Fulfillment Key to Success on the Web

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Today's electronic commerce marketplace has added many buzzwords to business jargon - business-to-business, "clicks and mortar," electronic shopping cart, to name a few - but at the most basic level, the buying process has not changed.

A consumer shops (albeit online), buys an item and expects it to be delivered. Publications are full of success stories about system "front ends" - a store Web site with the newest gee-whiz application, the latest shopping cart technology, etc. But little has been written about what some view as the most crucial element: the successful delivery of the order.

The last holiday buying season brought the back end of the system, as it is often called, to the front page. Consumers placed orders that were acknowledged; their credit cards were billed; and then - nothing. Sometimes their orders arrived days later than promised. In some cases, such as Toys 'R' Us, they never arrived. The result: unhappy consumers and a black eye to the e-commerce retail market. What was the culprit? In one word, fulfillment. So what can retailers fulfilling orders inhouse do to avoid a repeat this year, when consumers are expected to spend $61 billion, according to projections by Boston Consulting Group?

Your e-commerce system: commitment, commitment, commitment. As last year proved, e-commerce is not a promise; it's a commitment. Don't get halfway to the altar and have second thoughts. You're either in or out, because if you don't make that commitment now, the market will make it for you.

Implement a scalable technology. Even the best systems will be challenged by demand. Anticipate that, and be ready to add capacity. Think those pipes are fat enough? They're not. Do you want to fix it now or later?

Inventory management is key to success. It's scary how many companies don't have inventory integrated into their e-commerce site. That flashy front end is hiding an archaic "let me go and check" back end. That won't cut it this holiday season. Track your inventory in real time. The returns are well worth the investment.

How's your distribution network? You have the mother of all warehouses? Is that an asset or a liability? Today's customers are increasingly savvier; they know they can get the same product from your competitor a day earlier. From whom do you think they're going to buy? Instead of a megawarehouse, consider three or four smaller, geographically dispersed warehouses. In the past, 24 hours didn't matter. Today, it does.

Don't overpromise - underpromise and overdeliver. Don't be greedy. If it's not in stock, don't say it is. If you can't guarantee two-day delivery, then don't. Conversely, for those special customers, promise two-day and deliver overnight. That kind of customer satisfaction can't be bought with dollars.

Crank up your staffing. Just as holiday '99 saw an exponential increase in online shopping, this year it will be even greater. Advertise now for help and have a thorough training program put together. This is not the time for your people to "learn as you go."

Put the customer first. We all have had frustrating shopping experiences, whether online or offline. Today's successful retailers are embracing a customer-first approach. It's a lot easier - and, ultimately, more profitable - to deal with a satisfied customer than with an unhappy one. Make this your company's mantra.

After what happened last holiday season, some have decided to outsource fulfillment. Have you? What should you do? First, look at total operating costs. Are they within expectations? Are your processes streamlined? Are you getting the most bang for the buck? Are you really good at it? Is it the best it can be? If you even hesitated at saying yes, you should consider outsourcing.

United Parcel Service, for example, earlier this year set up e-Ventures, a wholly owned subsidiary, to develop new business related to supply-chain management and e-commerce. The company's first launch is UPS e-Logistics, formed to provide everything from warehousing to order fulfillment to customer service for e-commerce start-ups. Not limiting itself to new players, UPS is applying the same strategy to larger, more established companies such as Nike. With UPS' assistance, Nike is on its way to becoming a virtual corporation, as UPS is moving to take over the footwear company's entire distribution chain and customer service operation.

Some other dot-coms have signed the engineering firm Bechtel to develop the mortar side of their bricks-and-clicks operation. Among them is WebVan, which has contracted the company to replicate its successful distribution and delivery infrastructure in 26 markets over the next two years. IMotors.com, San Francisco, is looking to Bechtel to build 30 vehicle certification centers for the Internet used-car dealer's distribution network.

The bottom line is customer satisfaction. Study after study has found that after price, what brings a customer back to a company's Web site is responsiveness. How long does it take to respond to my e-mail? How long does it take for my order to arrive? If your customers are coming back to buy again and again, you are doing something right. If not, you should consider changes.

Fulfillment has become a technology function. A study this year by Deloitte & Touche found that e-commerce leaders "have mastered the fundamentals of superior customer service, especially involving order fulfillment and customer service call centers/e-mail centers/chat centers." The study recommended that those companies "use technology to add value for consumers cost-effectively, enabling Web site personalization in real time, multichannel customer information and relationship management, shipment track/trace, mass customization of products and service, automated up-selling/cross-selling, personalized promotion, easily navigated information/education, and entertainment."

Companies that understand this will be here today and tomorrow; those that don't may be gone tomorrow. Whether you keep your fulfillment operations inhouse or outsource them, what's key is to keep those customers happy, whatever it takes. Will you do it? This holiday season will tell.

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