By Matt Pillar, chief editor
A look at how the 60-store specialty retail chain took control of its diverse merchandise mix and overcame the ups and downs of seasonality.
When Bob Anderson opened a newspaper shop in Maynard, MA, back in 1964, odds were slim he envisioned what the shop, appropriately called The Paper Store, would look like today. Fifty-three years and 59 stores later, The Paper Store has evolved into a unique specialty chain with a diverse assortment that includes gifts, greeting cards and custom stationary, fashion and fashion accessories, bath and body care, baby apparel, home décor, toys and games, gourmet foods, books, and more. It’s still run by the Anderson family.
Growth Creates Supply Chain Challenges
While The Paper Store’s incredibly diverse assortment is a key ingredient of its success, managing the procurement and allocation of such a diverse SKU base across 60 stores — while simultaneously nurturing a growing e-commerce site and planning for the expansion of its store count — became cumbersome for its legacy systems. The company was manually reviewing almost every SKU/ store combination for DC replenishment and purchasing order quantities. To maintain its in-store customer service goals and expand fulfillment options for its growing base of e-commerce fans, the retailer needed to reengineer its processes and adopt some new technology. A cross-disciplinary executive-level team comprised of CEO Tom Anderson, VP of Operations Craig Hewitt, VP of Planning Linda Thatcher, and VP of IT Brian McGinty set out to do just that.
The Paper Store adopted Aptos as its ERP system, followed by the integration of a predictive analytics platform from Retalon. That omni-channel predictive retail analytics platform introduced a high degree of automation to the retailer’s forecasting, purchasing, replenishment, inventory transfer, promotion optimization, and planning operations. That automation has created a newfound ability for the merchant to account for the hundreds of complex factors that affect its unique product mix, including seasonality, price elasticity, cannibalization between products, assortment diversity vs. depth, and geodemographic diversity. User intervention is required only when exceptions are flagged by the system.
Predictive Analytics At Scale
The Paper Store’s new retail analytics system features proprietary compression and in-memory technology, giving the merchant the ability to calculate several billion store and SKU combinations in a matter of hours on an off-the-shelf PC. The system is also self-learning, enabling The Paper Store to automate the adjustment of product procurement and allocation. That’s important in a highly seasonal business. Traditionally, seasonality equates to high peaks and low valleys in retail — in terms of both sales and stock levels. Moving holidays such as Easter only exacerbate the challenge. With its predictive analytics platform, The Paper Store is now able to account for seasonal peaks, moving holidays, promotions, and even weather changes. This allows the retailer to maintain a high in-stock percentage on hot items during seasonal peaks while avoiding overstocks and carrying costs.
With the passing of each seasonal promotion or special event, sales and throughput performance tracked by the platform’s algorithms allow the automated adjustments necessary to properly buy and allocate merchandise at optimized levels for future events. The platform also provides users at The Paper Store with decision support tools that empower managers to uncover hidden opportunities via granular and graphical analytics dashboards.
The Paper Store is now able to calculate and forecast demand, purchasing, and replenishment requirements for the business as a whole at the store, distribution center, and e-commerce levels. As such, promotions are automatically accounted for when calculating optimal purchasing and replenishment quantities across the business.
Reaping The Rewards Of Supply Chain Automation
Within just two years of launching its predictive analytics platform, The Paper Store was able to increase its store count by 20 while realizing 30 percent growth. Much of that success is attributed to efficiency. Reports that previously required several days to be compiled by multiple users are now created in just minutes, freeing up time for managers to focus on growing the business and building a stronger assortment as store and e-commerce expansion continues.
The company has minimized its inventory costs by reducing its weeks of supply from 40 weeks to 12, thanks to a more proactive and accurate demand forecast. Even with fewer weeks of supply on hand, The Paper Store was able to decrease out-of-stocks on key performing items during its events and seasonal promotions by allocating those items to the right channels and locations at the right time.
Throughout its expansion, The Paper Store has maintained a commitment to the “something for everyone” merchandising model that it’s been striving for since it began expanding beyond newspapers and periodicals in the 1960s. With the addition of innovative supply chain planning processes and technologies, the company is in a good position to continue that commitment as it expands throughout the New England region.