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No Margin of Error: E-tailers Scramble to Please Holiday Shoppers

Dec 20 2013, 4:51pm CST | by

No Margin of Error: E-tailers Scramble to Please Holiday Shoppers
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Internet retailers are taking an ever-growing bite out of traditional store sales. But their position with buyers is precarious. A single slip-

up, especially during the peak holiday shopping season, can result in the permanent loss of finicky customers.

A survey from Voxware Inc., a provider of voice-activated systems for material handling, found that 29 percent of respondents will stop doing business with an online retailer that makes just one delivery mistake. And 68 percent said their expectations for accurate, on-time orders are even higher during the holidays.

Returns are a huge headache for retailers, but a majority of them are self-inflicted. In another Voxware survey, 64 percent of buyers said the reason for returning an item bought online or over the phone was incorrect size or color.

“It’s the culture of the society we live in,” said Voxware chief executive officer Keith Phillips. “People want instant gratification.” When they fail to receive an item on time or precisely as ordered, “it rocks their world.”

At the same time, e-tailers must cope with the surge of online business. According to supply-chain software vendor E2open, e-commerce channels will account for an estimated 13.6 percent of all holiday retail sales — totaling $82 billion — in 2013. That would represent an increase in sales of nearly 15 percent over the same period of 2012, according to Shop.org, the National Retail Federation’s digital division.

Even so, the fulfillment of online orders remains a challenge for many retailers. Phillips said they “haven’t figured out that store delivery is a completely different process from taking a single item and delivering it to your doorstep next morning.”

Like their retailer partners, distribution providers ramp up resources sharply during the holidays. Maria Haggerty, president of Dotcom Distribution, said she nearly doubles staff in the warehouse, usually starting right before Thanksgiving. The company is determined to meet peak-season demands, no matter how onerous. “We definitely have the mentality that this is our opportunity,” she says.

Phillips believes warehouses haven’t invested enough in distribution resources to meet the growing needs of e-commerce. That’s hardly a surprising view from a seller of warehouse technology, but he isn’t just talking about his company’s products. Distributors also need to modernize underlying systems, including equipment such as racks and conveyors.

“There are two things that companies need to think about,” Phillips said. “You need to have technology in place, and you need to invest in infrastructure, as opposed to laying that technology over outdated services and databases that aren’t capable of handling the volume.”

There are only so many people that can be crammed into a warehouse, no matter how busy a distributor is. But when it comes to acquiring new technology instead of warm bodies, many companies continue to take a “minimalist” approach, Phillips said.

In theory, e-tailers are in an excellent position to service the younger generation of buyers, who are accustomed to going online for nearly everything they want to buy. But sellers could easily forfeit that favored position if they are unable to juggle the disparate needs of internet orders and merchandise headed for brick-and-mortar stores. What’s more, pure internet retailers are facing new challenges from some traditional merchandisers, who are beginning to allow customers to order online and pick up their purchases at the store.

New distribution technology boils down to three main categories: voice-directed picking and packing, “pick-to-light” systems, and barcode scanning. Which option a warehouse chooses depends on the type of product and service expectations, although many facilities are deploying all three within the same distribution center, Phillips said.

“You apply the best solution to each operation,” he said. “At the end of the day, it’s all about one thing: making sure the customer experience is protected.”

Voice technology isn’t cheap — it can run into the tens of thousands of dollars in a single facility — but Phillips said Voxware has been working to bring the price down. One solution is reliance on the cloud, which might cost the user more in monthly subscription fees, but saves money down the line by eliminating the need for in-house IT staff to manage software residing on the premises.

Distributors embracing the cloud for material-handling software can run into trouble, however, if their overall IT strategy doesn’t incorporate that option for running other key systems. Those familiar with cloud computing, on the other hand, will have already made the necessary adjustments to IT staffs. As a result, they won’t even consider the on-premise alternative.

Voxware has seen a “fairly significant” increase in the acceptance of voice technology within the warehouse, driven partly by the emergence of the cloud. Gartner, Inc.’s latest “hype cycle” for emerging technologies shows speech-recognition well advanced along the maturity curve, entering the “plateau of productivity” phase. “We’re certainly seeing what they seem to be predicting,” Phillips said.

Warehouses appear to face no serious issues in bringing temporary workers up to speed on voice technology during peak shipping seasons. Recent statistics from customers show a reduction in training time from nearly four weeks to half a day, he claimed.

Source: Forbes

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