Study: E-tail Service Flubs Could Cost $11B

Despite spending almost US$500 million over the past 12 months to improve their customer service operations, e-tailers could face a loss of some $11 billion in sales by the end of this year, according to a report released Friday by market analysis firm Datamonitor.

Poor customer service all too often will result in users abandoning their filled shopping carts before finishing their transactions, said researchers. In fact, Datamonitor found that some 8.7 percent of incomplete purchases could have been salvaged and converted into sales if e-tailers had provided better service, up from 7.8 percent last year.

Moreover, these lost revenues could represent more than a third of any individual company's online sales.

"Online customer service will have a significant impact on the way consumers make purchase decisions this holiday season," said Datamonitor analyst Glenn Koser. "A poor showing could spell doom for many e-tailers already struggling to come up with capital to continue operations in 2001."

Koser added that it is especially critical for pure-plays that lack the support of brick-and-mortar outlets to compensate for lost online revenue, since their fortunes are so closely tied to retaining a large and satisfied customer base that could easily be lured elsewhere.

Slow Response Time

The greatest driver of customer frustration is sluggish and "dramatically inefficient" e-mail response time, said the report. Although online buyers expect immediate replies to their questions and concerns, many must wait days for an answer.

Since the new breed of Internet consumer is savvier and holds higher expectations, researchers found that e-shoppers are more likely to be satisfied with sites that have direct interactive communication capabilities or provide phone support specifically for resolving service issues.

"People want their Web shopping experience to simulate the live shopping experience as closely as possible," said Koser.

Increasing Expectations

While e-tailers have made some strides in beefing up their customer service capabilities, Datamonitor concluded that the demand for online satisfaction "has become so overwhelming that many companies cannot keep up."

This finding comes on the heels of a report released this week by Jupiter Research and NPD Group, which found that only 29 percent of Web sites meet consumer response time expectations. In addition, it said that 62 percent of consumers who shopped online last year and contacted customer service had a negative impression of online customer support.

The study also advised Internet retailers to forego e-tail flash and instead adopt consistent service models that provide "customary and mundane actions," including delivery updates and rapid responses.