Outsourcing Takes Flight

The industry continues to debate whether or not to outsource mission-critical systems, but Phoenix-based online luggage retailer

Some chains remain cautious about outsourcing due to fears of communication risks between companies and sharing sensitive, critical data with a third party. Pundits, however, say outsourcing improves operating costs because solutions are only used as needed, and labor expenses are reduced because chains don’t need to keep a full IT staff or pay for ongoing education for specialized applications. Such is the case for ShopBags.

“We are not technical people—we are a retailer that knows luggage,” explained Todd Andrew, the company’s president. “Worrying about backing up servers and managing IT takes time away from selling merchandise.”

ShopBags was a mall-based luggage retailer until 1998, when it ventured into e-commerce. One year later, wanting to expand on a much larger scale without investing in real estate, it became a pure-play retailer. Challenges abounded during the transition.

Since ShopBags was still new to e-commerce, it worked with several technology partners to manage different applications. But this kept business operations and data files segregated. Each night, the retailer had to synchronize all orders that came into different backend servers, which took its toll on fulfillment. ShopBags works with approximately 100 manufacturers, including Samsonite and TravelPro.

“We ship 50% of merchandise from our warehouse, but the other 50% is drop-shipped directly from our individual manufacturer partners,” Andrew noted.

ShopBags also struggled with system upgrades. It wasn’t uncommon for a vendor to reformat processes, unknown to the retailer.

“These minor changes could alter the timing of an order from a few seconds to a minute or two, a huge difference to us and our shoppers,” Andrew added.

These and other challenges, including limited design options, which made customization difficult, eventually pushed ShopBags to look into a hosted solution that could integrate a majority of e-commerce processes supplied by third parties. ShopBags also wanted creative flexibility for site redesigns and ease-of-use for its consumers.

Outsourcing partner ShopVisible, Atlanta, provided the best option. Its software-as-a-service solution is based on systems integration and links marketing, analytics, order management automation and customer relationship management in a single console. ShopBags is able to upload images, product descriptions, promotions and even customer-profile data to fuel CRM and targeted-marketing initiatives. The vendor also manages fulfillment for the retailer.

Customer orders come into the e-commerce front end and are filtered directly to ShopVisible and the order-management system. Redundant servers manage the traffic and security of sensitive information, and provide scalability to handle increased volume. The vendor conducts daily backups to ensure data security. Since launching its outsourced site in August 2008, Andrew reported a strong increase in sales.

“This was a remarkable achievement within such a short period, especially during a time when the economy was tanking and consumers were spending less on travel,” he said.