ShopKo Selects Spotlight Markdown Optimizer

Leading U.S. specialty discount retailer ShopKo Stores Inc will use Spotlight Solutions Inc's Markdown Optimizer, a software product designed to help increase margins and clear merchandise more effectively.

ShopKo, based in Green Bay, WI, operates 327 retail stores in the U.S. and had revenues of $3.9 billion in 1999.

The Spotlight Markdown Optimizer is a software application that applies mathematical algorithms to sales, inventory and other operating data to help retailers better optimize, manage and automate markdown decisions. The Markdown Optimizer determines the timing, depth, and location of markdowns enabling dramatic increases in gross margins.

ShopKo, widely recognized for its innovative use of information technology, will use the Spotlight Rapid Results program to quickly implement the Markdown Optimizer. The initial pilot will generate markdowns in selected apparel, hardline, and home categories during the 2nd half of 2000. Upon successful completion of this initial phase, the retailer plans to further deploy the application across virtually every category in 2001.

"At ShopKo, we are determined to keep our operating model fresh and current with the fast pace and ever-changing demands of our customers," said ShopKo president and CEO William J. Podany, who in February was named "Retail Executive of the Year" by Discount Merchandiser magazine. "Adopting innovative new technology like Spotlight's Markdown Optimizer is a key element of our strategy."

Spotlight's Rapid Results program for markdown optimization reduces implementation time and costs, and accelerates financial and merchandising benefits by deploying best practices via an application service provider (ASP) delivery model. All infrastructure, platforms, application software and services are pre-configured and tuned to reduce the time-to-benefit.

"We have worked hard to create a culture that focuses on driving results for the business rather than technology for its own sake," said Paul Burrows, ShopKo's senior vice president and chief information officer, who was named a "Top Ten CIO" by the editors of RETAILTECH magazine in May, 2000. "We are excited about the Spotlight Markdown Optimizer because we believe it will provide tremendous value to ShopKo. Spotlight's ASP delivery model will also enable us to achieve anticipated benefits very quickly."

Spotlight Founders Look to Simplify Complex Business Processes

Jim Kelly Jr., president and CEO of Spotlight Solutions, formed the company in 1999 along with several other industry veterans to provide a new breed of business optimization software to analyze, optimize, automate and manage knowledge-intensive retail business processes automatically for the business user, providing dramatic financial returns.

"Retail merchants that we work with tell us they are constantly challenged to manage vast assortments to the SKU level while responding to rapidly changing trends in consumer demand," said Kelly. "They want the software to be smart enough and powerful enough to help them solve these problems, and recommend actions, not just generate reports."

Kelly added that the need to better manage the markdown process has never been more important to a retailer's profitability. He stated that markdowns as a percent of total retail sales have grown from 8 percent in 1971 to more than 33 percent in some segments today.

ShopKo's senior vice president and general merchandise manager Skip Chustz agrees. "While markdowns are a necessary part of the business, we are constantly striving to price merchandise to reflect consumer demand, and maximize gross margins at the same time," Chustz said. "We need to equip our buyers with new and more powerful tools like Spotlight's Markdown Optimizer to better serve our customers, and deliver profits for the business and shareholders."

Industry Analysts Support Innovative Approach to Improving the Bottom Line

According to an article by John Hutchins published in the AMR Research Alert on Retail Applications, May 5, 2000: "Two of the most effective ways to immediately drive financial performance is through pricing optimization and markdown control. Applying mathematical algorithms to key data points like sales, inventory, and other operational data, the Spotlight Markdown Optimizer helps squeeze more profit out of markdowns."

Henry Morris, Ph.D., research vice president of data warehousing and applications, IDC, an information technology market research and analysis firm, said analytic software applications are moving beyond performance measurement and reporting to predictive modeling that optimizes a specific business activity. "It really makes sense to select a specific operational action point such as a price change that the business can act on and develop analytics targeted to optimize that action point," Morris said.

About ShopKo

ShopKo Stores Inc, a Fortune 500 company headquartered in Green Bay, Wis., operates 327 retail stores in 22 states, primarily in the Midwest, Western Mountain and Pacific Northwest regions. Retail operations include 162 specialty discount stores operating under the ShopKo name in mid-sized and larger cities, and 165 Pamida discount stores in smaller, rural communities. For more information about ShopKo or Pamida, visit the company's Web site at www.shopko.com.

About Spotlight

Spotlight helps retail and e-commerce companies and their suppliers more effectively price, promote, markdown, source, and allocate merchandise. Spotlight's software applications apply mathematical algorithms to sales, inventory, and other operating data to recommend specific courses of action. Spotlight's new approach optimizes, automates, and manages complex decision processes enabling merchants to dramatically increase gross margins by squeezing more revenue out of existing merchandise. For more information on Spotlight Solutions, visit www.spotlightsolutions.com or call 513-985- 9525.

Contact Spotlight Solutions, Steve Shaw, 513-985-9525, sshaw@spotlightsolutions.com or HSR Business-to-Business, Mike Fening, 513-346- 3580 mfening@hsrb2b.com, www.hsrb2b.com.