Web chat is the latest boom in e-service. But what does it do for your bottom line?

The way Jeff Macklin sees it, customer queries are the driving beat at Rock.com. The Boston-based e-retailer’s ability to answer them—in real time—is a strength Macklin intends to leverage in setting his 20-person shop apart from mega-hit Web stores like CDNow and Amazon. Fast answers, he’s learned, mean sales.

Yet Rock.com isn’t trying to run a superstore. Its traffic—123,000 visitors in September, according to PC Data Online—hardly comes close to CDNow’s 6.5 million, let alone Amazon’s 12.2 million. Macklin, the site’s chief operating officer, calls Rock.com an interactive music community drawn together by his staff’s encyclopedic knowledge. The questions, like the site’s customers, come from all over the map, such as: “Who’s that woman singing with Barry White on the software CD I just downloaded?” The customer who recently asked that didn’t have to wait for an e-mail reply from one of the retailer’s four music editors and two customer service agents. He not only got his answer (Edie Brickell) via real time chat with a service rep, but browsed the contents of a new CD containing the song and listened to a clip through a pop-up audio window. By the time the customer logged off Rock.com’s HelpLive, he’d ordered a copy of Brickell’s Picture Perfect Morning.

“You’d be hard-pressed to get that kind of service out of CDNow,” says Macklin. “This is all about getting the impulse buy, and HelpLive gets us closer. We can hold the customer’s hand.”

Many times, the hand-holding leads straight to the bottom line. Macklin says 1% of his customers turn to HelpLive each month, and about 40% of them ask questions about music (slightly more inquire about order status). But half who tap HelpLive to ask music questions go on to make a purchase, and that’s the glittering promise of an interactive customer service technology like Web chat. It gives retailers access to customers on the verge of buying, creating an opportunity to
reverse a couple of less-than-stellar statistics about Internet retailing: a browse-to-buy ratio hovering between 2 and 4% and a shopping cart abandonment rate stuck at two-thirds. EBags, a Web retailer with a home-grown Web chat system, says live help cut its abandonment rate by a quarter.

Experience like that is causing a boom in the market for Web chat software and services, with spending set to soar from $438 million in 1998 to $2.2 billion by 2003, according to International Data Corp. in Framingham, Mass. Analysts estimate that only 5% of e-retailers currently offer Web chat, but they expect the technology to reach near-saturation, spreading to 90% within five years.

Rock.com got in on the ground floor of this rush, beta testing software created by Sitebridge Corp. soon after its launch in 1998. All Macklin needed was another server to ensure he could handle the volume. And because the system is browser-enabled, his staff of techie music lovers faced a small learning curve.

Today, the story behind Web chat is a demand curve. EGain, a Sunnyvale, Calif., customer service software firm that acquired Sitebridge in May, has signed up nearly 130 new clients this year. Another Web chat player, FaceTime Communications of Foster City, Calif., has doubled its customer ranks to 60 since August.

With holiday sales expected to triple last year’s levels, Web retailers have scrambled not only to deck their sites with the latest techno trappings, but to convert an influx of Internet newcomers into buyers by making them more comfortable purchasing online. That’s led retailers like Lands’ End and Bluefly to roll out new interactive shopping features on their sites just in time for Christmas. The improvements at Landsend.com, created by Webline Communications, include online help as well as a feature that allows two customers to link their browsers and shop together. Lands’ End, which has an exclusive on the latter feature until after the first of the year, is heralding the improvements in a national TV advertising campaign that promises: “Shopping online has never been so friendly.”

Who needs it?

But is Web chat customer critical—a make-or-break proposition for e-retailers? That depends on what you’re selling. “Some people expect their merchandise or answers to their questions very quickly, while others understand there’s a delay for very specialized goods,” says Richard Berkman, a partner at net.Genesis, an e-commerce market research firm in Cambridge, Mass. “If it’s a CD or a game or some new software, I want service immediately so I can acquire what I’m looking to get. You only get one shot on the Web.”

Though Web chat may not be every retailer’s magic bullet, it does provide human interaction during the sale—something that more than 90% of online shoppers say they want, according to Jupiter Communications. But pressure is high to handle that interaction well. Other findings show that current levels of customer service on the Web are hardly having the desired effect. BizRate, for example, found that shoppers who didn’t contact a site’s customer support were 23% more likely to become repeat buyers than customers who sought help with their questions and problems. Price draws people in, says BizRate research director Valeri Tompkins, but a poor job of handling fulfillment drives them out.

Web chat software is a link in the customer service chain stretching from self-service fundamentals like frequently asked questions to e-mail-handling systems to call centers accessed by toll-free numbers. E-commerce was founded on a premise of computer users helping themselves, but many people either never get that far or don’t find the answers they need in lists of FAQs.

“What’s happening is that e-commerce sites have realized self-service is not a panacea,” says David Hsieh, cofounder and vice president of marketing at FaceTime. E-mail and toll-free phone calls, while working for certain customers and situations, involve waiting for a reply or logging off to make the call, giving consumers time to think twice about buying online. Enter interactive chat software.

Vendors have taken a Web hallmark—the chat room—and adapted it for use in call centers and other operations, where reps can handle two to six sessions at a time. Depending on the software, a retailer can carry on a live conversation with a customer and take control of the shopper’s browser to point out product features, send supporting information or suggest accessories.

Customers entering HelpLive at Rock.com choose one of four options—order status, finding music, technical help or general questions. Agents not only see the customer’s click stream but have some idea about the question being put to them. If Macklin’s staff is busy handling other sessions, would-be chatters enter an automated queue that tells them what’s happening and gives them material relevant to their questions. Once inside the session, a shopper having trouble finding an item or filling out the order form can get that assistance. Many systems offer a routing feature that directs customers to agents who handle certain requests or problems especially well.

1-800-Flowers, one of the first e-retailers to take the interactive plunge in 1998, worked with eShare Technologies to retrofit the software maker’s chat room application for e-commerce. “When eShare came to us, they had no product,” says Sharon Cain, project manager for interactive services. “We were the guinea pig, but there was no one offering this. Anything was something better than what we had.”

Eight months after its staff sat down with eShare, 1-800-Flowers went live with the chat feature and saw its e-mail volume drop by 40%. In a year’s time, the software has undergone two major upgrades. These improvements have given telemarketers more functionality in pushing pages to customers and managers more reports for tracking how the system is used.

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An ongoing issue is that call center staffers trained to speak well often don’t write well. Even though customer service reps who regularly handle chat sessions are the floral and gift retailer’s most highly skilled and can draw about half of their replies from a database of boilerplate content, the upcoming holiday season will require more than twice as many staffers. That’s led 1-800-Flowers to begin looking for an English teacher to train seasonal agents on the ins and outs of grammar and punctuation.

Seasonal demands aside, having an existing customer support operation has made all the difference in deploying Web chat, says Chris McCann, senior vice president at 1-800-Flowers. “We realized, in terms of our customer service strategy, that we had a strong advantage with a call center already in place.”

A customer service strategy is where e-retailers need to start, says Erin Kinikin, an analyst with Giga Information Group. Simply tacking on Web chat and other products as stand-alone features usually means they’re operated by separate staffs and prone to customer service mix-ups when one part of the operation isn’t aware of previous phone calls or e-mails to another part. All pieces need to share a database rich with customer histories. “Interactive customer service is really a portfolio of technologies,” Kinikin says. “And customer service is more and more about matching the appropriate technologies to the appropriate customer. The differences in cost are dramatic—from pennies per customer for self-service to nickels or quarters for e-mail, to tens of dollars to talk to a live person.”

Even among companies heavily marketing Web chat products, the choices vary widely. Products range from hosted services available for $250 to $600 monthly per service rep to robust enterprise systems that cost $100,000 or more and feature Web chat, e-mail management and call center tie-ins. But for the moment, forget about a single customer service solution. “No one vendor,” says Kinikin, “provides all functionality across all channels.”

A few companies, like eGain, Acuity of Austin, Texas, and Genesys of San Francisco, offer a broad suite of e-service technologies, minus call center automation. Customer management vendors like Silknet Software and Octane Software also have moved into the market with new Web and e-mail products. The latter vendors, says Kinikin, “really do the best job of covering the gamut, but their Web products aren’t very deep and may have scalability problems. Silknet’s system has some Web collaboration and can answer e-mails, but it can’t automatically suggest replies. And Octane won’t have chat until the end of the year.”

For now, most of the action in customer service is occurring among niche players, like eGain, FaceTime, eShare, LivePerson, Webline and Aspect Telecommunications. With Y2K cramping resources this year, many retailers have turned to these vendors to turn on chat alone. That’s made outsourcing especially popular. More than half of eGain’s clients, are part of its hosted network. “The niche players are growing faster than the enterprise players for now,” says Tim Harmon, vice president at the Meta Group in Burlingame, Calif. “But there are no real leaders, and the smaller players will be gobbled up. The niche vendors will either be acquired or will extend their offerings to compete successfully.”

In fact, an integrated market is already starting to take shape. EGain’s acquisition of Sitebridge improved its capabilities to link browser to browser. The combined company, though still lacking a call center product, “can pipe any online request into a call center infrastructure,” says Harmon. Acuity, thanks to its recent purchase by Quintus, stands to go further by integrating its Web-centered products with its new parent’s customer support software tying call centers and e-mail systems. Similarly, Melita International, a telephony systems company based in Norcross, Ga., acquired eShare earlier this year.

What these companies see, Harmon and Kinikin say, is the bigger picture. Customers not only expect fast answers but good answers that put earlier contacts in context—whether e-mail, a phone calls or chat sessions. A database combining all three is a powerful tool for understanding what customers want and what will motivate future purchases. “Most retailers deploy new applications independently—they’re just trying to fix a problem,” says Ryan Rosenberg, vice president of marketing at eGain. “They fix the problem, but don’t move on to the opportunity.” •

Maybe not long at all. Broadband connections, optical networking, and other developments could make chat look cheap inside of five years. Already, there are pioneers.

In September, Cameraworld.com of Beaverton, Ore., began rolling out of a voice-over Internet option, offering it as sales support for certain products and brands. The site also plans to add Web chat as part of a larger redesign timed for holiday shopping.

The voice-over Internet service, provided by Intel spinoff eFusion, connects customers into Cameraworld’s existing call center. When customers click on a telephone icon, eFusion’s system recognizes those with voice-enabled computers and gives them the choice of an Internet voice connection or a call back from a customer service agent.

“If people are going to lay down a couple thousand for a lens and want to ask a question, they want to be validated—and I want to be there,” says Walt Mulvey, Cameraworld’s chief operating officer. “Today, that makes me an innovator. In five years, this will be passe.”

For now, Mulvey acknowledges that the number of customers who can or will use voice-over Internet remains limited by both customer hardware and bandwidth, even with eFusion’s refinements to the technology. Mulvey says its too early to tell what percentage of his call center’s 31,000 monthly customers will be talking over the Internet with his reps. Nor will it matter, he insists: “I want to be first to offer this.”

Cameraworld, a discounter that also sells consumer electronics, also turned to the technology to help solve a business problem. Because it sells goods at prices sometimes far below suggested retail, it puts cooperative advertising dollars from Sony and other manufacturers at risk if lists those prices in plain sight. Sony, for instance, wants to protect mom-and-pop stores in Japan from discount pricing. Customers can find out an unlisted price simply by adding an item to their shopping carts—or they can call Cameraworld.

A talk with one of Mulvey’s 23 call center reps boosts the browse-to-buy ratio. “We close the sale on 25% of the people we talk to,” he says, “so if you can move someone from the site to the phone, the chance of a sale is that much greater.”