PracticePeople In PracticeIT Focus – A difficult delivery

IT Focus - A difficult delivery

Internet retailing is widely expected to generate big revenues over the next few years. However, talk of last Christmas being the first ever e-Christmas, appears to have been more than a little wide of the mark. And it appears we may still be years away from lift-off.

Retail consultancy Verdict Research estimates retailing on the Web totalled £400m for the whole of last year – just 0.23% of total UK retail.

It would, however, be impossible to argue against the notion that retailing on the Web will increase in the future. Indeed, analysts believe that by 2003 electronic shopping will have exploded to £6bn a year; an estimated 2.5% of total UK retail sales. Meanwhile, Verdict has calculated that £8m of food was purchased on the Web last year, but says that figure will rise to £930m by 2003.

Retailers who have set up websites to sell their goods have reported a number of customer complaints, with the most common grievance being that their order takes too long to arrive; if at all. It is a situation that needs addressing and may lead to many retailers having to completely rethink their Web strategy.

More and more retailers continue to put their brands online – 61 of the top 100 retailers by turnover, now have their brands online compared to 45 this time in 1999. Of these, 29 allow shoppers to make a purchase compared to just 14 last year.

But a potential problem for the many retailers of all sizes setting up on the Web is that they are happy to merely have a Web presence, rather than thinking what the net can offer in terms of attracting and retaining custom – not to mention customer service.

Many retailers have proved slow in addressing delivery. It is one thing to worry about the front-end appearance of the site. It’s quite another to set up a completely reliable and efficient back-end operation.

As one analyst recently remarked: ‘The difference between a good e-business and a bad e-business is that a good e-business will put in place a standard of website service which will encourage people to come back. It will be the recycling of customers and the ability to generate loyalty that will be decisive.’

Andrew Fowler, business manager of Rebus Software, believes the process of ordering retail goods over the Internet has got to be as simple as withdrawing money from a cashpoint machine for the consumer, but for the retailer the whole ordering process needs to be integrated.

‘At the moment a good many Internet retailers are receiving orders but then have to re-enter the orders internally by hand. For many, the whole process of tying Internet orders with in-house systems needs to be looked at, so that transactions can be automatically fed into financial systems without any rekeying, especially as the number of orders over the Web increases.

‘The success stories that will come out of online retailing will be the companies spending money on delivery channels and those which understand customer service,’ he adds.

Ruth Green, retail consultant at Ernst & Young, says: ‘The type of product sold by the e-tailer tends to determine what distribution channel a company uses. Book and video sellers tend to use outsourced couriers and the post for deliveries as their products are small and of a value that warrants these channels.

‘Most start-up companies prefer to outsource their deliveries to agents because they themselves do not have the infrastructure in place.’

As a result it is likely traditional mail-order businesses will begin to charge rival businesses with customer delivery guarantees for the use of their delivery infrastructures.

David Thomas, PwC UK retail consultant, says: ‘There is no right or wrong way to deliver to your customers.

‘Rival grocery retailers Tesco and Sainsburys for example, have different models. Tesco delivers goods from nearby stores whereas Sainsbury has set up dedicated distribution centres. Each method has its strengths.

‘Companies need to ask themselves what their goals are and what delivery times they promise, and create a strategy accordingly.’

Sega Dreamcast recently finished fully integrating its Web orders into its main support functions.

Alex Pappas, Sega IT manager says the company has moved in this direction as it thought the introduction of online selling would offer the company an extra stream of revenue.

Its Web shop at www.dreamcast/ sells merchandise including games and consoles across Europe and is linked up to a third-party warehouse and fulfilment company Track 1 – a subsidiary of Tibbet and Britten.

The company uses EDI messages which are sent from its back-end operation to its warehouses and Track 1. The system appears to work so well, the company reckons that despite promising delivery to your door in three days, 95% of orders are delivered in 24 hours.

‘The beauty of the Web is that customers can choose the language they wish to use and then order in an easy and convenient manner, while it has given us a platform to increase of customer base at a price that is not prohibitive,’ added Pappas.

Meanwhile Cisco says the amount of revenue it generates from trading over the Web has risen to over 60% of sales, but it also stresses the need for delivery standards.

‘Customers are attracted by the ease of buying over the Internet, but it has also allowed us to make the most of our supply chain and drive huge costs out of the business.

‘When our manufacturers are shipping products for us in our supply chain, we want to make sure they’re meeting the standards we require,’ a spokesman says, ‘so all our testing methodologies are on the Web for them. Also, before our products can leave their factories, they have to provide digital signatures (certifying quality compliance’).

Colum Joyce, DHL e-commerce manager, says the e-companies that will ultimately succeed will be the ones that meet the standards met by the majority of brick-and-mortar retailers. That he believes can only be done by fully tying Internet orders in-house.

Rentokil Initial courier arm Citylink, has seen rapid growth in take-up of goods sold online, but believes that retailers have not fully thought out distribution issues.

The company believes it was the first to develop an advanced network integrated system which allows customers to check the location of its parcels at any stage of the delivery and even find out where the parcel was sent from and who signed for it.

Spokesman Tony Stephens says he believes smaller companies should look at their larger rivals to decide the approach they should take.

Andy Crosby, a spokesman for Mercury Interactive, an Internet testing company, says ‘the last mile of e-commerce’ – the delivery of orders – is going to be the biggest issue facing sellers over the next couple of years. ‘Guaranteed delivery times will fall from 48 hours to two in the next couple of years and companies that cannot compete could be in trouble,’ he says.


In the rush to sell over the Net there is a danger of forgetting that (under English law at least) companies are entering into legally binding contracts, and so the cost savings of e-commerce could be swamped by the expense of fighting contract disputes.

Adam Taylor, partner and head of e-commerce group Withers Solicitors, says contracts can be formed online under English law although there is uncertainty as to the exact moment at which this happens.

For businesses, the key is to include a clear set of terms and conditions.

The more firmly they are built into the process, the more effective they are likely to be. Ideally this should be on a ‘clickwrap’ basis, i.e. the other party is forced to read and click acceptance.


However, even if the terms and conditions are fully incorporated they may be overridden by the laws of a particular country; this is more likely in business-to-consumer than in business-to-business transactions. Particularly vulnerable are clauses which try to cut down the liability of the seller if something goes wrong, but these can be crafted to minimise this risk.

There are certain terms and conditions that need particular attention.

For example, it is wise to clarify precisely when a contract comes into existence so there can be no doubt about this.

Another vexed area is the question of ‘jurisdiction’ i.e. if there is a dispute, which countries’ courts can hear it? Borrowing from Oscar Wilde, getting sued is unfortunate. But it is careless to get sued in a remote foreign country because you did not include a clause saying you could only be sued in the UK. Equally the terms and conditions should specify which law applies (a separate issue).

So businesses will, and should, continue to take advantage of the benefits of trading over the Net. But the relative simplicity of doing so should not obscure the need to take basic legal precautions. Otherwise the cost savings may be more than wiped out in litigation later on.

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