December 6, 2001, 12:00 AM

E-fulfillment a challenge for overseas web merchants as well

European pure plays and multi-channel merchants ship 12,000 items per week – but few track fulfillment costs and peformance metrics.

 

The language may differ, but the challenges of e-retail fulfillment are the same on both sides of the Atlantic. Less than 42% of the 40 European web retailers recently surveyed by Forrester Research Inc. even knew their total fulfillment costs, and less than 18% have a full performance tracking process in place.

While 60% of those polled said they are satisfied with their fulfillment systems, their satisfaction – and their investments -- tended to be based on instinct rather than hard metrics, says Forrester analyst Julia Woodham-Smith. So far, few European e-retailers use data to gauge fulfillment costs “either because they have blind trust in their outsource partners or because it`s simply too much work to pull the data out of internal systems,” she says.

A full 90% of those surveyed say they expect to be satisfied with their fulfillment systems in the next year as volumes grow and planned process upgrades kick in. But unless European web retailers develop a detailed, integrated picture of customers’ activities through the fulfillment process, they’ll continue to waste money and lose customers due to poor service, Woodham-Smith says; simply growing volume and squeezing vendors isn`t enough.

The full cost picture is worse than the retailers may believe, says Forrester, because many of them don’t look beyond pick, pack and delivery into their total fulfillment operation costs. Economies of scale that could drive down fulfillment costs are still far away for most of Europe; last year, only France, Germany and the UK had more than 3,000 online orders per day in any product category. Delivery firms and e-fulfillment companies that today give away services below cost to gain market share will soon be forced into more realistic pricing, causing fulfillment costs to rise, Forrester says.

Fulfillment costs gobble an average 15% of revenues, but getting them under control will require European e-retailers to manage more tightly with cuts across the contact center, warehouse and delivery stages of fulfillment, says Woodham-Smith. That means accurate demand forecasting so as not to miss out on peak sales periods, creative labor management to accommodate ebbs and flows in demand and central vendor partnering to expedite work flow through outsource partners, used by 90% of European retailers for delivery and by 30% for warehousing.

 

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