BUSINESSWEEK ONLINE : OCTOBER 23, 2000 ISSUE
BUSINESS WEEK E.BIZ -- COVER STORY Service, Please More and more dot-coms are figuring out that cutting corners on customer satisfaction and service is a one-way ticket to Nowhereville At first, the folks at Petopia.com Inc. thought it was time to break out the champagne: Last holiday season, 160,000 people clicked on the pet supply site's buy button--four times the number of customers it expected. But the flood of orders quickly overloaded its one distribution center, and thousands of complaints and questions poured in. Even Chief Executive Andrea C. Reisman had to pitch in and answer phones. When customers still couldn't get through, they blitzed Petopia with angry e-mails, many of which went unanswered for as long as four days. It's the sort of nightmare that has plagued almost every e-tailer. The problem? Many sites, figuring the Web's self-service model would save them millions in customer-service costs, didn't realize that was the last place they could afford to pinch pennies. According to market researcher Datamonitor, 7.8% of abandoned online shopping carts could be salvaged through an effective customer-service solution--which works out to a gut-wrenching $6.1 billion in lost sales in 1999. Poor service isn't the only thing that's gotten consumers steamed. Major e-commerce sites such as Toysrus.com (TOY) and Macys.com let customers place orders for items already out of stock, prompting the Federal Trade Commission to slap a combined $1.5 million fine on them and five others. And things could get worse before they get better. Datamonitor reckons sales lost to poor service could reach $10.9 billion this year. Says Bill Bass, senior vice-president of e-commerce at catalog retailer Lands' End Inc.: ''If there's a train wreck to happen this year, it's going to be around customer service.'' The tragedy would be that good customer service is the best investment an e-tailer can make. Recent research shows that they can get much higher sales gains by keeping existing customers than by blindly seeking new ones. According to Forrester Research Inc., more than 90% of satisfied consumers say they'll visit a site again, and 87% will recommend it to others. Some e-tailers are learning their lesson. The first thing Petopia did was apologize. ''We were upfront with our customers about botching things,'' says Petopia Vice-President Tim Allen. Instead of the usual gift certificate for a problem order, the company sent every customer a music CD for pets to enjoy when owners can't be home. Positive response to that program is one reason why 70% of buyers today are repeat customers, says Allen. Quick answers. Reisman realized that not everyone would stand for a mere apology again. Pleasing customers is so important that companies are spending far in advance of sales to make sure they deliver. Petopia has laid out more than $10 million in the past year, triple its total 1999 revenues, on new customer-service software. Now, its service staff can respond to twice as many people a day as last year. What's more, it posts an 800 number on every page and responds to e-mails within 24 hours. The e-commerce research firm Gomez Advisors Inc. now ranks Petopia tops in customer relations among pet sites. Others are redesigning their site and computer systems to avoid problems long before the transaction. This year, eluxury.com Inc., a San Francisco-based, high-end goods site, has spent an estimated $2 million or more on new software that scans its warehouse every seven minutes to update inventory records. That way no customer is even offered the chance to buy an item out of stock. The company expects that, simply by preventing angry customers from clicking elsewhere, the system will more than pay for itself this holiday season. Not only do companies need to provide customer service, they need to provide it however customers want it: by e-mail, chat, phone, mobile devices, or voice over the Internet. And they need to spend whatever time it takes to please them. Luciano Rosa, one of several thousand customer service reps employed during peak holiday hours by the Long Island-based florist 1-800-Flowers, will chat online with each customer for 20 minutes or more to direct them to the perfect bouquet. Sites also need to lavish special service on returning customers. ''The businesses that are going to succeed are those that, when I call, can access my e-mail history, my account history, my preferences,'' says Forrester analyst Bob Chatham. At San Francisco-based beauty-product seller Sephora.com, for instance, a customer-service rep answering the phone will have instant access to what shade of lipstick the person on the other end of the line likes most. And they can cross-sell by suggesting a matching shade of lip gloss. CEO Jim Wiggett expects this personalization to build loyalty and boost sales per customer. Some companies are taking the red-carpet treatment even further. This season, Nordstrom Inc. (JWN) will offer a cyber-assist: A service rep can take control of a customer's Web browser and literally lead her to just the silk scarf she's looking for. CEO Dan Nordstrom says this will help seal enough additional purchases to more than pay for the $1 million-plus software investment. Service is the watchword at the other end of the retail spectrum, too: BlueLight.com, Kmart Corp.'s (KM) online unit, lets customers and gift recipients return online merchandise to stores. So a teenager who gets a sweater covered with pink teddy bears from an aunt in Milwaukee can return it to a store in Kearney, Mo. Online, good customer service means taking care of everyone--even ungrateful nieces. By JEANETTE BROWN _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS EBIZ Contents for issue dated Oct. 23, 2000 Cliff-Hanger Christmas TABLE: Building the Perfect E-Tailer TABLE: Breakeven or Bust TABLE: E-Tailers vs. Retailers Double Play TABLE: Toys `R' Both of Us Service, Please TABLE: Profile of the Online Shopper ONLINE EXTRA: Q&A with Toysrus.com CEO John Barbour ONLINE EXTRA: Q&A with Amazon CEO Jeffrey Bezos ONLINE EXTRA: Q&A with Toys 'R' Us CEO John Eyler INTERACT E-Mail to Business Week Online

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