The two firms will become independent publicly traded companies in 2015. The move follows pressure from investor Carl Icahn to spin off the payments ...
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Suits vs. sweaters
Such first-rate fulfillment is important to Bank as its web sales increase. And Bank’s fulfillment amounts to custom fulfillment on a large and growing portion of its orders. Sales of tailored suits online, for instance, have jumped 20% since Bank launched a new version of its web site in June. Making sure that exactly the right suit gets into the shipping box is a lot more difficult than making sure that the right color and size of a sweater, of which the retailer may have hundreds on hand, gets to the right customer.
Internet sales today represent 30% of Bank’s direct retailing business and that portion is doubling each year, Ullman says. In fact, Internet sales growth has been far outstripping growth in the rest of the company: Web sales rose 166% in September over September 2000, while companywide sales rose 13.3%. Thus fulfillment of online orders has taken on a crucial role in the continued success of the company.
Jos. A. Bank, which has annual sales of more than $200 million, invested more than $1 million to bring e-commerce fulfillment in-house and so far it has paid off. Ullman says the company has had no problems with fulfillment since it brought the process to its own warehouse in Hampstead. And even more importantly, the number of customer complaints has dropped significantly.
Starting from scratch
A retailer doesn’t have to be a big operation like Jos. A. Bank to run its own fulfillment department. Smaller niche players often find it important to build and protect their brand by keeping direct tab on product, presentation, delivery and customer service. In doing that, the retailer creates its own customized fulfillment.
New York City-based specialty gift retailer UncommonGoods.com has been running its own operations since inception in 2000. “We built our fulfillment center from scratch with an empty room and some software,” says Rob Purle, director of operations at UncommonGoods, which generates annual sales in the seven figures. “We worked with some out-of-the-box software and some we developed ourselves to integrate inventory management and order processing.” For instance, UncommonGoods bought a warehouse management system, then developed an order processing system in-house. Its inventory management system is a combination of in-house development and off-the-shelf software.
As it has done with its entire operation, UncommonGoods.com started small to see what would work and built from there. “We started with a couple of orders a day and tested it until we figured out some efficiency,” Purle says. “Now we take orders up to 3 p.m. and sometimes 5 p.m. each day.” The warehouse occupies a loft in the Chelsea neighborhood of New York City.
It’s worth having fulfillment in-house in order to have control over quality and customer service, says David Bolotsky , president and CEO. Because it’s a gift-oriented site, the company relies on good inside help to customize packaging and ensure quality control on the many different items that come from all over the world. “I wasn’t willing to give up an opportunity to interact with our customers,” Bolotsky says.
Saving a marriage
UncommonGoods believes that putting more effort into customized service pays off by impressing customers who are more likely to come back if they have a good shopping experience. Purle cites the case of a husband who contacted UncommonGoods late in the day before his anniversary, wanting to buy a particular gift for his wife. UncommonGoods filled the order and arranged a late UPS pick-up for next day delivery. “We might have saved this guy’s marriage so I’m sure we’ll be seeing him again,” Purle says.
Jos. A. Bank and UncommonGoods.com are not alone in their desire for control over the fulfillment process, says Delray Beach, Fla.-based Ecometry Corp., which provides fulfillment software to such retailers as Nordstrom Inc. and Coldwater Creek as well as to large fulfillment houses such as Precision Response Corp. Many retailers want such control and the corresponding flexibility in their enterprise systems so they can customize their marketing and customer relationship management, says Jon Marrah, president and COO of Ecometry.
Ecometry can add software modules that allow a retailer to keep track of orders that require embroidery, thank you cards or other custom work. The software routes the order to the correct custom work station then back into the order flow for packaging and delivery. “Our software improves fulfillment efficiency so retailers can provide customization in an integrated manner,” Marrah says.
But while many retailers are bringing fulfillment in-house, outsourcing remains a viable option, especially for retailers who want to focus on selling rather than shipping. Pittsburgh-based American Eagle Outfitters, which sells clothing to twenty-somethings, outsources its growing e-commerce fulfillment demands to Columbus, Ohio-based SubmitOrder Inc. “Utilizing SubmitOrder allows American Eagle to focus on our core competencies-building a brand, creating a store, catalog and web site-that speaks directly to our customer and designing and selling clothing that is the right fashion at the right price,” says Mike Rempell, senior director of AE Direct. Rempell says last year’s e-commerce revenue was $20 million, which was 2% of American Eagle’s $1 billion in revenue.
The flip-flop factor
As fulfillment companies respond to market demands, outsourcing no longer means forgoing customized fulfillment. Frank Pancetta, SubmitOrder’s executive vice president of sales and marketing, says sellers are calling on the company to do more special custom services. For example, SubmitOrder does custom embroidery for Major League Baseball jerseys. Providing outsourcing for retailers takes the need for hiring specialty laborers out of the retailer’s hands, he adds.
For American Eagle, SubmitOrder has done custom jobs such as adding free flip-flops to each order, which coincided with an in-store promotion. “The web is important for us in that it’s driving real dollars to the bottom line. It’s important that customers get the same promotions online as they get in the store,” Rempell says. SubmitOrder’s ability to do custom work helps the retailer achieve that. “Due to their sophisticated infrastructure which allows them to easily handle our volume of business, SubmitOrder has allowed us to brand the entire experience, such as packaging, gift wrapping, inserts, and promotions, and still provide the high level of service that our customers expect,” Rempell says.