The Luxury of Logistics Excellence

Impressing new buyers and forging relationships with some of the world’s largest department stores and retailers was a priority for luxury leather accessories company Royce Leather. But proving to retailers it could successfully meet their high-volume demand was a challenge. So Royce turned to a software services company to gain access to a pool of 2,000 retailers, become a more attractive vendor, uncover new opportunities, and prove its fulfillment capabilities.

Royce Leather dates back to 1944, when Austrian immigrant and leather artisan Eugene Bauer started a tradition of luxury leather goods by making his first wallet. Three generations later, the Bauer family has established the Royce Leather brand as one of the fastest growing names in the luxury leather accessories market, no mean feat for a small, family-owned company.

Secaucus, N.J.-based Royce specializes in personal accessories, such as wallets, briefcases, and travel essentials for men and women. It also offers household and office furnishings, and gift items. The company’s products are available at many online retailers, mass retailers, and department stores. It sells internationally and its warehouses boast complete fulfillment capabilities. How Royce achieved this position is a success story and sets an example for any small vendor looking to establish itself as a big player in the retail market.

“Establishing relationships with retailers was challenging for us because we were a small fish in a big pond—an ocean really,” says Billy Bauer, Eugene’s descendent and owner of Royce. “We tried to impress buyers, but we needed a greater element of legitimacy to get and hold their attention.”

To help achieve this goal, Royce turned to Minneapolis-based SPS Commerce, a supply chain services company that provides Software-as-a-Service (SaaS) solutions for retailers and vendors that source and supply products through retail channels. SPS provides a multi-tenant platform that allows companies to connect once to its network, and it handles the connections so companies can interface with one another.

For small companies such as Royce, one principal challenge in adding new retail customers is integrating the flow of orders and information to and from retailers and any third-party partners involved in fulfilling them. By establishing a comprehensive connection that allows Royce to quickly add new customers as it grows its business, SPS eliminates that challenge.

The SPS solution provides both enterprise resource planning (ERP) level integration, where data flows from one ERP system into another, and a suite of Web-based products. This allows smaller businesses to receive orders via a browser-based cloud interface that enables transactions with trading partners in the form that best fits. In the case of Royce, SPS integrates with its operating processes.

“Our products and services can go toe-to-toe with the best competitors, but we needed to show retailers our fulfillment capabilities and ability to meet increasing volume as demand grows,” says Bauer. Before companies such as Macy’s, Best Buy, or Burlington Coat Factory take on a new vendor, they must have confidence that the vendor can meet their requirements and handle increased responsibility. “SPS helped us prove to these retailers that we could meet their demands successfully,” says Bauer.

The Other Side of the Equation

While the SPS platform was one side of Royce’s retail equation, its Retail Universe Sourcing Community was the other. Royce has been using the multi-tenant platform for approximately seven years and joined Retail Universe in 2012.

Retail Universe provides Royce with a connection to the world’s top retailers, suppliers, and third-party logistics (3PL) providers. Modeled after easy-to-use social networking sites, the community gives users a unified site to:

• Promote products and capabilities to potential retail customers.
• Highlight and promote their ability to ship direct to consumer, transact through EDI, and integrate with e-commerce platforms.
• Get merchandise in front of interested retail buyers.
• Publish attributes and digital assets to showcase e-commerce-ready product lines.
• Bolster their reputation within the community by highlighting existing trading partners.

The Retail Universe community facilitates Royce’s ability to collaborate with retailers by showcasing its products in an easily accessible and usable database. “The community acts as a virtual trade show,” says Bauer. “It provides value. As a company with limited capital, we can’t afford to attend every trade show and industry event we might benefit from. Retail Universe levels the playing field for small firms such as Royce.”

With more than 1,000 SKUs on the site, participation in the community has both boosted sales and established Royce as a recognizable trading partner in the retail sector. “The community enables us to be seen on major retailer’s sites such as Macys.com and Kohls.com, so we are perceived with a greater level of legitimacy and respect,” Bauer notes.

Being associated with and able to comply to e-commerce giants that uphold high levels of performance standards reflects a large degree of competency about Royce.

Expanding the Sales Arsenal

According to Bauer, Royce used to fight for sales with one resource—its products. But SPS has expanded the arsenal by enabling logistics excellence and adding credibility.

Retail Universe’s primary use is direct-to-consumer fulfillment. Many retailers are hungry to expand the number of products they offer on e-commerce sites using drop-ship capability. Retail Universe highlights their fulfillment capabilities as filters in the community. For example, a retailer can ask for a list of luxury briefcases available for drop-ship and the site provides that information at a click. With Retail Universe, Royce is now leveraging its logistics and fulfillment capabilities to garner new business.

Sometimes, when a business grows rapidly, it makes sense to outsource non-core competencies to a vendor that has the ability to scale at a rate beyond what it could if it kept operations in-house. Relying on SPS Commerce to host the connection to its ERP system—then leveraging Retail Universe’s connections to more than 2,000 retailers worldwide—allows Royce to be more agile and uncover new sales opportunities.

Participating in the network on the sourcing side also enables Royce to scale, because it’s able to quickly engage with many potential customers—without manual communication or trade show exhibitions. This creates more expansive market activity while keeping costs down.

“Participating in Retail Universe has made us more compelling to retail buyers looking for new suppliers,” says Bauer. “The heightened level of brand awareness comes from being in front of the people that matter the most, with the information they need to truly assess us. That has made a monumental difference.”

Expanding the DC Network

Royce’s key distribution center is a 10,000-square-foot facility in Secaucus, from which it ships worldwide. But growth in new markets has prompted the firm to establish facilities elsewhere.

With direct-to-consumer fulfillment, the service area is critical. For example, some retailers find it difficult to foster direct-to-consumer fulfillment from the United States to Canada because it is a complex operation. But Royce’s ability to indicate the range of countries it can fulfill within, and have those areas defined through the SPS software tools, allows it to highlight a competitive advantage.

Royce recently opened a new distribution center in Ontario, Canada, primarily to serve the volume of business it does with the Canadian operations of Best Buy, Staples, Sears, and Walmart. “Given this massive influx of business in Canada—and the dearth of leather goods in Canada—it made sense for us to open a facility there,” says Bauer.

The company is also exploring the idea of establishing European distribution centers. For example, U.K. retailers Harrah’s, Wayfair, and TJX represent a huge opportunity for Royce. “Many retailers mandate that their suppliers maintain facilities on the continent,” says Bauer. “So we’re starting small to demonstrate that we are serious about serving the market, that we have strong distribution capabilities, and that we’re expecting high growth.”

To SKU or Not to SKU

When Royce started up e-commerce operations in early 2000, the retail industry had reached a consensus that “the more SKUs, the better.” They thought that a larger number of SKUs correlated with greater sales, because the probability of purchase increased through more options for the customer.

Thus Royce’s SKUs grew to more than 1,000, but times have changed. “Now we’re looking to cut the number of SKUs—by half,” Bauer says. “Addition by subtraction” allows better focus on core competencies, greater economies of scale, and lower production costs.

“This is the movement now,” he adds. “We’re determining the competitive advantages of our products, then focusing on putting those products in front of retailers.” Royce is tailoring its products using insight from SPS and direct communication from buyers.

One big challenge in retail is the increased emphasis on synchronizing product information among trading partners. This has become increasingly important as e-commerce continues to grow significantly faster than traditional brick-and-mortar retail. For a product to be successful in e-commerce it needs to be accompanied by its digital assets: all the characteristics that can make it attractive to a buyer scanning an online product detail page. Further, the speed at which retailers are moving has dramatically increased: instead of adding 10 to 20 vendors every month as in the past, today they’re adding 100 to 200 vendors monthly. This requires all trading partners to move faster.

Companies need to have a solution in place that lets them quickly synchronize their information with new customers. As the market changes and these new demands emerge, solutions such as SPS Commerce have helped vendors expanding their retail footprint. This has been the case for Royce, Bauer says.

Fulfillment as the Future

“Fulfillment proficiency distinguishes suppliers from their competitors, and validates legitimacy among retailers,” says Bauer. By adopting the SPS Commerce platform, Royce now has a refined ability to determine what products are overstocked, and the rate at which items are selling. Inventory accuracy also has increased. For example, the company does a huge volume of business with Amazon (85 percent of its products are available through Amazon Prime). Keeping up with the velocity of that business requires the functionality provided by the SPS system.

The system also provides enterprise analytics, which are especially valuable given that Royce doesn’t have the marketing resources of its larger competitors. The analytics help ensure the right products are in the right places, and inventory is sufficient to meet fulfillment requirements. They also provide insight into product assortment trends.

“The system enables us to do so much logistically: shipping, inventory, and sales management,” Bauer says. “That’s what has made it an integral part of developing our business.”