Seven Internet retailers will have to rethink the way they deliver products after promising the Federal Trade Commission that they would update fulfillment procedures to prevent shipping snafus over the 2000 holiday shopping season, industry observers say. The settlement with the FTC stems from charges that the retailers failed to notify shoppers of shipping delays during the 1999 shopping season.
Analysts with Forrester Research and Gartner Group say the seven retailers--CDNow, KBkids.com, Macys.com, Minidiscnow.com, The Original Honey Baked Ham Company of Georgia, Patriot Computer, and Toysrus.com--not only should ensure better coordination between their sales and fulfillment operations, but also consider implementing business-to-business fulfillment systems. Fines ranging from $45,000 to $300,000 were levied on the companies.
David Cooperstein, online retail research director for Forrester, says the retailers in question overmarketed themselves, creating demand that exceeded their ability to deliver. That equation, he says, has to change if they are to meet customer expectations. "The IT department has to know that when the left hand takes orders, the right hand is fulfilling those orders," he says.
Gartner analyst Larry Clopp says many Internet retailers deal with the fulfillment of each transaction separately, creating inefficiencies at various stages of the fulfillment process. Clopp says too many online retailers have put the proverbial cart before the horse, but they're changing that practice. "Our recommendation has always been to work out your workflow processes and systems before putting up the site," he says. "They're doing that more now."