Instant Messaging: The Next E-Commerce Channel

Instant messaging (IM) can help e-commerce sites capture potential sales, but cost, service and technological hurdles must be cleared before IM can have a major impact, according to analysts.

Gartner (NYSE: IT) research director Rob Batchelder told the E-Commerce Times that live, instant help could help e-tailers address the problem of shopping cart abandonment. Too often, he said, shoppers ditch an online purchase just before hitting the pay-now button, simply because they are unable to get an immediate answer to a simple question.

"Web sites have horrible problems with shopping cart abandonment rates. Having instant messaging, in many instances, could have saved that sale," Batchelder said. "It's spontaneous, and it fits right into the flow of the transaction."

E-Mail Too Slow

The problem arises when shoppers have only one phone line and are using a dial-up connection. E-mail has proven to be too slow as a channel to address questions during a transaction, Batchelder noted, and if a shopper needs to log off and use the phone, that sale has been delayed or lost altogether.

"This is a huge, huge issue in e-commerce," Batchelder emphasized.

Conversational IM is a popular feature of portal services like Yahoo! (Nasdaq: YHOO) and AOL. According to Batchelder, it also is being used more and more in corporate settings for internal communications and business-to-business transactions.

But IM is problematic for consumer e-commerce. Most companies are not equipped to handle potential inundation with thousands of simultaneous messages. They are not prepared, for example, to route IM questions and make sure they reach people who can answer them.

"No one yet really has the infrastructure to support this [flood of messages]," Batchelder noted, adding that competing IM standards are also an impediment to acceptance of the channel.

Artificial Answers

Meta Group vice president Gene Alvarez said that tests of instant messaging have shown it to be effective in reducing shopping cart abandonment rates, but he added that most companies are hampered by logistics and personnel costs when it comes to implementing IM systems.

In place of such systems, Alvarez told the E-Commerce Times, some businesses have installed more cost-effective "artificial intelligence" programs that simulate instant messaging by delivering quick responses based on certain keywords that occur frequently in inquiries.

Alvarez noted, however, that artificial intelligence systems can provide only a limited number of personalized answers and may not have answers for all situations.

Special Incentive

In order for IM to be cost-effective, Gartner's Batchelder said, companies would need to deploy it only in certain situations. For example, an e-commerce site might make IM available to its most profitable customers. In this way, the technology could be used as part of a range of personalized services designed to encourage customer loyalty and more frequent shopping.

Batchelder noted that a number of technology providers, such as LivePerson (Nasdaq: LPSN), have begun offering live-interaction instant messaging programs designed to enhance customer service and help reduce the number of calls to phone contact centers.

Such systems are gaining popularity among financial and retail companies, but they are not set up on a large enough scale to handle issues during transactions, Batchelder said.

But e-tailers that want to connect with their customers in this fashion should not give up hope. Batchelder noted that if standards and business infrastructure issues can be ironed out, instant messaging could become a more viable part of the e-commerce landscape in the next five years.