February 18, 2004, 12:00 AM

E-retailers must excel in customer service, Zappos founder says

There are many steps an online retailer needs to take to succeed, but the future belongs to those who can dazzle their customers with service, Zappos.com founder Nick Swinmurn will say at a panel discussion at next week’s eTail 2004 Conference.

There are many steps an online retailer needs to take to be a success, but the future will belong to those who can dazzle their customers with service, Nick Swinmurn, founder of shoe retailer Zappos.com, will say at a panel discussion at next week’s eTail 2004 Conference.

"The future of retailing online will be extremely bright for those companies that can ‘wow’ customers with their service," Swinmurn says. Swinmurn will be one of several online retail executives appearing an eTail panel, "The Future of Retailing Online: Evaluating the Key Factors that Are Driving Your Industry, at 10 a.m., Feb. 24, in Palm Springs, CA.

Swinmurn will provide a look into the customer service policies, including free shipping on all orders and returns, that have set Zappos on a course of revenue growth from $8 million in 2001 to $70 million in 2003. "Focusing the entire company on the customer has led to a loyal customer base of word of mouth advocates that keep spreading the word about Zappos," he says. "That will propel us to $140 million in revenue in 2004."

Because shoppers today have more options than ever, including Internet search, on finding things to buy, Swinmurn says, retailers must find ways to stand out with customer service. Zappos forged ahead, he adds, by being the first in its market to offer free shipping on orders and returns, the first to send all orders as 2-day deliveries at no charge, and the first to photograph each shoe it sells in every color from six different angles. "Whether in a brick-and-mortar store or online, customers want the same things: a large selection, the ability to view the merchandise properly, quick and courteous service when shopping or returning, and having their new shoes on their feet as quickly as possible."

"As we move forward," Swinmurn says, "the companies that succeed will be the ones that continue to push the boundaries of the customer experience."

Kal Raman, president and CEO of drugstore.com inc., who is also on the panel, will refer to the importance of building a market edge to capitalize on expected continued growth in online retailing. The health, beauty, and personal care industry, he notes, had a 2003 growth rate estimated at 9% and a total market value of $273 billion. "Online adoption of this category is still in the early stages: Online HB&PC; sales approximate 2% of the industry, while more mature online categories have reached adoption rates of 12%. This portends very strong online growth potential for health, beauty and personal care companies," Raman says.

He adds that the number of online buyers is growing rapidly: 36% of the population now buys online and women now constitute over 50% of Internet users and online buyers. Women age 25 – 55 are the primary consumers of HB&PC; products at drugstore.com, he says. "At the same time, aging baby boomers (over 32 million online users are between the ages of 35 and 45) are approaching the ‘prescription drug buying’ stage of their lives," Raman says. "The current growth rate of prescription drugs sales is 11% and that should accelerate as the baby boomer population ages."

Stephen Messer, CEO of LinkShare, a provider of affiliate marketing and media-tracking services, will address what he says is a forthcoming change in the way companies are structured to handle marketing. "I don’t think that the way companies are structured now organizationally will exist two years from now," he says.

For example, he says, companies will trade existing structures of marketing department subgroups that handle different aspects of marketing – including Internet search, e-mail, portal management and affiliate partners – for core groups of marketing strategists who will rely more on third-party specialists to handle specific marketing tasks like e-mail campaigns and management of paid Internet search.

Also appearing on the eTail panel will be Meredith Hanrahan, senior vice president of marketing at American Greetings; Jon Nordmark, CEO and co-founder of eBags.com; Ken Seiff, CEO of Bluefly Inc.; and Larry Freed, CEO of ForeSee Results.

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