Retailers testing waters of e-commerce

THE e-commerce honeymoon may but the marriage remains, according to marketing expert Dr. Roger Blackwell, who analyzed successful e-commerce strategies at a recent Hardlines Technology Forum in San Antonio, Tx.

To capitalize on the potential of online retail, Blackwell said companies need to master commerce functions, understand how customers buy their products, create blended sales strategies, and build their brand on the Internet. "You go online to serve your existing customers better, not to get new ones," he said, suggesting that companies should have all functions of management represented on their e-commerce team.

"The purpose of e-commerce is not to replace but to enhance traditional selling. The Internet is more about searching for stuff than selling it," he said, adding that research has revealed that 43Va of online customers are very satisfied with their purchase experiences.

Blackwell said companies need to build the logistics and operations side of the business before brand campaigns are launched. The next step to building a brand online is to get the Web site right with consumer-friendly, two-way communication. Finally, the company must create an "event" that involves customers and then give them a reason to visit the Web site on a regular basis. The items that sell best on the Internet are specialty products, not convenience items. Blackwellnoted.

Rob Palevich, manager-electronic commerce, Do it Best Corp., said the Internet allows the buying group to use data mining to provide better customer relations management. "We can determine which items sell best for members in the same demography and do e-mail direct marketing and ad targeting," he said.

The company is also getting into wireless lumber applications, with members being able to use a cell phone to gain immediate access to Do it Best's lumber system to check prices and reserve inventory.

Another new initiative for Do it Best is the placement of Internet kiosks in airports and malls, offering the co-op's 70,000 item catalog greater exposure to niche markets. "Its been generating a lot of sales for us," Palevich said.

Another positive development is a recent affiliation with goracer.com, which Palevich said has the ability to add 30 million hits each month to Do it Best's Web site.

TruServ is looking to create a seamless network with vendor-managed data. According to eBusiness director Eric Lane, the co-op now receives 707o of invoices and 907o of purchase orders electronically. "We want your data electronically," he told manufacturers. "We have the tools to translate it and get it to our members."

Lane said upcoming initiatives are to begin doing electronic funds transfer with members and vendors and to develop an electronic catalog to put in front of its members' customers. "They will be able to price it separately, show what SKUs they want to show, and then get orders," he explained.

Greg Lenard, director of inventory control, Ace Hardware Corp., noted that Ace has to carry a lot of buffer inventory to deal with uncertainty in the marketplace. "The more we talk (with suppliers), the less uncertainty there is." Ace is currently doing vendor-managed inventory (VMI) with 28 suppliers, Lenard said, but sees even more opportunity with CPFR (Collaborative Planning, Forecasting and Replenishment). A test with one Ace vendor involved taking collaborative sales forecasts and creating live orders with pre-defined parameters. The result was a9Vo increase in annual sales with that supplier, a 247o reduction in overstock returns. and a 28Vo reduction in distribution costs, according to Lenard.

"lt's the single largest opportunity over the next five years to move inventory management forward," he said. "CPFR delivers, clear, measurable results and Ace is committed to this process."

Ken Tackett, Sears' director of merchandise information systems, said his company is seriously looking at item setup and maintenance this year. It has adopted paperless Web applications to enter a new item into the retailer's system.

The chain also plans to expand its use of GlobalNetXchange, which gives Sears the ability to collaborate with vendors on merchandise and supply chain planning. "We want to start piloting things such as CPFR, auctions for retailers, and start mov- ing off EDI on VANs and onto the Internet," he said.

Lowe's is currently doing VMI with more than 100 suppliers. "We're sending daily and weekly point-ofsale information to about 350 vendors," said Greg Forester, director of logistics support. "We've hit the ceiling with that, so we came up with Internet EDI and have about 40 vendors doing that now."

In an effort to eliminate paper in its systems, the retailer now sends about 93Vo of purchase orders electronically. "We're going to start rolling out a process where we will send out special orders electronically," Forester said, adding that the goal of many of Lowe's electronic initiatives is to reduce lead times with vendors and make information more visible to them.