The recent holiday season was an electronic-commerce milestone in Canada. For the first time, Canadians were offered a wide selection of merchandise through the World Wide Web, and quite a few of us took advantage of the opportunity to shop online. Even though Canada is among the world’s most wired nations, Canadian merchants have been a good deal slower than their American counterparts in bringing their wares to the online market. Yet they are beginning to jump on the bandwagon. Here are the stories of three of them: an international chain whose Canadian operation has led the way in e-commerce, a young Canadian-owned bookstore chain, and an East Coast maker of quality cookware whose Web site has brought international exposure.
While the three are quite different, their experiences illustrate some common lessons. Among those lessons one thing stands out: a key to online success is good customer service, and that in turn relies very heavily on well-designed, integrated information systems behind the scenes.
HMV CANADA: CALLING THE E-COMMERCE TUNE
Built from a standing start in late 1998, HMV Canada Inc.’s e-commerce operation has become the model for the British music retailer’s operations in several other countries. “Canada sort of ended up being the template,” says Frank Koblun, director of consumer e-commerce at HMV Canada in Toronto, adding that teams from HMV operations in Britain and Australia have visited Toronto to learn how HMV Canada built its site.
Though HMV had had a limited e-commerce operation on the Web site of its home-base operations in the United Kingdom for a couple of years, the Canadian company was the first to launch a full-fledged online store, which later served as the model for a relaunch of the U.K. site, says Sara Ross, Internet marketing manager at HMV Canada.
HMV Canada had designed the site — www.hmv.com — by January 1999. Coding took the first half of the year, and the site went live in the middle of July. Since HMV Canada is a private company, Koblun will not release online sales figures, but he does claim the company’s online sales so far have been about double what he originally budgeted. “The real challenge is on fulfilment,” he says, and just before Christmas, HMV Canada warehouse staff worked until midnight most nights to keep up with the orders.
Integration Strategy
A key to HMV’s strategy was integrating the e-commerce site with existing inventory and ordering systems. This ties the online store in with all HMV’s bricks-and-mortar stores across Canada. “Because of the integration,” Koblun says, “we can draw on the entire stock, all of the inventory of HMV Canada.” If a disk is not in the warehouse, it can be retrieved from one of the physical stores to fill a Web order. Shipping is by Canada Post unless customers choose to pay extra and receive their orders by United Parcel Service.
Close integration with other systems essentially means HMV’s online store looks almost exactly like its bricks-and-mortar stores from the point of view of back-end systems — with a few extra features, notes Rodney McBrien, HMV Canada’s director of information systems.
To achieve this integration, though, HMV had to go out on a limb. Its existing systems were on IBM AS/400 hardware, and even IBM had relatively little experience at the time with building e-commerce applications on the AS/400. “The time lines were definitely one of the big issues that we were faced with,” McBrien says. “The biggest challenge we had was to implement it and integrate it with our fulfilment system.”
It was the first implementation of IBM’s WebSphere application server software on AS/400 hardware, and to make things more interesting HMV’s financial and inventory management systems required changes so they could be fully integrated with the e-commerce site. IBM made programmers from its Rochester, N.Y., facility, where WebSphere was developed, available on call to help HMV.
The new technology also required new skills, McBrien says. HMV chose to contract out JavaScript programming to IBM, but hired some additional AS/400 specialists to support the new system, as well as junior people who will be trained for future support jobs.
Paying Attention to the Customer
Besides facilitating quick delivery by integrating its systems, HMV is careful to let customers know what they can expect. Don Thompson, a partner at Deloitte Consulting in Toronto who specializes in electronic business, says this is a key to e-commerce success. Sites should be very clear about shipping time, charges and returns policies, he says. On the HMV site, details for each disk include a “usually ships within” date so customers know how quickly they can expect delivery. And if a customer is not happy with an order he or she can “ship it back to us or bring it to our nearest bricks-and-mortar store,” says Ross.
In some ways online music shopping beats the storefront approach. HMV’s site lists more titles than one would find in any one store, and a simple search capability makes it easy to call up a complete discography of any artist’s works. Fans of Montreal blues singer Ray Bonneville, for example, may have a hard time finding his CDs in stores in other parts of the country, but online all they need do is type “Bonneville” and press the search button. The site also uses streaming audio to let Web surfers listen to brief excerpts from some of the tracks on the CDs offered for sale.
Not only has HMV’s Canadian site been a template for the company’s subsidiaries in other countries, but Koblun says HMV Canada may in future expand its electronic horizons to the U.S. market. HMV has about a dozen stores in the United States currently, including a new one just opened in New York’s Times Square in December. Since the Canadian operation is already using the hmv.com address — the one American customers would most likely seek out — a single North American site would make sense.
INDIGO: GOT THOSE E-COMMERCE BLUES
How do you compete with the quintessential e-commerce success story? That’s the problem facing major Canadian bookstore chains. Hardly an article has been written about electronic commerce without mentioning Amazon.com, the Seattle-based online bookseller that, though still not making money, has become the darling of Wall Street and everyone’s favourite example of what the Web can do for business. So how can Canadian chains get in the game?
In fact they have, partly for the same reason that underlies Amazon’s success — books are so well suited to online sales. They are relatively easy to ship, they don’t have to be tried on, and for many buyers the purchase decision depends largely on the author’s name and the book’s reputation, not on handling and examining the physical article.
One of the Canadian chains that has built a sizeable Web presence is four-year-old Indigo Books Music & More of Toronto. Last July, the 14-store chain launched its Indigo Online Inc. subsidiary after acquiring an independent online book retailer called Bookshelf.ca. The acquisition gave Indigo a foundation on which to build its online operation. Says Ted Boyd, president of Indigo Online, “Our philosophy is that of a multi-channel player, such that we would want to be able to serve our customers whatever channel they desire.”
Playing the Canada Card
To compete with the Amazon juggernaut — and with other major online book retailers such as Barnes & Noble — Indigo relies in part on its Canadian identity. That’s why Indigo’s Web address is www.indigo.ca, not indigo.com, for instance. And like all Canadian merchants competing in their own market with e-commerce sites south of the border, Indigo has the plus of pricing its goods in Canadian currency.
Quick delivery is another bonus that can work for a Canadian merchant. Boyd says Indigo Online can ship a title within 24 hours if it is in the Mississauga, Ont., warehouse, and 48 hours if it is in one of Indigo’s stores. This is possible because the e-commerce systems are directly tied in with Indigo’s order fulfilment system. In the worst-case scenario, when Indigo neither has a book nor knows for sure if the publisher has it, the order is handed to a customer service representative, who can usually track down a copy within three to six weeks.
Like HMV, Indigo lets its customers know what delivery time they can expect. Each title carries an expected shipping time, and links with the inventory system keep these right up to date. “If, boom, that last book goes from the warehouse,” Boyd says, “you’ll see a change day-over-day — sometimes from 24 hours to three to six weeks.”
The software behind the Web site is an important factor in providing this kind of service. Close integration of systems, from online ordering through to fulfilment, makes it possible. “The integration factor is absolutely critical,” Boyd says, and that is the result of a good deal of work on Indigo’s part. “We’ve had to kind of stitch the things together,” he adds, “because there really isn’t a turnkey solution.”
Indigo Online’s orders are not only from Canada. Boyd says the company has filled orders from Japan, Europe, Israel, and quite a few from the United States. “People seem to find us,” he says. But while the U.S. market is admittedly attractive, Indigo does not plan to pursue it aggressively in the near future. “It would require significant resources,” Boyd says, “and we feel the market here in Canada has much, much room to grow.”
Web Site Stickiness
Being Canadian is not the only element of Indigo’s online strategy. Boyd says the chain has set out to be a “cultural department store” selling both books and music, and emphasized a welcoming atmosphere in both its bricks-and-mortar stores and its Web site.
In the stores, that atmosphere comes partly from decor and partly from factors like the smell of coffee and food from the in-store caf
