March 28, 2002, 12:00 AM

Answering questions the instant the online shopper asks them

Live chat may have started as something that distracted teenagers from their homework, but live chat-no doubt pushed along by teens who grew up with it-is about to become a powerful customer service and marketing tool for retail web sites-another technology that has the potential to bring the web-shopping experience closer to the real-world.

While fewer than 5% of retail sites offer live chat today, results from early adopters show that the technology has promise-especially since retailers who are using it say the cost of implementing it is low compared to the return. “We perceive it as such a low-cost way of communicating with our customers that only now are we qualifying and quantifying how much impact live chat is having,” says Rich Atlas, director of direct mail and e-commerce marketing at Venus Swimwear Inc., which has been using live chat for 18 months.

Venus Swimwear is not alone in its enthusiasm. Specialty retailer TechnoBrands.com of Colonial Heights, Va., which uses LivePerson Inc.’s chat application, reported a 35% increase in average dollar amount spent by customers who engaged in live help chat. New York-based LivePerson supports 1.2 million live help chats per month for 3,200 clients, including such retailers as Godiva, Neiman Marcus, QVC and Sony.

Shoe company K-Swiss Inc., which uses ServiceReps.com Inc.’s live chat product, reports more than double the average conversion rate when customers use live chat, since 75% of chats are directly related to product knowledge and getting questions answered often prompts shoppers to buy. And Jacksonville, Fla.-based Venus Swimwear, which sells junior swimwear on three web sites, has experienced a 15% drop in abandoned shopping carts since implementing Seattle-based InstantService Inc.’s live chat in 2000. “Because customers get an immediate response they are more inclined to complete their orders,” says Robin Johnson, Venus’s customer care manager. It has also put a lid on its threefold annual growth in e-mail from customers.

Revolutionary

Live chat holds so much promise because it changes the way shoppers experience web sites without requiring a huge technology investment, analysts say. “Live chat brings the cost of customer service down significantly and puts the retail sales rep in the home with customers while they are shopping,” says Leigh Duncan, manager at KPMG Consulting Inc., McLean, Va. “It’s revolutionary.”

In spite of the promise, few sites today-LivePerson says only 3-4% of all retail web sites-employ live chat. One reason is that many are unfamiliar with the technology as a business tool, perceiving it mostly to be something that kids use to talk to their friends. Others are afraid of live chat because the technology is too new for anyone to know if its ease of use will create so many chat sessions as to overwhelm a customer service center.

Nonetheless, market participants say the rise in consumer instant messaging offered by America Online, MSN and Yahoo will boost the technology, making not only consumers but retailers as well more familiar and accepting of it. “People understand how to use instant messaging and retailers are beginning to realize that they can utilize this tool for casual conversation in customer service,” says Tony Pante, executive vice president of marketing and product development at LivePerson.

IDC predicts that more than 400 million consumers worldwide will be using instant messaging by 2004. “As customers become more familiar with chat technology, shoppers are going to demand live chat on retail sites,” predicts Jim Tisdel, president and CEO of Montreal-based ServiceReps.

Web-based chat itself has been around since the inception of the Internet. Market participants contend that a phenomenal number of online chats and IMs occur every minute, but the fact that many are private makes their number difficult to tally. If the market develops the way chat vendors expect it to, that large number will grow even more. Once the results that early users achieve become known, demand will follow, they say.

Overwhelmingly in favor

Among the results that retailers seek with live chat is to provide instant service-much like a clerk answering questions in a store-to customers who would have had to go offline to call the customer service center or wait for an e-mail response.

Venus aimed to increase customer loyalty with the service. Johnson says positive consumer response confirms that customers appreciate a live chat option. Venus conducts 100 live chats per day in a service that it offers Monday through Friday from 8 a.m. to midnight. The company is certain that number will grow as the swimsuit season approaches. “The response we get from customers is overwhelmingly in favor of live chat,” Johnson says, adding that there’s another benefit as well: “Our operators are getting more done because they can handle up to five chats at once.”

Being able to handle multiple chats at one time requires special skills and training. While vendors say operators can learn to master the technology of live chat in less than a day, there are other traits that retailers must seek in the customer service reps they hire for live chat. Venus tests call center reps for typing speed, grammar and spelling ability, and overall quality of written skills. “The skill set is definitely higher and we test and train for that before we put someone on live chats,” Johnson says. Just like with e-mail, though, live chat has an added benefit in that retailers can set up preformatted answers to make the chat move faster.

Analysts and vendors say the cost of implementing live chat is low and the implementation is not onerous. Generally, the application can be downloaded onto a retailer’s server in under an hour. In addition, the retailer’s customer service reps must all have browsers on their computers, which most have today.

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