Launched in 1999, GSI Commerce was founded on the belief that if online sales were to account for just a fraction of a company's overall sales, then investment in the technology, not to mention the fulfillment and warehouse end of things, had to be kept low. "E-commerce today makes up 2 to 3 percent of business transacted per merchandise category and will maybe grow to 7 or 8 percent in five years. But that still doesn't justify making huge investments in it," says Michael Conn, senior vice president for corporate development at GSI. "We saw an opportunity to aggregate the business of numerous retailers onto a single platform that provides more features and functionality than they could develop independently."
GSI competes with Amazon.com in offering a comprehensive, single-source E-commerce outsourcing option (see "Amazon Finally Clicks," Spring 2004). "Amazon.com and GSI are going head-to- head on every single deal," says Forrester's Johnson. "GSI is the leader right now." She points out that Amazon.com is challenged by channel conflict — being a seller itself, while also offering a technology platform to other sellers. The irony of that is hard to miss, given that similar channel conflicts initially prevented several brick-and-mortar companies from pursuing the online channel. But now GSI can count everyone from Timberland, Reebok, and palmOne to Major League Baseball and even the Public Broadcasting Service among its clients. "We store the goods, take orders from customers, and then pick, pack, and ship the order from two massive fulfillment centers in Kentucky. We even do gift wrapping, gift cards, refurbishment of returned items, and monogramming of soft goods like towels," Conn notes.
What sold Linens 'n Things on GSI was "the continuing cost of technology and the need to hire more people with expertise" in IT to run things, Kimple says. "GSI has the ability to leverage the expenses and capital required to run a world-class Internet business — thanks to the partners that send checks to them every year. They have a high sense of urgency when it comes to delivering a great experience for our Internet guests, who often go online to do research and then come into our stores to buy."
But some companies have found that a soup-to-nuts outsourcing approach is not for them. Take the case of The Finish Line, a $1.2 billion retailer of athletic footwear, clothing, and accessories. Like Linens 'n Things, it initially launched a homegrown E-commerce platform several years ago. By 2002, it had outgrown the capabilities of its Website but had developed critical expertise in order fulfillment, customer service, and inventory management. Wanting to upgrade the bad but keep the good, it decided to make a larger investment in its Website "to give our merchandisers and marketers more tools to get the message in front of the consumer," says Kent Zimmerman, The Finish Line's director of E-commerce. "With our old site, every time there was a problem, we just threw new servers at it or wrote new code."
The retailer, with 625 stores nationwide, tapped Art Technology Group (ATG) to design a new Website that offered the ability to customize promotions to consumers by testing and measuring how each individual uses the site (see "Counting More Than Clicks"). "We learned, for example, that our customers prefer to see a page with a single shoe in six different colors, rather than a shoe in just one color, even if that color has been their preference in the past," says Zimmerman. The new site is helping The Finish Line win more sales and reduce product abandonment — "where someone fills up a shopping cart and then inexplicably leaves the site before paying," he explains. Recently, the dot-com added a "sneak peek" program in which customers get updated information on the next hot sneaker before it hits store shelves. "We're starting to embrace the site as a research tool to drive more traffic into our stores, rather than just another retail channel," says Zimmerman.
ATG's Website software offers the ability to perform standard transactions — like search, order status, or product information — as well as more-sophisticated cross-selling and up-selling personalization services, including the ability to "morph" the site as a customer moves through it, targeting him or her with specific products based on buying preferences.
In between the do-it-all approach of an Amazon.com or GSI and the relative specialization of a company like ATG is a vast middle ground, where companies such as Fry offer a blend of consulting and technology. "We provide everything you need up to the actual fulfillment — someone putting the product in a box and shipping it to the customer," says David Fry, founder and CEO.
Fry walks customers such as T.J. Maxx through their online options. "Companies come to us and say they want to create an online presence, but they are not sure what that involves," he says. "We talk with them about the merchandise that might best be sold online, and how we would develop and host the site. We also provide the servers and infrastructure to get the Website running, and then integrate it all into the company's fulfillment system, inventory system, customer-service system, and credit-card processing. They do the purchasing, credit-card clearing, marketing, and merchandising, as well as manage the site. Essentially, they are the merchant and we are the store."
Reader Comments» Post a comment