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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | OCTOBER 17, 2000 TECHNOLOGY Filling the E-Tailers' Gaps The quest to find extra services or unique offerings often ends at small technology companies that sell innovative solutions
The episode piqued Friedman's entrepreneurial spirit. Within six months, he had hooked up with a former classmate from the University of Pennsylvania, Ajay Singhvi, and together they launched 4YourSoul.com. Fueled by $2.1 million from private investors, the 18-month-old startup offers Internet retailers a system for custom-printing commercial-quality greeting cards. Shoppers need only choose a design and type in the message they would like to include as they pass through the virtual checkout stand. When e-commerce debuted in the 1990s, some online retailers figured splashy graphics were the best way to win customers. Others invested almost nothing in their Web sites, and it showed. These days, companies -- from dot-com "pure-plays" to catalogers and familiar brick-and-mortar brands -- have realized that what it takes to sell goods on the Net is convenience and customer service. And increasingly, they're turning to small companies and startups like 4YourSoul.com for niche services aimed at boosting customer loyalty and making Web sites easier to navigate and more interactive. "There has definitely been a proliferation of these services," says James Vogtle, chief of e-commerce research for Boston Consulting Group. "As the online retailers are looking for ways to improve the customer's experience, there's just so many different elements of that experience that can be addressed." HITCHING A RIDE. What's the advantage of relying on outside help? Often, it's cheaper and less time-consuming than developing new Web-site functions, such as two-way voice communication, in-house. And retailers have plenty of other things to worry about, from choosing the right product mix to making sure packages are delivered on time. While online sales are expected to hit $10 billion this holiday season -- twice 1999's amount -- it's still no easy feat closing a sale. Roughly two-thirds of shoppers abandon their carts before the final click to process their orders. At the same time, luring new eyes to a Web site can be prohibitively expensive -- especially for dot-coms, which spent an average of $82 per customer on advertising last year, according to Shop.org, the trade association for online retailers. To a large extent, the fortunes of companies such as 4YourSoul are hitched to the fortunes of the retailers using their services. But the test of whether a startup will really succeed is two-fold: Does its service spur repeat visits and bigger orders, boosting a retailer's bottom line? And can the company deliver on its promise without major technical snafus? Features added to a Web site "need to be customer-driven," says Ron Zemke, author of the newly published book, E-Service: 24 Ways to Keep Your Customers When the Competition Is Just a Click Away. "One of the big mistakes is finding a new technology and using it just because [it's there]." Bill Ihle, a spokesman for Northwest Express, the first retailer to test the appeal of 4YourSoul cards this holiday season, believes the service will provide a competitive advantage. "To be able to have that greeting card in the package is something that our customers -- according to our research -- say they want," he says. Still, the gift and apparel company, which is owned by Bear Creek Corp., also the parent company of fruit purveyor Harry & David, is taking a cautious approach. The custom-printed cards won't be offered to Harry & David customers -- a far larger business than Northwest Express -- until the 20-employee Santa Barbara (Calif.)-based startup proves that its software system and costly digital printers can do the job. "We want to walk before we run," Ihle says. PAVING TROUBLE SPOTS. It's difficult to say how many small companies are working behind the scenes for retailers this year. But without a doubt, Web sites are hungry to try what's new. "The bar keeps being raised," says Vogtle of Boston Consulting Group. "As soon as one online retailer in a category starts to offer a new service or feature on its Web site, the others in that category will at least examine it." Here's a sampling of features online shoppers will find this year -- and the largely invisible companies behind them: To make cybershops more like traditional stores, retailers are adding prerecorded messages and the ability to talk with a customer-service representative. eStara, a year-old Reston (Va.) startup with 35 employees, recently began providing the latter for the Web sites of J. Crew and Continental Airlines. "It was just absolutely obvious to us that if voice could be added, it would dramatically increase the number of transactions that get completed," says Thomas Natelli, eStara's CEO. The only downside: Customers must have a sound card, speakers, and a microphone in their computers. Another startup, 78-employee AudioBase Inc. in Sausalito, Calif., is adding preprogrammed sound to Macy's and Old Navy's sites. The messages are intended to ease customers past trouble spots, such as credit-card processing, and answer frequently asked questions. Fees for the service range from $10,000 to more than $100,000 a month, depending on demand and complexity. SEEING RED. Similarly, AskIt.com lets customers type in a question, which is then parsed for keywords and matched with a database of answers. The 10 employee startup's system is being used this fall by infant apparel and accessory site Babyuniverse.com. "More consumers are gravitating toward the chat and real-time solutions because they haven't been satisfied to date with waiting for an answer," says David Daniels, an analyst with Jupiter Research. And finally, veteran online shoppers know the frustration of ordering what appears to be a fuschia sweater that turns out to be blood-red. That disappointment can cause consumers to abandon a Web site altogether. To help solve that problem, Bloomingdale's and Lucy.com, an online retailer of trendy workout clothes, are employing a service provided by E-Color Inc., a San Francisco-based company whose software matches the tint on a shopper's monitor to an item's true color. "When you go to a Bloomingdale's, they have just the right lighting and the right music. A salesperson is talking to you in a very pleasing tone, telling you how good you look," says E-Color Vice-President Peter Bernard. "On the Web, the only sensory experience is visual. You have this 15-inch piece of glass." But that piece of glass and its assorted hardware and software seem to be opening a whole new field to enterprising entrepreneurs.  By Julie Fields in New York  | | |
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