More and more e-commerce companies are expected to begin using Internet
fulfillment networks that connect them with manufacturing and distribution
partners in an effort to resolve their shipping woes, says a new industry
report.
Indeed, an estimated 33 percent of online retailers will outsource shipping
to drop shippers in the next year as they attempt to profitability, says the
report from New York City-based Jupiter Media Metrix
The company predicted that spending for private trading network
infrastructure will hit about $37 billion by 2005.
The report found that a whopping 44 percent of online retailers currently
lose money on shipping and handling. And 37 percent of online retailers cite
the cost of shipping as a major fulfillment headache.
But
Jupiter analysts said that merchants can
drastically reduce labor costs and processing times by using Internet
fulfillment networks.
The private trading networks can automate the drop shipping process —
including order routing, performance monitoring and real-time inventory
checks. Jupiter analysts said they believe merchants can save up to 25
percent in labor costs by using the fulfillment net approach.
“Retailers, online and off, are realizing that the Internet not only affords
new ways of interacting with consumers, but more efficient ways of
interacting with suppliers,” said David Schatsky, research director and
senior analyst at Jupiter.
“Merchants that deal with numerous drop-shipping suppliers are finding that
fulfillment nets offer huge advantages over the traditional and widespread
use of telephone and the fax,” he said. “With setup costs typically in the
low five figures, and transaction fees typically in the $1 range, Internet
fulfillment networks offer a clear economic advantage.”
Jupiter said that retailers who are selecting a fulfillment net provider
should:
- Evaluate prospective service providers on the ease of integration and the
amount of work that would have to be redone if a switch to another provider
was necessary. - Look for vendors that have signed large clients that provide good base
revenue streams and (have) a vested interest in the survival of the provider. - Choose the connection type that makes the most sense based on the
merchant’s volume. Browser-based applications are best for low-to-medium
volume vendors and XML-based interfaces for high volume merchants.
Among the players in the fulfillment net space are
OrderTrust,
Commerce Technologies Inc.,
CommercialWare,
Managize and
RedKnife.
