How Replacements looked in-house to serve a volatile inventory of china to web customers
By Mary Wagner
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 greens
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.
The solution grew out of Replacement’s existing e-mail marketing infrastructure. The company depends on e-mail and paper mail to deliver price information to customers as it doesn’t list prices on the web site for the top 5,000 patterns featured there, which represent 70% of inventory. That’s partly for competitive reasons, says Whitley, and also because prices fluctuate with supply and demand. Prices are based on a complex formula that also factors in historical sales data on each china, silver or crystal pattern. “We don’t go 50 or 100 items deep in every SKU,” says Whitley. “We may just have three or four. So the algorithms that we have to run to price the merchandise times a million SKUs is pretty mind-boggling.”
Daily snapshot
Mind-boggling, and for now, impractical to put on the web in real time. Instead, Replacements gets pricing information to customers by sending them mail and e-mail updates on the inventory status of their registered patterns as inventory changes. “Those updates are generated every night based on what has gone out and what comes in. They take a snapshot of our current inventory from the system,” says Whitley. “We thought, why not take those pages and write a script that converts them to HTML and then automatically publish them to our web site in the early morning hours?”
Now, as soon as the back-end system reads new inventory data based on sales or new arrivals, it automatically updates the customer mailings and e-mails being prepared for distribution that night, then pushes the pages to the web site. Each morning, when customers access the site, they see inventory levels no more than 24 hours old.
The enabling script was written in-house in Dream Weaver. Under the “more functionality at less cost” challenge, Whitley’s in-house IS team has used the authoring tool multiple times over to enhance the site while keeping costs down.
They’ve been able to speed downloads, for example, by lightening up pages versus paying for content acceleration. “We served 2.6 million pages in August versus 1.4 million a year ago,” he says. “But that data transfer—the amount of data that had to be served up with the pages—only went up to 62 gigabytes from 58 gigabytes, a very small increase. That’s because we were able to write pages that are extremely clean in terms of code, so they load faster, are easier to view across more browsers, and take fewer server resources to serve up correctly.” The cost? Staff time, and six software licenses—one for each web developer—at about $600 each.
Replacements doesn’t transact most of its sales online, but the web is emerging as its most cost-effective marketing tool and its biggest source of new customers. Through tracking codes attached to every shopper file, the company segments customers as they’re added to its database according to how they arrive. Last year, it added more than 198,000 new customers directly from the web site, about 25% of the year’s 800,000-plus new customers. Some 51,000 new customers learned of the company from print ads that year, a few hundred thousand were added from lists acquired at other companies, and the rest came from an affiliate program and other means.
The number of new customers who come through the web site will be even larger this year, says Whitley. “We’re on pace for that to be the number one source for adding new customers to the database,” he adds. “The power of that is the cost is fairly low and we can measure our return very accurately.”
The ultimate goal
As customers’ expectations rise, so will the web-site capacities of Replacements.com. Registered customers already can click through to buy specific items on e-mails received from the company. If Replacements eventually decides to put its entire inventory on the web—not just the 5,000 top patterns—or if it wants to let customers mange their own profiles on the web, the necessary architecture is already in place. Bringing its 1 million SKUs and 4.2 million customers together on the web in real time is, Whitley says, the company’s ultimate goal and challenge. But for now, he says, the company’s web development is exactly where it should be, for while the site is designed to get users to their pattern in one click, the demand for online ordering is not pervasive.
“For our particular business, we think we’ve proceeded
at the right pace,” he says. “We’ve used the web for lead generation and e-mail
marketing, which didn’t warrant large investments. We offer a form on the web
for people to use to get the price list from us if they want to order from the
site. We’re using that as a gauge to tell us when to make the larger expenditure
on the e-commerce database.”
mary@verticalwebmedia.com
