(Click here for Lessons from the Outsourcing Journal).
An early convert to the world of Internet retailing, FNAC’s customers have been able to download music from the company Web site since the late 1990s, “as an extension of our fnac.com virtual retail store,” says Alexander Blaizot, Project Director of the retail strategy team for FNAC, a subsidiary of the French Pinault-Printemps-Redoute Group, a retailer of books, CDs, computers, TVs, videos, cameras, telephones, and show tickets.
But the process was becoming less efficient and profitable because “we were working with software that was not ours, over which we didn’t have complete control. There was more we wanted to do, but couldn’t,” lamented Blaizot.
“Retailers are reaching a point where they’re ready to roll out services more broadly,” says Patti Freeman Evans, a retail analyst at Jupiter Research. “They had to get their basic services down before they could really start customizing in a big way, which many now want to do,” she adds.
“FNAC has been selling ‘physical’ music in its stores for the past 35 years,” says Francois Momboisse, the fnacmusic.com Project Director. “As new ways of buying music emerge, we want to be leaders in this business.”
How a Study Led to an Outsourcing Contract
FNAC first began considering the prospects of fnacmusic.com, an entertainment site dedicated to music downloads and the possible services it could offer in May 2003. But it wanted a presence that would draw from many resources, offering information and other services that music buyers want. FNAC needed the site to be more than just a retail Web portal. It envisioned an information resource that draws traffic and creates additional entertainment retail opportunities. The site also had to conform to the sometimes thorny and dubious legal environment of music copyright.
To ensure the viability of this new strategy, the retailer sought the counsel of several IT providers and settled on CSC after CSC validated FNAC’s initial approach. It helped the retailer develop a study as to whether FNAC’s vision could be profitable. CSC had worked with FNAC before. On the strength of that previous success, it anticipated this might produce a deeper relationship on behalf of fnacmusic.com But at this preliminary juncture, none was guaranteed.
As FNAC began negotiations with major and independent music rights holders, the study group sought to define the project’s functional needs such as acquisition and digitization of the music, necessary technical partners, and the support needed to store the music. What sort of IT and management environment was necessary in order to succeed? All these issues required answers before deciding if fnacmusic.com would even be viable.
The FNAC-CSC team reviewed a variety of technical issues and options, including:
- Should FNAC integrate music files directly from distributors or digitize and host those files exclusively?
- Should FNAC develop a system of identification for each unit of music?
- Should FNAC create 30-second preview files?
- Should FNAC produce digitized album jackets to go with music files?
The team completed the first draft of the requirements in the fall of 2003; then CSC members laid out the site on paper. The enterprise viable, FNAC next had to find an outsourcing partner. It invited five additional service providers to submit bids and in January 2004, chose CSC.
Consolidating the Partnership
A variety of reasons produced this choice, but there was one in particular, according to FNAC’s Momboisse. “We had successfully worked together before on a large supply chain project at our main warehouse near Paris.”
“We already had operational teams set up for this project,” says Habib Achkar, Delivery Assurance Director for CSC West Europe and FNAC’s account manager.
“But we offered FNAC a long-term working relationship which exceeds simply carrying out the project: a real partnership,” continues Jean-Louis Gross, CSC West Europe’s Vice President, who notes that the culture of this project closely paralleled the partnership between the two firms in the interests of FNAC’s Paris distribution center. “We also proposed a technological watch service to keep abreast of the market and then enhance fnacmusic.com’s tools when appropriate,” he adds, such as periodic review of new music playing formats and playing devices to assist with downloads.
“In the face of the fast-changing world of digitized music, an ability to swiftly embrace new products is vital for retailers to remain competitive,” says Phil Leigh of Inside Digital Media.
The objective was to have fnacmusic.com online and fully operational in time for the December 2004 holiday season. This produced some rather acute deadlines. The site had to be working in an experimental basis by July with the official launch by September.
CSC dedicated a 15-member team to develop and implement the project. The team chose the Microsoft Commerce Server as the operational platform for catalog management and customer relations. “It was more efficient to start with an integrated and compact solution for this type of project, even though we had to develop many features ourselves using Visual Studio for catalog management,” says CSC’s Achkar.
One of the critical points for the success of the project is the initialization of the music information flow as well as standardization of the data that accompanies it including author, title, album, genre, record label, and play list. This categorization is essential to establish the marketing necessary for music sales, which also had to be coordinated with the more traditional music promotions in FNAC stores. Quality Collaboration Makes the Difference
At launch, the fnacmusic.com site offered more than 300,000 pieces of music. “The real difference is the superior quality of service offered to the Web surfer,” Blaizot says. “To our pleasure, we all discovered that the platform supports the data load much better than those of our competitors.”
Officials at both FNAC and CSC feel the vast choice of music available on the site, coupled with store employees’ knack for guiding customers, have made the outlet stand out.
In January 2004, Shelley Taylor & Associates released its study of fifteen digital download sites. It ranked fnacmusic.com as the best of its kind in Europe. Reasons cited were discounts for buying multiple tracks and usability features such as easy navigation and the ability to incorporate collateral features such as downloading music videos, product cross-promotion, and purchasing concert tickets.
“Among the primary changes forcing retailers into technology decisions is the intertwining of e-commerce and marketing,” says Jupiter’s Evans. “More features and offerings are finding themselves on retailers’ Web sites. They have to work and be easy to use.”
The service offered by fnacmusic.com to Web surfers is extensive according to the Taylor & Associates survey. “Beyond the 30-second listening samples, the site can advise the visitor in accordance with the playing device he or she uses, which is a real asset.”
With a now mature and proven Web retail portal, FNAC looks to the upcoming holiday shopping season with great anticipation.
Mombisse specifically cites FNAC’s collaboration with CSC for the success of fnacmusic.com. “Web surfers can now select, buy, and download music with great listening quality, simply and legally. CSC first worked with us during assessment in defining the project’s functional needs, then through the technical aspects of the development.” Legally is key. (No Napster-esque challenges.)
“There was, and is, a very strong synergy,” says Blaizot. “We really work together like a team. That is what enabled us to foresee and smooth out problems and create a clearly superior retail presence.”
Lessons from the Outsourcing Journal:
- Many retailers have been on the Web since the late 1990s. But increasingly sophisticated consumer demands require new services. Outsourcing is a good way to gain that technological advantage, especially since the buyer already has the mastered the basics of e-commerce.
- A past business relationship helped CSC win the business. So did its preliminary consulting study. The buyer felt comfortable handing this piece of the business to an already trusted partner. Building valued relationships can be valuable for suppliers.