E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
When Celestial Seasonings launched its e-commerce initiative last year, the country's No. 1 seller of herbal teas neglected to electronically link its Web site with its customer service software. Consequently, every time someone ordered a few boxes of peppermint or mountain chai tea online, an employee had to type that information into Celestial Seasonings' computer system so the company could send the customer information on the availability of their order.
As with any manual data entry process, sometimes information was typed in wrong, causing customer service headaches, says Steve McKown, director of information technology at Boulder, Colo.-based Celestial Seasonings.
Today the company is rushing to fix the problem. It is overhauling its site and setting up computer system interfaces to eliminate any need for manual data entry. The upgrade must happen quickly because while Celestial Seasonings started small on the Web-processing only 100 orders even on peak days-its goals for 1999 are much bigger. With an increased marketing push, the company hopes to drive online sales from $250,000 in 1998 to $5 million this year, most of which could come in the busy holiday selling season.
With the fourth quarter fast approaching, the clock is ticking for many Internet retailers in need of back-end systems integration. Under normal circumstances, it takes large retailing companies a year to 18 months to plan and implement a major information management project. But because the holiday shopping season is so vital, online retailers are scrambling to complete their systems integration work in record time. "There is a very high sense of urgency," says Kristin Gillespie, vice president of marketing for Evergreen Internet Inc., a Chandler, Ariz., e-commerce software developer.
In their frenzy to start selling on the Internet, most merchants focused on building glitzy electronic storefronts instead of figuring out how the technical aspects should work once customers began to place orders. Now merchants of all kinds are having to retreat and build links between their e-commerce Web sites and their back-end business systems to create smooth electronic pathways for information to follow.
Few e-commerce sites are well integrated with their business systems, according to an IBM analysis. Excluding new e-commerce players, less than 50% of sites will have some level of integration by year's end, according to Dan Liederbach, IBM's director of e-commerce marketing.
Tracking the buzz
Problems resulting from the lack of integration began to arise last year. During the 1998 holiday shopping season, some companies resorted to printing hard copies of orders and faxing them to suppliers. In many cases, the results were big delays in shipping orders and angry phone calls from shoppers complaining about poor customer service.
As the volume of Web shopping increases, the problems can only worsen, so retailers have to focus on solving systems integration problems now. "The buzz last year was about channel conflicts and the front-end, such as one-to-one marketing and gee-whiz techniques on the front door," says Jim Daniell, CEO of OrderTrust, a Lowell, Mass., order-processing network. "This year, the buzz is about back-end integration."
The most important back-end applications that retailers have to link to their Web sites include order processing, fulfillment, inventory management, customer service, accounting and merchandising systems. But few e-commerce products come integrated from the start, and there's no such thing as an industry-wide standard. "It is an age-old problem: Software systems developers design packages that fit a narrow application," says Frank Andryauskas, principal of CFT Consulting in Florida. So to interface software programs to a Web site, programmers have to write customized software code that links the commerce server to each back-end application.
The first step retailers should take in getting the job accomplished is to put an overall integration plan in place. Retailers should also ask themselves what applications will be most important when their Internet business matures. As an e-commerce business grows, it can require stronger ties to core business systems, says Karl Salnoske, general manager of IBM's e-commerce division, which in April introduced a product called Commerce Integrator to link different computer platforms. "While e-commerce can start simply, it quickly becomes more demanding as a company seeks to serve a greater range of customer needs online."
Sparks.com is finding that to be true. The San Francisco-based greeting card retailer launched its site in a whirlwind of good ideas and strong financial support last year. But its original systems integration work, which "was great for getting us up fast," in the words of CEO Felicia Lindau, is not holding up as the company wants to expand such features as personalization.
Now Sparks.com's chief technology officer is working with more than half a dozen staff engineers as well as about 10 outside contractors to better integrate its computer systems. Sparks.com is racing to finish the integration before the fourth quarter swamps the company. "It's just a matter of getting it done," Lindau says.