E-tailers Prepare for the 2000 Holiday Season: Page 2

Although KBKids.com still is grappling with its issues and refused to return phone calls, the recent partnership between ToysRUs.com and Amazon.com probably is an attempt, at least in part, to deal with the toy company's fulfillment problems, says Seema Williams, senior analyst for online retail at Forrester Research Inc. of Cambridge, Mass.

"Focus your energy on making your warehouses more efficient, and devise a plan that allows warehouses to back each other up. The key is warehouses--not IT systems."

"I think ToysRUs threw its collective hands up and said, 'We've got enough trouble in our traditional business to worry about, so let's let somebody else take care of it,'" she says. The choice of Amazon was particularly smart for ToysRUs.com, Williams notes. "You rarely hear about delivery problems with Amazon. It has always been good at fulfillment."

Like CDNow, officials at Patriot Computer, in Markham, Ontario, Canada, insist the company's problems were not typical of the other six fined e-tailers. Although Patriot Computer didn't deliver about 50% of the orders it had promised before Christmas, the problem was caused by a power supply problem on the company's Barbie and Hot Wheels PCs--not by faulty internal processes, says chief operating officer Dave Morrison. Without this problem the company would have fulfilled 98% or more of its orders, he says.

"We had a quality problem that hit the last week of November, and it caused us to have to stop shipment," Morrison says. "We had a system in place to notify customers, but we weren't able to notify everyone."

With Christmas fast approaching, customers began to panic and flooded the 230-employee company with calls. "You just don't plan for that amount of phone capacity increase all of a sudden," he says.

In response to these issues, the company has developed a homegrown report for its customer service area that analyzes delays one week before the orders come due and generates a letter required by the FTC that alerts customers about order delays. If the order will be delayed again, the system generates a second letter and the order automatically is cancelled, Morrison explains.

If industry reaction to the FTC fines is any indication, by shoring up its customer service systems Patriot Computer is on the right track.

Many companies also are adding more customer service representatives for the holiday season. In fact, it has been standard practice for several years in both the online and offline retail worlds, says Forrester Research's Williams.

That's one step CDNow plans to continue this year. In fact, CDNow expects to increase its customer service reps by up to 35% for the coming holiday season, says Belew.

CDNow Online Inc.'s Amy Belew, VP, customer service and operations

"We know we'll increase our resources in the customer service area this holiday season as we do every season," she says. "We're going to make sure we use a combination of e-mail and phone support strategies to create a centralized atmosphere, and we plan to bring on some specialists who can work specifically on holiday order questions."

Providing additional training for customer service reps--both permanent and seasonal employees--can improve the process, too. SmarterKids.com's customer service reps undergo an exhaustive training program that teaches them how to properly interact with customers. And CDNow plans to give its reps specialized training on how to handle e-mail and phone inquiries.

But adding customer service representatives and training won't make much of a difference unless e-tailers have a system in place to handle customer inquiries quickly and efficiently.

"Retailers need to make promises and keep them," says Steve Robins, director of products and services marketing at Servicesoft Inc., an e-tailer-focused software developer and service provider based in Natick, Mass. "To do that, they need an integrated system so every piece of the system knows what is going on everywhere else."

Using these types of systems can help eliminate inaccuracies about in-stock items--a misperception that can turn to bitterness when an item is not received as promised.

"Let's say a customer goes to a Web site toy store, which might have a front-end catalog showing the product is available. But the information on the Web site is only getting updated once a day. The company might not have tight integration into the back-end, and because the inventory isn't being updated in real time, they can have stock-out situations very easily. If you're missing that integration, you're going to have major challenges," Robins warns.