The e-retailer heads into the holiday shopping season behind a 30% increase in fulfillment spending and a widening net loss. North American sales increased ...
Replacements, the seller of old and new china, silver and crystal, faced a challenge when it went online: How to serve its 8-million-item inventory to customers on the web in near real time and not go broke doing so. The answer: Do it in-house.
Pre-web days, inventory management was already a challenge at Replacements Ltd. The 20-year-old Greensboro, N.C.-based seller of new and old china, crystal and silver had 8 million items for sale and merchandise counts that changed daily. It already had the back-end nailed, with internal systems that tracked outgoing and incoming inventory in real time. But then, in 1998, Replacements.com was born and the game changed.
Suddenly top management was faced with a big question: how much of a window into its fast-changing back-end inventory could the company afford to give online shoppers at its new web site? The company decided that to make its web site useful to customers, it had to offer them a reasonable proximity to real-time inventory. But then the next question loomed: Could the customer interface be made to mirror the back-end system in real time without breaking the bank?
Three years later, Replacements.com has answered its questions: Customers can expect that what they view on the web site accurately reflects Replacements’ inventory data no more than 24 hours old. And the company was able to do it at reasonable cost.
To keep costs down, Replacements has implemented the solution in house with its own IS team and avoided the estimated $4 million to $5 million tab of a complete systems integration. “We’re getting about 80% of that functionality at about 1% of the cost,” says Jack Whitley, who oversees the company’s Internet operations as director of sales and marketing.
Just the recipe
Linking the back-end inventory management system to the customer interface in near real-time is just the latest step in the multi-channel expansion of Replacements, whose sales for the fiscal year ended Sept. 30 were $75 million. The company began as the weekend hobby of founder, china collector and CPA Bob Page, who initially warehoused inventory in his home and kept records in a recipe file box. Today, Replacements, which incorporated in 1981, has inventory that fills a 225,000-square-foot showroom and warehouse facility big enough to cover four football fields and then some.
The web site accounted for $11.1 million, or about 17% of sales for the first 11 months of the fiscal year, and it’s growing fast. Replacements, which numbers more than 600 employees overall, is now handling thousands of online inquiries daily and blasts out some 2.5 million e-mails per month.
It took a lot more than an eye for fine porcelain to build an operation of that size and to harness the power of the web. That’s where Page’s experience as a CPA and auditor for North Carolina came in handy. With a dead-on sense of how to calculate ROI, Page, who remains sole owner of the company, has made web and IT investments under a self-imposed mandate to seek out the best functionality at the least cost. From the beginning, Replacements has grown strictly on a cash basis, out of its proceeds-an object lesson in an age when overinvestment in both technology and marketing has sunk more than a few ships.
So, how does a company’s IT operation evolve from a card file to an Oracle database? “It’s been amazing,” says an unabashedly enthusiastic Whitley. Recruited in 1993 from the CRM arena at American Express Co. Inc. for his telephone call center experience, Whitley was hired to manage the growing company’s call center activities when it added its first toll-free number.
The Internet as a sales channel was barely percolating, but Page had already taken a critical step that would later help the company move to the web by converting paper inventory files to computerized records in the mid-1980s. That made real-time inventory data instantly available to call center agents to share with customers on the phone. It was a feat for its time, but the technology platform of the day required agents to master 40 different green screen applications.
Though state of the art then, the green screens were non-intuitive and difficult for agents to read. Nevertheless, with its inventory data already on computer, Replacements was positioned for easy upgrades as technology advanced. “It was a natural evolution to move those applications from a green screen environment of 40 separate applications to a unified applications set that was more intuitive for the call center agents, with a back-end relational database attached,” Whitley says. Today, the company manages internal operations on an Oracle database that runs on Unix. The applications were written in the Windows-based authoring tool Power Builder, and Replacements’ IS team wrote the programs in-house, with support from IT consultants Keane Inc.
The result is a smooth-running back-end inventory management system that reflects real-time data as merchandise is sold. It also captures real-time data as new merchandise is added to inventory, fed in by a network of 1,000 independent agents who make a full-time job of tracking down patterns for the company at local sources throughout the country. But the inventory system is strictly an inside-the-building loop. Linking the back end to the web site and funding the effort solely out of operations has been the company’s biggest IT challenge so far, Whitley says.
“We have 1 million SKUs, 4.2 million customers, and inventory quantities that change daily,” Whitley says. Companies that put big inventories on the web in real time face a whopping challenge, he points out. Not only must they create and maintain the database on the back end for internal use, but they also must create and synchronize the inventory database at the customer interface as well.
“So not only do you have to have web servers for your web pages, but you have to have a database server out there on the web as well,” Whitley says. “When you have inventory the size of ours and counts that change all the time, it’s a very expensive development project to replicate that inventory database on the web and keep it in sync with the internal database that the call center agents are seeing.” Beyond the problem of synchronization, there was also the issue of systems integration: the back-end systems are written in Power Builder, but the customer interface uses Macromedia’s Dream Weaver.