Retailers spruce up sites for holidays

Mall workers are busy decking the halls with wreaths and piping carols into food courts, but the holiday spirit gripped the online division of FAO Schwarz six months ago.

That's when four full-time employees at the New York-based toy retailer began taking surveys and making site upgrades to prepare for what they hope will be a holiday onslaught at FAOSchwarz.com. Throughout the summer and fall, they dressed up the home page and quickened the checkout process. They simplified a 15-item "product parade" that scrolls across the bottom of the site so that dial-up users--who account for more than half of FAO Schwarz's online customers--won't get impatient.

"Because we got an early start, we were able to see if there were any bottlenecks and if we needed to add more hardware," said Torva Danielson, director of new media for FAO Schwarz, a 140-year-old brand that was purchased Monday by educational toy retailer Right Start. "We always try to keep a high level of customer service, online and offline. We had a lot of capability that we had to add."

FAO Schwarz isn't the only brand overhauling its online division for the 2001 holiday shopping season, which begins Friday. From J.C. Penney to Lands' End, traditional mall and catalog retailers are gearing up e-commerce operations to offer the same level of customer service as physical stores or mail-order divisions. Regardless of whether they deliver, their efforts represent the most aggressive push into e-commerce by mainstream retailers.

The stakes are high. According to Gartner researchers, online stores will get $11.86 billion in sales in North America and more than $25 billion worldwide. The retailers who win customers this holiday season could keep them for life.

Strong start for online holiday shopping Sean Kaldor, VP, NetRatings, and Melissa Francis, correspondent, CNET

"Sears, Marshall Fields, Nordstrom, Macy's--even last year they were trying to get their online customer service to match the levels of customer service in physical stores," said Susy Chan, director of the e-commerce master's degree program at DePaul University in Chicago. "This year, people are saying that online customer service should be a given. If it's not, people will not come back to the Web site. Those stores will lose customers forever."

2001: An e-commerce odyssey
Most big retailers launched e-commerce initiatives in the mid-1990s, when dot-coms were wooing customers. To some extent, retailers that are beefing up their online sites this year are merely continuing a trend of improved e-commerce operations.

But the landscape for big-box retailers differs starkly from last year. Many of the Internet-only companies that stole the thunder from brick-and-mortar retailers--ranging from eToys to Pets.com--have been absorbed into Old Economy retailers or have folded, leaving consumers few choices other than brand-name retailers or large dot-coms such as Amazon.com, Yahoo and eBay.

Plagued by site outages and poor customer service in holidays past, many retailers have been working since this summer and spending millions of dollars to upgrade their sites and build backups in case of holiday outages. They're hiring temporary workers for customer service call centers, and they're packing sites with personalization features beyond what traditional catalogs or physical stores can offer.

For example, Landsend.com, the Internet arm of mail-order retailer Lands' End, is debuting a cyber-tailoring service that allows Web shoppers to buy made-to-order chino pants for $54.

After first deciding on color and whether they want pleats or flat-front chinos, customers then answers a series of questions at Landsend.com: "What is your height?" or "What is your preferred rise?" The information is analyzed and electronically sent to the manufacturer, which custom-cuts the pants.

After the checkout process, the trousers reach the customer's front door in two weeks. The system, developed by Archetype Solutions, is designed to ask the least amount of questions to make the consumer experience as fast as possible.

Numerous retailers are trying to make it easier to exchange or return items purchased online at physical stores, and vice versa--one of the biggest complaints from customers in recent years.

The Spiegel Group, which includes Eddie Bauer, Spiegel and Newport catalogs, announced Tuesday that it had streamlined its refund and exchange system for online and catalog shoppers. The company's new "returns management system" allows items to be returned via drop-off at a nearby postal facility--without people having to fill out forms, repackage the goods or call a customer service agent. In some cases customers will receive instant credit card refunds, or in-store or catalog credit.

"In test groups, it took between 3 to 5 minutes for the customer to get a receipt. Then it's a done deal and you don't have to wait 12 weeks for credit," said Karla Villalon, a spokeswoman for the Austin, Texas-based start-up Newgistics, which sold its ReturnVallet service to Spiegel and is beta-testing it with cataloger Lillian Vernon. "It's just like going back to the store and getting the whole transaction completed, but you only have to go to a mail center."

Retailers are more bullish about e-commerce this year because of several developments in recent months.

New research suggests that online sales spur in-store sales--they don't cannibalize them, as some retailers once feared. According to a recent report by Jupiter Media Metrix, a customer who spends $1 at a manufacturer's online site will likely spend $5 at the retail store.

According to a recent survey of J.C. Penney shoppers by IBM, the average transaction at the department store is $122. The average J.C. Penney online purchase is $500. And the average purchase by someone who shops through the Web site and at the store is $1,000.

Because of such research, the prospect of getting a single customer to buy online, through catalogs and in physical stores--also called "multichannel marketing"--has become one of the hottest pursuits for retailers and software companies. In August, IBM launched MerchantReach, which allows retailers to compile customer information from their stores, catalogs and Web sites. Database software market leader Oracle, as well as BEA Systems and Microsoft, offer various tools, as do smaller specialty software makers.

Traditional retailers are also eager to boost online sales this year because they believe the Sept. 11 terrorist attacks may keep shoppers away from malls, downtown shopping corridors, outlet strips and other high-density areas. Consumers who want goods from Banana Republic or Williams-Sonoma without the perceived security risk of the mall will gravitate toward the Internet to complete their gift lists, they say.

According to eMarketer, online consumer spending will reach $10.7 billion in the fourth quarter of 2001--a record quarter for e-commerce and a 20.2 percent increase from the same period in 2001. eMarketer says the boost comes in part because of the attacks and consumer reluctance to shop at malls.

Lessons learned--and perks purged
To some extent, it doesn't matter whether people shop online because of the terrorist attacks, said Jim Sterne, founder of e-commerce marketing company Target Marketing. What's most important is that traditional retailers have finally grasped the significance of e-commerce.

"Two years ago, the dot-coms finally attracted a whole bunch of attention, but then they fell on their faces because they couldn't deliver," Sterne said. "Last year, the dot-coms died and the traditional retailers learned that Web sites don't run themselves and they need human beings behind them to apologize when necessary. Hopefully this year we'll all realize that customer service is key."

To be sure, customers won't find categorical improvement in online customers service.

Free shipping--once popular among dot-com retailers trying to establish brand identity--is falling from favor. Last year, Amazon offered free shipping on orders of $100 or more. This year, the Web superstore is offering to pick up the delivery charges on only select items.

Another perk gone by the wayside: free rush delivery.

Some last-minute BlueLight.com shoppers last year found that they ordered too late to have their goods delivered at standard ground transportation rates and still arrive in time for the holidays. BlueLight, the Net unit of big-box retailer Kmart, paid the extra cost of shipping the goods via overnight delivery.

Not this year. Although BlueLight hasn't announced what its holiday promotions are, company spokesman Dave Karraker said free shipping is out of the question.

"You're not going to see the blanket offering on free shipping on the big Web stores," Karraker said. "BlueLight is focused this year on providing better value to our customers through lower prices throughout the site."

News.com's Greg Sandoval contributed to this report.