FULFILLMENT: We Deliver

When brand managers sliced distribution of coupons, samples, premiums, and direct-mail in a move toward target marketing in the mid-1990s, suppliers moisturized drying revenue streams with new products and programs that could float those early one-to-one initiatives.

The fulfillment industry, however, was left high and dry. Reduced shipments translated simply into less business.

That was then. This is now.

The Internet invasion began a few years later and reinvigorated the fulfillment industry. As a result, the segment is now flourishing. Revenues jumped 20 percent to $3.23 billion in 1999, according to PROMO estimates (2000 figures will be released in May) as millions of cyberclickers surfed the Web, direct-ordering everything from tax-free cigarettes to caskets. “Fulfillment has come back from the dead,” says Michael Kushnerick, senior promotion manager at Colgate-Palmolive, New York City. “The Internet has resurrected it.”

Fulfillment is arguably the most essential component of a Web-based business. Research shows that botched shipments sour consumers, sometimes forever. “Fulfillment is the bottom line,” says David Schatsky, a research director with market research firm Jupiter Communications, New York City. “Consumers want what they ordered in a reasonable amount of time. Web operators have to be able to deliver what they’ve committed to.”

Online samplers such as freesampleclub.com, startsamplingcom, freesamples.com, and sampleville.com are well aware of this, and continue to invest time and money to ensure that fulfillment is up to snuff — with good reason, since fulfilling online requests for samples doesn’t come cheap.

“While traditional store sampling costs 17 cents to 24 cents per sample and event sampling runs a brand about 25 cents per, online sampling costs 75 cents to 90 cents each,” says Jack Lee, vp at Right Choice Sampling, New Canaan, CT. “The fulfillment is the biggest cost item.”

Many marketers say the cost is worth it. “Yes, the delivery charge eats 80 percent of the total cost,” says Ben Christensen, assistant targeted promotion manager at St. Louis-based Ralston-Purina, which is currently sampling its pet food online (Right Choice handles fulfillment). “But online sampling is working for us.”

And for other brands, too. Surf through offers on freebie portals such as amazingfreebies.com, nojunkfree.com, 1allfreesamples.com, and thefreesite.com and you’ll find endless offers for gratis goodies.

Shipping Out

Some brands execute sample offers from their own home pages. Most, however, farm out the efforts to sample portals such as freesampleclub.com or startsampling.com, the latter of which recently registered its one millionth member. Fulfillment strategies differ by company, with many handling shipments in-house and others outsourcing to third-party houses.

Sampling sites that manage shipments in-house say they have better control over their operation. At Carol Stream, IL-based StartSampling, orders get downloaded daily and sent to an on-site fulfillment center. There, orders are run through “hygiene” software to verify each mailing address. A bar code is assigned to the order and samples are picked, then packed, then shipped within a few days. “People said we were nuts to handle fulfillment ourselves,” says Larry Burns, the company’s president and ceo. “But we control what is offered on our site today so we know exactly what will be sent out tomorrow.” Burns says the in-house system allows his company to more easily take on smaller orders (of 20,000 samples or fewer) that large third-party shippers wouldn’t touch.

Others say third-party fulfillment house operations are the better option, a decision that allows samplers to better focus on the core business. Philadelphia-based freesamples.com, which boasts 600,000 registered users and inventory from the likes of Kraft and Johnson & Johnson, outsources fulfillment to Memphis-based The Order People, a unit of United Stationers. Orders are transmitted nightly, and People takes care of the rest — up to 200,000 samples can be mailed daily. “It best serves our business needs to have other people handling our back-end,” says freesamples.com vp-sales Steve Olinger.

Regardless of where the samples are housed or from where they get shipped, the survival of online sampling sites depends on two factors: mailing time and inventory control.

Getting the sample to consumers in a timely fashion is critical. Early online samplers promised that orders would be mailed out same-day, then felt the heat from clients when consumers didn’t receive them for weeks. As a result, many sites have relaxed their shipping promises in order to give consumers exactly what they’re expecting. Marketers at freesampleclub.com, owned and operated by Overland Park, KS-based The Sunflower Group, originally went live in 1998 with a four-day delivery goal. “It turned out to be a strain,” admits president Dennis Garberg. “So we backed away from that offer.”

The site, which now takes 1,000 to 7,000 orders daily — with each visitor requesting four to seven samples on average — now promises delivery in two weeks. Orders are outsourced to Kansas City-based Intelligent Marketing Solutions. “Consumers aren’t as concerned about how long it takes to receive a sample as they are about getting the sample in the promised time frame,” says Jason Kusner, owner of free offer portal nojunkfree.com, Mesa, AZ.

Inventory control is another key to Web success. Requests can come in by the thousands, so making sure there are enough samples to go around is an ongoing challenge. StartSampling manages fulfillment orders with a “green-light/red-light” system that freezes certain offers when requests run high enough to threaten shipments or deplete inventory. When offer-specific inventory is half-depleted at freesamples.com, the company lets the client know. At 75 percent depletion, the client can add more. At 90 percent, freesamples.com kills the offer. “We don’t want to offer the consumer something we can’t deliver,” says Olinger.

On Track

For now, online sampling sites seem to have the fulfillment flow under control, although most admittedly run fewer than 10 offers daily. Should the day come — and most portals are betting it will — when the channel goes mainstream, current operations, whether handled in-house or outsourced, will need a serious upgrade. That will most likely come in the form of automated systems similar to the ones used by large CPGs and retailers. Sunflower’s Garberg says his fulfillment operation is scaleable for only about six months, and an upgrade is planned. StartSampling’s semi-automated fulfillment center can handle 30,000 to 50,000 shipments per day. The company is slowly moving to a fully automated center that will handle upwards of 150,000 daily shipments.