By Nikki Baird, Managing Partner
12/4/07
eCommerce sites are behaving badly this holiday season – more, actually, than I expected to see. Somehow I thought the industry was well past “eCommerce 101”, but that’s not the case. For example, I was looking for a very popular kids’ book and found a small bookseller who said they had it. I placed my order, had it confirmed, and felt confident that I would get the book in time for the holidays. Then I got an email the next day that said the item was out of stock and wouldn’t be available for another 3-4 weeks – well past Christmas. This is a big eCommerce no-no. They knew they were out of stock when I placed my order. They should have told me so right away – not 24 hours later.
I found another example of sites behaving badly this season at a gardening site, where I added a $10 item to my shopping cart, filled in all the order and shipping information, and my credit card number, only to find at the final confirmation screen that it was going to cost me $15 in handling charges on top of $7 to ship it, bringing the price of this little $10 item up to a total of $32. Choke! Another big eCommerce no-no – don’t surprise your customers with shipping charges at the very end of the transaction.
But it’s not just small online retailers that are behaving badly. Amazon did almost the same thing to me as the little bookseller with a large order of multiple items. Amazon often uses affiliate sellers to fulfill orders, but it’s not always clear that you’re buying from an affiliate until you complete all of the order and shipping – and payment – information and get to that final confirmation screen. I found that of the 7 items in my cart, 5 were coming from affiliates and the earliest ship date for any of them was going to be 12/19, with some shipping on 12/21. Hmmm. I had the impression when it said the item was “in stock” and when I added it to my cart, that it was going to ship sometime in the same week I placed my order. 12/19 doesn’t sound like “in stock” on 12/1.
At Toys R Us (TRU), it was a different experience – but just as distressing. For the hottest toys of the season, TRU decided to make them unavailable online. You could see the item, and you could locate the nearest store, but you could not buy the item online, defeating the whole purpose of shopping online for toys: avoiding the trip to the store.
Amazon’s and TRU’s bad behavior is of a different sort than their smaller competitors, and it underscores the limits of today’s capabilities for online selling. Sure, consumers now get email updates (“Your order was picked”, “Your order was shipped and here is the tracking number”), and inventory availability and shipping costs are usually presented to consumers much earlier in the process nowadays. But how do you promise inventory when you’re relying on third parties to deliver it? How do you offer limited quantities of products to an unlimited audience?
These aren’t easy problems to solve, but these are the next set of problems that retailers will need to address to keep their websites humming. My holiday shopping list for next generation eCommerce capabilities? It doesn’t include Web 2.0 – it’s a little bit more back-end focused:
- Inventory accuracy. You need to know – reliably and accurately – where your inventory is in order to be able to promise it to customers. For online only retailers, you would think this is a snap, but it’s not, even for them. Many online retailers are still living off of the original warehouse and inventory systems that they built their business on 5-10 years ago, back when it was 100 orders a month and who knew how big it was going to get. These systems don’t provide real-time inventory visibility and more than a store perpetual inventory does – the other hole in inventory accuracy. If you want to make sure you have every opportunity to satisfy your customers’ demand, you need to know where your inventory is and how much of it you actually have. And then throw in third party inventory. Not only do you need to know where your inventory is, you need to know how much your suppliers, distributors, and partners have as well.
- Available to Promise (ATP). It’s not enough to know how much inventory you have, you need to be able to soft-commit inventory to soft customer orders for high-demand items. This is the Ticketmaster paradigm of selling limited quantities to an unlimited audience. You want that Wii? You have 3 minutes to complete your transaction or I’ll offer it to someone else. By the way, your selling partners need to be able to do that too so that you can offer this kind of service across all the things you sell, not just what you carry.
- Price optimization. This isn’t about setting prices for the online channel vs. the store or catalog channel. This is about setting each channel’s price based on demand and available inventory across channels. Rather than trying to optimize inventory across channels, and potentially add costly handling charges trying to shuffle in-channel inventory around, you need to use price to guide demand to the channels that have the most inventory. Out of stock in the store? Offer it as an online purchase with free shipping.
- Promotion optimization. To really wrap it all up, you need to match price optimization against what offers that particular customer responds best to. You might want to offer one customer free shipping if they order it online rather than try to get it through the store, but a different customer might respond better to a free accessory or 10% off the price of the item instead.
These are complicated and sophisticated supply chain and customer service capabilities that even some of the best supply chain companies in the world struggle to implement, so I don’t expect to see any of these in my stocking this year, or even next year. But it will be these capabilities – not the fancier shopping cart or the jazzy online merchandising tricks – that will distinguish the online winners from the rest of the pack in the years to come.
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