Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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Most clients pay a per-transaction fee of 40 to 55 cents, although some retailers that have relatively few, higher-ticket orders pay a percentage of revenue, says Donny Askin, OrderMotion CEO. The average retailer using OrderMotion spends $13,000 a year, he says.
The outsourcing decision
Whether to license software and maintain it in house or use a hosted system like OrderMotion or GSI is among the first decisions facing a retailer considering an order management system.
Proponents of hosted systems, such as Maris Daugherty of consulting firm J.C. Williams Group Ltd., argue that they provide retailers with better technology with lower upfront costs.
Frank of LA Police Gear considered a hosted system and decided against it, fearing disruption of his Internet connection would shut down his business. With the system in house, he says, he can still take phone orders and produce pick tickets for his warehouse even if his Internet connection goes down.
But Kent Krueger, vice president and part-owner of online pet supply retailer SitStay.com has no such fears. Having both his web site and his order management system hosted by specialists frees him to focus on his business, not on technology, he says. “I’m not in the data management business,” says Krueger, who is using OrderMotion software. “I’m in the retail business.”
Once decisions about budget and outsourcing are made, each retailer must figure out which features are essential to its business.
For Coggins Promotional Advertising, which sells items such as caps and umbrellas with corporate logos for marketing use, the system had to accommodate the many ways businesses pay. That can include setting up budgets that salesmen can draw on to buy items they need. InOrder provided that functionality as well as Coggins’ other requirements.
In many cases, what’s key is being able to integrate an order management system with another system. For Cowgirl Creamery, a cheesemaker that ships exclusively via FedEx, easy data exchange with FedEx was essential, says Maureen Cornelia, mail order and online sales manager.
The San Francisco-area company chose Mail Order Manager after several other food retailers told Cornelia they used the Dydacomp software. Just being able to easily provide a customer with a FedEx shipping number, rather than sifting through paper orders to find it, made the 2006 holiday season easier, Cornelia says.
For Toys 2 Wish 4, which sells on Amazon.com, a big benefit of the Stone Edge system is its integration with software from WrinkleBrain Inc. that automates the updating of inventory on Amazon, says Jan Lawrence, president of the toy retailer, which also has two bricks-and-mortar stores.
As its sales have grown, LA Police Gear finds more suppliers asking that it order through electronic data interchange, a standardized format for business communications. Frank says he is negotiating with Stone Edge and his suppliers to share the expense of adding EDI functionality to the Stone Edge software.
The flexibility to add revenue-generating features is important for Hardiman of Charming Interactive. He wants a system that can interface with customer records so he can provide personalized offers and handle complex promotions, such as a coupon on top of an employee discount.
Better use of data
Retailers also want to make use of the data an order system accumulates. Krueger of SitStay.com says one topic of discussion at a recent OrderMotion user group meeting was the need for an improved report writer so retailers can more easily design custom reports that draw on order data. OrderMotion says it’s working on that request.
For Systemax Inc., which assembles personal computers and sells mostly to businesses, a key requirement was a single system that contained information about all its products, customers, orders and sales, rather than having that data split into several databases. When the company could not find a system that met its needs, it set out four years ago to build one, and for the past two years has marketed it under the name ProfitCenter Software.
Richard Leeds, CEO of Systemax, says the system ensures consistency of data. For instance, while regional and national sales managers normally want to see only summary data, if the CEO wants to see exactly what was shipped to whom at what price, the data is in the system.
“I can drill down to the minutest detail, and it all matches because it’s all out of one database,” Leeds says. ProfitCenter has signed up 39 external clients, although most will not go live until next year, says George Winter, executive vice president.
Among the earliest to sign up was Ken Bain, president of Mary of Puddin Hill, a manufacturer of pecan fruit cakes and other treats that sells online, through a catalog, through one permanent store and some seasonal stores in malls. He wanted an all-encompassing system like ProfitCenter so that different vendors would not point fingers at each other when problems arose. The web-based system would also allow him to quickly set up a store in a mall and have ready access to available inventory.
But the ProfitCenter software was designed for a business-to-business manufacturer, and implementing it at a business-to-consumer company like Bain’s has gone slowly. He signed a deal last fall, committing $120,000, and expected to go live in February. Now PCS is promising a September implementation date, too close to the holiday season for Bain’s comfort.
Experiences like that underscore the wisdom of a retailer consulting with other merchants before making a buying decision. One way to do that is to ask a vendor for access to its online user group, says Donald Bizzaro, senior marketing representative for Morse Data, which markets the InOrder system.
“That’s where you’re going to learn what it’s like to own the package, because those people are totally honest,” he says. “If there are any dirty secrets, that’s where they’re going to be.”
While there will be glitches in almost any new system, most retailers say their investments in order management have paid off.
Krueger says warehouse productivity has improved 50% because OrderMotion sorts orders more efficiently. Coggins says order accuracy has improved with InOrder, and he now has real-time visibility to his inventory. Stone Edge has a feature that prevents double filling of orders, “which really comes into play at Christmas or whenever your busy season is,” says Lawrence of Toys 2 Wish 4.