Nov/Dec 2003

Growth in direct home shopping is bound to demand more e-fulfilment capability in the long run, says Amethyst's Martin Palmer, and his company intends to be there to provide it. Peter Rowlands hears why

In an era when some still see the word "dotcom" as a slightly dubious term, many of the logistics companies that made their name in e-fulfilment have gradually been retreating into more conventional logistics.

It is therefore intriguing, and perhaps reassuring, to find at least one contractor that seems if anything to be moving in the opposite direction. Amethyst emerged from roots in automotive parts distribution, and still has a strong presence in that field; but it is also steadily building up a reputation in the e-commerce market.

 

"We wouldn't mind if all our new fulfilment customers had an 'e' in what they were doing," says Martin Palmer, Amethyst's logistics and business development director. "But we're happy to start off by helping them with conventional logistics, and expand with them into new markets." He says a number of clients have come on board on this basis.

So why this confidence in a market where others have shown caution? Palmer points to ongoing surveys by organisations such as IMRG, which have shown for instance that e-tail growth is now outpacing catalogue retailing. "We think more and more suppliers will be willing to jump in."

He says a parallel process of expansion is under way in the business-to-business market. Despite all the early excitement surrounding the use of online exchanges in e-procurement, he feels use of the Web in the B2B world "has not really matured yet." He suggests that the B2B and B2C developments could "bootstrap" one another, and sees further opportunities opening in both market segments.

Happily for Amethyst, e-fulfilment is in fact only one component of its portfolio. It has two other distinct divisions which straddle the B2B and B2C sectors ­ logistics and customer relationship management. Having been formed by two automotive giants, Japan's Itochu and Britain's Inchcape, it continues to work for customers such as Wabco Automotive, Mazda and Kia.

Its range of services extends from physical warehousing and distribution to data management and analysis and customer profiling. Until recently it had a separate warehousing subsidiary, Autoflow, but now the two organisations have been rolled together under the Amethyst name.

It was this slightly unusual mix of skills that prompted the company to move into e-fulfilment. "Three years ago the group started with a basic idea," Palmer says. "We were experienced in working with customer data, and were using the Web to manage the switch from a supply-push environment to a demand-pull environment. We realised we could exploit those skills further in a market where the Web played an even more central role."

The group also had another strength, he adds. "We were accustomed to working with niche products such as low-volume spares and accessories. We were comfortable handling work that other logistics contractors would avoid."

From the outset, Amethyst has adopted the approach of offering all-in e-fulfilment solutions. "There are companies that can handle Web development, and companies that can do the fulfilment, but there's often a hole in the middle. We aim to fill it."

He says the proposition Amethyst takes to clients is simple. "If it moves, outsource it," he says. For e-tailers wanting to build up a presence, but thwarted by nervousness in the investment market, he feels this is an ideal solution.

But are there in fact still enough retailers looking for expansion in the multi-channel market? Very much so, Palmer says. "We see plenty of evidence in terms of the level of enquiries we're getting." He says these are coming both from new contenders and from companies that have dabbled in e-tailing before, but now want to mount a more concerted push in that direction.

Palmer points that Amethyst is not locked into a single route to market. For some customers it deals with multiple ordering channels, which might include telephone and catalogue as well as the Internet.

He admits that multi-contact retailing "really can add a lot to the cost of trading." The solution, in his view, is to minimise client interaction wherever possible. He accepts that there are instances where consumers will only buy if they can have direct contact with the supplier, but maintains: "About eighty per cent of enquiries really can be handled electronically."

Part of the secret, he says, is to build the retail Web site intelligently. "You need to put a proper knowledge engine behind it. Ideally you don't just want a 'frequently asked questions' section, you want to integrate enquiries more fully with the Web site as a whole."

He says Amethyst has identified a partner with which it hopes to be able to develop this concept further. He says Amethyst itself normally aims to keep control of the transactional part of the Web sites it works with, but is happy to bring in specialist designers to define the look and feel of them.

The company also contracts out other aspects of fulfilment ­ notably final delivery, for which it uses carriers such as Lynx, Royal Mail and TNT, as well as specialist hauliers. One of its parents, Itochu, also has its own fulfilment company, which is sometimes used for handling inbound goods.

In common with most companies in the e-fulfilment game, Amethyst has no definitive answer to the challenges posed by the "last mile" part of home deliveries. "There's a constant tension between customer expectation and cost," Palmer says, adding that he sees no simple remedy as long as there's a general discontent among consumers about the cost of home delivery.

However, in the longer term he seems more upbeat. "There are latent solutions out there," he says, "and as Internet shopping gains further in volume, those solutions will kick in." He's not revealing exactly what he thinks they will be, but suggests they could range from high-tech solutions to the use of agency delivery drivers ­ "a very appealing model," he says, "which we will be developing."

When it comes to choosing its market sectors, Amethyst does not attempt to be all things to all men. It would not take on chilled or frozen food distribution, for instance. However, its range is still broad, extending from leisure goods and consumer electronics to high-tech and defence products. "And we want to move into other new sectors," Palmer says. The company also relishes added-value activities such as product re-working, re-labelling and finishing.

In terms of its target market, he says it aims to offer a "tier one" service, but not necessarily only to tier one companies. "We like to talk to companies occupying the middle ground. They're the ones most likely to have systems issues."

He adds that Amethyst is also willing to talk to what he calls "growing" companies, and to help them through their growing issues. As an example, he cites music specialist Arbiter, which although long-established, was moving into new territory when it chose Amethyst to develop a spares re-ordering business for accessories. It then also used the company to develop an entire Web operation for its karaoke music sales business (featured in depth in e.logistics Magazine, issue 9).

Above all, Palmer says, Amethyst aims to be flexible in what it offers. "Users can trial our services for say three months if that is what suits them best. They can select just the right elements for them." It seems to be working. "Customers see the potential when they realise we're in this for the long term."

Pay-as-you-go fulfilment

To take as much pain as possible out of the start-up process, Amethyst is willing to supply its services on a pay-as-you-go basis. That was exactly the proposition it adopted earlier this year when it started working for a new e-tail business called Dot2Shop, which sells high-tech gadgets and "big boys' toys" over the Internet. Amethyst offered a complete package extending from developing the Web site to handling the fulfilment ­ freeing the client to concentrate on buying and marketing its product range.

Another recently acquired customer is World Wheels, which specialises in selling Dahon folding bicycles. The company decided to launch a Web site as an extra channel to market, and Amethyst swung into action to set this up. "Build-to-order is a key element in its proposition," Amethyst's Martin Palmer says, "and the Web is an ideal medium for this."