transaction patterns and merchandise flow.

"It's sad to say" that one of the reasons the parent company has not been able to make a quicker turnaround than it would like was because of its outdated systems, which hindered the retrieval of decision-making information, said John Rossler, president and ceo of parent company Retail Ventures, during the company's third quarter conference call last week.

"We did not really know clearly who our customer was and what they wanted to buy by category. We've come to learn the brand and our customers a lot better now," he explained.

Now, however, the division is halfway through substantially renovating its systems — its largest issue — which "will help our business in the long term," he said. For Value City, new POS and in-store systems will be brought in during the late fourth quarter to the first quarter of '04.

Warehouse and merchandising systems will be implemented in three phases in 2004, so as not to affect the selling seasons: early in the first quarter, then late after the spring selling season and finally, after the Christmas buy and ship next year.

The new systems will yield visibly substantive improvements in 2005, added Ed Kozlowski.

Executives also felt that the company will be back to its operating profit margin levels of 1999 within a year and a half to two years.

It has also renovated two locations, including its Covington, KY, unit, with another one just completed, though it's still too early to know how they are faring, executives said.

The company is determining whether the box size is appropriate, or if it should expand or shrink merchandise categories, since it has been difficult to get information about gross margin per square foot, due to the dated systems, Rossler added. He indicated that it would continue to use all of its space, or farm out excess space to leasing opportunities.

Merchandising is another evolving area for both Value City and Filene's Basement.

The Value City brand was previously "footballed around" with price points swinging from levels competing with Wal-Mart to Neiman Marcus. Now, however, it is more focused the brands and price points it should be carrying, Rossler said.

The merchandise at Filene's Basement had become too promotional but has shifted under the leadership of its new division president, Heywood Wilansky, who joined the retailer in February. Because the division is small, Wilansky was able to steep himself in the business and "get back to best brands for less," event-based marketing, said Rossler.

"You're starting to see best brands rather than brands or just better brands." Within the second half of 2004, the Basement "will be firing on a lot more cylinders than it is currently," Rossler said.

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