Ohio companies are finding that fulfillment, delivery are entry
points into the hot world of e-commerce, experts say there's more to
come
If you're placing a phone bid or checking on an Internet bid at
Priceline.com, you're talking to an operator at CallTech Communications
in Columbus.
When you buy toys through ZanyBrainy.com, employees at SubmitOrder.com
are fulfilling the order from a 537,000 square-foot warehouse in
Groveport, near Columbus.
Some Greater Clevelanders selling items on eBay are turning to U.S.
Brands Inc. in Beachwood to store and ship stuff to other Internet
surfers throughout the country.
A growing number of Ohio businesses are starting up or retooling to take
advantage of the explosion of Internet commerce. Like similar businesses
around the country, they handle millions of calls and store, manage and
ship thousands of pieces of merchandise that virtual businesses
generate.
It's called back-end fulfillment, a branch of the long standing business
that has targeted the direct-to-consumer market. Now, the Internet is
giving it a whole new boost.
"It's a fun business, and it's a growing business," said Ralph Kovel,
chairman and chief executive officer of the three-year-old U.S. Brands.
"Everyone's going to be on the Internet soon, and they have to find a
way to ship."
At fulfillment centers, they focus on managing merchandise. At call
centers, phone representatives answer questions from nervous first-time
customers as well as from more savvy shoppers who want to know about an
online company's return policy. Increasingly, fulfillment centers are
handling both calls and merchandise.
New businesses are diving into fulfillment for a good reason---the
allure of riches. Online shopping in teh United States alone is expected
to explode from $20 billion in 1999 to $184 billion in 2004, according
to Forrester Research Inc., which focuses on online business.
The U.S. third-party fulfillment market is expected to grow from about
$334 million in 1998 to $20 billion by 2003, mostly because of
e-commerce, according to Stephens Inc., an investment banking firm in
Little Rock, Ark. E-Commerce companies are expected to spend $9 billion
in call centers alone in 2003.
Online competition is becoming increasingly fierce. The successful
Internet businesses will be those that pay special attention to
servicing their customers with people who can talk to customers and
answer e-mail and with efficient inventory management and order
processing.
SubmitOrder.com geared up to its fulfillment in May with 30 employees
and now has more than 500 employees working in its distribution and
customer response centers focused on online retailing. At any given
time, about 100 people with headsets sit at computers fielding phone
calls and e-mails, and many others---ranging from late teens to
grandparents---wrap and pack gifts.
In December, the company snagged $75 million in investment funding to
help fuel its growth plans. Aside from Zany Brainy, customers include
Limited Too, Indulge.com, GoodHome.com and some Fortune 500
manufacturers.
SubmitOrder.com gets about 10 percent to 30 percent of sales for
handling a dot-com's shipping and call answering. The percentage
variation is based on the size and cost of orders as well as the number
of employees dedicated to customer service.
"We recognized the problem with Internet commerce in general, and we
basically built a company that solves the problems of back-end
operations," J.T. Kreager, the president, said. "One of the values we
provide is the ability to allow clients to focus on growing the business
online without having to make large capital investments. It's a very
different business than traditional brick-and-mortar retail or even the
catalog business. Customers are buying things 24 hours, seven days a
week."
Dzin Dzilna, an analyst at Xceed Intelligence, the market research
division of Internet solutions provider Xceed Inc., in New York, said
the potential for back-end fulfillment companies is huge. He noted that
even powerhouse Wal-Mart outsources its e-commerce fulfillment to
Fingerhut.
"Wal-Mart is ramping up to provide direct-to-customer infrastructure to
actually get one product to one customer rather than 50 to 100 products
to a store," Dzilna said. "There's a huge difference between bulk
distribution and individual distribution, and this is where the
opportunity is for fulfillment houses for the online space."
Executives at FitnessQuest in Canton understand better than many
companies the demands that come from shipping directly to customers. A
pioneer in infomercials, the 22 year-old exercise equipment and products
company has sold merchandise through retailers, home shopping channels,
and catalogs.
Three years ago, FitnessQuest began expanding its delivery channels
through its own web sites as well as items sold on other vendors' web
sites, including Torso Track, The Total Gym and Slam Man.
A couple of years ago, the company expanded its fulfillment operations
to accommodate 22 other companies that sell everything from buffalo
steak to Cleveland Browns paraphernalia online.
"This is a fast-paced society with fast-paced customers, and if we can't
respond in the manner that they're accustomed to, they'll go someplace
else," said John McVay, FitnessQuest vice president of manufacturing.
"We really just transferred our marketing expertise into moving
products."
Aurora Products in Beachwood sells operational software to the retail
and catalog industries, as well as e-commerce software to a variety of
industries. Now the company, which also designs and hosts web sites,
plans to use its software and knowledge to launch a fulfillment
operation.
"We're going into the business because our e-commerce client base is
asking us to be there," Mike Heines, president, said. "It's a logical
business extension because we have the knowledge, and we own much of
what has to be purchased to manage that business as well."
Heines plans to launch the business in April with Nick Romito, president
of the Wilderness Shop, which has three retail locations in Greater
Cleveland. The new company's first e-commerce retail client will be the
Wilderness Shop, but the company plans to offer warehouse and shipping
services to other customers this year.
CallTech doesn't handle warehousing or shipping, but in just three years
the Columbus company has built a fast-growing business offering customer
services for e-commerce companies. CallTech has 1,200 seats in two call
centers in Columbus and a third in Brownsville, PA. The centers field
about a million calls monthly between e-mails and phone calls to
companies such as CompuServe and Prodigy.
"Many of our clients believe that quality customer service is the key to
survival," George Zimmermann, CallTech's senior vice president, said.
"There are so many web sites selling the same goods and services that
many believe that customer service is what's going to put them ahead of
their competition.
"For many of the e-commerce companies, their competitors are just one
click away, so they know they have to serve their customers well or risk
losing them"
