A fulfilling opportunity

Jan 01, 1999 10:30 PM  By

As the Internet becomes an increasingly viable sales channel, catalogers such as Fingerhut, Hanover Direct, and Stark Bros. have begun providing back-end services to Web-only marketers.

Many online-only catalogers, most of which are relatively new, don’t want to incur the cost of maintaining a warehouse or storing merchandise. “Typically, because of high labor or operating costs, maintaining a warehouse becomes too costly for companies,” says Wayne Teres, president of Framingham, MA-based Teres Consulting. For these e-marketers, outsourcing their fulfillment operations is a cost-effective solution; for traditional catalogers that already have their own warehouses, it is an opportunity to increase revenue.

Minnetonka, MN-based general merchandise cataloger Fingerhut launched Fingerhut Business Services (FBS) in 1997 “as a one-stop shop providing back-end fulfillment services for Internet marketers,” says FBS president John Buck. “Because [clients] don’t have to invest in all that infrastructure, they can focus on the marketing, merchandising and customer service.” FBS’s 10 clients include floral marketer PC Flowers & Gifts, of which Fingerhut owns nearly 20%.

Another multititle mailer, Weehawken, NJ-based Hanover Direct, is also offering its back-end expertise to online catalogers. In November, Hanover partnered with Internet search engine Excite to create an online shopping mall that will feature Hanover titles such as apparel books Tweeds and Austad’s, and Web-only marketers such as wine merchant Virtual Vineyards and gifts marketer 911gifts.com. Under terms of the partnership, Hanover will provide fulfillment services for mall merchants through its Keystone Fulfillment subsidiary in Keystone, PA. “The distribution center is centrally located, our work force is highly trained, and our systems platform is set up to fulfill for multiple operations,” says Hanover president/CEO Rakesh Kaul.

And Kaul is banking that Key-stone will eventually fulfill for other Internet merchants beyond the Excite partnership. “We’re comfortable that we can create a service business providing back-end support for other online retailers. This is a business that will grow over time,” he says.

Few changes necessary Indeed, for large catalog companies already fulfilling merchandise for a number of titles, providing third-party fulfillment lets them make more money without having to make much of an investment.

Louisiana, MO-based horticultural marketer Stark Bros. Nurseries, launched its third-party fulfillment services division back in 1984. In 1989, it expanded beyond fulfilling for horticultural marketers to provide services for apparel, crafts, and hard goods catalogers such as gifts and tools marketer Tools for Living. In 1997, Tools for Living launched a Website, and Stark Bros. (which was bought by multititle cataloger Foster & Gallagher in 1994) jumped at the chance to fulfill its online orders.

“We’ve seen a rise among our clients asking for Internet fulfillment within the last 18 months,” says Jack Alexander, vice president of operations for Stark Bros. And expanding its fulfillment services to meet the needs of online marketers hasn’t required radical changes, he adds. “We’re equipped to handle batch loading,” so that each day clients can send an electronic file listing that day’s orders. “Or we can provide an online, interactive option that can interface with an existing site.”

And as more and more marketers realize the selling potential of the Web, the number of print catalogers fulfilling orders for Internet marketers will only increase. As Hanover’s Kaul says about the Excite deal, “This strategic initiative will help us become a major player in the world of e-commerce.”

Is your warehouse a wasteland? If you’re wasting time, space, and materials in your operations, the following tips can help you boost productivity and save money.

1) Be sure you have the right equipment-and enough of it. Avoid the “hurry up and wait” syndrome by supplying enough tools for your warehouse workers, says Columbus, OH-based consultant Kenneth Ackerman. For instance, he says, one of his clients keeps hand-wrapping tools on every forklift so that forklift operators can wrap the outgoing merchandise on the spot.

2) Reconfigure your warehouse with the selling seasons. “Heavy coats, for example, may move well in December, but they’re typically not the best sellers in February or March,” Ackerman says. So they should be moved from the most accessible part of the warehouse, and the new hot items should be relocated from less convenient spots.

3) Install an automatic identification system. For greater efficiencies in picking merchandise, use a bar code scanner. “It’s the most important development in the warehouse since the forklift,” Ackerman says. “A bar code scanner can read faster than the human eye, and it doesn’t make mistakes.”

4) Get creative about recycling. New York-based wood crafts cataloger Garrett Wade runs paper and cardboard boxes received from inbound shippers through an industrial-strength shredder and uses the remaining shred as filler in its packages-eliminating waste and reducing dunnage costs.

5) Partner with your suppliers. For instance, ask your suppliers to reuse wooden pallets for shipping. “When you ship out an item, have your supplier return the same pallet on the next inbound shipment,” Ackerman says. Spending $9 a pallet may not seem like much, but it adds up as your quantities increase.

6) Get rid of the dogs. Catalogers need to periodically clean house to make the most efficient use of space, Ackerman says. “If I walk through a warehouse and see dust on some boxes, it’s a definite sign that a company is mismanaging inventory.” -MDF