Santa delivered an important message to on-line enterprises last Christmas: get your back-office fulfillment right or pay the price in lost customers and sales. For while most World Wide Web sites are now slick enough to ensure a satisfactory experience for consumers at the point of purchase, few of the companies behind those sites can now execute the rest of the transaction with the same degree of efficiency. Unless this problem is put right, it will prove costly as the novelty of on-line shopping fades—and, with it, shoppers’ forbearance.

Acquiring and retaining customers on-line means providing complete satisfaction from initial promise to delivery at the door.¹ This is not a simple, and certainly not a "virtual," proposition. Indeed, on-line fulfillment forces Internet companies to do far more than enter orders, pick the stock, package it, and ship—the standard drill in the brick-and-mortar world that electronic retailers are supposed to have left behind. Electronic retailers must also answer the queries of customers quickly and accurately (while learning their buying habits and preferences) and make good use of the data generated during transactions. Moreover, e-tailers must integrate on-line orders and returns with off-line ones, and do so in a way...