Promises Realized
Revenues in the fulfillment segment saw another strong year of double-digit growth in 2003, climbing 11.0% to $4.1 billion from $3.7 billion in 2002. The continued growth was mostly fueled by manufacturers and marketers growing acceptance of Internet-based fulfillment as a mainstream tool.
“The most interesting thing from a fulfillment standpoint was that the number of shipments that were done by e-mail was equal to the number of shipments done by us through the U.S. Mail and FedEx,” says Michael Ahern, CEO of Seattle-based. Giftcertifcates.com. “2002 was 30% e-mail; for it to jump up to 50% is really quite a milestone.”
Ahern, whose company saw fulfillment-related revenue climb by 40% last year, says the huge jump in e-mail fulfillment is simple to explain: “A lot of the larger deals used to be more complicated; there were so many pieces of paper and plastic cards that had to be manipulated and handled, whether by us or by our customers,” Ahern explains. “By taking care of it in e-mail, you create significant cost efficiencies; and the whole process is really just frictionless.”
In 2003, fulfillment industry executives finally began to see all their investment in new technology and Internet-based databases pay off. “Fulfillment is really based in data services, except for the pick-and-pack portion,” explains Frank Clausen, executive VP of data services for IOS, Bloomington, IN. “Internet activity is stronger and stronger and we now do all of our reporting to clients on the Internet.”
The industry has seen an ongoing investment in new technology, but most insiders felt that tech investment spiked in 2003. Fulfillment companies needed to spend a good deal of money both ensuring the security of customer information and getting that word out to marketers.
Despite heavy investment in new database technology, fulfillment execs are finding that what they spend on the technology side has a corresponding effect of decreasing labor costs.
“When all is said and done, fulfillment companies provide labor,” Clausen says. “In 2003, we saw a lot more use of Internet rebates. Whereas before we had the mail-in cards, a lot more of that is being collected on the Internet now. The info from the consumer is collected and worked on quicker because of the media. Data capture is quicker, so fulfillment is quicker, and the technology helps us to keep costs down.”
Fulfillment industry sources feel that the worst of the economic uncertainty is over, and that business is climbing back up into the sort of sustained growth rates the industry had experienced before Sept. 11 and the recent recession. “In 2003, we saw a pickup, a nice increase,” Clausen says. He says his company’s revenues jumped 50% last year, as the company expanded through acquisition. “Particularly by September and October last year, we saw people really step up their promotions and put together more offers. We’re seeing a return to normalcy; overall when you look at coupons and promotions and rebates, things are getting back to normal.”
One trend that Ahern has noted is an uptick in fulfillment of gift certificates from manufacturers promoting to their sales channels. “Particularly in the cell phone market, we saw a lot of companies promoting to their retail sales partners,” explained Ahern. “Companies like Sony ran promotions that gave the actual salesperson who sold the cell phone a ten -dollar gift certificate. This is not your typical promotional program, but we really saw that take off in 2003 and see no drop in that activity for 2004.”
SNAPSHOT 2003
- Total spending: $4.1 billion (up 11% for year)
- Cost-efficient and frictionless, e-mail fulfillment goes mainstream
- Data collection is a bonus
