Online, On Time

Los Angeles Business Journal
December 5, 2005
By HILARY POTKEWITZ

Less than three weeks to go before Christmas - nervous time in the online retail world where reputations, even entire businesses, can be won or lost by the ability to wrap and ship in time for the big day.

Except this season, the pressure seems to be easing.

Retailers and shippers have learned from past glitches, with the biggest improvements coming in the unglamorous logistics area, where stocking, shipping and consumer research are the tools of the trade.

"We try not to fall behind," said Brett Morrison, founding partner of Los Angeles-based Onestop Internet which handles online sales for several local premium denim brands that include 7 for All Mankind LLC, Earl Jeans and L.A.-designer Trina Turk.

This is Morrison's third holiday season and he now knows to hire six more staff members to his team of 25, just to handle holiday orders. "Once you fall behind, you cannot catch up. It's impossible," he said.

Last year, only 9 percent of shoppers nationwide said that their orders arrived later than the day promised by the retailer, down from 15 percent in 2002, according to JupiterResearch. But for the unlucky 9 percent, it's not easy to forgive the retailer and much easier to forget them.

The online comparison shopping site Shopzilla found that 50 percent of shoppers reported being "very concerned" to "extremely concerned" about receiving their purchases in time for the holidays.

"If a store doesn't deliver on time, it is very unlikely that a consumer is going to buy from them again," said Jupiter retail analyst Patti Freeman Evans.

As holiday shopping becomes a clicking frenzy, with consumers dropping more than $300 million online the day after Thanksgiving, the first couple of weeks in December will be a packing and shipping frenzy for online retailers. This year, the cutoff for orders that are ground shipped is around Dec. 15, while air delivery can go as late as the 22nd.

"Retailers have gotten much better at managing online operations," said Freeman Evans. "They've probably learned about inventorylevels, how customers behave. They've only had a couple of years experience at this, so before, who knew?"

Trendy Westside boutique Intuition started an online store three years ago, and owner Jaye Hersh says she's getting the hang of it.

"At first we were really chasing the business because we didn't know," Hersh said.

She has learned how to use the store's trend-setting status to her business advantage. "Now we're projecting and anticipating what we decide is going to be the ‘next big thing,' so we're in much better shape. We know what the trend is going to be before it happens."

That means training customer service representatives about the hot items in stock. Hersh hired 10 holiday employees just to handle the phones, something she learned from the first year when the lines were so busy customers couldn't get through.

Success in the online retail game depends on knowing what consumers want before they want it. If the "it" item sells out in the "it" color, many customers will be just as happy with a similar color, Hersh says - something to keep in mind when stocking Web site inventory. "If we're out of pink but we have lavender, that's close enough for a gift," she said.

Trina Turk takes the approach a step further during the holidays. Retail Director Andrea Ginsburg reviews sales reports for all Turk lines leading up to the holidays and plans to buy more heavily this year than last.

Sweaters, scarves and clutches are big holiday items, Ginsburg explained, because they fit everyone. "If we don't have extra stock, I might send it in a different color...or try to find an item that is similar in another category," she said.

Managing expectations

Most retailers say there's one aspect of the holiday shopping they can't control: "We're still at the mercy of the shipper," Morrison said. "There's not much you can do about that."

FedEx Corp. has beefed up its holiday service to accommodate the spike in online sales. "Obviously we're a beneficiary of all the online shopping," said spokeswoman Sally Davenport. The overnight delivery service increases the number of cargo flights out of its major hubs during the holidays and typically hires 8,000 temporary workers for its ground deliveries.

It's all about managing expectations. As it is, Federal Express modifies some of its guarantees because of the sheer volume coming through its systems. "We do work closely with the e-tailers to give them parameters for how late things should be offered," she said.

For OneStop, changes made since last year can be as mundane as warehouse configuration - making sure items flow from shelf to box to pallet to truck in a logical way.

"Retailers have gotten very slick and prepared for the holiday season online," said Shopzilla spokeswoman Helen Malani.