When Smithsonian Business Ventures sent out RFPs to outsource its catalog and online fulfillment last year, the competition was so fierce that the final choice came down to references from some unlikely sources. “We’re very proud of the fact that every single client we had gave a good reference to the Smithsonian, but I got a call asking for more,” says Steve Graham, senior partner and chief technology officer of PFSweb, the eventual contract winner. “I said, ‘You can call my mom; she’ll say something nice about me.’”
Although Plano, TX-based PFSweb probably got by without the endorsement of Graham’s mother, Smithsonian Catalogue director Tom Holzfeind says that the selection process was grueling. “It was one of the most rigorous RFPs that I’ve ever been through. We’re very pleased with the result.”
Announced on June 11, the deal between PFSweb and Washington, DC-based Smithsonian Business Ventures, the division that runs the Smithsonian Catalogue and SmithsonianStore.com, is worth $14 million over five years. PFSweb will serve both the catalog and online businesses, providing inventory management, customer care, order management, lettershop services, credit card processing, and reverse logistics management.
PFSweb was chosen for its customized solution, among other features, says Holzfeind. “From a technological standpoint, PFSweb was clearly superior to anyone that we talked to. From a customer service standpoint, they were excellent, and we all got the feeling that this was a system that they would create for us, rather than us having to fit into a system that existed.”
Although the Smithsonian Institution is a non-profit organization, Smithsonian Business Ventures (which includes retail stores, concessions, and IMAX theatres) must show a profit to support the activities of the parent entity. Because of the complex needs of such an enterprise, Holzfeind says, the flexibility and scalability of PFSweb’s solution were essential factors in clinching the deal.
The decision to outsource came about primarily because the Smithsonian’s previous fulfillment center was costing the institution more than its size would allow it to absorb. “We felt, after reviewing all the RFPs from the companies we knew, that PFSweb could [provide fulfillment] for a lot less money than we could do it for,” Holzfeind says. He adds that as of June 17, PFSweb has taken over all fulfillment functions from the Smithsonian’s facility in Virginia.
One of the Smithsonian Institution’s most valuable assets is its image, which fits in with PFSweb’s approach to maintaining its clients’ brand images, says Graham. “Our play is that we support the elite brands, and nothing is more elite than the Smithsonian, except maybe the United States Mint, which we support also, or IBM, or Lancôme Paris. These are brands that have it their way. They spend billions of dollars building an image, or a brand, or a way that they do things; we’re not going to dictate to them how this is going to get done. So we build a custom solution for every single client that we engage with.”
The Smithsonian was concerned that PFSweb wouldn’t have enough staff to handle heavy holiday volume for all of its clients, but Graham emphasizes that PFSweb is able to juggle contact center staffing as volume dictates. “With the Smithsonian moving from a fixed model, where they’ve got the same infrastructure every month, but not the same revenue, they can be profitable every month, as opposed to just the good months,” he says. “We’re only charging them for what they’re using. If the Smithsonian’s revenue is down one month, its costs are down too.”
Switching Channels
Shopping still isn’t as easy as punching buttons on the TV remote, but it’s getting there fast. According to Lauren Freedman, president of the e-tailing group inc., consumers freely use various retail venues all at once, buying from one or more channels and returning or exchanging the item at yet another.
In a comprehensive report titled “It’s Just Shopping,” released in June 2002, Freedman discusses the evolution of retail from the earliest mail order catalogs to today’s freewheeling mix of shopping environments. To support her findings, she provides statistics from direct marketing consultants, trade magazines, and industry research groups.
That consumers now routinely shop online is a given, Freedman says; what’s more striking is that they use the Web to support traditional retail shopping. For instance, a full 50% of online consumers surveyed prefer to buy electronics at brick-and-mortar retailers, although the majority investigate the product on the Web before visiting a store. Nineteen percent of electronics retailer Best Buy’s store purchases during the 2001 holiday season were directly influenced by customer visits to bestbuy.com, and 15% of online orders were picked up at Best Buy stores. In early 2001, 15% to 20% of Sears customers who bought items in a store had visited the Sears Web site first, and this year, 10% of in-store major appliance purchases came from shoppers who had logged on to sears.com previously, accounting for more than $500 million in in-store sales.
The Web is also ideal for “replenishment” purchases: Businesses’ ongoing need for items like copy paper, labels, and toner helped expand Office Depot’s 2001 e-commerce volume to nearly 15% of its business.
Freedman’s report contains the highlights of a detailed study of customer service on the top 100 merchants’ Web sites. Conducted along with the Direct Marketing Association, the survey examines yardsticks like time to shop, time to check out, and number of business days to receive the item. Not surprisingly, Amazon.com finishes as number one overall.
For more information, e-mail Lauren Freedman at [email protected] or call her at (312) 255-9590. — Rama Ramaswami