Just before Christmas, Best Buy told some of its customers that it was canceling their online orders because they wouldn’t be able to fill them. [“Uh oh: Best Buy cancels some online orders before Christmas,” by Mae Anderson, USA Today, 23 December 2011] Anderson reported:
“The largest U.S. specialty electronics retailer said … that overwhelming demand for some products from Bestbuy.com has led to a problem redeeming online orders made in November and December. The Minneapolis company declined … to specify how many orders are affected or which products are out of stock. The shortages are a black eye for Best Buy, which has beefed up its online campaign to fight off intense competition from online retailers and discount stores. … Some glitches should not be a surprise with such a massive surge in online shopping this year, analysts said, but there is a risk of a backlash. ‘It is a hiccup for the company, said Morningstar analyst R.J. Hottovy. ‘They were kind of behind the curve building out their online channel. They’ve done a good job investing in it, but if you make a lot of rapid changes, inevitably there are going to be growing pains.'”
Best Buy may have been surprised by its online sales, but it wasn’t alone. Stu Woo reported that online sales were “up 15% compared with a similar period a year earlier, according to data from research-firm comScore Inc. That greatly outpaced overall U.S. retail sales, which grew 3.8%, according to the International Council of Shopping Centers.” [“U.S. Web Sales Sparkled for Holiday Season,” Wall Street Journal, 30 December 2011] However, Best Buy was singled out for its embarrassing situation over the holidays. According to Kim Bhasin, “Customers are livid.” [“Best Buy Is Getting Slammed By Angry Customers For Canceling Their Orders Right Before Christmas,” Business Insider, 22 December 2011] Bhasin continues:
“They’ve gone to the Best Buy forums to bash the company for ruining Christmas, and the atmosphere there is so hostile it’s probably tough for a Best Buy PR person to read. Words like ‘thieves,’ ‘boycott’ and ‘scam’ and being used pretty commonplace. Elsewhere on the web, commenters are lighting up Best Buy for its failure too.”
Best Buy tried to conduct some after-disaster mitigation by giving electronic gift cards to affected customers, but the harm was already done. Best Buy spokesperson Susan Busch, senior director of Best Buy’s public relations, stated, “What was wrong is that there was an unacceptable delay between order confirmations and cancellations, and for that we are very sorry. It’s important to note that this was a rare situation based on a high volume of orders over a short period of time.” [“Best Buy issues statement regarding online order cancellations,” by Katherine Field Boccaccio, Chain Store Age, 28 December 2011]
Busch’s explanation was interesting. She basically admitted that Best Buy’s supply chain visibility wasn’t good enough to detect order fulfillment problems before they became a crisis. Jesse Langley warned that such fulfillment crises could occur, she wrote, “Successful order fulfillment and strong branding are inextricably linked, and the hectic holiday season presents greater challenges than some retailers can manage.” [“Fulfillment Outsourcing Can Overcome Holiday Challenges to Improve Your Brand,” republished in Who said supply chains are boring?, 21 December 2011] Langley continues:
“Veteran retailers understand that outstanding order fulfillment services involve much more than simply wrapping up a product and shipping it. This is a wonderful opportunity to strengthen your brand and build customer loyalty. In the longer term, this target is much more important to your consistent profitability than just timely product receipt.”
Best Buy learned that the opposite can be true as well — poor order fulfillment can hurt a company’s reputation and disaffect customers. On the positive side, Langley writes, “Forward thinking companies … realize that this opportunity to engage their customers helps their brand reinforcement and identifies the organization as one that stands above the madding crowd.” On the negative side, poor order fulfillment simply makes the crowds mad! Langley continues:
“Use that shipping container and its contents to further emphasize your specific brand and your company’s winning biography. Understand that branding is not a marketing campaign with an end date. Your evergreen branding efforts must first promise superior products and outstanding customer service. Then you must deliver on those promises.”
Amazon.com has obviously done very well with order fulfillment service. Despite its enormous volume, Amazon has a reputation for providing products on time. That’s why it proudly puts its name on boxes it ships. Langley continues:
“Should you … not deliver on those promises, … [the] result may be more damaging than ignoring branding efforts. However, making promises your customers want–and delivering that which you promise–will engage your customer base much more than millions of dollars of media or mail advertising ever could. The level of credibility your company will enjoy will be as strong as positive word-of-mouth recommendations from friends and family. You simply cannot buy this wonderful level of customer confidence.”
Langley apparently wrote her article as a freelancer for Fifth Gear. Fifth Gear advertises itself as a company that “provides outsourced order fulfillment, contact center services, ecommerce technology, and marketing services to specialty retailers and manufacturers of consumer products.” Her article, as expected, is supportive of companies that provide such services. She continues:
“As e-commerce explodes, using order fulfillment as a branding tool can also become more popular and effective. Of the almost 180 million consumers that research products online, 83 percent will make an Internet purchase of goods or services. Using order fulfillment as a branding strategy component should be self-evident. Whether you employ in-house order shipping or choose fulfillment outsourcing, use this function as a valuable marketing tool. … Getting an order to the right customer at the right time with brand-enhancing materials and packaging will generate a return on investment (ROI) that will excite owners, management and shareholders.”
Amit Ambekar reports that to accomplish getting an order to the right customer at the right time retailers are expanding their fulfillment options. [“Fulfillment Options – Recent Trends,” Supply Chain Management, 23 December 2011] He continues:
“Typically, retailers have provided their customers a standard set of fulfillment options i.e. the different ways in which the order could be delivered to the customer. E.g.: Standard Delivery (2-5 day delivery), Expedited (Next day delivery), Store Pickup etc. Increased competition has compelled these retailers to provide services that differentiate them from the rest of the pack. And fulfillment options are one area where they are pulling out all stops to woo the customer. An interesting battle is on among retailers that have an online presence in addition to traditional brick & mortar stores pitted against those that have an online presence only.”
I agree with Ambekar that multi-channel commerce is gaining momentum. To read more on this topic, see my posts entitled Multi-Channel Commerce: The Rise of E-Commerce and Multi-channel Commerce Gaining Ground. Ambekar continues:
“For the holiday season of 2011, Toys ‘R’ Us offered an interesting variation to the store pick up service. The ability for the customer to designate a person (other than himself) who would collect the order at the store once it is ready to be picked up. Clearly, the retailer does not want to lose a sale where the customer may not be able to pick up the item and hence does not order. Similarly, amazon.com, which has no store presence, is currently doing a pilot project where store pickup would be offered as a fulfillment option. Which store, you ask? A neighborhood store such as 7-11 or Rite-Aid. Amazon has setup lockers at a few stores in select cities in the US and in London, England. Customers choosing this method of delivery receive an email that contains a code that unlocks the locker holding the package. (The customer can choose a locker during checkout.) Of course, the email is sent only after the package has been delivered to the locker by the carrier.”
For someone traveling, the option of buying an item online then having it delivered to a locker is intriguing and useful. Ambekar concludes:
“Interestingly, it is not just the retailers who seem to be feeling the need to differentiate. Carriers, used by online retailers for deliveries, are also innovating and offering newer services. UPS recently announced that it was collaborating with a few retailers to offer a MyChoice program which lets consumers, for a fee, subscribe to alerts (emails, text messages) on their package progress OR choose a two hour delivery window within which they would want their package to be delivered. The two hour delivery slot has been offered by retailers (typically grocery retailers) that run their own delivery fleet; it is interesting that a carrier such as UPS also now offers this choice.”
The fact that customers are willing to pay for improved supply chain visibility underscores the importance that all stakeholders should place on that capability. Without good upstream and downstream visibility, companies simply can’t hope to achieve the benefits from order fulfillment discussed by Langley. The ability to predict potential delivery delays in time to do something about them is of particular value. The Enterra® Pre-Inventory Prediction System (PIPS) mitigates Product Not Available issues by tracking global shipments of products produced by manufacturers and their supplier network from factory, to ocean, rail and truck carriers, to the distribution centers of manufacturers and retailers, all the way to brick-and-mortar stores. The system predicts the perturbative effect of shipping delays on customer orders. The system also suggests remedies to minimize the impact of delivery delays, and can suggest optimized container unpacking priorities. The system monitors shipping vessels, trucks, and rails to detect shipping issues and notify the supplier immediately of a problem. This kind of capability can go a long way towards helping companies avoid the kind of embarrassing situation in which Best Buy found itself this past holiday season.
