PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
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Many companies also look beyond the physical capabilities of the fulfillment provider to the financial structure that backs it up to ensure that the provider will be there for the long haul and able to grow as the retailer grows. “When you make your investment in going with a fulfillment provider, you want to make sure they will be there for a while,” says Warner, who notes that Bradley Direct traces its history to 1885. “We have the capital to grow in support of our customers’ behavior.”
The fact that fulfillment is so tightly tied to the rest of the online ordering process is prompting retailers to look at what other services a fulfillment company can provide-and causing providers to stress that fulfillment is closely related to other areas. “Best practices dictate that fulfillment begins quite a bit in advance of the physical shipment,” McGovern says. “To have the entire order delivery and fulfillment cycle be successful, you can’t ignore all the other areas. They are all important.”
One of those areas that may not be so obvious, yet stands in the way of orders being fulfilled, is payment processing, McGovern says. Using a fraud detection system that it developed in-house, Progressive Distribution caught $700,000 in potentially fraudulent transactions in the first 12 months after development. And while it’s important to make sure that the fraud-detection system does its job in catching fraud, it’s also important to make sure that the fraud process is fast and accurate and doesn’t stand in the way of customers getting their orders.
Third-party providers also note that customer service is another important aspect that leads up to successful order fulfillment. Thus the major providers have developed contact centers that, again as they have done with fulfillment, allows them to leverage their investment to provide state-of-the-art capability that many retailers would have a difficult time replicating. NewRoads, for instance, operates two contact centers that offer telephone, voice over IP, live chat and e-mail support.
An intranet-based support center
Bradley Direct also offers customer service support and has gone so far as to web-enable clients’ policies, procedures and product information on an intranet that it calls CAIRnet-Customer Agent Information Resource network. Having that information, which is usually stored in binders in a call center, at an agent’s fingertips has reduced talk time significantly for some clients, Warner says. In one case, Bradley Direct’s average talk time actually came in at one minute less than the company had estimated when the client came on board, due in large part to the information available through CAIRnet, Warner reports. That resulted in cost savings of 25-35% for the customer, she says. “We have a philosophy of one-call resolution,” she says. “With the information we have in CAIRnet, the agent doesn’t have to look something up and get back to the customer.”
In addition, CAIRnet contains all records of a customer’s interaction with the call center, so if a customer calls with a follow-up question and gets a different agent, that agent has a record of the previous call and can easily help the customer.
The stores, the warehouse, anywhere
Just as third-party fulfillment companies and their retailer clients have broadened the scope when thinking about fulfillment, so have other fulfillment vendors. For instance, CommercialWare has just released its CW Locate product, which gives retailers the ability to find inventory for web order fulfillment anywhere in an operation, whether that be in stores, warehouses or the catalog or online distribution center. “Our focus is on inventory visibility,” Askin says. “A retailer needs to fulfill from any and all channels and never lose a sale. A retailer needs to see a product no matter where it is and get it no matter where it is.”
When products arrive at a retail location, the information about the product gets entered into the CW Locate database. CW Locate then stays updated by recording the movement of inventory from warehouses to stores and then by grabbing data from store POS systems in whatever frequency the retailer wants, from near-real-time trickle polling throughout the day to batch reports that are sent nightly. The retailer sets the rules as to the quantity of safety stock.
By optimizing its view into where the inventory resides, retailers will end up with fewer markdowns, Askin says. “If something is selling on the web, but not in stores, you can pull it from the stores and send it to the distribution center to fulfill web orders. It doesn’t have to sit on the shelf in the store until it gets marked down to move it out.”
While all retailers desire an accurate picture of inventory levels, online retailers coming from the direct world are more comfortable with taking orders for out-of-stock products than are traditional retailers, Himes notes. The difference stems from the Federal Trade Commission’s rules about backorders and promised delivery times. “There’s a stark contrast between catalogers and brick-and-mortar merchants,” he says. “Catalogers are comfortable with the FTC regulation and know how to manage to it. Brick-and-mortar retailers are not comfortable at all with it.”
Eventually, Askin believes, inventory visibility will extend into the supply chain. CommercialWare offers the CW Collaborate product to help retailers work with suppliers to ensure that their inventory is available for sale. “We’re seeing growing interest in the supply side,” Askin says. “Retailers and direct merchants have been laggards in that area, but it will become a hot button.”
Leading third-party fulfillment providers will tie inventory data into all the other data that they report to their customers. For instance, NewRoads provides sales and inventory data to customers in the financial format that customers want. “The ability to handle data flow is immensely critical to many clients,” Himes says. “And it only makes sense to make sure that data flow comes from the demand stream as well as elsewhere.”
Expansion into areas that feed into fulfillment does not mean, however, that the fulfillment companies have abandoned their focus on stellar fulfillment. Progressive Distribution, for instance, continues to refine its quality control process, McGovern says. A three-step process ensures the right product is going into the right box before the box is sealed. “Our accuracy level stays above 99.2%,” McGovern says.