"We believe the new site, which came online Nov. 19, 2012, cost us approximately $3 million in lost sales for the third quarter. Following the launch, it became apparent that the customer experience was negatively impacted, evidenced by a decline in several key performance factors," said Glenn Lyon, CEO of the $1.4 billion sports apparel chain with more than 640 stores in 47 U.S. states, during an earnings call on Friday (Jan. 4). "We made a strategic decision on December 6 to transition back to our previous site, given the importance of the selling season. As part of our contingency plan, we had kept our previous platform up and running, parallel to the new site, so we were able to swiftly engineer a smooth return to the original site. This has generated improved results versus what we experienced during the three-week period the new site was live."
A few weeks earlier, Finish Line was singing a very different tune when it said the chain's "aggressive omni-channel growth initiatives drove its decision to move away from legacy in-house-managed software to Demandware's flexible and scalable cloud-based solution."
Chris Ladd, the chain's EVP and chief digital officer, gave a news release quote that he may now regret: "Demandware reduces operational complexity and puts the power in the hands of our users to create world-class brand experiences. It provides customers a better and faster online experience, rather than having technology get in the way."
But in the earnings call, CEO Lyon spoke very differently. "Well, we're back to the drawing board in terms of the legacy system that we ran and the upgrade of that system, which was an option, the utilization of Demandware and their ability to perform. Obviously, we were disappointed by the performance back at the end of November," he said. "We have some options here, and we're going to get those out and more diligence over the next 90 days. There is a lot of learning to be done, including outside advisers and so on. There's our confidence level, and that has been shaken a little bit. And as I said to you, reality reared its ugly head to us for the first time in a number of years in terms of initiatives that we've put out into our business. This was a tough one."
Finish Line executives didn't go into detail with what they called "customer experience and functionality problems." But that language suggests the site was simply not responsive enough, a problem some other major site revamps have hit in the past. And the most likely culprit is the cloud architecture.And the most likely culprit is the cloud architecture, because Finish Line in November bragged about how the new site stitched together CRM, inventory and other databases with customer shopping carts. That means a lot of round trips between Demandware's cloud, Finish Line's datacenter and customers' browsers. It may be possible to tune a site that ambitious to overcome all that inevitable network latency, but it sounds like Finish Line's site didn't manage to achieve it.
Samuel Sato, Finish Line's president, said the site's launch timing was potentially the biggest problem from the chain's point of view. "Two critical pieces: One is the timing of our launch prior to holiday. In hindsight, this was a mistake, given the importance of the holiday season. Secondarily, we had consumer experience issues that were primarily driven by the site design and functionality. And, in fact, traffic on our new site did not change from its previous legacy site. In fact, it grew a tad. It was really about conversion that led us to make the strategic decision to move back to our legacy site and to ensure that we could preserve our important holiday selling season."
CFO Edward Wilhelm added that shoppers were happy again as soon as the old site was restored. "Once we reverted it back, we got back to the same metrics that we were seeing on our old site previously, so there was no lingering effect," he said.
CEO Lyon took much of the blame, saying overconfidence and insufficient supervision appears to have been behind the problem.
"In hindsight, launching the Web site in November was a huge mistake. Now you get into the whole leadership and management scenario that says, 'Did confidence outweigh reality of doing something like that at that time of the year?' We had so much confidence built into the fact that this platform was going to improve our business, never thinking that it could be decreasing our business," he said.
Once management realized the problem, it didn't immediately go to the old site. Instead, the chain worked on the new system for 10 critical holiday shopping days before reverting.
"We spent 10 days to make sure that we couldn't fix it and have it perform at a level that was acceptable at holiday time and then go forward with it, adjusting it on a go-forward basis," Lyon said. "I constantly use the expression around here that we need to be confident, but we can't be cocky. And the fact is, we might have got a little out on our skis here. And we're admitting that to you, and we're taking all of the proper actions to fix that."