IDG Capital Partners has invested in 18 Chinese e-commerce startups this year.
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Bodyflash.com, a jewelry and accessories site in business only five months, works with 20 manufacturers that drop ship orders directly to customers. Bodyflash processes more than 100 online orders per month-manually up to now. Yet with sales goals edging toward $2 million by the fourth quarter, Karen Post, the company’s president and cofounder, has put order management software on her wish list. In fact, Bodyflash hopes to close a deal with OrderTrust in the next several months. For now, Post says, the manual system can handle up to four times the current order volume. But with no automated system in place and a small staff that also functions as the call center, Post concedes, “I think if we got really, really busy, that’s something that would keep me up at night.”
OrderTrust, formed in 1995, was one of the first back-end order management software systems to stake its flag in the sand. But it didn’t take long for the space to fill up. “A year ago, when we looked at order processing houses, there was one company,” says Forrester’s McCullough. “Now there are about 15 companies like that, and they’re all growing at about 300%. More and more e-retailers are realizing that they have to put an emphasis on the technologies that help them keep connected and serve customers.”
Another software vendor, Smith-Gardner, has automated direct-marketing sales for retailers since 1988 and branched into e-commerce fulfillment in 1997. Its Web-enabled applications go beyond back-end management to integrate real-time support of front-end sales and customer service for retailers selling online and in other channels. “Fulfillment has been a real learning curve for retailers new to the direct sale model of the Internet,” says Sharon Gardner, vice president of marketing. “When a lot of them get past focusing on the front-end and realize they need a distribution system, they go out and find a warehousing partner or a warehouse management software system. But they’re still missing the middle order management piece that follows the entire life cycle of the order.”
That missing piece caused chaos in the warehouse at American Musical Supply, a Midland Park, N.J.-based supplier of instruments and accessories, says chief operating officer Peter Rubacky. Until two years ago, the retailer and cataloger made do with an order management process spliced together using various software. But a growth spurt and a move online was taxing the system beyond its limits. “Our volume was being capped by the number of brush fires we had to put out every day,” says Rubacky. “Reps would call in to make someone actually check to see if the product was stocked and on the shelf-they didn’t believe the inventory numbers. They’d even come over and check themselves.”
Online sales promised to exacerbate the problem. “In the catalog environment, if something is not right you have someone there on the phone to track things down and act as the customer’s advocate. But when things aren’t working on the Web site, it’s a less forgiving environment,” says Rubacky.
The company went on the Smith Gardner platform for its catalog operation in 1998 and added a Web Order for its online business in 1999. The result? “We’ve been able to ship every order, every day-that alone is what’s helping the business grow,” says Rubacky.
Catalog fulfillment veterans also have entered e-fulfillment, claiming the expertise of decades. But some e-retailers aren’t convinced that experience guarantees success online. “You walk into a catalog warehouse and it looks like what you need to do for e-commerce, but e-commerce is a very different animal,” says Gerry Brunk, vice president of business development at Indulge.com, a luxury goods retailer launched last year. “A lot of fulfillment providers claim they have the technology to support e-commerce, but when you look under the hood, there’s nothing there.”
In choosing SubmitOrder.com, Indulge picked a company spun off by technology distributor Digital Storage. SubmitOrder handles traditional warehousing functions such as receiving, inventory, storage, and pick, pack and ship-but with a twist. Based on forecasting models, clients’ inventory is kept on a “forward pick” location for easy picking-not on pallets or racks as a traditional warehouse would do.
That Cartier watch you ordered from Indulge? It sits inside a caged, high-security area until the shipment is ready. But don’t expect it to show up in the same package with the Petrossian caviar you ordered at the same time. Lower-volume, perishable goods are drop-shipped from the supplier. It’s all handled by automation-and within 24 hours-a goal SubmitOrder was largely able to meet during last year’s Christmas rush, when its distribution centers handled 8,000 to 10,000 orders a day.
With that kind of demand, e-fulfillment technology is critical-undoubtedly a reason why Keystone Fulfillment recently changed its name to Keystone Internet Services. The switch reflects its investment in the needed tech platform. But technology wasn’t the issue last October, when Fogdog signed up with Keystone, a sister company of cataloger Hanover Direct. The draw was fulfillment experience.
“We started out as a Web development company,” says Fogdog’s Komanduri, “so we’ve built our own systems for order management. We’ve grown it to match the scale of our business. We have yet to find a software vendor out there who has what we need.”
Fogdog, which works with more than 40 fulfillment sources, including manufacturers and distributors, needed help in making sure products keep flowing once holiday volumes begin to build. Keystone handles most of the retailer’s owned inventory.
The sporting goods industry is fragmented and serves many niche markets. Fogdog’s manufacturers know their products, but aren’t necessarily geared to ship direct to consumers. So the e-retailer is identifying those with potential problems if volume soars. “We’re working with Keystone to get our projections as close as possible,” says Komanduri. “They’ve got a good idea of the December spike in relation to normal business. They’ve added value by forcing us to look beyond our normal planning window. In the past we looked ahead six months. Keystone convinced us to look nine months or a year out.