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Are You Ready for Holiday 2000?
The 2000 Holiday season will likely be the highest grossing season of Internet retail sales ever. Retailers are learning from past mistakes in planning for customer service, supply chain strategies, and distribution processes.
Posted Jul 17, 2000
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As the 2000 end-of-year holiday season looms on the horizon, e-tailers are facing the largest online shopping rush ever. All indications are that consumers will flock to the Internet with a warm credit card and soaring expectations. They may spend as much as $10 billion online this year, according to Irwin Cohen, managing director, Consumer Business Practice at Deloitte & Touche.

While some companies have prepared themselves for the rush, the shopping boom may prove disastrous for brand name giants in the traditional world who prove naive in the Internet world. For example, Toysrus.com was the subject of a class action lawsuit by consumers who did not receive gifts in time for Christmas last year, if at all. To head off the complaint, it offered to send $100 to such shoppers.

According to AMR Research, less than 62 percent of all Internet orders were shipped using best practices. And when items were out stock, consumers received immediate notification less than 52 percent of the time. Front end selling processes were not integreated with back end fulfillment processes, says Greg Girard, service director, retail advisory service at AMR Research. "We are seeing a number of retailers starting to invest in these planning activities."

Keeping Up with the Rush
Retailers expanding across product lines and national boundaries are learning how to consolidate operations across these different geographic and product areas. Tower Records Online currently has separate but essentially redundant operations in the United states, UK and Japan, each with its own Web site engine to deal with local marketing and distribution.

Kurt Booker, Tower online webmaster, is working with Akamai to set up global caches of its content, allowing users in remote countries to access a local caching server for maximum speed. Akamai maintains a network of caching servers around the planet that enable companies to quickly scale their Web sites to meet rapid demands, such as the Christmas rush.

But only outgoing data can be cached, so e-tailers need to find a way to scale-up their incoming transaction-processing capabilities to meet increased sales. Booker noted, "One of the big challenges is the credit card confirmation."

Better Integration = Better Customer Service
A major concern with shopping online is that a customer who asks a question, it can be days or weeks before a customer service representative (CSR) answers it. Bear Creek Corporation, which owns Harry and David and Northwest Express, plans to add a button to its site that consumers can click to be instantly connected to a CSR. Customers will find the high-touch service they expect from a phone call when asking questions the site could not answer, and the service will free up CSRs from having to provide basic answers that a caller can find on the Web site.

A key element of their strategy is to have all customer interactions--phone, Web site or e-mail--stored together in the database. All CSRs are aware of all previous interactions. Bear Creek is developing an address book that a customer can fill out online. When a customer calls in and says, "Send a $25 gift certificate to my Mom," the certificate can be sent out without the customer having to repeat the address on the phone.

Toysmart.com is using Silknet Software to log all relationships with customers, whether the customer contacts Toysmart.com via e-mail, phone, fax or the Web, tracking orders as well as questions. Toysmart.com is planning to deploy a live chat system developed by Kana Communication (which bought Silknet) to better serve customers online.

Toysmart.com is is also integrating its e-mail system with its automated call distribution system. When an e-mail arrives, it will be handled by the next available CSR with the same priority as a phone call would be. "If the customer is sitting at his computer in the decision mode, he wants an instant response," says Sandra Charest, director of customer care at Toysmart.com. "This new system will give them answers within minutes."

Working with Fuzzy Predictions
The problem with selling online is that it is growing so fast that retailers are unable to predict how much they need to order ahead of time. "Online, where your sales may be doubling or more, it becomes difficult to predict demand," Cohen says.

Retailers must either forecast accurately or invest heavily in inventory. Otherwise, they run the risk of disappointing their customers. They should also be prepared to use Web technology to substitution sell. Unfortunately, it is almost impossible to be highly accurate, particularly in a market as volatile as the Web. It can also prove expensive to overstock inventory. Amazon wrote down $39.4 million in excess inventory after last Christmas.

End-of-Season Fallout
So when January comes around and your warehouse is full of unsold inventory, how do you realize a return on your investment? You could have a fire sale, but that might jeopardize your brand. Many catalog companies have set up outlets to deal with this problem, but pure play-online retailers need to look at inventory liquidation markets.

Fortunately, a number of online trading exchanges--such as Tradeweave.com, Redtagbiz.com and Retailexchange.com--have opened to deal with excess inventory. These kinds of exchanges allow retailers to post offers to sell items anonymously, so that they can select the buyers and unload the excess merchandise without hurting the brand.

To Get Ready, Get Real
This year promises to be the biggest online shopping season ever, and, still, being a winner will take careful preparation. First, accurately prepare inventory to match the online sales rush. Be prepared to offer customers desirable alternatives when you run out. Then, make shopping on your site a cinch for users of all experience levels. Use traditional promotional vehicles along with promotions from places like AOL and Yahoo! to lure customers to your site. Charest says, "I don't know of any successful electronic retailer that has not bought space on AOL, the Microsoft Network or Yahoo!."

Finally, integrate the back end. Customers need immediate information and updates regarding stock and delivery issues or they will feel lost in cyberspace and run for the phone, the most expensive communication channel. In short, provide the customer with a similar or better shopping experience than they are getting at the local brick and mortar.

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