IT Makes Cents

Prepared & presented by:ANKUR JAIN (PGDM 12127)

DHRUBAJYOTI SAHU (PGDM 12136)RHEETAM MITRA (PGDM 12156)

ROHIN GEORGE THOMAS (PGDM 12157)SHIRON PONNAPPA (PGDM 12167)

VINAY A. HAMASAGAR (PGDM 12177)

Case facts• 99 Cents Only Stores” is America’s

oldest chain of one-price stores• It has 220 stores across America• 99 Cents Only Stores, founded

by David Gold, is family owned• Competitors – Wal-mart, Kroger• Targets high income people • Spending on IT/IS relatively small• The company uses high jump software,

design system for its warehouse andsupply chain management

Case facts (contd.)

One peculiar characteristic of 99 Cents Only stores is that it is able to replenish 60 percent of its inventory IS has helped company to keep

an eye on its stocks – it is able to avoid under and over stock

The company avoids implementing cutting edge technologies

Background of the company• The first 99 Cents Only Store opened in 1982 and as of September

3o, 2012 the company operates 302 retail stores including 221 in California, 37 in Texas, 29 in Arizona and 19 in Nevada

• The company also operates ”Bargain Wholesale” which sells wholesale to retailers across the United States and exports to over 15 countries

• The stores carry mostly branded general merchandise, including food and beverages,health and beauty aids, cleaning supplies,house wares, hardware, stationery etc.

Dollar Store Industry• Also called variety store or price-point retailer• It is a retail store that sells inexpensive items, often with a single

price for all items in the store• Typical merchandise includes

cleaning supplies, toys,household goods andgardening equipment

• The $52 billion dollar-storeindustry has been rapidlyexpanding majorly becauseof the increased spendingby the middle class

Dollar Store Industry (contd.)

• The industry is concentrated, as these three companies account for nearly 60 per cent of the retail establishments

• The profitability of companies depends on their ability to effectively locate stores, to maintain value in the eyes of the consumer

• Barriers to entry are low• Start up costs are estimated to be about $230,000 per retail outlet*• Average annual revenue per worker is slightly less than $150,000^• The industry is highly competitive, as companies must compete

within the industry• Small companies can compete effectively by filling a niche market or

locating in a previously untapped market

*^http://www.firstresearch.com/Industry-Research/

Key facts• 99 Cents Only Stores raised its top price for the first time in 26 years

to 99.99 cents due to "dramatically rising costs and inflation"• Dollar Tree, Deal$, Fred's, Dollar General, Family Dollar, Five

Below, Galloway Dollar, Real Deals, and Honks are the competitors of 99 Cents Only Store

• Revenue - $1.30 billion (‘09)Operating Income - $12.91 million (‘09)Net income - $8.48 million (‘09)Employees - 11,500 (‘09)

IT/IS-Concept and Strategy• Selected Warehouse Advantage from HighJump Software• Customized its functionality for warehouse, yard and event

management, as well as supply chain visibility• Utilizes the High Jump Warehouse Advantage(WMS) for complete

control of activities occurring from the time products enter the warehouse until the minute they leave

• For both inbound and outbound operations -The High Jump Yard Advantage yard management

solution to keep track of trucks and the inventory they contain

IT/IS-Concept and Strategy• WMS is tightly integrated with a Voxware voice picking system(on

the server) to deliver directed, optimized work instructions to material handlers

• Uses the HighJump application which streamlines activity flow on the warehouse floor and results in more efficient truck loading

• The company’s retail locations utilizesWeb-based system to access informationabout the status of incoming shipmentsvisibility tool that gives a high-levelview of facility and workers’ performance

IT/IS-Concept and Strategy• Leverage event management functionality receives notifications of

exceptions/aberrations occurring throughout the supply chain• Proactively resolve issues such as late shipments that can impact

retail stores adversely• Computer systems at the

distribution centres and point of sale registermovements and purchasesat every store

QuestionsQ1. Is 99 Cents Only on the leading edge of IT? Is it on the bleeding edge?

• It is still on the leading edge of IT. The company is too small and traditional to sustain "bleeding edge IT"

• Company integrates proven technologies into it operations. They prioritize IT projects by ROI gain

• Implements only if it is efficient

Questions (contd.)

Q2. What characteristics of the dollar store industry make it so important to increase efficiency?

• They sell limited inventory on fixed price for one time buy -out. • IT as a strategic tool to increase efficiency. Warehouse Management

software(WMS) in all distribution centres.• Maintenance of real time inventory levels and order volumes of

various products. • Picking and shipping of items right first time(Logistics). • Merchandise distribution system between warehouse centres and

stores.• Avoiding overstocks or under stocks.

Questions (contd.)

Q3. The company has performed better than its competitors. In terms of the eight initiatives discussed in this chapter, which initiative or initiatives has gained it the competitive advantage?

• Reduce costs• Differentiate and enhance products or services• Different target neighborhoods

Questions (contd.)

Q4. 99 cents must modify its information systems frequently. Why?

• 99 Cents Only does better than its competitors in every measure important in the retail industry

• IT is an ever changing field as new technologies occupy market every other day. This usually leads to cost-effectiveness and increased efficiency for any competitor who opts for the latest IS available in the market

• Therefore, to retain its loyal customers and to keep being better than its competitors, 99 cents Only should modify IS frequently

Questions (contd.)

Q5. Often, CIOs are frustrated with the time it takes senior management to support their strategic initiatives and with the difficulty of earmarking funds of such initiatives. How is 99 Cents Only different in this respect?

• The Gold family owns about 35% of the company• David Gold is the Chairman of the Board and his two sons and son-

in-law run the company• Company is family-run and therefore decisions are made quickly• Formal meetings are least required. Therefore, the time between

requests and implementations is very short

References• http://www.99only.com/• http://en.wikipedia.org/wiki/99_Cents_Only_Stores• http://www.utsandiego.com/news/2012/feb/27/dollar-stores-making-sense/• http://

www.forexpros.com/analysis/thriving-dollar-store-industry-points-to-an-altogether-different-economic-reality-119001

• http://www.ibisworld.com/industry/default.aspx?indid=1093• http://www.getyourguide.com/• http://www.cpaglobal.com/newlegalreview/5252/us_ip_the_fivetrillion_dollar• http://

articles.latimes.com/2011/oct/12/business/la-fi-99-cents-only-stores-buyout-offer-20111012• http://www.foodprocessing.com/articles/2004/138.html• http://www.fdreports.com/• http://

articles.marketwatch.com/2011-01-05/industries/30781468_1_consumable-merchandise-higher-sales-industry

• http://www.studymode.com/essays/99-Cent-Store-Case-Study-61360.html• http://www.mightystudents.com/essay/Managament.Information.Systems.94908• http://www.writework.com/essay/99-cent-only-business-strategy-v-competition