January 2001 | Commentary | Viewpoint

Get Customer-Centric or Get E-liminated

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Ask three people to define e-commerce, and you'll end up with three disparate answers. The problem is that companies use e-commerce to define varying degrees of involvement in e-business. Some companies think they conduct e-commerce because they have e-mail. Some believe that the mere presence of a web site constitutes an e-commerce approach. The fact is, companies that are truly engaged in e-commerce use sophisticated Internet technologies to unify all their business procedures—both internally and externally.

E-commerce must encompass a customer-centric approach when implementing a back-end order fulfillment system. It's not enough to simply be an order taker. True e-merchants must provide pre- and post-sale customer support that is integrated with automated order fulfillment and returns management.

Get Automated

Eighty-five percent of companies with e-commerce sites have no automated, real-time connection with any of their existing business applications, reports Forrester Research. What's more, according to a Jupiter Communications study, 42 of the web sites surveyed never responded to customer inquiries, took more than five days to reply, or did not offer e-mail responses to reported problems. It's logical to surmise that the level of online customer service is not keeping pace with the actual growth of e-business and Internet usage.

Consequently, the key to success in e-business is not to be technology-centric, but rather customer-centric. Businesses must resolve the following issues:

  • Are customers being recognized when they show up on the virtual doorstep?
  • Is the quality of service the same for the web customer as for the pedestrian customer?

With approximately 64 million adults using the Internet, it is predicted that e-commerce spending will top $3 trillion by 2003. All major analyst firms agree that the demand for order fulfillment solutions will reshape the existing e-commerce landscape as e-tailers work feverishly to provide a timely and accurate fulfillment capability that is integrated with quality pre- and post-sale customer service.

Because the Internet is expanding at a tremendous rate and e-commerce businesses are experiencing extraordinary increases in online shopping, it is critical to ensure consumers have a satisfying experience online. The ramifications of poor customer service can be detrimental in a global retail marketplace where the competition is just a mouse click away.

Today many Internet enterprises look to outsourcing fulfillment and customer service operations as a strategic imperative to help drive business objectives. A successful working relationship with a third party allows businesses to focus on core competencies, such as marketing services, optimizing productivity, increasing revenue and controlling costs.

Why e-Commerce Companies Should Outsource

Demand for order fulfillment solutions will evolve as logistics suppliers turn to serving the small-package, individual-oriented needs of commerce site operators, according to Forrester Research. As online sales move past the experimental phase, several factors will combine to put new pressures on order fulfillment systems. These include an expanded selection of products sold online, the need to move a large volume of small parcels, and rising customer expectations.

Most mid-sized e-merchants (averaging 1,000 orders per day) should outsource their fulfillment to gain economies of scale, Forrester advises. Outsourcers have the ability to share warehouse space and resources among online merchants, allowing orders to be fulfilled for less than 10 percent of revenue. Sophisticated order fulfillment companies can integrate a merchant's inventory and planning systems, allowing the merchant to retain control of the service experience.

From start-up companies to established businesses venturing onto the web, e-merchants are realizing that outsourcing online fulfillment requirements is critical to staying competitive. In addition, outsourcing allows companies to focus on their core competencies, increasing speed to market.

Choosing a Partner

Retailers find that it is relatively easy to distribute products in bulk through a wholesale, retail or distribution channel as compared to e-commerce distribution. Difficulties can emerge, however, when a company has many individual products that require consumer-to-home distribution, inventory control and customer support.

E-commerce merchants considering outsourcing order fulfillment systems should look for the following when choosing a company:

1. A company that is dedicated to protecting the merchant's brand name. Launching and sustaining successful e-commerce initiatives by establishing tightly integrated, exceptional fulfillment and customer service capabilities is crucial. Equally important is the process of enhancing the customer's buying experience and ensuring the brand is properly represented.

2. An outsourced partner that understands e-commerce market opportunities and provides a complete back-end solution. Select a vendor that provides a full spectrum of management, order processing, fulfillment, distribution and IT services to its customers. Make sure it offers reliable back-end technology.

3. A management team with broad experience. The people involved should have experience in inventory management, logistics, information technology and customer service.

4. The ability to effectively and efficiently move goods. Make sure the third party is one that can both anticipate the needs of current and future consumers and has the capabilities to fulfill customers' needs.

Because many small and middle-market e-merchants do not have sufficient volume to build a cost-effective infrastructure, they can team with an outsource partner that offers a cost-efficient, accurate and timely fulfillment process coupled with quality post-sale customer service. This ensures cybershoppers' expectations of convenience, on-time delivery, status updates, personalization, and exceptional service are either met or exceeded.

Outsourcing Works

New Basics, Boston, Mass., is an example of an e-merchant that has experienced great success by outsourcing its fulfillment system. As an innovator of personal beauty care products, New Basics harbored plans to distribute its products through retail channels and via the web. The company needed a partner who could support wholesale shipments to retail stores, as well as single orders directly to customers. New Basics also needed to provide a single point of contact for customer questions and concerns. As a start-up company focused on marketing and manufacturing, New Basics did not want to develop in-house fulfillment and customer service operations.

New Basics partnered with a leading fulfillment and customer service solutions provider to outsource its back-end processes. The companies worked together to develop a plan that would integrate and manage a customized fulfillment and customer support program. The program included integrating their e-commerce sales engine with the vendor, overseeing the training of customer service representatives on the features and benefits of New Basics' new product lines, and having the vendor provide phone and e-mail sales and post-sales support.

"After analyzing the process we realized we saved an enormous amount of time and money by eliminating our need to develop fulfillment and customer service functions in-house," says Dina Chu, president and CEO of New Basics. "The most important part for us was that the order fulfillment vendor was able to maintain our brand image by providing exceptional customer service, allowing us to focus on marketing and developing next-generation products."

Such comprehensive fulfillment solutions are dramatically improving the e-commerce universe. As in the case of New Basics, customer-centric e-commerce is finally within reach for small and mid-sized companies.

As e-commerce retailers learn more about the benefits that outsourcing order fulfillment offers, a growing number will discover that it is the most efficient and effective way to retain customers and keep them satisfied. Before companies reach their goal of becoming leading online retailers, they must first address their back-end capabilities.

The ones that do not embrace this all-encompassing e-business philosophy will likely be e-liminated from the marketplace.

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