An Example of an E-Commerce failure and its causes
Toys "R" Us (currently spelled Toys Я Us in the logo, and before as Toys "Я" Us with a reversal on the "R".) is a toy store chain based in the United States. The chain also has locations in Europe, Asia, Oceania, Africa, and Canada. The company currently operates 585 stores in the United States and 716 stores in 34 other countries, with some of them under franchises or licenses. Being an $11 billion business with 1600 stores worldwide, this huge regime operates in five divisions:
Toys "R" Us, U.S.
Toys "R" Us, International
Kids "R" Us
Babies "R" Us
Imaginarium
In order to provide the customers the products and services whenever and wherever they need, Toys "R" Us announced its plans to create an e-commerce subsidiary, Toysrus.com. In 1999, Toysrus.com has established as a premier online toy, video game and baby store outlet. Tragedy happened at the end of 1999.
During Christmas 1999, Toysrus.com employees faced a real siege. The company’s “Black Sunday” came on Sunday, November 6, 1999 as 62 million advertising circulars were placed in local newspapers around the U.S. offering free shipping on Christmas toy orders placed over the Internet. When Toysrus.com was unable to fulfill orders in time for Christmas, the firm received numerous consumer complaints and negative publicity from newspaper and magazine articles and TV news reports about the firm’s problems. Toys "R" Us had the toys available in its warehouses, but was unable to pick, pack, and ship customer orders in a timely manner. Many employees worked for 49 straight days to fill orders, with some employees reported to pull sleeping bags out from under their desks to rest during the round-the-clock operation. Despite the heroic efforts, customers were still displeased. “I have never been exposed to fouler language,” explained Joel Anderson, a Toysrus.com vice president, as he described the angry e-mails from unhappy customers.
Failing to handle the orders flushed into its website, the company totally lost track of thousands of orders or failed to deliver them on time. When it was clear that the company was not going to be able to ship all its orders by the time Santa slid down the chimney, Toysrus.com took the unusual step of breaking the bad news to their customers via e-mail. They refunded 3% of the total orders and mailed $100 Toys “R” Us gift certificates to affected customers. Besides that, the Federal Trade Commission also fined Toys "R" Us $350,000 for not notifying customers soon enough. Although the company had pumped millions of dollars into setting up its own online operation and distribution network for order fulfillment it had to announce 75% slump in profits in 2000.
Technical errors were one reason for Toysrus.com's inability to fulfill some orders by the holidays. Toys "R" Us badly bungled the operations side of creating a Web site able to handle large traffic and shipping orders. They couldn’t execute their Web business effectively due to a lack of experience with both the front-end design and the back-end order fulfillment processes. As a result, one in 20 children failed to get presents in time for Christmas from Toys "R" Us.
In addition, Toysrus.com only had one distribution center, located in Memphis. Thousands of orders can arrive in almost no time. For example, if thousands of Sony PlayStation 2's were sold in only twenty- three seconds, thus, additional staffing, as well as more distribution centers are crucial for fulfillment.
Toysrus.com's distribution center in Memphis
The entire process appears simple, but one glitch can cause the whole operation to collapse. As soon as the consumer types in an order, it is fed into a computer system in the distribution center. The order is printed out and "picked off" by a worker, who then packages it and sends it to be shipped. If a company is lacking in the technology to process the order and the bodies to distribute it, there's no guarantee that an order can be completed.
The company had to change its ailing e-commerce strategy and operation. In 2000, Toys "R" Us announced its Internet joint venture with Amazon.com. Toys "R" Us would take charge of buying and managing inventory while Amazon will oversee all web operations of order fulfillment, and customer service. Toysrus.com's alliance with Amazon changes all the technical problems.
Toys "R" Us Website
Video Clip
Toys "R" Us commercial in 1999 which aired during Christmas
Related Links:
6. http://www.youtube.com/watch?v=y5S9xIsMeDo - source from errantellipses
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1 comments:
Although Toys "R" Us faced the failure before but now they had succeed. Actually during 1999, the etoy of the US also faced the same problem but at the end they also failed. It is important to learn from mistake and become successful.
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