BENCHMARK 2000: OPERATIONS

To satisfy customers’ need for near-instant gratification, many catalogers are investing in technology to provide better, faster service. For instance, among respondents to Catalog Age’s 2000 Benchmark Report on Operations, 60% offer an online ordering option, and more than 35% say their transactional Website is integrated with their catalog management systems. On the other hand, few respondents have invested in other fulfillment technology. More than 66%, for example, don’t use barcodes in the distribution center. And only 6% use computer telephony integration (CTI) in their telemarketing facility. Even fewer (3%) use radio frequency (RF) for inventory management.

ORDER PROCESSING

Not surprisingly, 77% of the total respondents provide an inhouse toll-free telephone number for customer orders. That includes 89% of consumer respondents, 85% of business-to-business marketers, and just 50% of hybrid companies (those that sell to consumers and businesses alike). But quite a few respondents still expect – or encourage – the customer to pay for the call, considering that nearly half (48%) provide an inhouse toll line for orders.

Twenty-four-hour phone ordering is hardly the norm among survey respondents. Just 11% overall (20% of consumer mailers, none of the b-to-b marketers, and 5% of the hybrids) provide 24-hour ordering lines, although many no doubt accept overnight orders via fax, Internet, or e-mail.

CUSTOMER SERVICE

Customer service should be top of mind for catalogers, but only 29% staff service lines up to 18 hours a day. Most b-to-b respondents (85%) staff their service lines 8-10 hours daily, compared to 63% of consumer respondents and 53% of hybrids. More hybrid respondents (32%) staff their service lines between 11-18 hours a day than consumer marketers (28%) and b-to-bers (15%).

With fierce competition from retailers and e-tailers, it’s customer service that will set catalogers apart. And 82% of respondents say their order-takers are cross-trained to handle customer service, with b-to-bers (85%) more apt to have their order-takers perform double duty, followed by hybrids (84%) and consumer respondents (79%).

INVENTORY MANAGEMENT

The mean initial inventory fill rate that respondents aim for is 93%, and the mean initial fill rate achieved is 89%, both of which are about the same as last year’s respondents. For the mean final fill rate, respondents aim for 95% and achieve a mean of 93%, compared to 96% and 95%, respectively, last year.

Catalogers talk a lot about the importance of controlling back-end costs, so it’s somewhat surprising that only a third of total respondents use barcoding. Of those that use barcoding in the warehouse, 29% of respondents said they use it for shipment processing and 13% for inventory tracking, while 8% use it for order processing, and just 5% use it as a benchmark for tracking productivity of pick/pack workers.

In addition to controlling back-end costs, getting rid of excess merchandise is a constant challenge for catalogers. Internet sales – an option not available just a few years ago – are the most popular liquidation method this year, used by 46% of respondents. Rounding out the top five liquidation methods are catalog inserts (45%), special sale catalogs (42%), donating to charity (40%), and package inserts (39%).

FULFILLMENT AND RETURNS

While third-party fulfillment may be popular for Web-only businesses, traditional print catalogers still favor handling fulfillment inhouse. Just a scant 4% of respondents find outside help when it comes to fulfillment.

Good help is hard to find, especially when it comes to warehouse workers. The percentage of returns that result from internal errors, such as picking and packing errors or clerical mistakes, as opposed to customer dissatisfaction has increased over the past few years. The mean percentage of returns due to internal errors this year was 20% – that’s up from 17% last year and 11% in 1998. Catalogers can save money by more closely scrutinizing picking and packing procedures – especially when training new hires – and therefore reducing returns.

Apart from the cost of processing the return, the majority of catalogers pay the postage for the returned item as well. When the customers return a product because of a mistake on the cataloger’s part, 57% of respondents pay the postage for the returned merchandise. Another 16% indicate they always pay for returned merchandise, regardless of the reason for the return.

If they can, catalogers try to liquidate returned items using the same methods as getting rid of general overstock. Most (55%) restock returned goods in hopes of selling them again, while 31% return the stock to the vendor, if possible, and 24% resort to destroying returns that can’t be resold. Nearly 17% use warehouse sales and their Websites to liquidate returns, while 16% rely on package inserts, and 15% try to move returned items in their outlet stores.

While most catalogers handle fulfillment inhouse, and only a small percentage contract out for fulfillment services, some marketers drop-ship merchandise, or have the merchandise vendor ship the goods directly to the customer. Business catalogers appear more likely to drop-ship: b-to-b respondents say that a mean of 23.7% of dollar sales comes from drop-shipped items. Consumer respondents report a mean of only 6.8% of dollar sales from drop-shipped items, and for hybrids, a mean of 18.9% of sales come from drop-ships.

Whether fulfillment is handled inhouse, outsourced, or done via drop-shipping, most consumer marketers offer gift wrapping. Of the 29% of consumer respondents that gift wrap, 52% don’t charge for it;19% charge up to $3; 19% charge $3-$5; and 11% charge more than $5 for gift wrapping.

Global marketing is a hot topic, and thanks to the Web, many catalogers are getting international orders without even trying. Once you get the order, though, you have to fullfill it to an overseas market – and few respondents are set up to do so with local operations. Of the 77% of respondents that ship overseas, 85% fulfill all international orders from the U.S, while about 16% fulfill most of their overseas orders in the U.S. That means that none of the respondents fulfill all their overseas orders from overseas facilities.

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