By Matt Pollock, V.P. Solution Sales, Harte Hanks
The leading e-commerce businesses have set the bar high for e-commerce fulfillment and for e-commerce success, in general. They have our customers expecting the same level of execution from our e-commerce businesses.
The leaders have invested heavily in the following kinds of tools:
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- Powerful big data science that finds doppelgängers for each of us and then recommends the products our mirror images have bought.
- Searching that guides us to the e-commerce site’s recommended products.
- State of the art purchasing and warehousing.
- Amazing—order at 10 am; on your doorstop same day at 3 pm—delivery.
- Low prices and shipping speed-and-cost choices.
Manufacturers can hardly resist doing a deal with one of the leaders. They buy volume but give up margin.
However, there are two aspects of the manufacturer—distributor—consumer chain that Amazon doesn’t serve well for the manufacturer: branding and pricing. And the consumer is worse off for it.
Manufacturers that have worked long and hard to create better products, to differentiate their brands, find themselves competing in the mega e-commerce retailer price game.
Branding includes important information about product differentiation and brand associations with values like sustainability, fair trade sourcing, supporting employees and communities, et al. that consumers want to know about and are willing to pay a premium for.
The alternative is for manufacturers to go direct to consumers by establishing e-commerce sites: to beat the e-commerce leaders at their own game.
The manufacturer’s targeting task is clearcut—fewer, simpler targets—compared to the huge firms’ need to profile everyone for all products. The manufacturer’s e-commerce site can provide valuable product and usage information and can differentiate their products on non-price attributes. The huge firms can’t begin to match the level of product information.
But…here’s the challenge: The manufacturer must meet world-class standards for fulfillment.
We think of the digital and user interface aspects of e-commerce as difficult. And they are. But the fulfillment process is even more complex and demanding.
Kim Whitler of the University of Virginia Darden School of Business has observed:
“There seems to be some arrogance oftentimes within the digital realm…What they are doing is…a lot of coding. It’s one-dimensionally complex. It’s very different when you’re talking about a physical [fulfillment] experience.”
Fulfillment involves so much more complexity:
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- Interface with e-commerce
- Inventory management
- Picking, packing, and shipping
- Process control and continuous improvement
- Tracking and measurement of each aspect of the fulfillment process
- Key Account Management levels of communication
- People with relevant industry experience
- …and ever-lowering cost
Flawless execution of the fulfillment process is so hard it becomes a sustainable source of competitive advantage—much more difficult to imitate than the front-end digital part of e-commerce.
Here’s an example
A major producer of branded nutritional products has a first-class e-commerce web site. They use it to reinforce their already great brands and to build highly differentiated brands. This company uses their e-commerce site to provide valuable information for mothers about baby nutrition. The site also has information about how nutrition can control diabetes as well as how their products fit in to a healthy diet. For seniors, the site includes information about how nutrition can enhance energy and health. And the site provides valuable information about many other nutritional products.
The company needed to replace their fulfillment partner and sent out an 18-page RFP specifying services, processes, locations, measurements, etc.
The winning bid addressed four dimensions of the fulfillment process:
1. First, IT infrastructure
The client had a sophisticated e-commerce site: The fulfillment partner’s IT infrastructure needed to be compatible. Further, the client was always enhancing their site and the fulfillment partner needed a flexible process for changes and improvements. The client managed its complex e-commerce business through web-based reporting: The fulfillment partner needed to feed its metrics into the web-based reporting system. And other IT requirements as well.
2. Second, Processes
The fulfillment partner’s workflows had to meet Federal regulations: The partner had experience with fulfillment of products that needed to meet the same regulations. The client’s products needed to be warehoused in certain temperature ranges and in accordance with strict aging rules: The partner again had experience with fulfillment of products with similar requirements. The client’s strategy included high levels of customer service like returns and batching orders from different order streams: The partner demonstrated relevant customer service experience. And the partner’s in-place continuous improvement process exceeded the client’s specified requirements.
3. Third, Measurement
The partner demonstrated the ability to measure customer satisfaction in general with overall satisfaction measures like net promoter score, as well as the ability to monitor satisfaction at the transaction level. Similarly, the partner demonstrated the ability to measure financial performance at both a high level and in detail.
4. Fourth, People
The partner’s execution team had industry and functional expertise. The demonstration of the right skill sets, and experience convinced the client they would execute flawlessly.
Conclusion
Ultimately fulfillment is all about flawless execution. And it’s the team that makes flawless execution happen. It’s your people who learn from the measurements to continuously improve the processes and IT infrastructure. And it’s this team, supported by the other dimensions, that is so hard for competitors to imitate.
So, the teaming of the branded nutritional products manufacturer and the fulfillment partner’s flawless execution could serve customers so much better than the mega e-commerce retailer low-price war, and it made the nutritional products manufacturer’s business more successful as well.
Don’t underestimate the potential of going direct to your consumers. You’ll need to find a rock-solid partner for fulfillment—but both you and your consumers will benefit.
