Graceland had a whole lot of shipping going on. Graceland, a division of Elvis Presley Enterprises, wanted an international expert to handle the orders for those blue suede shoes, high-heeled sneakers, and Elvis's two new jean lines. Outsourcing turned out to be an angel, not a devil in disguise.
"Our core competency is direct consumer selling," explains Danny Hiltenbrand, Director of Merchandise for Graceland. Visitors to Elvis's home often stop at the retail store. When the mansion opened its doors for guests in 1982, Elvis Presley Enterprises had no intention of selling merchandise anywhere but in its own retail stores. Today there are nine retail stores in the US.
"But we began to receive checks in the mail from people who wanted to buy Elvis stuff," recalls Hiltenbrand. "We knew if we wanted to grow our mail order and online business, we'd have to commit capital resources to it. So we decided to outsource, because it was the quickest and most economical way to get us to the next level," he explains.
The due diligence in selecting a supplier had an extra layer: Hiltenbrand had to protect one of the world's most recognized brands. To paraphrase the King, they didn't want to be fools rushing in. "We went through an arduous contractual process to make sure our supplier could adhere to our trademark policies," he says.
Elvis Presley Enterprises selected eFashionSolutions, a one-stop eCommerce solution. eFashionSolutions has experience with famous brands; its client list includes J. Lo, Phat Farm, Shady by Eminem, and Orange County Choppers, all household names among the hip and chic.
"We schooled them in Elvis 101," reports Hiltenbrand. Ed Foy, Jr., CEO of eFashionSolutions, and his team visited Graceland. "It was very emotional," says Foy. "We understood how important it was to protect Elvis's integrity."
EFashionSolutions handles all the creative and logistical components for the retail segment of Elvis Presley Enterprises except the operation of the retail stores. That includes operating a call center, providing all customer service, writing creative copy and preparing digital images for the Web site, and determining online marketing strategies.
Hiltenbrand is counting on the supplier's online expertise to turn its online sales numbers into a hunka, hunka, hunka burning change. "We know how to sell Elvis. We know how to deal with hard-core fans," he says. But the actual mechanics of online marketing "with the latest in navigation bars in not our strength."
Lessons Learned from the Dotcom Bust
Foy began his career at Macy's. He met his wife, Jennifer Silano, when they worked at Calvin Klein jeans. When they started, the company had revenues of $50 million a year. Two years later sales soared to $500 million. "We helped create a brand that generated large profits by selling directly to the consumer," says Foy. "We watched and learned. We were so fortunate to be at Calvin Klein during those critical years."
In 1998, Foy created Cyberretail.com, which attempted to apply the lessons they learned at Calvin Klein to the nascent online retail market. In 2000 the company imploded like most dotcom start-ups.
But Mrs. Foy realized their expertise was not in the brand but in the infrastructure needed to promote a brand. They formed eFashionSolutions and invested in the infrastructure required to create an online retail solution. "We deliberately wanted to be the back end and let the brand have all the glory," says Foy.
Now the stars were aligned in the proper formation. They had the right formula just as online sales began to take off. Forrester Research predicts online sales will grow from $172 billion in 2005 to $329 billion in 2010 in a September 2005 report entitled "A Five Year Forecast and Analysis of US Online Sales." According to the report, "Both consumers and sellers continue to stoke the eCommerce fires. As consumers increase shopping-related activities and sellers compete to innovate and keep them engaged, online sales will enjoy a solid 14 percent compound annual growth rate (CAGR) over the next five years."
Foy says outsourcing the eCommerce process is a natural for a retail brand because "the process is large and cumbersome." (The supplier, for example, has a 71,000 square foot warehouse and its own call center.) "And it's really too late to learn how to do it."
The Third Supplier Hits a Home Run for Elvis
This was the brand's third entry into retail outsourcing. In 1996 Graceland outsourced its customer service and fulfillment to a local outfit in Memphis, Tennessee. But the Elvis operation realized it had to change suppliers in April 2004 because its needs had outgrown the capacity of the Memphis outfit.
So it moved its outsourcing business to Fan Buzz, an outsourcer specializing in professional and college sports merchandise. "It was a good fit," says Hiltenbrand until Graceland needed to expand into the overseas market. "We realized we needed to find a partner who was already had inroads in the international market," explains the Elvis executive.
International shipping costs were cruel. A buyer in Europe purchasing an Elvis CD would have to pay $20 for the CD itself. But then the US Postal Service charges started at $15 depending on the final destination. Add on duties and taxes and suddenly the CD was costing $40. "Buyers were paying at least double the retail price for our goods. They had to be ardent fans to pay the freight," says Hiltenbrand.
Graceland selected eFashionSolutions because it had extensive roots overseas thanks to its fashion business. The supplier's large volume created a critical mass which allowed it to negotiate far better rates with the US Postal Service and UPS. "Now our overseas buyers pay one-third of what they had to pay before," reports the Elvis executive.
In the first six weeks after outsourcing to eFashionSolutions, Graceland's international business volume doubled from its high at Fan Buzz. International sales now account for 20 percent of Graceland's total business, according to Hiltenbrand. Historically that number was just five-to-ten percent. At Christmas, the international trade might spike to 20 percent, Hiltenbrand reports. "That's pretty strong growth right there," he adds.
The switch became even more important now that Graceland is introducing two new clothing lines. Memphis Blue includes jeans that sell for under $100; Elvis Clothing includes high-end clothing, for example, jeans that sell for $200 a pair.
How Analytics Help the Partners Make Business Decisions
Graceland budgeted four months for transition from one supplier to another. "And we needed every minute of it," Hiltenbrand says.
Foy says one of the initial challenges was taking over an existing business from another supplier. It built Baby Phat from the ground up, so it installed its systems and software into the operation from the start. But Graceland was already up and running. "You knew there were challenges because you got the business for a reason," says Foy.
The two partners worked together to set up the proper inventory mix. Then they had to determine the proper inventory supply--should we hold items two weeks or two months? EFashionSolutions used its analytics to help Hiltenbrand make those business decisions. "If we see we're getting a number of irate emails, we will fix it quickly for immediate customer satisfaction. Graceland knows we have the tools to identify these types of problems and are confident that we are on top of any that might arise," says Foy.
Offshoring Is Part of the Solution
After a buyer has been with the supplier for three years, eFashionSolutions talks to its executives about switching some of the work to India. "We have to know the buyer's business intimately before we can train someone else to do it," Foy explains.
The supplier only sends 20 percent of the tasks offshore. For example, the 40-person call center, which sits outside Foy's office in Secaucus, New Jersey, handles all new incoming orders. But if a customer wants to check on a shipping date, its Indian outsourcer can answer that call. Email fulfillment is another task the US supplier sends offshore.
Foy is now using his third Indian call center supplier. "The quality just wasn't there," he says of the first two.
"This is our second attempt and this time we got it right," says Foy. Elvis Presley Enterprises would agree.
Lessons from the Outsourcing Journal:
- When the brand is critical, process and systems are not enough. A retailer has to choose a supplier who also understands the emotion behind the brand.
- EFashionSolutions arose from a dotcom failure. The supplier learned critical lessons that allowed it to concentrate on the back end of the online selling process, leaving the glory to the brand. This hard-earned knowledge benefits its buyers.
- As a buyer's business grows or changes, switching suppliers may be the only way to further business goals.