July/Aug 2003

Zendor's focus on Web development and usability makes it one of the most integrated of e-fulfilment companies. Peter Rowlands hears from managing director Keith Basnett why he's so bullish about the future

"I can't stand high street shopping. As far as I'm concerned, the Internet is wonderful. If I never had to set foot in a shop again it would be too soon."

Keith Basnett, who has headed home delivery specialist Zendor since it was founded four years ago, accompanies this assertion with a quick grin (everything is quick in his discourse); but you suspect there's more than a grain of truth in it.

You also sense that this eulogy is more than just a matter of personal convenience. He means the Internet is wonderful in a much broader sense - wonderful in what it can do for consumers, for retailing and for fulfilment.

"At the moment it's seeing a rebirth," he says. "Originally most Web development was driven by technophiles. Often the substance was nil. Now responsibility has moved to marketing directors."

This means there's been a sea change in the role of the Internet, he believes. "Now it tends to form part of a wider multi-channel strategy. It's seen as a real channel to market. Professionals are driving the strategy - taking a consistent approach to their company's look and feel, whether it's in-store, online or anywhere else. The Internet isn't a 'bolt-on' any longer."

This Web evangelism marks a sharp distinction between Zendor and many of the other fulfilment companies that emerged at the turn of the decade to tackle dotcom deliveries. These often regarded Web development as little more than a sideline - something they were obliged to offer in order to earn credibility in a new market niche. Zendor, by contrast, has built up its Web capability steadily, and made it a central plank in its market proposition.

A key stage in that process was its acquisition in 2000 of Eunite, a high-profile Scottish-based Web development specialist. "Eunite had some great technology, but few customers and no real direction," Basnett says.

Initially it retained a separate identity, but more recently it has been merged with Zendor - a move that has created a business with coherence and logic, in Basnett's view. "On the Zendor side we can offer call centre, integration and fulfilment. The Eunite side allows us to add a full Web capability."

Significantly, it also means the company can appeal to a broader client base. Alongside the obvious targets in manufacturing and retailing, for instance, it can also sell to telecoms and financial services customers. Recently it has even found an unexpected niche in the online gaming market, where it is working with customers such as Stanley Casinos.

Despite the fact that Zendor was born at the height of the dotcom boom, one perhaps surprising fact is that none of its clients is a pure-play dotcom, and of the 77 clients it has now worked for, few if any ever has been. Basnett says he's always aimed to develop a client base among organisations with a proven track record of selling in the real world.

Not all such companies originally got it right, though, in his view. "Many organisations made the mistake of separating distance selling from the rest of their business and calling it 'e-commerce'," he says. "In reality, consumers will use many channels for their shopping, so existing retailers will have to provide choice. And the Internet and interactive TV are great ways of talking to customers."

Now that this lesson is sinking in, Basnett sees enormous potential for further online sales growth among existing retailers. He gives no credence to sceptics who, earlier this year, were suggesting the online shopping boom might have run out of steam.

"Yes, there may have been a pregnant pause as a result of the Middle East war and the flat economy. Some consumers have been wondering whether to spend at all. But we're confident the market will come back." He points out that distance selling accounts for just 5 per cent of UK retailing at the moment, and says he firmly believes it will double in the next three years.

He draws his confidence from the fact that retailers Zendor deals with are growing faster in sales through new channels than in any other segment of their market. "And growth is coming faster than they predicted," he adds. "We haven't seen the half of it yet."

Manufacturers, too will sell more product through alternative channels, Basnett says. He accepts that in the past they tended to worry that their dealers might regard direct selling as an aggressive move to disintermediate them, and feared they might lose market share instead of gaining it. "But if customers themselves want to have a dialogue direct with the manufacturer, it makes no sense to prevent it."

As an example of this philosophy, Basnett cites work it has been doing with Sony on direct sales of Playstation games consoles. "The strategy should be to talk to customers if that's what they want. Dealers will realise that it doesn't mean knocking them out of the equation."

If Zendor has been cautious about taking on pure-play dotcom business, it's been equally wary of growing too fast. "We've avoided stretching ourselves unnecessarily," Basnett says. "We've watched too many others fail." Instead, he says, the company has been built up at a sustainable pace - a policy vindicated by the fact that this year it turned the corner into profit. But this is only the beginning, Basnett says. "Now we're in the foothills of the next hike."

Although Zendor is these days putting so much emphasis on the Web, it would be wrong to suggest it has neglected the other aspects of its fulfilment portfolio. At the end of the day Basnett still sees the Web as just one weapon in its armoury - albeit a significant weapon. "The Web is the way in to customers," he admits. It's the first thing they need." For some, he acknowledges, Zendor's work may never go beyond Web development; but the real objective is to find customers like River Island, which "take the whole lot."

The whole lot includes activities such as customer contact, order processing, storing, picking and packing, despatch and home delivery. Much of this is handled in-house; only recently the company opened an additional warehouse dedicated entirely to Zendor activity, and Basnett regards the group's network of home delivery couriers as "a great asset".

However, right from the start, Zendor has also worked with other service providers to offer a full portfolio of products. Lately, for instance, it has developed what Basnett calls "a very healthy relationship" with fulfilment house Amethyst. "We have the intellectual assets, they have resources and expertise in warehousing."

The group has also been working with parcels carrier Securicor Omega Express to build up a specialist delivery network. In essence, SOE trunks consignments to 92 of its depots, and N Brown couriers collect them from there for final home delivery.

Significantly, since fully absorbing Eunite into the Zendor fold, the company has restructured its management team into modular groups. "We don't divide ourselves into developers and fulfilment specialists any longer," Basnett explains, "and we don't have line managers. We have team managers, with teams that are responsible for a whole project from cradle to grave."

This integrated management approach has been helped by a move to new office premises in Manchester. Previously Zendor was dispersed among three different buildings; now it is concentrated in one. And although it is part of the much bigger N Brown catalogue retail group, the company has its own separate identity, with over a hundred of its own permanent staff. It also hires the services of around 220 N Brown staff on a per-transaction basis - an arrangement which on its own costs around £7 million a year.

"If it becomes logical, obviously we can add more permanent staff to our own strength," Basnett says. "This flexibility is one of the benefits of being part of a larger group."

Usability labs

Usability laboratories are a concept usually associated with giant software houses such as Microsoft. Smaller players rarely have the time or resource to devote to finding out how users really interact with their software or services. And it's almost unknown for a fulfilment company to create one.

Yet Zendor, which itself is now a Microsoft certified partner, has done so, and considers it a significant contributor to its product portfolio. "We bring in customer focus groups, and get people to sit down at a screen and try out the interface for themselves," says Keith Basnett. "If they want to, retailers can sit in another room and watch how consumers interact with the system."

He says the concept is particularly useful for testing out potentially complex services such as online banking.

Not only is the service provided to new or existing customers; Zendor has set it up as a product in its own right.