US: Ghost of Christmas past haunts the Net shopper

Many US online customers were let down last Christmas by companies failing to deliver gifts on time. This time around, have things have improved?

However, not all shoppers will be logging on with festive anticipation. Up to 25 per cent of all gifts ordered online in the US last Christmas arrived later than promised. Many online consumers who had to tell little Johnny that Santa could not deliver his long-awaited toy will think twice about risking that again.

Two of the big-name culprits were ToysRUs.com and Macys.com, both of which had to pay large fines to the Federal Trade Commission after they let down many of their consumers on deliveries. Online shopping sites will be working extra hard this year to convince Americans that they really can deliver. According to market research firm Datamonitor in New York, about 78 per cent of all online shopping carts are abandoned before checkout, and they estimate that at least eight per cent of those could be saved if Internet retailers offered an improved service. Frustrated consumers are costing e-tailers a lot – Datamonitor valued the eight per cent of salvageable carts at $6.1bn (Ãâ&£4.3bn) in 1999.

Last year was a Christmas past that many e-tailers would probably rather forget. Desperate to attract customers and build brands, they spent large chunks of their venture capital on above-the-line advertising in the fourth quarter, driving up media prices in the process. Many sites created high consumer demand and what followed was every marketer’s worst nightmare. Many of the e-tailers’ logistics and inventory departments could simply not cope with the demand and the whole process spiralled out of control. Customer service departments were too overwhelmed to be of much assistance to these disgruntled shoppers, and thousands of customers were undoubtedly lost forever – if not to online shopping in general, certainly to that e-tailer.

Not all US e-tailers messed up last year and the clear winners were those who were already experienced in the fine art of delivery. Brands such as Victoria’s Secret, Lands End and Eddie Bauer, which have run catalogue operations for years, were the ones who pulled through. Many of the newcomers had simply underestimated the skills and technology needed to move successfully from order placement to fulfillment.

As for Christmas present, it looks as if many US e-tailers have learned their lesson. This time last year New York was awash with dot-com advertising but now there is only the usual run of established brands’ festive offerings. It seems that Internet companies are keeping a lower profile, perhaps focusing more on nurturing their existing customer base than creating splashy ads to attract new ones. Mary Obana, vice-president of marketing at Send.com, a Boston-based gift e-tailer, says: “Last year, our objective was to launch the brand and create awareness and brand credibility. Offline advertising was perfect for that. This year, we have leveraged that awareness and credibility to acquire additional customers at a low cost.”

The e-tailers which have survived to see another Christmas are improving their customer service by speeding up e-mail response times (currently standing at an average of two days for an order confirmation), as well as offering real-time online customer service and tools such as “escorted browsing” – pop-up screens to help shoppers navigate the site.

US consumers are also much better equipped to shop online this year. Millions will be more comfortable with the mechanics of Net shopping and realise that it does require a bit more planning than the usual last-minute dash round the mall. To help in the search for the best sites, a new US magazine called Hotdots, launched in November, is devoted entirely to advising readers about the best shopping on the Web. The first issue included a feature about buying Christmas trees online, which says it is more likely to guarantee you a fresh tree than a visit to a traditional seller whose trees were probably cut weeks earlier.

Some “Internet police” have also sprung up. Sites such as BizRate.com and MySimon.com gather detailed information from customers of various websites about the quality of service they received, especially whether their order arrived on time and in full. Many sites now offer comprehensive order tracking services as well as more prominent customer service numbers to reassure any worried consumers. The market confidence in Internet start-ups has literally crashed between last Christmas and this one, and many companies are finding it a struggle to get further funding if they are not showing profit or at least good signs of approaching profit. “The companies with clearly profitable e-commerce businesses or business models are the only ones that will succeed in this environment,” says Obana.

With regular stories in the press about e-tailers going out of business, many Americans are preferring to put their trust in brands they already know. Walmart.com visitor rates have trebled since this time last year and other store-related sites such as Bestbuy.com, Target.com and Bluelight.com, the online affiliate of K-Mart, are all surging in popularity compared with online-only stores such as eToys and Buy.com.

Investors and employees at online-only e-tailers must certainly be hoping Santa has something nice for them in their stocking this year or that the ghost of Christmas future will perhaps pay them a reassuring visit.

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