WEB ORDER FULFILLMENT: Dot-coms scrooged by glitches

The e-commerce world got a black eye for Christmas, thanks to the well-publicized inventory and fulfillment problems several online marketers suffered. Toy marketers took the worst bruising, as online catalogers such as KB Toys.com, Toys R Us.com, and eToys.com could not deliver some orders in time for Christmas.

“It was obviously a very busy season across the board,” says Jonathan Cutler, spokesman for Santa Monica, CA-based eToys, though he would not disclose sales figures. “Though we saw a significant uptick in sales, we were able to handle most orders.” But, he concedes, the company did suffer inventory shortages, which it communicated to customers by e-mail. “With certain products, such as Pokemon items, we encountered manufacturers’ limitations – they simply couldn’t keep up with demand.”

Don’t blame us!

But others counter that the merchants – and not their suppliers – are to blame. “Some Websites faced a fairly significant failure to properly prepare for the holidays,” says Donny Askin, founder of Natick, MA-based order management software company CommercialWare. “Sites such as KBToys.com, Toysrus.com, and Walmart.com suffered serious midseason setbacks due to improper planning and inventory shortages,” he adds, referring to published reports in The New York Times and on the Web. “And sites with no or little direct marketing experience are less likely to anticipate problems.”

Online toy catalogers weren’t the only ones caught with their inventories down. “Sales certainly exceeded our expectations,” says Jim Sluzewski, spokesman for San Francisco-based Macys.com. As a result, “a small percentage of our stock ran out earlier than we had planned.” The online division of the general merchandise cataloger/retailer informed customers about the backorders via e-mail.

Then again, some Web catalogers that had adequately stocked their shelves still ran into problems. “Stocking lots of merchandise is a double-edged sword,” says Mark Rowen, Internet commerce analyst for New York-based Prudential Securities. “Amazon.com says it delivered 99% of its orders this Christmas, but now it has to liquidate large quantities of overstock. It wouldn’t surprise me if Amazon is a little more cautious next year.”

– Start early. It takes time to get a solid infrastructure in place for a successful online commerce venture. “Even if you have a market cap of $2 million, it will take more than six months to build your infrastructure and deliver quality service,” says Donny Askin, founder of CommercialWare software. Online toy cataloger eToys.com, for one, “started preparing for Christmas 1999 the day after Christmas 1998,” says spokesman Jonathan Cutler.

– Make space. Be sure you have enough warehouse space for extra seasonal inventory – and then be sure that you’ll have enough inventory in stock.

– Consider implementing real-time order status. “The benefits of real-time order status far outweigh those of the batch-order process,” says Askin, especially in that real-time communication allows the Website to inform customers of products’ actual inventory status.

– Reevaluate your back-end procedures. “Good relationships with shippers, and careful management of our warehouse, call center, and returns department made our season a success,” says Jack Kotowski, spokesman for cataloger Magellan’s, which claims to have successfully delivered more than 99% of its Website holiday orders.

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