With ever-tighter margins and changing consumer preferences, retailers have to maximize their limited resources. Last year, former Best Buy exec Kevin Freeland launched a new company to help retailers do just that. Eden Prairie–based Optimal Advantage’s clients are specialty and big-box retailers seeking to improve their procedures in forecasting, merchandising, purchasing, promoting, pricing, allocating resources, and space management.
Freeland conceived the idea while working as a consultant in 2004. “I realized the need to deliver more complete solutions using the resources of a team,” he says. He hired mostly former co-workers from Best Buy, who Freeland says had helped the company during its big growth period that began in 1996. “I recognized the talent coming from the executive levels of Best Buy and the lucky coincidence of members of a ‘dream team’ being available,” he says.
Freeland was president of Musicland and then senior vice president of inventory for Best Buy from 1995 to 2003. (Best Buy owned Musicland from 2001 to 2003.) “Under the extreme duress [Musicland] experienced in 1996, we learned how to judiciously spend every precious dollar we had, and how to drive efficiencies in everything from our Sunday ads to our supply chain to our store space,” he says.
One of Optimal Advantage’s five current contracts—and the only one he can mention—is with Best Buy. “We have an especially strong affinity with those retailers who have to manage short–life cycle products like apparel, foot-wear, technology, and the like,” Freeland says. “We certainly can help companies who have long-lifespan products, but we have found that the short–life cycle products have problems that are more difficult to solve.” Among other things, it’s harder to forecast the sales of a new item than for a long-established brand—and thus determine how much of an item to buy.
Optimal Advantage now has 17 employees and affiliates. It draws on both the expertise of its employees and a roster of operations-research academics from the Harvard, Wharton, Duke, and University of Chicago business schools. Says Freeland, “They give us access to leading-edge thinking and solutions about how to apply rocket science to basic retailer issues like forecasting demand for new items, optimizing prices, [and] establishing optimal levels of assistance”—that is, determining the right staffing during store hours.
Freeland says this is the right time to launch his company because “for retailers to compete, they need to have back-office functions that are more efficient than ever to keep overhead low, while also being more flexible than ever . . . in the marketplace.”
