Avoid the 'Return to Sender' Blues
Articles on fulfillment in the trade press focus predominantly on issues relating to inventory management, distribution, logistics, outsourcing and supply-chain management. E-tailers worry that they don't have enough Santana albums or Tom Clancy books in stock. They debate whether to outsource fulfillment. Everyone agrees, however, that a key component of customer satisfaction is the accurate delivery of goods and services. Yet, when considering issues related to fulfillment, the vast majority of e-businesses fail to ensure the validity of customer address information.
For any e-tailer that needs to deliver a physical product, the need for ship-to and bill-to address validation is apparent. The 1999 holiday online buying period received considerable attention in the business press, not merely because of its size ($5.3 billion, according to the U.S. Department of Commerce), but because of the tremendous operational difficulties experienced by many major e-businesses. In response, customers and e-businesses alike have cited on-time and accurate fulfillment and delivery as key concerns about upcoming holiday e-tail seasons. An industry study showed that only 65 percent of orders handled by e-commerce companies were delivered correctly and on time during the 1999 holiday season. Bad address data most likely played a role in late deliveries.
E-business is a different ballgame from traditional retail. For example, you drive by your local bookstore every day on your way to work. When you think about buying books, you think about the local store's friendly staff, mahogany bookcases and convenience to your home. These customer experiences do not exist on the Internet.
Competition for your book dollar, however, is not 30 miles from your house anymore, but only a Web site away, as there are dozens of sites that sell books. Furthermore, geographic location, convenience and familiarity play diminishing roles in determining the e-tailer from which you purchase goods.
Nearly everyone recognizes that e-businesses face unique challenges in trying to create lasting relationships with customers who are interacting with them in a less personal environment. Because of this, many of these companies are realizing that poor or inaccurate deliveries can jeopardize their customer relationships. It may seem obvious, but getting the goods delivered on time to the right address cannot be overlooked.
When e-tailers try to deliver products to incorrect customer addresses, the dominoes begin to fall. Operationally, an incorrectly delivered package can prove costly. First, there are shipping costs. The U.S. Postal Service, United Parcel Service and FedEx, among others, have surcharges associated with invalid addresses or undeliverable goods. Businesses can pay almost three times the original shipping costs if a package is unable to be delivered, returned to the organization's fulfillment center and then reshipped to the customer.
Bad addresses also harm inventory and supply-chain management. Undeliverable goods may have to be reopened and restocked in inventory. The item may have to be repackaged and shipped again, if the customer still wants it. Additional operational costs are incurred through the customer service department when agents have to contact the consumer to determine the correct delivery address.
E-tailers no longer can view fulfillment as a domestic issue, because e-commerce has become a global phenomenon. Research firm International Data Corp., Framingham, MA, estimated that 60 percent of the world's Internet users in 1999 were not U.S. residents. IDC also predicted that e-commerce sales in Europe will soar from last year's $5.6 billion to $430 billion by 2003. In Asia, online sales are expected to surpass $72 billion by then, compared with last year's $2.7 billion.
According to Forrester Research, Cambridge, MA, worldwide e-commerce will hit $6.8 trillion in 2004, with only half of this figure from the United States. As a result of the incredible worldwide growth of the Internet, online merchants can expect inquiries and orders from customers worldwide.
Though customers in the United States currently comprise the majority of online shoppers, it is expected that consumers in Europe and Asia soon will represent a significant portion of Web shoppers. Subsequently, the ability to validate, correct and standardize international addresses is an operational requirement.
The Web is global by nature. By ensuring that goods are being accurately shipped to their customers, e-tailers will reap tremendous savings by eliminating the operational costs associated with improper delivery. Companies must use available technologies, either in their own environments or through service providers, that can provide real-time worldwide address verification.
• Tim King is director of product management and e-commerce at Group 1 Software, Lanham, MD, a fulfillment services provider. Reach him at email@example.com.