February 2, 2001, 12:00 AM

Digging deeper and betting big on e-service

E-retailers have spent millions on customer service software. But it`s not enough--abandoned shopping carts are still too common.

E-retailers-at least those with the resources to do so-are spending millions on software solutions to improve customer service. But they’ll need to invest even more time and money to see a big impact on sales, predicts research firm Datamonitor.

E-retailers spent $460 million on so-called e-service solutions last year (software to support online customer service), and the total percentage of abandoned shopping carts dropped to 74.6% in 2000 from 78% in 1999, according to Datamonitor. But customers who bailed out specifically due to poor customer service actually rose during that time, to 8.7% in 2000 from 7.8% in 1999. That 8.7% translates into about $10.9 billion for the year in lost e-commerce revenues potentially salvageable with better customer service, says Datamonitor Analyst Glenn Koser.

“Online service has a significant impact on the way customers make a purchase decision,” Koser says. “It’s critical for pure-play dot-coms that lack the support of brick-and-mortar outlets to compensate for lost online revenue.”

Shopper bailouts rose because while e-retailers are beginning to spend big on technology to support customer service, online customers are becoming savvier, and their expectations are rising at an even faster rate. “People want their online experience to simulate the live shopping experience as closely as possible,” Koser adds.

In a survey of 2,000 U.S. online shoppers with input from shoppers in five other countries, plus interviews with e-retailers and e-service providers, Datamonitor found that e-mail response drives much of customer dissatisfaction. The findings showed that while shoppers expect immediate response to their inquiries, e-mail response time sometimes takes days. “The most common response time is 24-48 hours, but it can take up to a week,” he says. “You don’t want to wait a week to find out if you can get the sweater in a different size.” It follows that handling customer e-mail is the single e-service application on which e-retailers are putting the most e-service dollars. In the survey, web-enabled call centers received 35% of their revenue from providing e-mail services for retail clients; a figure that far outstripped the 11% of revenue derived from live chat and the 7% received from handling voice-over-Internet applications.

Datamonitor estimates that by 2005, e-service solutions will be a $2.3 billion industry. The question is, how soon will the ongoing investment by e-retailers in online customer service turn into more cash at the register? Though spending is high and returns are so far low, Koser believes the disconnect is short term, a function of growing pains. “These systems need time to be put in place, the agents trained, and consumers need to become comfortable with these applications,” he says. “The bottom line for e-retailers is long-term return on investment in these systems, and they’re going to get it.”

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