Short Takes

Jun 01, 2001 9:30 PM  By

Trapeze Artists

It takes more than a leotard and a swing set to leap into e-commerce. From running brick-and-mortar stores to integrating systems to fulfilling online orders, retailers must jump gracefully from one role to another under the multichannel Big Top, handing off tasks precisely and landing without injury.

Cost and technological complexity make online retailing something like a lion without a tamer. Most of the 159 respondents to “Retailing in E-time,” a joint RIS News and Computer Sciences Corporation study, are poised to expand their companies’ Web strategies, but it’s not a simple prospect. The Internet continues to affect the retail industry both positively and, as the study points out, like “a monster that is reaping havoc with traditional retail formats and business models.”

According to the survey, conducted in 2000, improving supply chain operations and satisfying online consumer demands for value are top retail priorities. To improve and develop their existing systems to deal with e-commerce, one-third of the respondents have opted for software packages. About one-fourth have chosen to build custom solutions or use stand-alone applications, and about 17% prefer to use ERP software.

Although 78% of responding retailers had Web sites, 13.2% did not, and only 8% of those who did have had a site for more than four years. Fifty-five percent of the companies with Web sites outsource operation and maintenance. That figure may account for the remarkably small number — 10.5% — of respondents who say that their Web sites are fully integrated into their corporate infrastructure.

In spite of the promise of Web technology for streamlining business-to-business communication, 57.3% of respondents claim that they do no Web-based business at all with trading partners. Among the explanations offered for this kind of lag is the idea that the difficulty of setting up proprietary EDI relationships has promoted a sort of neo-Luddite backlash. Still, 57.3% of respondents also expect a significant increase in B2B trading volume by the end of 2001.

Providing adequate fulfillment services is the single largest concern of these online retailers, along with attracting customers to their shopping sites and, not surprisingly, hefty start-up costs. The largest companies surveyed are more concerned with security issues than they are with the start-up costs that seem like the biggest hurdle for retailers with $101 million to $500 million in revenue. Smaller companies tend to focus on attracting customers as a key objective. As merchants add more online retail operations to their repertoire of tricks, we can expect retailers to engage in increasingly ingenious feats of skill and dexterity to please the audience.


The Red and the Black

Extracting a profit from the Web these days seems like squeezing blood from a turnip, but some companies claim they’re not seeing red. The black ink is just starting to flow, according to respondents to a recent survey by RIS News and Consumer Goods Technology. Seventeen percent of the companies surveyed look forward to a positive net income by the year’s end, and 8% hope to reap profits by the end of 2002.

The report, titled “Consumer-Centric Benchmarks for 2001 & Beyond,” analyzes the results of an e-mail survey of 7,500 readers of the two magazines. Of the 183 respondents, 39% focus on consumer goods marketing, 30% on store-based retailing, 19% on e-tailing or other, 9% on distribution/wholesale, and 4% on direct marketing.

The majority of consumer goods firms (89%) operate a Web site. Forty-two percent of respondents sell directly to customers over the Internet, while 23% sell only to retail buyers online. Fears of cannibalization appear to be subsiding — 67% of the retail respondents report no conflicts with consumer goods suppliers or plan to take little action beyond protesting.

Over 20% of consumer goods companies report that they run profitable Web sites. Among all respondents, 14% are still paying back initial e-business development costs, while 8% are making money but don’t expect to earn enough to offset online set-up expenses. Around 16% of both retailers and consumer goods merchants indicate that they are not profitable now, nor do they expect to be in two years (although many of them use an online presence strictly as a marketing tool).

What’s disturbing is that a large chunk of respondents, 37%, say they don’t know whether their Web operations are profitable. Maybe it’s time to read the manual.

For more information, contact Mark Frantz at mfrantz@edgellmail.com.


Call It Growth

Remember when a phone call was just that? Now it’s tied to customer service, sales, multichannel marketing, and what have you. Companies will spend $240.5 billion on teleservices in 2004, an average annual increase of 13%, according to a recent Industry Map report by New York City-based Winterberry Group.

Teleservices comprise outbound sales, inbound order taking, and customer service. In 2000, spending on the inbound portion accounted for 52% of the total, or $76.7 billion out of $147.7 billion. Because of pressures to provide superior customer service, merchants will hike their spending on inbound teleservices by more than 18% a year; the sector will account for 62% of the total by 2004. Pressure to keep up with technological advances will fuel outsourcing of teleservices, with third-party providers expected to constitute 15% of the market, or $35.6 billion, within the next three years.

Other trends documented in the Winterberry report, titled “Teleservices Industry: Multichannel Marketing Drives Universal Call Centers,” include transformation of the traditional call center into a complex multichannel contact center and proliferation of multilingual contact centers. High employee turnover continues to plague teleservices — an average annual turnover rate of 35% costs the industry $5 billion a year.

For more information, call Marilena Balbi at (212) 842-6031 or e-mail her at marilena@winterberrygroup.com.