Shipping Product: The E-Commerce Albatross

E-tailers often live or die by their shipping processes. The "last mile" to consumers' doorsteps is arguably the most critical phase of online commerce. For a long time, e-tailers faced one shipping hurdle after another -- and often fell flat on their faces.

While many companies recently have mended egregious deficiencies in their shipping operations, room for improvement remains.

"Shipping is still among e-tailers' top three imperatives," Meta Group senior program director Gene Alvarez told the E-Commerce Times. "We will still be talking about this issue years from now."

Shipping Shapes Up

Many e-tailers endured a rocky first foray into the shipping arena, alienating customers and wasting resources.

But the sector as a whole now has coalesced around a set of best practices, and it has nearly expunged such blemishes as the 1999 holiday season from its collective reputation.

Online retailers have made strides in back-end system integration and returns processing, analysts agreed, and should continue to pursue brick-and-mortar partnerships to improve their overall fulfillment processes.

Despite reaching an acceptable performance plateau, most e-tailers still treat shipping operations -- along with site functionality and order-to-fulfillment system integration -- as a top priority, Alvarez said.

"Shipping is extremely important, but not necessarily a challenge for us," BarnesandNoble.com (Nasdaq: BNBN) spokesperson Carolyn Brown told the E-Commerce Times.

Back-End Integration

For its part, Austin, Texas-based Dell Computer (Nasdaq: DELL) has expended ample resources integrating its ordering and fulfillment systems in order to make timely deliveries to its 10,000 daily customers.

"Shipping is not a challenge for us as much as it is an opportunity," Dell spokesperson Venancio Figueroa told the E-Commerce Times. "We have streamlined our back end and carved costs out of the process, so we can pass these savings on to customers."

In Dell's build-to-order system, demand signals from customers automatically trigger responses from manufacturing facilities and logistics partners.

"Our logistics people work with our sales and marketing people to understand [each other's] worlds," Figueroa added.

Money Talks

Along with Dell, some analysts pointed out traditional catalog companies like Lands' End and L.L. Bean as purveyors of shipping best practices.

"Those companies who were selling through catalogs before using the Internet had the 'bricks' in place and are now making money," said Alvarez. "Many of the traditional brick-and-mortar [multichannel retailers] have outclassed Amazon.com."

Although Amazon (Nasdaq: AMZN) has received accolades for its shipping efficiencies, Alvarez emphasized the company's immaturity in terms of warehouse and order management systems.

"Earnings reports speak the loudest," he added, referring to Amazon's relatively late achievement of profitability.

Ship Shock

Although shipping procedures may be under control, e-tailers still face a consumer constituency that cringes at the cost, risk and time associated with even the best delivery systems.

In fact, Alvarez estimated, shipping concerns rank among online shoppers' top five worries.

"Shipping determines what kind of products consumers buy online," Forrester Research analyst James Crawford told the E-Commerce Times. "If it costs too much to ship or if they need it right away, customers simply will not buy it online."

Understandably, many e-tailers -- including Amazon, BarnesandNoble.com and Buy.com -- are experimenting with free or discounted shipping promotions to tackle this obstacle.

Strong Tradition

To meet consumer demand for more immediate fulfillment of purchased goods, analysts advised e-tailers to continue to strike deals with brick-and-mortar companies, enabling customers to buy products online and pick them up in stores.

"Fulfillment execution still cannot beat a consumer going to the store and getting a product," Alvarez said.