August 7, 2000

Printer ready

FTC Ruling Gives Boost To Fulfillment Outsourcers

By Tony Kontzer

utsourcing fulfillment may help online retailers avoid the kinds of fines imposed by the Federal Trade Commission on seven companies that failed to ship products as promised.

"Fulfillment has been the Achilles' heel for online retailers," says Jupiter Communications senior analyst David Schatsky. One fulfillment outsourcer, New Roads, plans to take advantage of the FTC's ruling; chief technology officer Tom Lesica says New Roads will refer to it during client pitches. But even companies not interested in outsourcing should pay attention to fulfillment, Lesica says. "You have to take the whole operating model post-click and sanity-check it," he says. "As you approach September and October, you better batten down the hatches."

Kelby Hagar, president and founder of online grocery retailer GroceryWorks.com Inc., says a serious commitment to logistics has made the company more efficient and responsive. But Hagar says that commitment wouldn't have had the same kind of payoff without the contribution of outsourcer EXE Technologies Inc., which built the brains of GroceryWorks .com's fulfillment system. "It would be crazy to think we could build an electronic logistics system entirely on our own," he says. The result? Hagar says the company is achieving on-time delivery for 96% to 97% of nearly 7,000 daily orders.

Schatsky expects most E-retailers will soon outsource fulfillment and that the number of companies providing outsourced fulfillment will grow fast enough to create a buyer's market within a couple of years. Until then, he says, companies such as New Roads and EXE are in an enviable position. They'll have to move fast, though: Federal Express and United Parcel Service recently unveiled E-commerce services that include E-fulfillment outsourcing.

Back to This Week's Issue
Send Us Your Feedback
Top of the Page

---