May 29, 2009, 12:00 AM

An Ounce of Prevention

Cutting off bad addresses at the source is saving retailers money, and reducing customer dissatisfaction

One of the most hated calls to customer service is the WIZMO question: Where is my order? Many retailers have dealt with that question by installing order-tracking links to package delivery companies’ web sites. But while that technology has diminished WIZMO calls, it hasn’t eliminated them.

With sophisticated shipping technology and tracking procedures, many retailers had thought they had driven a stake through the heart of WIZMO. But WIZMO lives on. One of the biggest reasons: customer error in entering delivery address information.

Huh? Don’t customers know their own addresses? As a matter of fact, as many as one-fourth of addresses that consumers enter into order forms on e-retail web sites have errors, according to companies that provide address correction software. The most common errors are incorrect ZIP codes and misspelled addresses for gift purchases being sent to an address other than the buyer’s.

Fix-for a fee

The delivery companies will take care of the problem-for a fee. At a cost of about $10 per package, they will re-route the package to the correct address, if there is enough information on the label to deduce the correct address.

Nonetheless, quality of implementation is important in preventing drop-offs. “For us, the value of reduced resends outweighed a very small percent of abandons,” Baly says. “I’ve seen address verification implemented poorly on a few sites, so I think it could be a significant prompt to exit when the step is not communicated clearly and if the process does not implicitly assist the visitor.”

Those $10 charges add up, retailers report. In the first half of last year, Overstock.com Inc. spent $83,000 in re-routing costs to ensure that 8,300 packages with wrong addresses could get where they were supposed to go.

And then there are other fees associated with incorrect addresses. Shari’s Berries, a retailer of gourmet, chocolate-dipped strawberries, spends $25 on carrier fees and its own handling costs of each incorrectly addressed package that it must re-send.

Where there’s a cost, there’s a vendor with a solution. In this case, the solution is address correction software that flags address errors and asks shoppers to enter the correct address. Some work as the shopper inputs the address, prompting for corrections immediately and suggesting fixes; others check for errors after the order has been submitted and return the shopper to the address page to fix any problem areas.

Last year, Overstock reduced address input errors by 40% using QAS Pro from Experian QAS, part of global information provider Experian PLC. The company figures total savings reached $1 million, including the reduced costs of WIZMO calls and other logistics expenses, such as processing and re-sending returned packages, reports Steve Tryon, senior vice president of logistics and talent management at Overstock. In addition, the software reduced by 25% the number of orders that were never delivered.

Not only do bad addresses represent a direct cost, but those costs got in the way of Overstock’s goal of being a low-price seller, Tryon says. While Overstock didn’t pass the correction fee directly to the customer, it did factor such costs into its base business expenses, meaning everyone was paying.

And more than the direct cost, there is also the cost of a tarnished reputation. “We pride ourselves on being a low-cost provider and on providing the best customer service,” Tryon says. “Automatically fixing the address is good customer service, but the customer isn’t aware of it and errors delay the package’s delivery.”

For time-sensitive deliveries, the reputation issue is even more critical. Shari’s Berries, which has used Melissa Data Corp.’s address correction software since 2004, believes that more accurate delivery reflects positively on the company’s reputation, says Dustin Baly, marketing manager.

In fact, that was an aspect that Shari’s Berries specifically wanted to measure with the implementation. “We have quantified our improved brand reputation to deliver gifts on the exact dates that a customer chooses. These dates quite often coincide with important events such as birthdays, Valentine’s Day and Mother’s Day,” Baly says. “There is not a delivery window; it is all next day, not sometime next week.”

And, he notes, customers do notice when a package is delayed. “We get customer calls because they babysit our product,” Baly says. Baly says installing the address correction software reduced calls to Shari’s Berries’ customer service center by 5%.

No tripping point

Given that e-retailers find adding a step to checkout, no matter how benign, causes some buyers to abandon a purchase, Overstock carefully monitored the drop-out rate of shoppers filling in address forms. “That’s a very sensitive issue with us,” Tryon says. “Every change in checkout will affect whether a customer will buy.” But, he adds: “Drop-offs were not significant. When we weighed it against the reduction in other costs, it was worth it.”

Although such software has been available for some time, the online retailing industry has yet to embrace it widely. Melissa Data, for instance, counts about 500 online retailers using its address verification software, reports Greg Brown, director of marketing. Experian QAS has 300 online retail customers in the U.S. and Canada, says Joel Curry, chief operating officer of Experian QAS.

But as the days of easy growth in online sales appear to have ended and e-retailers look to cut costs, interest in address verification has picked up, vendors report. “In the last six months we’ve seen a 40% year-over-year increase in the number of retailers investing in address verification, which underlines the continued need for better customer data in the retail space,” Curry says.

Part of the reason the market had not heated up before is that many online retail businesses, especially mid-sized and smaller retailers, are run by entrepreneurs without a lot of experience in the direct marketing business. They may not even be aware that delivery companies are fixing addresses and charging the retailer for the fix.

Such charges may have gotten buried among other charges and they were few enough that no one paid attention to them.

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