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Breaking the Supply Chain to Unlock Hidden Profits F i n g e rhut: Rise and Decline of a

By Now Dan Newman


By Dan Donohue December 1998. Fingerhut stock is up 50 percent on the year riding strong holiday sales fueled by Internet shoppers. The stock grabs the attention of Wall Street, where many see it as an underrated Internet play. One money manager says it "is an easy double in the next 6 to 12 months." February 1999. Federated Department Stores announces the $1.7 billion purchase of Fingerhut Companies, in part to acquire the small but rapidly expanding backoffice fulfillment unit, Fingerhut Business Services. October 2000. Fingerhut announces the cutting of 550 jobs affecting headquarters and e-commerce center staff (potential effects on distribution center personnel remain unclear). Also announced is the scaling back of the e-commerce division by not accepting any more outside business. Granted, Fingerhut is beset by more issues than simply problems in its fulfillment business—namely, credit-related problems in the catalog division. Are the forces buffeting Fingerhut signaling a shift in the e-commerce business dynamics away from outsourced fulfillment houses? Will the new forces soon come to bear on other competitors such as Hanover Direct’s Keystone Fulfillment or In the Beginning… Fingerhut’s fulfillment services rose to prominence in the mid-1990s on the rising tide of e-commerce. The company had over invested in warehouse facilities during the late 1980s and early 1990s, banking on strong growth in its core catalog business. But by 1997 more than half of the warehouse space was vacant. Opportunity soon came knocking in the form of e-commerce that, according to Forrester Research, was expected to explode in growth to $108 billion in consumer sales by 2003. Student resumes available on the Grainger Center web site WWW.WISC.EDU/GRAINGE

Year: 1997
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