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December 13, 1999

Rule No. 1: Don't Annoy Your Customers
continued...page 2 of 2

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Fulfilling Expectations

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InternetWeek Transportation/Logistics

Network Computing Logistics Services: Governing Who Goes Global

"The fact is, the most critical part of the transaction for all Web retailers is after the buy button," says Steve Dong, VP of operations. When a consumer initiates an order, he or she triggers an automated process that sends the order information from the retailer's Web storefront to a distributor via an electronic data interchange network or over the Internet. Distributors send inventory and shipping information back to CDnow, which then updates the customer on the status of the order via E-mail. CDnow tracks more than 20 order-status data points for every order. The company also shares sales-forecast information with its distributors.

CDNow custom-develops its Web-site and order-processing systems on a Sun Microsystems server platform and Oracle databases with a product-development team of 200 people. A significant portion of CDnow's development efforts are spent improving data exchange with distributors and tying in new partners as its distribution network expands. CDnow sends order information to distributors through private EDI networks and via the Web. The company is moving toward XML as a common language of exchange, says Michael Krupit, chief development officer of the company. "We're moving toward real-time distribution, allocation, and inventory," he says.

Crutchfield Corp. shares this view, though it owns its distribution centers. The company has been selling electronics to consumers via catalogs since 1974, but since launching its Web site in 1995, Crutchfield has become super-serious about customer service and delivery. "Internet customers require us to raise the bar on customer service because they're online to save time," says David Dierolf, VP of IT at the Charlottesville, Va., company. "The front end is the easy part. Fulfillment is where you meet or miss satisfying the customer."

Expecting online order volume to double during the holidays to 1,000 orders per day, Crutchfield has added Web servers and load-balancing capabilities to handle the traffic. To help it move orders quickly, Crutchfield has also improved the efficiency of its distribution center by equipping workers with handheld computers that tell them where to find merchandise in the warehouse.

Like CDnow, Crutchfield has custom-developed most of its E-commerce and order-fulfillment applications. The company develops applications with Microsoft Visual Basic tools and runs them on Microsoft NT Server and a SQL database.

With these improvements and the tight integration of its Web storefront with existing homegrown fulfillment, order-processing, and call-center systems, Crutchfield says it can meet holiday shoppers' demands on the Web, promising five-day delivery and free returns for less than $10 on most orders.

And to keep customers up-to-date, Crutchfield sends notification via E-mail when the company receives the order and when the order has shipped, along with the tracking number from the carrier. Customers can track the status of the order online or by phone. The Web site can indicate whether items are in stock, but nothing is perfect: The site doesn't specify when an out-of-stock item is expected to be available. "We don't want to over-promise," says Dierolf. "It's a tricky calculation that depends on manufacturers and carriers who are sometimes overseas."

The online shopping experience this season will set the tone for Web commerce for the year to come. While Web retailers say investments in technology and some fancy footwork will help them meet consumer expectations, it's still anyone's guess whether they'll avoid the missteps made by Handspring and others. But having a strong logistics system in place is one way for E-retailers to hedge their holiday bets.

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