E-retailers learn delivery lesson

Setting expectations key; delays singe Toys R Us

Toys R Us Inc. was one of many retailers this holiday season that learned heavy Web site traffic can make high expectations hard to fulfill all the time.

On Dec. 22, the company found itself e-mailing "a small percentage" of its mammoth volume of customers to tell them that they might not receive in time for Christmas the merchandise they ordered almost two weeks earlier. A Toysrus.com spokesman said that the company faced overwhelming demand online and that it would give $100 gift certificates to shoppers who spent Christmas without their ordered toys.

Retailers are still learning how to properly meet and manage customer expectations about the fulfillment of e-commerce orders.

In particular, they're learning that providing realistic delivery information is a key component of keeping buyers happy, even if merchandise won't arrive right away, according to a study by Andersen Consulting in Chicago.

But before Andersen could measure how electronic retailers performed logistically, it found that a quarter of the purchases -- 130 out of 480 -- that its supply-chain consultants tried to make couldn't be completed because sites had crashed or were somehow blocked. Andersen had 25 employees visit 100 Web sites between Dec. 3 and 10 to conduct the test.

"It was not something we had anticipated," said Andersen consultant Robert Mann. Rather than reflecting systematic deficiencies in the e-commerce industry, he said, the site availability problems reflect the huge surge in online shopping traffic that overwhelmed retailers' servers. He said some of Andersen's clients have been scrambling to add servers in the past few weeks.

Reports indicate that online shopping activity was tremendous, with $1.2 billion spent online during the week of Dec. 6 to 12 alone.

But even when purchases come through, Mann said, consumers aren't always getting the answers they need for a fulfilling experience. Andersen's study found that sites rarely tell consumers when to expect to receive their orders. And different merchandise categories often take different amounts of time. Electronics, for example, often arrive within four days, while music can take as long as a week.

Order fulfillment is a pivotal issue for many customers. Last month, New York-based Jupiter Communications Inc. warned that although the holiday season would see an increase in online shopping, consumers would still limit their online spending to 10% of their total, partly because of worries about the timeliness of deliveries.

Lessons Learned

In three years online, Austin, Texas-based Garden.com Inc. has learned from its order fulfillment glitches and applied those lessons to the way it does business, said Chief Operating Officer Jamie O'Neill.

The company tells customers when to expect a delivery, he said, even if the delivery time will be long. The reason for providing the information up front is that customers have shown that they will return a product just because they were unhappy with the delivery experience, even if they like the merchandise.

To help improve the performance of its supply chain this year, O'Neill said, Garden.com invested heavily in demand forecasting. "A year ago, we didn't have a demand-forecasting group. This year, we have a group with five people in it," he said.

This past summer, the company applied its knowledge by contacting its Christmas-tree supplier in North Carolina with a forecast of consumer demand for this year based on the previous two. The supplier used that information to tell Garden.com to set a cutoff date for orders after which the merchandise wouldn't reach customers by Christmas. By providing customers with that date, the site was able to ward off potential disappointments.

More recently, the company implemented demand forecasting software from i2 Technologies Inc. in Irving, Texas.

Demand forecasting isn't an option for e-commerce neophyte Citystuff.com Inc. because it doesn't have any historical data yet. But the New York-based retailer, which debuted Sept. 1 selling the wares of merchants unique to the city, realized that fulfillment would be crucial. It made a point of dealing with only those merchants that had a demonstrated record of mail-order fulfillment, said CEO Ed Vincent.

To manage customer expectations, Citystuff.com reminds customers that ground shipping can take four to seven days and that all items are shipped from New York, Vincent said.

Mann said sites that make realistic predictions are likely to satisfy customers more than sites that emphasize speed that can't be delivered. "The key to it all is management of expectations," he said.

Copyright © 2000 IDG Communications, Inc.

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