However glossy the internet shop window may be, without effective order management, logistics, service and tracking, retailers will continue to lose money, by Christopher Field

The decision by boo.com, the online clothing store, to discount unsold stock by 40 per cent sent shockwaves through the small investor community which had been largely responsible for the capitalisations of internet start-ups. It was revealed that, following the failure of Boo's suppliers to fulfil orders in time, the company had acquired a certain amount of its own stock, much of which had simply not moved quickly enough.

Boo has had a problem which is currently facing start-ups, which lack any sort of fulfilment infrastructure or experience, and established retailers alike; how to fulfil orders in a timely fashion and still make a profit.

Until recently, even the mighty Amazon was spending $40 to fulfil a $20 order.

According to MORI, the market research company, Corporate Europe is looking for an ambitious return on its internet-related investment over the next 24 months of 20 per cent. But research company Verdict has said: "Online shoppers are dissatisfied with the service they receive. Excellence in fulfilment will determine the winners and losers in online retailing."

ost, particularly internet-only, companies spend their money on the look and feel of the web site and leave fulfilment to chance. Without integration of both processes - and data in the back office and through links to third parties which may take responsibility for warehousing and logistics - these companies soon become victims of their own success as they are overwhelmed with orders that they can not fulfil.

Enterprise Resource Planning companies (ERP) such as SAP, JDA, NSB Retail Solutions and Retek are the self-appointed saviours of the disjointed retailer because they offer integrated, modular software in key areas such as merchandising, financials, warehousing and marketing, and promise that the data flowing through them will be consistent. These companies have the advantage of a track record in traditional retailing.

Roy Patrick, product manager, application service provision for NSB, says: "The switched-on retailer already has much of the infrastructure for web trading in place, namely links between store, head office and warehouse, but may struggle to integrate them. If the retailer then decides to sell through other channels, it can get on line quickly as well as achieve economies of scale."

These economies of scale will be critical once the latest batch of electronic channels comes online in force, namely Wap (Wireless Application Protocol) phones, personal digital assistants and other hybrid devices such as personal scanners.

Retailers currently building internet sales capability separate from their stores business may be in trouble once they try to integrate the internet ventures into the supply chain. They risk making a loss if everything has to be retuned; customers will simply click to a competitor unless they are treated with consistency through each channel.

While ERP implementations may not take as long as they used to, as modules become more packaged, many retailers will simply not have the scale or resources to build their own infrastructure. Both traditional and new technology vendors are recasting themselves as Application Service Providers (ASPs) to provide, as a managed service, everything a retailer might need to do business on line. This can start at the web interface, providing applications hosting and development as needs change, but also extend as far as merchandising, logistics and call centres, all paid for per transaction.

According to IDC, spending in the European ASP market will reach £1.1bn by 2003.

Some online retailers do not even hold stock, preferring to outsource everything to third parties. The danger is that these third parties will simply not meet the expectations of their clients and indeed the end-consumer. Manchester-based tool shop Cooksons took this route with great success and its cooksons.com site is due to overtake the main business, established 40 years ago, only 18 months after launch.

Stuart Armstrong, managing director, explains: "Suppliers must confirm to us that an order has been sent, but to prove it, they must attach the courier consignment number.

"In addition, we monitor all suppliers at 4pm every day to check orders have really gone."

For retailers with their own warehouses, the challenge is how to retune systems to pick and ship large numbers of small orders to consumers while existing systems are geared to shipping small numbers of bulk orders to a relatively small number of destinations. Most warehouse management systems companies claim to be able to make these adjustments but retailers need to understand that if they choose the wrong solution they could be waiting around.

Wine.com was lucky; it took only seven weeks to implement a warehouse management system from Manhattan Associates called PkMS.

Neil Thall, Manhattan's e-commerce specialist, says: "Dotcoms have plenty of money but one thing they are desperately short of is time to get on line and prove their worth."

The battle for loyalty and therefore repeat purchase will be more intense on the internet, where the competition is only a click away, than on the high street. Fulfilment will therefore need to encompass more than simply getting orders right. Consumers will expect more and will graduate to those companies that can deliver.

US home delivery company Streamline keeps a close eye on its customers and has moved on from groceries to video hire, dry cleaning and film processing. Unlike Boo, Streamline feels it can trust its burgeoning number of third-party suppliers to deliver because it has systems that can monitor their activities in real time. If one of them fails, Streamline can step into the breach.

Waterstone's

new  services

Payment over the web


looking ahead
Future FTIT coverage

steve  luczo

View from the top


previous surveys
April 2000
March 2000
February 2000
January 2000
December '99
November '99

special reports
US Elections
World Trade
FT Telecoms
Connectis
FT-IT
FT Euro
FT500
FT Surveys