Outsourcers Come to the Rescue of Internet-Only Start-Ups

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With the recent buzz about a forthcoming shakeout, many Web sites are seeking a strong partner. Recently, a new batch of business-to-business Web-based companies have been lining up to help struggling Internet-only start-ups through the pitfalls of online retailing. Unfortunately, many of these services neglect to address the issues that are posing the greatest challenges to these businesses.

To address the consumer's needs effectively, many Internet-only companies are looking for retail consulting. Since most retail consultants aren't experienced with the unique demands of e-commerce, other essential service providers such as fulfillment and customer service houses have offered retail consulting.

As any e-tailer that has been through a holiday season can tell you, creating a slick front end is the easy part. Backing up your interface with attentive customer service and reliable fulfillment is what separates the real players from the rest of the clutter. Since most start-ups don't have the depth of staff to handle such chores, choosing a partner to handle these facets has become a pivotal decision in the first phase of business. This need has led to explosive growth in outsourcing.

The first concern a partner will address is scalability. With many niche start-ups, there is a dependence on loyalty rather than volume. Other e-tailers have to be prepared for the peaks and lulls, which aren't always as obvious as one would think. Everyone knows that traffic will pick up for the holiday season, but other seasonal peaks vary on a case-by-case basis. It becomes the role of the fulfillment and customer service partner to forecast when the demand will be the heaviest and when a lull may occur.

The fulfillment partner also must compensate for the inevitable expansion of the original product offering. The Internet claims to be a tool of convenience, so offering the most complete product category in your sector is an immediate goal for the majority of start-ups. Handling logistics internally is nearly impossible for these companies.

The most valuable asset an outsourcing partner can offer is its experience. By working with a variety of e-tailers, outsourcers can see what makes successful companies different from the ones that are forced to fold after a year. Even if there isn't a dedicated retail consultant in-house, there are usually business development and implementation specialists available to help get a start-up out of the gate or assist an existing site in expanding its offering. Finding a fulfillment or customer service manager in the current job market is both time consuming and expensive.

Many of the same rules apply when it comes to customer service. Creating an efficient call center requires much of the same planning process involved with fulfillment. As the product categories expand, a system must develop so the call center has timely access to a wealth of information on each product and site navigation in general. Many consider customer service to be the face of a company. Unnecessary delays during a service call give the impression of incompetence and disorganization.

Internet-only retail start-ups don't have the benefit of existing branding available to bricks-and-mortar retailers that go online. Fulfillment and customer service considerations cannot be an afterthought. To provide the crucial positive first impression, all logistic operations must be in place well before the launch.

Another obvious consideration is cost. While a traditional catalog company may be prepared to integrate its Web business into its existing infrastructure, an Internet-only retailer needs millions of dollars to build a warehouse, complete with a pick, pack and ship network and call center. Most outsourcers tailor their fees on a transactional basis, although most will have minimum service requirements, creating scalability in cost as well as infrastructure.

As we have seen in recent analyst reports on the tenuous health of many Internet-only retailers, the market is becoming intolerant of companies that have no plan for profitable growth or competitive advantage. A recent study by Forrester Research cautioned that these companies must offer high levels of customer service to survive setting the stage for a market shakeout and increasing demands from consumers and investors looking for profits. Focusing and improving the nonvirtual aspects of the shopping experience can go a long way towards satisfying customers and investors alike.

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