E-tailers look to make good on order fulfillment

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by Jessica Davis

(IDG) -- Let's face it, almost every holiday season is make or break for retailers. But in the e-tailing industry this year, one might say the stakes are higher than ever before.

Much like Santa's elves, technology organizations at consumer e-commerce sites have worked all year preparing for this time when most orders are placed and delivered. Many are trying hard to avoid that chunk of coal bestowed upon them last season, when embarrassing failures of their order-fulfillment systems saw customers receiving holiday gifts in January.

Next week the test of their work to fix those systems begins in earnest with the official start of the holiday shopping season. It's likely to be a tough test, as analysts expect more consumers to shop online.

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Taking the lessons learned from last year, many e-tailers, including Macys.com and eToys.com, have revamped their systems and are employing a variety of different strategies.

For e-tailers that also have brick-and-mortar stores, flawless fulfillment has come from keeping a dedicated inventory for the online operations.

Macys.com struggled with fulfillment problems last year, switching to separate inventories for this year's buying season.

"In the early days of Macys.com the merchandise was picked from a store and shipped from the store to the customer," said Jim Sluzewski, a spokesman for San Francisco-based Macys.com. "This will be the first year that all online order merchandise comes from our distribution center. This gives us a better way to track the merchandise."

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Seattle-based Nordstrom.com, which has enjoyed fulfillment success, has kept separate inventories since the inception of its catalog business in 1993. The retailer handles apparel fulfillment -- 80 percent of its orders -- via its own warehouse in Cedar Rapids, Iowa. Fulfillment for its shoe business is outsourced to iFulfillment or provided directly by its wholesale shoe vendor.

"Our biggest problem is that we have such a broad range of items, 340,000 SKUs," said Paul Onnen, CTO of Nordstrom.com. "We have created this three-tier fulfillment model to handle it all."

By 2002, however, Nordstrom.com's CTO plans to create a Web-based perpetual inventory system to link the online/catalog and store inventories.

"A lot of the brick-and-mortar people have gotten their acts together," said Chuck Poirier, co-author of the book E-Supply Chain, which will be published in January. "Keep your eye on Nordstrom."

Santa Monica, Calif.-based eToys, an online-only retailer, also ran into fulfillment problems last year. According to the company, many of the botched orders last year were because of its fulfillment outsourcer.

To fix its problems, eToys is moving all fulfillment systems in-house this year into more than 2 million square feet of warehouse space in East Coast and West Coast hubs. The company estimates that the facilities can support as much as $1 billion in annual customer orders.

E-tailers that had the most success in order fulfillment last year are those that came from mail-order catalog roots.

"The back-end business for catalogs and e-commerce is very similar," said Shelley Nandkeolyar, vice president of the e-commerce division for San Francisco-based Williams-Sonoma. "It's about packing, shipping, and getting the order out to the customer on time."

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E-Toys Inc.
Nordstrom Inc.
Macys.com

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