The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
Hayneedle opts for on-shore and in-house with new contact center.
There’s still a faint hint of fresh paint in the air at Hayneedle.com’s new 28,000-square-foot customer care center in Omaha, Neb., which opened in late June. There’s also a sense of optimism that the online retailer will be able to grow more rapidly now that all customer calls come to Hayneedle employees in the United States equipped with the technology they need to turn inquiries and even complaints into sales.
“Before, the care center was something we saw as a necessity for servicing our customers’ needs,” says Jon Barker, chief operating officer. “Now it’s a revenue center. We spend more time on sales and engagement, and the return is well worth the money you would save with off-shore.”
Previously, 25% of Hayneedle’s agents were in Guatemala, with the rest based at Hayneedle’s headquarters and distribution center in Omaha. But the company’s growth—Internet Retailer estimates Hayneedle generated $241.5 million in online sales last year, up 15% from $210 million in 2008—created a demand for more call center staff. And that posed several alternatives, including outsourcing the work, taking advantage of cost savings in less-developed countries.
Hayneedle, which changed its name from NetShops last year, chose to build a new contact center in Omaha, and to keep all the workers on the company payroll. It’s betting that’s the best way to maximize sales from its 220 e-commerce sites that sell a wide range of goods, from Adirondack chairs to telescopes.
The e-retailer found that cultural differences kept staffers in Guatemala from being effective at closing sales, answering questions on such a variety of merchandise, cross-selling and upselling.
“The offshore team was so focused on cost and transactions and not focused on getting the engagement right,” says Tammy Van Donk, director of customer care for Hayneedle. Hayneedle has decided not to push in-house staff to speed up calls— talk time on the sales team is not measured. “You can be on a call for 15 minutes and it’s worth it because that can lead to a great sale,” Van Donk says.
Hayneedle’s approach stands out in an era of austerity for many retailers. But the strategy is based on building profits by boosting the top line, not cutting costs. Van Donk, who came to Hayneedle about two years ago from housewares retailer Williams-Sonoma Inc., says the approach was working even before the new center opened: Revenue generated from customer care was up 38% in 2010 as of late June compared to the same period last year.
Hayneedle is not alone in recognizing the benefits of keeping customer service in the U.S., says Pat Perdue, director of contact center operations for marketing communications agency Draftfcb. While wages, benefits, taxes, technology and other costs for the average contact center worker in developing countries such as India are much lower—about $13.50 per hour compared to $27.80 per hour for U.S.-based agents, according to market research firm Datamonitor—the costs of training, correcting errors and managing overseas staff add up, Perdue says. He says there are often unanticipated costs in handling customer calls in other countries, such as having to move U.S. employees abroad to manage operations.
What’s more, he adds, U.S.-based personnel are better at applying their personal experience to new trends, such as social networks. Hayneedle, in fact, has an intern who works out of its customer care center to manage its Facebook presence.
“We have done the financial comparison multiple ways and any labor cost variances between U.S. and offshore are easily offset by the increase in revenue and customer satisfaction attained by having our own U.S. team,” Van Donk says. “We all know how expensive it can be to attract new customers. We don’t want to lose them during the purchase cycle by not having the right person interacting with the customer.”
Every aspect of Hayneedle’s new center, which occupies the third floor of a building that houses other smaller contact centers, is designed to improve agent efficiency and morale. Floor-to-ceiling windows provide natural light and a break room equipped with up-to-date appliances offers free ice cream, a flat-screen TV and a foosball table.
That all costs money. Hayneedle says the lease costs between $336,000 and $560,000 per year, and the one-time improvements cost at least $1 million. While Hayneedle found new work stations run between $1,500 and $2,500, it also says companies can save 50% in some cases by purchasing slightly used furniture.
When the center opened, Hayneedle had 140 agents, 60% assigned to sales calls and the others to customer service requests. It receives about 1.2 million phone calls and e-mails annually, about 45% regarding customer service issues and about 55% sales. Sales calls take longer than customer service calls, Van Donk says. Also included in the 60% are agents dedicated to business to business sales, which require more engagement to close the sale, she adds. Hayneedle expects its customer care staff to reach 200 to 250 during the holidays.
Every work station in the new facility has dual monitors, so that an agent can navigate a site with a shopper while using the second screen to obtain other information, such as order history.
In addition, a new call-distribution system from Avaya Inc. can dole out calls to the employee best equipped to handle them. Because Hayneedle has a different customer service phone number for each of its sites, the Avaya system can see, for example, if a call is coming from a customer visiting Cribs.com and route it to a parent rather than a college student. It also can route calls first to the reps that generate the highest sales—overall or by category—if they are free.
“If someone just sold a $6,000 patio set, we want to route the next patio furniture call to her,” Van Donk says.
Because its business model is based on building hundreds of specialized sites, some of them selling highly technical products, Hayneedle needs well-trained personnel able to explain sometimes complex concepts, another reason for keeping the contact center in the U.S. For instance, Hayneedle has its own optics team to respond to inquiries from its sites that sell binoculars, telescopes and radar detectors.