F. Curtis Barry & Company » e-Commerce

UPDATE: Virginia House Kills “Amazon” Law

Curt Barry — Wed, 03 Mar 2010 15:13:28 +0000

Senate Bill 660, introduced by Sen. Emmett W. Hanger Jr. (Augusta County), was officially defeated yesterday by the Virginia House of Delegates Finance Committee. Senate Bill 660 would have created a new nexus standard to require certain Internet retailers to collect Virginia sales tax from its Virginia customers even if the retailer is not physically located in Virginia. The House Finance Committee adopted a subcommittee’s recommendation to lay Senate Bill 660 on the table, which effectively ends the bill’s chances of passing in this session of the General Assembly. However, the provisions of Senate Bill 660 are still present in the Senate’s version of the budget for the next biennium. To be adopted, the House of Delegates would have to concur with its inclusion in the budget.

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Shopping Cart Abandonment, A Consumer’s Advantage?

Tocky Lawrence — Thu, 10 Sep 2009 14:57:21 +0000

I recently had a conversation with a friend of mine discussing the opportunities of shopping on the Internet. Okay, in reality we were discussing how the economy has affected consumer buying patterns and what we were really after is finding the best bargains. My friend shared with me something that I had not heard of before but in turn seems to work, much to my amazement, a strategy that I never thought to employ.

My friend is a shopper that I would consider to be a cost sensitive purchaser, one that is always looking for the best price on an item that she is interested in. This leads to a tactic she recently deployed and believe it or not has to do with shopping cart abandonment.

During our conversation she shared with me that she has on several occasions, put items in shopping carts of various websites that she would like to purchase from. Typically these are items that she wants but is in no hurry to purchase right away. She then abandons the shopping cart if the item is at regular price and/or there isn’t a discount readily available. I kept thinking why would you do this? Well it turns out that many companies want to turn the abandoned cart into a sale, so my friend plays the waiting game. Eventually she receives an email from the business letting her know that they have noticed her shopping cart was abandoned and if she would like to purchase the item. Now here is the interesting part, to capture the sale the business usually attaches an incentive, either a discount or free shipping offer if she completes the transaction. With the discount in hand she usually makes the purchase.

Wow, I would have never thought of this as a consumer buying strategy to get the best deal but my hat is off to her as a savvy shopper looking for a discount. If this becomes a wide spread practice, how will this affect your profitability? Let me know your thoughts.

Tocky Lawrence is a Vice President with F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; learn more online at: http://www.fcbco.com.

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One option for going direct to your customers

Brian Barry — Mon, 27 Jul 2009 16:04:09 +0000

In this economy, everyone is looking for some kind of advantage – a way to build their brand image, how to increase product margins, reduce warehouse and logistics expenses – all while sticking to their core competencies. This can be especially difficult for consumer product goods companies and manufacturers. Often times they sell through vendor networks or distributors in order to reach retailers and end consumers. Many manufacturers have addressed the potential channel conflict issues and have decided to develop direct to consumer business offerings. But in trying to go direct to the customer, it means these companies need to invest in software, infrastructure, personnel and a new logistics process.

More importantly this means the company is moving away from what it does well. For some this isn’t a problem, for most this can be a major problem. Managing call centers, small package pick pack ship operations, and dealing with customers for a direct business is entirely different than a manufacturing operation.

But this doesn’t mean that it can’t be done. For those not wanting to invest in operations necessary for a direct ecommerce or direct marketing business, there are options. One option that several manufacturers and consumer product goods companies have turned to is Jagged Peak. Not only have they developed a strong warehousing and logistics division, but they have also developed exceptional order management and ecommerce applications.

What does this mean – if you want to take your products direct to your end customers, Jagged Peak can provide all of the applications necessary but also provide end to end services to support order fulfillment. By doing this, Jagged Peak allows their customers to remain focused on what they do well and leave the rest to them. Third party options like this are often times a great way for companies to test new markets and new channels in order to meet their financial goals.

F. Curtis Barry & Company assists companies of all types to develop fulfillment strategies which include the sourcing of third party options. If we can help your company develop a plan or evaluate different third party options, please contact us today.

Jagged Peak can be found online at www.jaggedpeak.com

Brian Barry is a Senior Consultant with F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com.

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Ways to Save Money

Curt Barry — Mon, 11 May 2009 15:30:48 +0000

The following is a brief email that we received from one of our eNewsletter readers, in response to an article we wrote about saving money in your company…

Curt:

Just received your electronic May newsletter and wanted to send you some ways we are saving money.

Cut utility usage
Drop non productive associates
Reduce fulfillment goals from 92% to 85%
Keep 15% of your OTB in your back pocket
Only mail your best customers ( we are thinking of prospecting again this summer )
Drop marginal books
Flow inventory, more smaller orders, more frequently.
Keep margins high, but salt the assortment with redlines for the illusion of markdown.
Offer free personalization instead of a mark down.

We are actually making money on a reduced sales plan.

Hank

Need help reviewing your inventory strategy, if so we offer inventory assessments for typically $6,500 – designed to be performed quickly with a high ROI and actionable recommendations – click here to learn more.

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ACCM Tidbits and Opinions

Curt Barry — Mon, 11 May 2009 15:21:51 +0000

ACCM Attendance: The show had about 500-700 attendees from what I could tell. Like many of the shows we have attended this year the number of attendance looked to be down 50% to 80% from prior years. Penton took a bath on both NCOF and ACCM this year. There is a question in my mind about the viability of two independent shows; I know they are two different audiences.

I will say that those who attended appeared to be decision makers. In my speech on dashboards and KPIs more than 75% of the attendees were new to ACCM. Interesting mix of e-commerce and multichannel managers. If you would like a copy of my PowerPoints, e-mail me at cbarry@fcbco.com.

Companies’ Results: As someone said to me, “The new standard is to be only 10% off plan.” I met many where sales were off more than that even when plan wasn’t very aggressive. Companies with unique product offerings are doing far better than companies with stock or open market product. Jack Rosenfeld, Chairman, Potpourri Collection and Sheryl Clark, President, Boston Proper, during the Monday luncheon panel both emphasized the importance of this. And they cited that their apparel businesses were doing well because they were tuned into the customer.

I did meet a number of niche businesses that seemed to be doing better than the average. They struck me as having unique product niche’s and unique marketing approaches. One of them has grown to $200 million in sales in 2008 from being a start up in 2000! What’s interesting to me is that they aren’t catalog or category merchants. They opportunistically market products that they think will sell – they don’t try to fit it under an existing title. They also test product and don’t buy product initially. We can be critical of the customer service/inventory approach but it’s interesting in terms of sales growth and profitability.

Leisure and hobby product companies seemed to be holding their own.

While there are many companies which are losing money, there were comments about people being surprised that more haven’t shut down already.

Many people expressed increased optimism with the improved stock market of the last 5 weeks. I think it’s really important for the leadership of this industry to remain optimistic. Without hope we don’t have anything. Some days I know it’s tough.

One of the largest business to business list brokers told me that many of their clients were doing OK (meaning flat to down 5%) until this past month when business declined further. No idea why last month was out of the norm with the trend.

Prospecting: Many companies are excited about the possibilities of the USPS “summer sale” on postage. My hat’s off to American Catalog Mailer’s Association (ACMA) for the work they have done with the USPS to help them understand the effects the postage increases have negatively had on our industry. Since July 2007 the ACMA estimates catalog mail volume is down 35%. The year-to-date net loss is $2.5 billion for the USPS compared to LY’s $35 million loss. To learn more about what the ACMA is doing for catalog businesses or to join this great association, please visit ACMA’s website, www.catalogmailers.org

Holiday 2009: Companies seem to be delaying Holiday mailing plans to see a few more “economic tea leaves”. Paper and printing seems to be available. It’ll be interesting to see how circulation plans pan up.

Measuring E-commerce promotional response: As we work with clients on our co-developed dashboard and analytical software product (with Taurus Software, Manage Metrix, managemetrix.com), we don’t see companies being very analytical about measuring E-commerce promotional breakeven. Companies are not measuring the profitability of the promotions. I asked this question in a number of ACCM sessions. No one seems to have been motivated to doing this. In my opinion, this should be a priority given that e-commerce marketing is 2% to 15% in our client companies on top of the catalog marketing costs of 25% to 35% of net sales.

That’s my take on ACCM 2009. Did you go? What’s happening in your world?

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How Do You Know What E-Commerce Promotions Pay?

Curt Barry — Mon, 11 May 2009 09:25:40 +0000

Historically, the catalog industry has measured the response rate for various promotions, the advertising cost of the promotion and its breakeven based on demand, product cost etc. Along comes the e-commerce world and many of the new promotional methods (such as e-mail, affiliate programs, etc.) are apparently not being measured.

At the same time, companies that were traditionally catalog oriented are spending 25% to 35% of sales for catalog advertising costs to create, print and mail catalogs. On the other hand, while the e-commerce programs are much cheaper our research shows they are spending 2% to 15% of net sales on e-commerce promotions.

The problem today is that the e-commerce costs are additive, incrementally. It’s not an offset to the catalog costs. And at the same time businesses have not been able to decrease catalog costs or eliminate the catalog without severely cutting sales.

How are you measuring your e-commerce promotions in terms of advertising and breakeven?

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How Will You Provide Your CEO’s Favorite Reports?

Brian Barry — Mon, 16 Feb 2009 20:02:05 +0000

You have just spent four months doing your homework to replace your aging call center and order management system: gathering user requirements, writing an RFP, getting capable vendors to bid on it, conducting demos and selecting the finalist. Yet there is one more activity that, if not done superbly, will shake management’s confidence that replacement of the old system will go smoothly. If you haven’t adequately studied how management at every level—from CEO to department managers—will get the information they’re used to having in order to run the business on an online, daily, weekly, monthly and year-end basis, your credibility could be in trouble. Even when business analysts feel they have done an adequate job of determining user requirements, this area frequently gets cut short. There are a variety of reasons:

In requirements and demos, users often spend too little time reviewing the entire system. Some feel they can do it in half a day. In reality, it is a two-day task—and even then you run the risk of not seeing everything.
Vendors have stopped developing reports—yes, that’s right: no reports. “But we have online displays of data!” software vendors and less experienced users will say. Of course, when you go live with the new system, users line up at your door and want to know, “Where are those 10 important reports I had in the old system?”
Then there’s the fact that management, while sponsoring the systems replacement effort, takes little time to see whether their most important data is in the system or find out how they will get it from the new system. The biggest area of systems deficiency is in the lack of plans and historical data. Many order management systems have been developed without history by product, category, list segment, total business by year, or any other criteria. Management therefore has adapted with its own spreadsheets and Access systems. How will they get the information in the formats they will need?
Software vendors convince the users that they can develop the reports they need with Crystal Reports, a query language or a data warehouse tool the vendor has included in the purchase agreement. But here’s the problem: Do you know how many and which reports will need to be replaced, or how much effort this will take? Our experience in implementing order management and warehouse management systems is that there are literally hundreds of reports that have to be replicated in order to be comparable. Just this week, in working with a client we discovered there were over 200 key reports that would have to be replaced in some form.

Think about some of the reporting needs of various departments:

How will Merchants get their merchandise performance reports? Do they require history? Plans? Vendor analysis? Category trending? Contribution to profit?
Does your Marketing department require source code statistics? Do they need figures by channel performance in terms of demand, average order, etc.? How about conversion rates for first time to multi-buyers? Reactivation of inactive customer accounts? What about history and plans?
Is there productivity analysis required for the Call Center? What about customer compliance and inquiry reporting from customer files?
What data do you need to provide Fulfillment with reports about picker and packer productivity? How will they feed their departmental productivity and cost systems, which may be manual or spreadsheets?

You get the picture. Here’s what you need to do: Be proactive in soliciting specifics on what analysis is required. Collect the requirements and determine where each analysis will come from in the new system. Get users to sign off on the new system, confirming that it meets their needs. Cost out the time and effort required to provide all of this and make it a key ingredient in your system conversion work plan. I think you’ll find that reporting is an area of systems requirements on which many don’t spend enough time before going live.

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MICROS Acquisition of Fry Moves Multichannel Applications Ahead

Curt Barry — Wed, 24 Sep 2008 13:26:38 +0000

Last month, MICROS Systems, Inc., whose MICROS-Retail group provides point-of-sale, loss prevention, and cross-channel functionality to more than 90,000 retail stores worldwide, announced the acquisition of Fry, Inc., which has been designing and developing e-commerce applications since 1994.

I think the industry has a real potential powerhouse in the MICROS-Retail and Fry merger, and I am excited about the possibilities, both for clients and for the combined companies. Fry is one of the most respected e-commerce solution providers, and MICROS-Retail (the former CommercialWare) is one of the strongest direct systems. MICROS made a significant step in the past year with the acquisition of eOne, which in my opinion answers small to mid-size company needs. While we all know integrations between providers are never easy, it lays a great foundation for the future.

In the longer term, this means one huge potential step further for clients looking to get an order management and e-commerce solution that is a Tier 1 application from a single provider. Over time I wouldn’t be surprised to see a hosted option for the combined solutions.

Jane Cannon, Chief Technology Officer for MICROS-Retail, and David Fry, Founder, President, and CEO of Fry, are two of the people I most respect in this industry. Jane was the COO of CommercialWare and has been leading the transformation of Datavantage/CommercialWare/eOne into an integrated MICROS-Retail suite. David was a respected teacher and consultant who returned to his family’s printing business and, in 1994, recognizing the impact the Internet would have on the company and its clients, launched a subsidiary to help those clients successfully compete in the e-commerce marketplace.

I had a chance to talk to David Fry, and asked him why the acquisition was important to him. David talked about how fluid the e-commerce industry and its solutions had to be. He sees this merger as a way to bring additional capital and innovation to bear as new applications are developed. How much capital? MICROS Systems had over $785 million in revenues in 2007, and total company revenue for the fiscal year ending June 30, 2008 was $954.2 million, an increase of $168.5 million, or 21.4% over the same period last year.

Step back and look at the combined businesses of MICROS as the retail industry leader. I see the potential for tangible data resources being exchanged between retail, catalog, and e-commerce applications. It brings a whole new dimension to multichannel solutions.

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Balancing Your Budget and Investment: When is the Right Time to Outsource?

Curt Barry — Tue, 26 Aug 2008 14:57:26 +0000

Many multichannel merchants focus on how they can lower operating costs when they consider outsourcing certain tasks. But when you outsource operations, you also outsource the investment. Sounds obvious, but maybe the magnitude isnâ€™t all that clear until youâ€™re faced with replacing an order-management system, moving into a new fulfillment space or upgrading your website.

When outsourcing your investment, you donâ€™t have to invest in those upgrades as your business grows and changes. Letâ€™s look at some examples that show the size of these investments.

* Order-management systems. Software as a service (SaaS) can free up a potential investment of $25,000 for an emerging company. If youâ€™re a $500 million company â€” with several hundred users adopting a SaaS model â€” it eliminates an $8 million to $10 million investment. For a $20 million cataloger, the spend runs $280,000 to $400,000 to license and buy hardware. Then you implement an order management system with call center and warehousing functions.

* Specialized forecasting and inventory management system (working in conjunction with your fulfillment system). Here, investment and implementation costs for a 10-user system will cost, on the low end, $150,000. Larger companies invest several million dollars.

* Replacing an e-commerce site. SaaS business models can eliminate an investment of $750,000 to $1.2 million for a multichannel cataloger with sales in excess of $100 million. With the e-commerce that growing companies experience, thereâ€™s also often a need for an e-mail management or chat-system investment.

* Call-center operations. Outsourcing eliminates investment in the required space, telecom terminals, headsets, ACD, scheduling software, call-monitoring hardware and software, e-mail management, chat systems, etc.

* Fulfillment center. You avoid investing in the construction and/or build-out costs, as well as the racking, conveyors, material handling, warehouse management systems, shipping systems, furniture and fixtures. Plus, you avoid a long-term lease.

It should be pointed out that when looking at these investments on a five- to seven-year basis, many would have been amortized and depreciated over that time. But many companies are struggling to make the initial and ongoing investments because of the competition for financial resources.

Here are some of the questions you need to answer as you look at outsourcing and the business investment:

Are you keeping pace with investment in the infrastructure required?

What alternatives for capital use does your business have rather than investing in physical assets?

Does the outsource provider have the finances to grow and expand? Whatâ€™s its track record of doing this for clients?

How will those costs be passed onto your business as it grows and changes?

Can a major activity be outsourced and not result in a total loss of control (e.g., call-center overflow, peaks and weekends)?

Which provider best understands your category of product (e.g., apparel with its high SKU storage needs, returns, etc.) and mode of operation (e.g., e-commerce, catalog management systems, etc.)?

Which provider will be the best long-term partner?

How vulnerable will this leave you if the providerâ€™s performance isnâ€™t up to par?

If you wish to sell your business and donâ€™t own major assets, does this help you (the prospective owners arenâ€™t paying for assets) or hurt you (you may need to remain operationally independent of the other businesses a prospective owner has invested in)?

The Issue of Control

So why isnâ€™t outsourcing more commonplace? Most managers want to control their own destiny. Outsourcing means giving up some control.

Also in certain cases, the outsource industry providers have a less than stellar record of long-term, reliable and cost-effective service. Many, including myself, believe that SaaS business models will change much of this. Iâ€™ve also seen many companies successfully use both domestic and offshore call-center facilities. Weâ€™ve had one client outsource all call-center and fulfillment operations for its $25 million apparel catalog and e-commerce business since 1988.

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Macy’s National Strategy Gets a Makeover

Curt Barry — Thu, 01 May 2008 13:50:30 +0000

The Wall Street Journal (April 21, 2008, B1) detailed a strategy by Macy’s CEO Terry Lundgren to localize store assortments to cater to what shoppers are more interested in buying. This localizationâ€”called â€œMy Macy’sâ€â€”will for now will be only 15% of the total SKUs, which range from 1.5 million to 4 million, depending on store size.

Macy’s same store sales declined 1.3% for 2007 from the previous year and 2% overall. Macy’s is the largest department store in the U.S., with 2007 sales at $26.31 billion. The other department store leaders are J.C. Penney, with sales of $19.86 billion; Sears, $19.50 billion; Kohl’s, $16.47 billion; and Nordstrom at $8.83 billion. Only Sears posted a worse 2007 sales decline than Macy’s.

Mr. Lundgren is obviously one of America’s smartest and leading merchants. But somehow, to me as a shopper, the strategy of all the stores across the country being a cookie cutter didn’t make sense from the beginning. If shoppers didn’t find what they were looking for in one Macy’s store, there was no reason to even set foot in another.

Having acquired nearly all the major regional chains and then homogenizing them to eliminate any differences, Macy’s may be lucky sales weren’t even lower. Even before Macy’s acquisition strategy took place, one of the faults in traditional department store retailing was that stores looked too much like each other and they carried the same national brands.

If you think of your own town, there are sure to be residential areas that are very affluent, with customers who are more selective and can afford better brand names. At the same time, in an urban environment assortments may need to be tailored to shoppers who work downtown. The people who live downtown may be affluent younger professional folks and a minority of lower income residents.

Once again, we believe the Internet has a profound effect on this strategy; in today’s shopping world, comparison shopping engines can pinpoint stores with lower prices and greater availability. This makes national brand names much more comparable and stores more vulnerable.

However, gearing stores to more localized assortments will be harder than one may think. It means turning some of the control over to local management rather than centralized buying and decision making. According to WSJ, â€œManagement behind the scenes will be revamped to have 13 executives oversee the merchandise assortments at 10 stores each, instead of 7 executives overseeing assortments in up to 23 stores.â€

In going localized, Macy’s is following the approaches that Best Buy, Ross Stores, Inc., Wal-Mart and Gap, Inc. have trail-blazed.

We wish Macy’s well as they make their transitionâ€”and we’d love to hear what readers think of this new approach.

Curt Barry is president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory management, merchandise planning and benchmarking. Learn more online at: http://www.fcbco.com.

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F. Curtis Barry & Company » e-Commerce

UPDATE: Virginia House Kills “Amazon” Law

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Shopping Cart Abandonment, A Consumer’s Advantage?

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One option for going direct to your customers

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