January 19, 2001, 12:00 AM

Why Online Retailers Are Flunking Out On Customer Service

Don Davis

Editor in Chief

The importance of keeping customers happy and turning them into loyal shoppers should be obvious by now to the more than 15,000 merchants selling consumer goods over the Internet. But while Web merchants may be experts at building glitzy electronic storefronts and launching marketing campaigns aimed at driving traffic to their sites, they're novices when it comes to providing quality customer service.
     "It's amazing how discriminating the Internet shopping public is," says James Medalia, founder of JustBalls Inc., a Kingston, N.J., online sporting goods retailer, which is building its success on good customer service. "They'll try you once, but if the customer satisfaction isn't there because the order got goofed or it's too much of a hassle to get a problem resolved, they won't come back."
     If consumer advocates, CEOs of consumer compliant organizations and shoppers rated Internet retailers on the quality of customer service, most would flat out flunk. Good customer service means answering phone calls or e-mails promptly and resolving shoppers' problems quickly. Quality customer service also means that online merchants should have their store policies or "help" buttons clearly located on their Web sites and offer shoppers a hassle free way to return merchandise they don't want.
     But it still takes many Internet retailers up to five days to respond to their customers' online queries. And for the companies that track online customer service complaints or help shoppers resolve their problems, business is booming. Springville, Utah-based Netcheck will field 2,500 complaints this year-double the volume of a year ago-from online shoppers wanting help getting refunds, returning merchandise or simply getting an e-mail response from merchants.
     Given that it can cost $100 for most online merchants selling anything but computers to acquire just one customer, it's surprising that more merchants aren't paying closer attention to customer service policies-or at the very least moving quickly to resolve problems once they arrive. But in their zeal to get up and selling on the Web, most Internet retailers-even large national chains-aren't making quality customer service a top priority.
     Bentonville, Ark.-based Wal-Mart Stores, for instance, makes it very convenient for real-world shoppers to return merchandise to any of the chain's nearly 4,000 stores worldwide. Yet Wal-Mart still isn't allowing customers who purchased merchandise at its Web site to exchange or return the item to any of its bricks-and-mortar locations. Wal-Mart says it's doing the necessary computer work that will allow store clerks to take back items purchased at wal-mart.com, possibly as early as September.
     But the very fact that it's taken the nation's largest retailer almost four years to implement such a basic policy tells consumer advocates that quality customer service will be a long time coming to the business-to-consumer e-commerce market.
      "If a national chain is selling online, they should make it as easy as possible for their customers to return merchandise and that means they should be able to return products to stores near them," says online advocate Edgar Dworsky, a former Federal Trade Commission consumer education consultant and Massachusetts assistant attorney general in charge of consumer protection.
      A recent study of 25 top e-commerce sites, including Dell Computer, Amazon, and other leading retailers, reveals that 90% have no immediate plans to hire a full-time customer service manager, let alone install a Web-based customer management system or real-time shopper assistance program. The study, by North Hollywood, Calif.-based Net Effect Systems Inc., also finds that 75% of the companies surveyed don't have a toll-free phone number listed on their Web sites.
     But having a phone number listed on the Web store is certainly one more way Web merchants can build credibility with their customers and is another alternative shoppers can use if a retailer's e-mail system or server is malfunctioning. "It's disconcerting that more retailers aren't putting phone numbers on their sites," says Richard Berkman, senior analyst, net.Genesis Corp., a Cambridge, Mass., e-commerce intelligence and Web analysis firm. "It demonstrates that many retailers just aren't keeping up with their customers' expectations."
     Once a shopper makes up his or her mind to make a purchase online and pay for the item with a credit card, the transaction can be completed in about three minutes. Yet the Net Effect study points out that almost two-thirds of people shopping on the Web abandon their purchase prior to hitting the check-out button because many merchants are still operating difficult-to-navigate Web sites or making it hard for customers to get their questions answered. In many instances, the Web site doesn't have a "help" button or a "frequently asked questions" page.
     Despite the fact that shoppers aren't very satisfied with the level of service they're getting from Web merchants these days, there are examples of retailers who do know what it takes to make their customers happy. That's because they're taking the time to think through what's really important in keeping shoppers coming back and they have incorporated the basics of good customer service into their e-commerce business.
     Online seafood retailer fultonstreet.com, for instance, doesn't operate a big call center or spend millions on interactive technology. But fultonstreet.com Chief Executive Officer Stratis Morfogen does read 90% of the several hundred e-mails the company receives each day. If he spots a problem, he personally writes the customer a follow-up letter to make sure the customer is happy and wanting to come back. The company handles about 100 orders each day and so far such detailed attention to shopper satisfaction is paying off. The average customer spends between $80 and $100 each time they visit the site (compared to the average of $tk spent on seafood at the grocery store or a fish monger) and repeat business is accounting for about 40% of fultonstreet.com's annual sales of $5 million.
     "The difference here is that we are trying to personalize what's on the computer screen just like I knew all about my customers when I was in the restaurant business," Morfogen says. "When it comes to good customer service in e-commerce either merchants get it or they don't. I think we do."


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