E-commerce: What works

Two years after the dot-com bust, some key technologies have proven to be the silver lining that has helped companies survive the unforgiving e-commerce climate.

The world of online retailers is littered with technologies that might have been cool but offered relatively little to improve customer service. Online delivery services, interactive TV sales, micropayments--all seemed like great ideas at the time but, for various reasons, failed to catch on in significant numbers.

"That's been a problem--companies have launched really creative technology that didn't improve the customer experience. Often it seemed the only reason companies launched it was to get the free press," said Ken Sieff, chief executive of online retailer BlueFly. "And very often those companies would abandon the technology or service within 12 months."

The story behind Amazon's 1-Click patent Mark Grant, author, "Law and the Internet" ="" onclick="window.open('http://www.cnet.com/radio/radio_load.html?showType=ondmd,sid=nws,asset=0307markN','radioplayer','toolbar=no,location=no,directories=no,status=no,top=no,scrollbars=no,resizable=no,width=295,height=175,left=200,screenX=200,top=100,screenY=100');" rel="follow" target="_self">Play clip

Truly useful e-commerce tools address one of three areas: displaying, buying or sending the product. As a result, iPix's 360-degree images, Amazon.com's "one-click" option and Federal Express' online order tracking are examples of popular technologies shoppers use online.

"We're into that phase where common sense makes decisions, not just new cool tech and bells and whistles," said Kate Delhagen, analyst at Forrester Research. "People will say: Do customers want to see the item better, or are they halfway through the purchase process and need help, or does it take too long to make a purchase?"

Some of the best tools save money for the company, which might then translate to lower prices for customers. Something like order tracking can cut down the number of e-mails or phone calls that customer-service representatives must deal with, and happier patrons are more likely to come back and buy again.

Here are some of the most groundbreaking services that have changed the way people shop online.

In the early days of the commercial Web, many people said e-commerce would work well only with certain items, such as computers and books--the kind of purchases that don't demand physical inspection beforehand. But who would buy something like a sweater or a sofa based only on a small or blurry photo?

Today, new zoom technologies allow for closer visual inspection than ever before online, enabling consumers to zero in on the smallest detail of an embroidered blouse or take a virtual tour of a house for sale.

Industry leader iPix allows photographers to create 360-degree images using just two standard photographs. The product has been particularly popular for displaying online real estate listings.

Zoom technology has also been key to e-commerce. RichFX's technology allows companies to create up to four "hot spots"--close-up views of product details--from a single picture.

A big change in this category came from the rising popularity of Macromedia's Flash software, which developers use to create animation and display them through relatively small file sizes.

"Compression technology is improving dramatically, and on top of that Flash is preloaded in something like 99 percent of browsers, so you don't have to require that consumers download a proprietary plug-in," Jupiter Research analyst Ken Cassar said. "It doesn't necessarily compensate for the fact that images are not the quality you have in catalogs, but it certainly helps."

When online shopping first took off, the idea was irresistible: You see something you want, click and it's yours. Unfortunately, the reality was more like this: You see something you want, you click and click and click, you type in a bunch of information, click again, type in some more information, click a few more times.

That changed when Amazon introduced its "one-click" option in September 1997. "One-click, that's a double- or triple-star idea," Forrester's Delhagen said. "That has been a huge catalyst for the Web."

The technology behind one-click is surprisingly uncomplicated. Essentially, shoppers are agreeing to skip several of the review and confirmation steps of the buying process. Customers set up a one-click account with the address they want products shipped to and a credit card to pay for it. Newer versions allow consumers to choose from preset multiple addresses and credit cards using dropdown menus on product pages.

The concept at first met with resistance. In 1997, consumers were very tentative about online shopping, and the idea of storing information online, and buying something without being given the option to double-check an order, gave many people pause. In early tests, customers incorrectly thought they hadn't actually made a purchase.

Since then, however, Amazon has licensed the technology to other companies, and partners such as Target have made the technology available to even more shoppers.

On the surface, eBay's "Buy it Now" feature doesn't seem like a major revolution in retailing.

The basic concept allows buyers to purchase items immediately for a fixed price, rather than endure a days-long bidding process--essentially the same thing that is done at regular stores. But for eBay, the move allowed for faster transactions, higher prices and, eventually, more money for the company.

"We're bringing new buyers to the site who weren't there before. And we're getting existing buyers to buy more," said Jeff Jordan, senior vice president for eBay's U.S. business. "Because of this feature, the overall average duration of items on eBay shrank. It makes our sellers more successful."

The technology, introduced in the 2000 holiday season, has caught on like wildfire. About 33 percent of listings included the feature in the second quarter, the company said, and about 20 percent of U.S. auctions close through "Buy it Now."

At first glance, it seems obvious: When people buy something online, they want to know when they will get their package. But for Federal Express, turning a tool designed for internal use into a customer service application was a stroke of genius.

Order tracking had been done by FedEx since the 1980s. But in 1994 the company decided to offer the service over the Internet, allowing any customer to find packages on their own through the same system FedEx uses internally to track its business.

"When a courier picks up a package, he scans it. When it's moved from his van to the destination station, we scan it again. When it leaves, we scan it again. When it's put onto a plane, we scan it," said Karen Rogers, vice president of marketing for FedEx.com. In all, the average package is scanned between 15 and 20 times between pickup and delivery.

Today, more than 1.6 million packages are tracked daily through FedEx's Web site. Customers can look up data over PDAs or cellular phones, as well as their PCs.

The service, also provided by FedEx's competitors, has become a must-have for online shopping, Jupiter's Cassar said. "The site that doesn't have order tracking is a site whose customer service reps will waste a lot of time," he said.

From a consumer's point of view, a store is a store is a store--whether it's a catalog, a Web site or a building on Main Street. But as recently as last year, most companies that operated both online and brick-and-mortar stores wouldn't let their e-commerce customers return goods in person, directing them to the post office instead.

The major roadblock to link online and offline stores was not technology, but a legal technicality. Under current law, an out-of-state company does not need to collect local taxes unless it has a physical presence somewhere in the state. The upshot is that many Internet companies and mail-order retailers don't have to charge customers sales tax, giving them a distinct advantage.

Many companies straddling the physical and virtual retail world tried to keep the businesses completely separate, which allowed them to offer tax-free merchandise on their Web sites. Allowing customers to return those online goods to a physical store would break down that wall.

But customers still wanted to return merchandise at stores, without having to bother with the postal service. So when the deflating dot-com bubble put pressure on companies to try harder to keep customers, many retailers opened their stores to accepting returned merchandise bought online. The Gap, one of the first to allow in-store returns, even allows customers to return items only available online to their physical stores.

Not every e-commerce tool is designed to get buyers online and shopping. Some successful technology is aimed at getting them into stores.

Combining geographical data with store location information can do more than provide the nearest addresses. By tapping into more detailed information, a gas station chain, for instance, can tell customers where to find a 24-hour branch with handicap access.

The market for spatial information software grew 3.3 percent from 2000 to $1.47 billion in 2001, according to market research firm IDC. That business, which also includes geographic information systems used for facilities management and land information, is expected to grow 10 percent from 2001 to 2006.

Anyone who doubts the effectiveness of such software need only ask Chuck Berger, chief executive of Vicinity, which sells location-based software to such large clients as Marriott, Pizza Hut and Shell.

One of Vicinity's customers is a car manufacturer that uses the software to help shoppers find local dealers. One weekend, Berger said, the manufacturer, who asked not to be identified, had a technical problem with its Web site and was unable to provide the data.

"They believe they lost $200,000 in sales that weekend due to the problem," he said.