August 9, 2012, 9:58 AM

An e-retailer promotes products from reliable drop shippers

Zoostores.com gives more prominence to suppliers it can count on.

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Zoostores.com operates some 250 sites, each one selling a very specific type of product, such as exercise mats or hammocks. The web-only retailer relies on more than 3,000 drop shippers to fulfill the hundreds of thousands of SKUs it offers on its site, and it carefully tracks—and rewards—suppliers that deliver on time, says CEO Nikhil Behl.

“Once we make a promise to a customer, we absolutely deliver on that promise,” Behl says. He says 85% of items arrive before the promised delivery date and 99% on time. Of the 1% that are not on time, he says, half arrive just one day late.

Zoostores, No. 236 in the Internet Retailer the Top 500 Guide, built its own fulfillment platform to achieve that kind of on-time performance. The platform, called Supplizer, receives data feeds from suppliers, so it knows for each SKU how many are in stock and the expected delivery time. The e-retailer also mines data from its own system to see how suppliers actually perform, and adjusts its promise to shoppers accordingly. “If a supplier says a product ships in three days and we know they actually ship in two days, we can commit to two days,” Behl says.

The system also is tied into the tracking systems of the delivery services that suppliers use. That allows it to track each order, making sure that delivery services pick up from suppliers when they’re expected to. If they don’t, the system sends an alert and Zoostores’ personnel looks into the delay, Behl says.

He says it took the company nearly nine months to build the Supplizer system, and another three months to add a shipping-optimization engine. That engine determines the best way to ship a product based on such factors as the origin and destination ZIP codes, the type of product, dimensions, weight and historical performance. For example, Behl says, if the product is made of glass the system will choose a delivery method that provides a high probability that the product will arrive unbroken. He says the new shipping-optimization technology has reduced shipping costs by more than 10% and damage rates “materially.”

The system also tracks the performance of suppliers and allows Zoostores to show more prominently on its e-commerce sites products from suppliers that deliver on time. “Suppliers that do it well, predictably, we’re making sure their products show up higher and more often,” Behl says. “They get more visibility to consumers, and in turn their products sell better.”

He noted one unnamed supplier whose sales increased 400%—although Behl concedes that was from a low starting point—after Zoostores began promoting its products more aggressively. Besides featuring products from reliable suppliers on its web sites, Zoostores also promotes them in its newsletters and other marketing material, Behl says.  “We try as much as we can to show our supplier base what their relative performance is to other suppliers so that they can see that those that do really well, they have significantly higher sales.”

Zoostores launched in June 2011. At the same time it bought a company called Mercantila that operated niche web sites such as rowingmachines.com that date back to 1997. The company is led by Behl and two other executives who worked with him at HP Home & Home Office Store, the e-commerce site of Hewlett-Packard Co. that is No. 21 in the Internet Retailer the Top 500 Guide.

Behl says Zoostores is considering offering Supplizer as a service to other web retailers. He says two potential clients are testing the software now, and that Zoostores will decide by the fourth quarter whether to launch Supplizer as a commercial product.

Zoostores generated $62 million in online sales in 2011, according to Internet Retailer estimates. Behl says by the end of the year its sales will reach an annual rate of $100 million.

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