Building a business
Getting online took cleaning up a faltering catalog and letting someone else build the store.
Nabisco had been taking in a modest US$5 million a year in revenues from its gifts franchise. But printing and postage costs were enormous given the relatively small sales volume Nabisco's gift operation fetched.
The catalog operation had other problems tooâ€"especially where customer service was concerned. Botched orders and delayed shipments were an entirely new experience to a company that spent 88 years cultivating the Oreo cookie as an American icon.
"I wouldn't characterise anything we did as a mistake," Fordham says in her unit's defense, but "we did a lot of learning . . . which we believe will lead us to success this time around."
Fordham's specialty lies in picking up the pieces after managerial missteps. As senior vice president of marketing for Nabisco Biscuit, she was credited with defending the company's market share during the cookie wars of the late 1980s and later with the turnaround of Nabisco's more than $2 billion cracker business. She became president of LifeSavers at a time when sales were slumping and helped steer the candy back into the market's sweet spot.
Fordham ordered a reevaluation of the gift business, asking Shurts to find a new fulfillment house. And in early 2000, they decided to move the entire business to the Net under the name of NabiscoGifts.com.
Timing was critical. "We really wanted to get some experience during this year's holiday season when gift-giving is at its peak," Fordham says.
Tom Garvin, director of e-business, began work with Shurts to develop the site using internal IT resourcesâ€"which were certainly plush. After all, Nabisco is an $8.3 billion-a-year enterprise. "We got about halfway down the road planning to build it internally," Garvin says. But it soon became apparent that the creaky wheels of corporate IT wouldn't get the site launched by this year's target holiday season.
Garvin is quick to defend those creaky wheels. IT shops, after all, are generalists. Security, bandwidth, scalability, redundancy of servers, shopping cart front endsâ€"all the pieces of e-commerce would have to be bought or invented in-house. The costs and time involved were staggering, so Garvin recommended the group go out-of-house. After all, dozens of service providers had already worked out these details and could deliver solutions faster and cheaper.
The company began evaluating the major players in April. It looked at more than a dozen service providers before narrowing the field to four possibilities. In July the company settled on Digital River, the service provider behind sites for 3M, Fujitsu, Siemens, and thousands of others. The reasons? The company's storefront templates meant that Nabisco Gifts could be open for business in time for the holidays. Digital River's fraud-protection technologies were vastly superior to what Nabisco could cobble together quickly. Digital River's server farmsâ€"stocked with redundant Sun computersâ€"promised the reliability, scalability, and bandwidth Nabisco wanted in place from the get-go.
Fordham was sold. "The major driver for me," she explains "was their front-end expertiseâ€"the large amount of e-commerce experience they had, their ability to link seamlessly with our fulfillment partner, and their ability to partner with us in developing online marketing programs."
So what about costs and time to market? Setup cost less than $250,000, and monthly fees will run less than $10,000. If Nabisco decides to make major enhancements to the site, it will pay extra. But chances are Digital River will have worked on similar projects for one of its other clients and can spread out the costs. Nabisco also plans to tap Digital River for online marketing campaignsâ€"another area where its expertise is greater than Nabisco's.
"From a cost perspective, it's difficult to compare an in-house alternative," Fordham hedges. "The way we thought about it was that Digital River was giving us a much more capable, attractive e-commerce site for similar dollars."
Perry Steiner, president of Digital River, estimates that most companies will spend $50,000 to $250,000 up front and $10,000 to $40,000 per month for hosting when they go out of house for their e-commerce solution. That price of admission buys you 24/7 management of your site. "Our business strategy?" says Steiner with a laugh. "Don't spend a penny on e-commerce. Outsource it all to us."
By September the NabiscoGifts site was up and running in a controlled test: ordering and shipping gifts across the country. The site was on target to open for business in Novemberâ€"in time for the holidays. "Our goal for the first year," Shurts says, "is for every customer who orders from us to be thrilled."
Fordham is less categorical about their expectations for profits. "Our experience is still limited," she says. But based on the e-business initiatives of others, she expects the site to "pay back very quickly, generally within the year."
Nabisco's bricks-and-mortar distribution channel could throw a wrench in the works if it senses a competitive threat from the site. Shurts explains that for now, the company is walking gingerly around the problem by selling Internet-only products from NabiscoGifts. Eventually, gift recipients could find in their cookie baskets coupons for . . . bricks-and-mortar retailers.
Nabisco plans to encourage its distributors to sell Nabisco gift baskets from their own Web pages. When customers click on a wheelbarrow of Oreos at Walmart.com, say, they could be whisked transparently to the Nabisco site on Digital River's server. Wal-Mart would take its cut for the referral. Alternatively, Nabisco could include a gift-finder utility on its home page that would point customers to retail distributors like Wal-Mart. The possible synergies are endless.
And what if Nabisco's distributors beat the company at its own game by selling more Nabisco gifts than NabiscoGifts? "That would be fine," Shurts replies. "No problem," he says, all smiles.
