Holidays offer lessons to online retailers

With the busiest online shopping season ever behind us, e-tailers are looking back at the numbers and finding several lessons to be learned.

Despite an impressive 37-percent increase in the number of shoppers online over the same period last year, according to Media Metrix, retailers catering to holiday shoppers have been tarnished by cases of selling out-of-stock items and of spotty customer service. In an effort to head off embarrassing snafus, companies such as Toys R Us sent out $100 gift certificates or other gifts to make up for any inconvenience that customers may have experienced.

Industry observers speculate that the root of the problem of missed orders and irate shoppers is that back-end fulfillment systems are not well integrated with front-end electronic-commerce applications. Moreover, order fulfillment and customer service is a major challenge that some e-tailers may have taken too lightly, according to one dot-com start-up.

"The most significant issue was fulfillment," said David Schatsky, director of commerce infrastructure strategies at Jupiter Communications, in New York. "It caused the biggest disappointments among customers."

"I think there are really two classes of problems," Schatsky said. "First is the availability of the Web site, particularly Web site outages and performance. Many customers were turned away because there were sites that couldn't handle the volumes. The more serious problem is fulfillment -- getting the goods into the boxes and getting them into the hands of the shippers."

For their part, many e-tailers are fessing up.

"I won't deny that online retailers have underestimated the amount of effort to apply to the customer-service angle. It's a huge effort. The dirty little secret is, not everybody can do (order fulfillment and customer service). The goal is to keep the customer satisfied by knowing how to transfer bits to atoms," said Brent Cohen, chief operating officer and co-founder at eHobbies, in Santa Monica, California.

But Cohen believes e-tailers are also getting a bad wrap on customer service, especially when compared to their brick-and-mortar counterparts.

The most difficult part of customer service comes from the fact that the warehouse and customer service are not physically next to one another, so companies rely on accurate databases to know what is in stock at any given moment in time, Cohen said.

No matter how quickly changes are included in the database when products come off the loading dock, are taken from the shelves, or are shipped out to customers, the real key to success is putting people into the mix to constantly update and check inventory, according to Cohen.

The inability to get goods to consumers on time caused concern with investors, which sent shares of bellwether e-tailers Amazon.com and eBay down this week.

Though many analysts had speculated that the shipping industry might falter under the added demand that online retailers would place on them over the holidays, the shippers are reporting glowing results and pushing back on the e-tailers.

"I think the problems are a little further upstream than the shipping," said Sally Davenport, a spokeswoman at Federal Express, in Memphis, Tenn. "The problems the e-tailers have been facing are more on the order-entry and fulfillment side."elivered."

Senior Editor Eugene Grygo contributed to this article.

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