The WIZMO Factor

Consumer expectations always outrun reality on the web. And nowhere is that truer than in order fulfillment. Customers don’t like paying for shipping. And they want their orders right away. Thus WIZMO has become one of the most expensive parts about operating a retail web site.

Where is my order—WIZMO—costs retailers at least $2 every time a customer asks the question. “WIZMO calls can really eat up profit margins,” says Mark Layton, CEO of Plano, Texas-based fulfillment provider PFSweb Inc., a company that knows first hand about overwhelming customer calls. It provided fulfillment for Roots Canada, the sporting goods store that sold the popular U.S.A. Olympic berets featured at the Salt Lake City Winter Olympics 2002, and fielded more than 90,000 calls in just one day.

A brand-building experience

Thus more retailers are adopting automated notification technology that keeps customers informed of their order status every step of the way. Their goal: Answer questions before customers ask them. “This service gives retailers the ability to create the sense that there is somebody in their operation who is paying attention and cares about what each customers is doing,” says David Himes, senior vice president of business process solutions at Greenwich, Conn.-based NewRoads Inc., which provides a service called Customer Concierge to notify retail customers of order status. “And that means telling customers what they want to know about their order before they even think of it.”

While large, sophisticated online marketers like Amazon, Lands’ End and 1-800-Flowers have had such notification systems for some time, the availability of such programs and their ease of implementation haven’t penetrated to the mid-size and smaller retailers, observers say.

But that may change as more providers offer the service. A number of fulfillment service providers as well as shipping giant United Parcel Service of America Inc. are offering automated notification services that range from simply providing the customer with a package tracking number and UPS’s URL to keeping the customer informed every step of the way. Growing demand for the services is fueled not only by heightened customer expectations but also by more product flowing through the fulfillment system which inevitably creates more kinks and by the low cost and easy implementation that most providers offer.

Retailers derive several benefits from incorporating proactive customer notification into the fulfillment process, observers say. One major benefit is that some have been able to reduce their workforces because they receive fewer WIZMO calls. Others who have not reduced their workforce say they have been able to use customer service reps more effectively as sales agents because they aren’t answering WIZMO calls. And there’s the harder-to-measure benefit that better customer service creates better customer relations. “One of the objectives is to create a brand-building customer experience by making sure the customer knows you are shipping what they want on time,” says Frank Di Maria, president of APL Direct Logistics, which launched its Proactive Parcel Management service this year. APL developed the product to give retailers better information about their drop ship management.

Some small retailers who have adopted e-mail notification systems have experienced dramatic and immediate results. Seattle-based Groovetech.com, for instance, which sells vinyl records to disc jockeys all over the world, has saved 40 hours a week—the job of one employee—by implementing UPS’s Worldship software that sends an e-mail to each customer with tracking information for orders. The company takes about 150 new orders per day and the customers are usually DJs who want the latest vinyl mixes for their gigs. “Timing is critically important for our customers because the music we sell is very time sensitive,” says Alex Hillinger, director of marketing. Hillinger says the shelf life for its music is only about six weeks because customers are always looking for the latest mixes. And so when they order music they want it now—or they want to know why they don’t have it. “We’ve been able to save a tremendous amount of time and money,” Hillinger says. “Before using this we had a person just answering calls and sending e-mails.”

Another small retailer that has benefited from proactive customer notification is Valencia, Calif.-based XDR2.com, which sells blank media such as CDs and jewel cases. The company is saving more than $26,000 a year by using a shopping cart product from PDG Software that integrates UPS’s e-mail notification feature. “We got rid of the person who answered shipping questions and we don’t even take phone orders anymore,” says G. Rick, president. He also says he no longer mails order status follow-up messages to customers. “I don’t have to pay anyone to stuff envelopes and my postage costs have gone down by thousands of dollars,” he says. The company gets about 100 orders per day and says it has almost no phone calls at all since it started using PDG’s shopping cart with UPS’ e-mail notification. “I’m even thinking of canceling the extra phone line,” Rick says.

Three calls per order

In addition to cutting staff, retailers can simply reduce their cost of operations with automated notifications, allowing them to grow without additional staff or to deploy their staffs to more productive uses. “The cost of doing e-mail notification is dramatically lower than the $2 per customer service call that retailers pay,” says NewRoads’ Himes. “If you can cut out 25% to 35% of those WIZMO calls you’ve more than recovered the cost of the product.” Some retailers receive up to three calls per order, analysts say. Furthermore, Himes says customer service representatives who spend their time taking calls from customers about their orders can instead be cross-selling and up-selling.

Himes adds that cost reduction isn’t the only advantage to automated notification. It also helps in maintaining customer relationships. “We’re all struggling with trying to translate the physical experience into the virtual experience,” he says. “And we all know customers are most frustrated when they can’t find out about their orders. Those are the details that our systems are able to provide to customers and it’s time to take advantage of that ability.”

UPS has been offering its Worldship software, which includes customer e-mail notification, for five years. It is a free add-on service for retailers who use UPS for shipping. Retailers have been slow to adopt it because UPS hasn’t made a great effort to push it and retailers have been more focused on the basics of getting online selling right. But that is starting to change as word gets around about the savings that retailers like GrooveTech and XDR2.com achieve. “E-mail notification costs pennies for the retailer to send and it provides a greater level of service,” says Alan Amling, director of e-commerce at UPS. UPS relies on vendor partners to incorporate Worldship into their e-commerce products. UPS also allows some of its larger customers, such as Lands’ End, to customize a tracking page that links to the UPS system.

Shaving costs

Third-party fulfillment and customer relationship management vendors are starting to tap into the need of the smaller retailer to keep up with the big ones, and so many are rolling out automated e-mail notification programs geared at small and mid-sized retailers.

Vendors who once focused only on their ability to pick, pack and ship quickly and efficiently today are moving more into the customer relationship management realm with notification services. Experts say it’s because the market is maturing and retailers are focusing on ways to keep a lid on fulfillment costs. They not only turn internally for cost savings, but they look to their vendors as well. “There is a trend towards shaving off fulfillment costs now that vendors have gotten the process down,” says Jim Bunn, senior manager of KPMG Consulting Inc.’s retail practice. The desire to shave costs has squeezed the margin on vendors and at the same time prodded them to look to other services they can add.

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And one of the ways they do both is by leveraging existing systems and data. “Retailers and vendors are collecting a lot more customer information now and they’re getting more sophisticated about how to use it,” Bunn says.

Everything and then some

PFSweb, for instance, used its e-mail notification systems to inform Roots` customers on a weekly basis of their order status. After taking orders for more than 400,000 berets, far beyond initial expectation of selling 10,000, PFSweb helped Roots keep its fulfillment process flowing. Layton points to the fact that fewer than 3% of orders were canceled as proof that customers were satisfied with the service.

Once retailers and vendors get the notification system well in hand, there’s no reason they can’t apply the instant-notice philosophy across the board, participants say. Boston-based SmartBargains.com, for instance, an online liquidator of high-end consumer merchandise, says it initially hopes to reduce costs by 10% when it implements APL Direct Logistics` Proactive Parcel Management product later this year.

But that is only the start, says Rich Secor, SmartBargains executive vice president. “Our philosophy is to give customers all the information they could possibly want, before they want it, so they don’t feel the need to contact our customer service department,” Secor says. “That philosophy applies to product information, service information, and anything else for which the Internet offers such a great advantage. Any time someone contacts our customer service department, it means we failed to provide adequate customer service.”

andrea@verticalwebmedia.com

Wireless may find its e-retail niche in customer notification

Online retailers have been trying to define the role of wireless devices in e-shopping. So far to little avail. The screens are too small to display and describe product adequately and the keyboards not easy enough for most consumers to input shopping, shipping and payment data.

Now some participants believe they have found the niche that cell phones and personal digital assistants will occupy in retailing: Delivering order status to customers. “There is a definite movement toward this,” says Mark Layton, CEO of Plano, TX-based PFSweb Inc. “Consumers will be able to specify how much and how frequently they want to be updated about orders.”

Vendors say consumers’ appetite for immediate gratification is increasing, which would make wireless delivery and shipping alerts a must for retailers concerned about customer service. “That’s why people shop online,” says Layton. And analysts agree there is value in even faster notification. “If I order flowers for my wife it’s more useful to me to be notified of when they are delivered, rather than having to rely on checking my e-mail to see when the flowers were shipped,” says Jim Bunn. senior manager of McLean, Va.-based KPMG Consulting Inc.’s retail practice.

Some already are rolling out wireless notification. UPS is expanding its wireless access to notification services so customers can get tracking information on PDAs and wireless devices. And Greenwich, Conn.-based NewRoads Inc. says its Customer Concierge technology that notifies customers about orders can be configured to support voice-response systems as well as text messaging. “People don’t appreciate how simple the wireless function can be,” says David Himes, senior vice president of business process solutions. “All we have to do is reformat the message to make it shorter and people just need to know their text messaging address.”

He may ride forever ...

On Dec. 18, college student Emily Peters logged onto Barnes & Noble.com to buy a couple of CDs as Christmas gifts. She was taking advantage of Barnes & Noble’s offer to get free two-day delivery with the purchase of two items. Two days later, one of the CDs arrived at her home in Evanston, Ill. Four weeks later, UPS delivered the other.

The Essential Oscar Peterson: The Swinger started its journey on Dec. 19 from Barnes & Noble’s fulfillment operation in New Jersey. It stalled at a distribution center in Ohio on Christmas Eve. On Dec. 27, it moved out to a major UPS sorting facility in Chicago. But once there, it made a U-turn and went back east. Over the next two and a half weeks, the CD got caught in an automated loop and traveled from Chicago back to Ohio four times before a customer service rep who had been asked to help solve the problem instructed a worker in the sorting facility to grab the package, put a hand-written label on it and send it back to Chicago. In the course of its odyssey, the package had been scanned by UPS sorting equipment 37 times.

The cause of the problem was a miscoded label. And when that occurs there is little UPS’s automated sorting equipment can do to flag the problem, says a UPS spokesman. While the scanners report information quickly, it’s not quick enough to keep up with the high speed conveyor belts, he says. Thus even if database information identifies a package as a problem, chances are the package will be on its way down the conveyor belt before the system could issue an alert, making it difficult to identify which package is being flagged, he says.

In any event, while frustrating to the buyer and the recipient, such an occurrence is rare, the spokesman says, noting that the service delivered 19 million packages on its peak day over the holidays, 29% more than on an average day throughout the year. Thus investment in technology to flag a package that has been scanned over a certain threshold probably would not have a great payback, he says.

Meanwhile, when Barnes & Noble.com went back to its inventory to ship another copy of the errant CD, it found it had sold out. An executive in Barnes & Noble.com’s New York headquarters finally located one at Barnes & Noble’s Lincoln Center store and sent it at no cost to Emily. It arrived a week before the original order.