The Customer`s Always Right (Even on the Internet)

Guide to E-Commerce Technology

It’s pretty clear that Sandra James won’t be shopping online again anytime soon. That’s because James, an avid collector of homemade arts and crafts, knows firsthand what it’s like to be left high and dry by an online retailer who fails to deliver merchandise. And James isn’t just upset over the episode. Her Internet shopping experience has soured her to the point that she would rather go back to buying her collectibles from an established catalog or a vendor at a weekend crafts fair than trust any online retailer who won’t keep promises.

Her frustration began last October, when the dolls she ordered—and paid for—from purecountry.com didn’t arrive in the three weeks she’d been promised. After nearly a dozen e-mails didn’t resolve the problem, she turned to Netcheck Commerce Bureau, an Internet complaint clearinghouse, for help. Eventually, James received about one-third of the dolls she paid for. But that’s all she’s going to get.

The now-defunct retailer that was supposed to ship her the dolls has since sold the domain name to another arts and crafts company. “It’s easy to order anything you want online, but what’s the point if you can’t get satisfaction from the merchant when you’re having a problem?” says James, who’s out $180 as a result of her experience. “I shouldn’t have to send a retailer multiple e-mails asking, ‘Where’s my merchandise?’ ”

The importance of keeping customers happy and turning them into loyal shoppers should be obvious by now to the more than 15,000 retailers selling consumer goods online. But while Web merchants may be experts at building glitzy electronic storefronts, 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 it’s too much of a hassle to get a problem resolved, they won’t come back.”

Flunking out

Justballs is doing all the right things by making it easy to find customer service information on its Web site and resolves 95% of all problems inside a day. But Justballs is an exception. If consumer advocates, CEOs of consumer complaint 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. It 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 complaints or help shoppers resolve 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 needing help. Likewise, BizRate.com, a Los Angeles company that rates more than 600 online merchants on customer satisfaction, reports that almost 25% of the 35,000 shoppers it surveys each month have to contact the online merchant more than once because of problems with deliveries that never arrived, difficulty in returning unwanted items or replacing damaged goods.

“If one in five customers walked into a store with a customer service problem, it would be a nightmare for the retailer trying to solve them all,” says Paul Bates, BizRate research director. “Web merchants rate pretty well on presentation and ordering, but improvement is needed with order fulfillment.”

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. But in their zeal to get up and selling online, most Internet retailers—even large 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 it still doesn’t allow 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 e-commerce market.

“Even the big guys haven’t thought online customer service all the way through,” says online advocate Edgar Dworsky, a former Federal Trade Commission consumer education consultant and Massachusetts assistant attorney general in charge of consumer protection. These days he’s curator of consumerworld.org, one of the most comprehensive customer education pages on the Web (see sidebar, page 30).

Great expectations

Unlike the offline world, where customers are used to putting up with long return lines and surly store clerks, online shoppers expect speed and convenience. Shoppers aren’t just expecting that they can order and pay for merchandise on demand—they’re also anticipating rapid delivery and a quick response to their online inquiries. By and large, online merchants are failing to meet shoppers’ expectations.

The exceptions include Amazon.com, eToys.com and bn.com (barnesandnoble.com), which are among the highest rated Web sites for customer service.

EToys has a sophisticated e-mail system that constantly sends order status messages to customers once they’ve made a purchase. The messages inform shoppers of the date and time the order was shipped and when it will arrive at their address. And Amazon and bn.com have installed sophisticated order tracking software that allows shoppers to view their past purchases as well as track their current order all the way through the fulfillment process.

“We’re trying very hard to listen to our customers,” says Joel Spiegel, vice president and general manager of auctions for Seattle-based Amazon.

Yet early e-commerce pioneers have had ample time to study and rethink their customer service strategies—and deep pockets to execute solutions. But most companies, including the 400,000 small businesses expected to be selling online by 2004, lack the resources to install personalized customer response programs. And the merchants that can afford such features, still aren’t making customer service software—or instant access to an employee who can help them with their problem—a top priority.

Sorry, not interested

For example, 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 list a toll-free phone number on their Web sites.

Upscale retailers such as Nordstrom, Macys and Blooming-dale’s made their reputation by the meticulous attention they pay customers when they walk in their stores. Yet on the Internet the only way shoppers can contact those chains regarding a purchase or delivery problem is by e-mail.

Cincinnati-based Federated Department Stores Inc., which operates both Macys and Blooming-dale’s, and Seattle-based Nordstrom, contends that most online customers prefer communicating through
e-mail instead of waiting on hold to get their questions answered.

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. “Retailers just aren’t keeping up with their customers’ expectations,” says Richard Berkman, senior analyst for net.Genesis Corp., a Cambridge, Mass., e-commerce intelligence and Web analysis firm.

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.

“There’s more to merchandising than lining up inventory and opening a storefront,” says Ronnie T. Marshaik, vice president of Patricia Seybold Group, a Boston-based Internet retailing research company, and co-author of Customer.com, a book on building long-lasting customer relationships over the Internet. “Customer service at many sites is mediocre and won’t improve until retailers get around to really rethinking their policies.”

Some star pupils

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 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.

Medalia, for one, conducted extensive market research and analyzed customer service policies of more than two dozen e-commerce sites before launching Justballs in January. After looking at sites where it took as many as six clicks to locate the merchant’s customer service information or scouring pages that didn’t even list the retailer’s address or phone, Medalia built the Justballs store with seven clearly visible help buttons located on the front page.

In addition to features that enable shoppers to track their order or view what’s in their shopping cart, Justballs also has a “help desk” button that in a single click gives shoppers access to the retailer’s shipping, payment, exchange or return policies and other pertinent information. Medalia could have built a Web store that didn’t have such easy-to-navigate features, But Justballs has ambitious plans to achieve sales of more than $2 million next year and Medalia believes he won’t hit those numbers if he doesn’t take the time now to build a base of repeat shoppers.

At Justballs, customers’ orders are shipped in under two days and 95% of all customer complaints are resolved by contacting the shopper by phone or e-mail within one day of receiving the inquiry. Today, about 25% of Justballs’ business comes from repeat customers, a figure Medalia wants to double next year by enhancing customer service over time with new applications such as an interactive call center. “To be a really serious player in e-commerce, you simply have to answer your
e-mail quickly,” he says. “Computers enable prompt feedback between the retailer and the customer. Getting back to people inside 24 hours is just a good way of conducting business.”

When merchants begin analyzing their store and fulfillment policies and what they can do to make improvements, their first thought might be adding more technology such as personalization software or customized order tracking. But not all the solutions have to be technical and they don’t have to be expensive. As in the offline world, customers appreciate good basic service when they get it. And not only will they return to an establishment where the clientele is kept happy, they’ll also tell their friends.

Online seafood retailer fultonstreet.com, for instance, doesn’t operate a big call center or spend millions on interactive technology. But fultonstreet.com CEO 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 $30 average 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.”

Chicken soup for the retail soul

Having made a career as an advocate of shoppers’ rights and testifying before numerous government committees on consumer awareness issues, Edgar Dworsky is a pretty good judge of what Web merchants can do to enhance customer service. His advice includes:

Honesty. “Customers don’t like surprises. If the item isn’t in stock, don’t advertise it as if it is.”

Upfront pricing. “One of the biggest turn-offs is hidden fees. Customers are lured in by a low price, but than get hit with sticker shock at checkout because of surcharges, shipping and handling and other fees. The price should include all of the merchant’s fees and additional charges upfront.”

Prominent policies. “Customers shouldn’t have to dig to find privacy, shipping, handling, order cancellation and return information. Shoppers should never be more than a click away from finding your policies on the home page.”