But the social network’s advertising revenue grew 18.4% during the quarter.
They started as catalog merchants, but pet supplies retailersDrs. Foster & Smith are morphing into web merchants.
It wasn’t exactly an epiphany that made Dr. Race Foster, a veterinarian and co-founder of Drs. Foster & Smith Inc., realize that the company’s days as a catalog-only operation were numbered.
Rather, it was the growing number of sales resulting from Drs. Foster & Smith’s early and aggressive move into Internet retailing and the chance to use the web to better manage all of the company’s distribution channels, including eight pet supplies catalogs, that made Foster realize the company’s growth was clearly tied to e-commerce.
Today, Drs. Foster & Smith generates about $85 million, or 45%, of sales from the Internet and expects the web to account for as much as 60% within two years. “We originally viewed the Internet as just another way people could order from the catalog, but it didn’t take us long to change our minds,” Foster says.
New web resources
As Drs. Foster & Smith looks to maintain market share in the $400 million online pet supply business and compete even more effectively against bigger chain retailers such as Petco Animal Supplies Inc. and PetSmart Inc., the company is dedicating additional resources to its web business, which includes its core e-commerce site, DrsFosterSmith.com, and three pet owner companion sites: PetEducation.com, LiveAquaria.com and eTropicals.com.
Drs. Foster & Smith bills itself as the nation’s largest and most comprehensive pet supplies cataloger, publishing as many as 40 million catalogs annually. For now, Foster says the company isn’t planning on making significant changes to its catalog operation. “We’ve been in business for more than 20 years and have been fortunate enough to build one of the most trusted names in catalogs,” Foster says.
But it’s clearly Internet retailing and greater web utilization to more closely integrate its multiple shopping channels, including a store, that are driving the company’s growth and sales. “Once we reached about $65 million in web sales and realized that we could improve operating efficiencies without sacrificing customer service, we knew the Internet would become our main sales channel,” Foster says.
Today more than 1.5 million monthly visitors click on DrsFosterSmith.com to shop for more than 16,000 items in almost a dozen categories covering everything from pet food and squeaky toys to flea collars for dogs and cats, and aquariums. An additional 80,000 pet owners, pet health care providers and animal lovers visit a companion site, PetEducation.com, each day to access an archive of nearly 3,000 articles and other content on animal health, medical conditions, pet care and pet wellness topics.
A seamless experience
“We are a good catalog company and a good Internet company and now we need to become one to present a more seamless shopping experience to the customer,” Foster says. “You can have great educational subject matter on your web site and great merchandise both on the Internet and in the catalog, but those two factors alone won’t keep customers coming back if it’s not easy to order or we don’t have truly integrated customer service.”
To create a single company across online and offline channels, Drs. Foster & Smith is investing more than $2 million in initiatives such as integrating all e-commerce applications and databases into its back-end order management systems to create streamlined shopping. The company is also overhauling its e-mail and search engine marketing program and developing new applications and procedures that will expedite merchandising.
Customer service integration starts with the order. Like many catalogers who moved to the web, Drs. Foster & Smith started out processing all online orders manually, re-typing into the company’s order management system all the information the customer had entered into the online order form. At the company’s two Wisconsin call centers, a customer service representative could sometimes spend as much as 4 minutes entering just one order. The time-consuming process of having call center employees enter on average 2,250 daily Internet orders into Drs. Foster & Smith’s order management and fulfillment system, coupled with the time spent correcting mistakes on already-entered information, resulted in the company spending as much as two days processing, packing and shipping an order.
Now, as the importance of the web site has grown, the company is automating the process. A team of Drs. Foster & Smith web developers and information technology managers spent three months developing a web order interface application that links directly to the company’s legacy-based order and inventory management systems. The interface application scans all pending web orders and automatically submits eligible orders into the legacy system. Any web orders requiring human assistance are flagged and brought to the attention of a customer service representative, who manually corrects the mistake.
Out the door
Today about 70% of web orders are entered into the streamlined order management system and Drs. Foster and Smith is cutting at least 12 hours, and in some cases, almost an entire day, off its product shipping time. It’s another example of how the web is changing the way traditional catalogers such as Drs. Foster & Smith operate. “This new program allows us to reduce our order processing time,” says Joseph Voellinger, Internet marketing manager. “This ensures we can maintain the goal of getting all orders out the door within 12 hours of receiving it.”
Drs. Foster & Smith was an early believer and user of the Internet as a new merchandising channel. In 1998, a year before now defunct Internet retailers such as Pets.com spent $50 million on sock puppets and Super Bowl commercials hyping the ease and convenience of purchasing pet supplies online, Drs. Foster & Smith launched an e-commerce site that quickly amassed a core audience of loyal customers. Within two years, DrsFosterSmith.com was producing about $800,000 in monthly sales and monthly traffic of 125,000 visitors. “We learned pretty early on the value of promoting the web site in our catalogs and telling customers how easy it is to place a catalog order online,” Foster says.