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E-tailers push products or perish

Merchants selling perishable goods online may face their biggest challenge yet: spoilage.

Fruit rots. Fish float. Flowers wilt.

Spoilage--or the more dire threat of a customer's purchase dying en route from Web order to doorstep--is the challenge for any online merchant building a distribution system to handle perishable goods. Indeed, anything from apricots to Angelfish and Azaleas can expire on its way to the customer.

In some ways, the challenge for online retailers is no different from that faced by companies selling through mail order or in corner stores, analysts say. The shop needs to sell products while they're fresh or still healthy and make sure they've got the facilities to keep items in good shape until they are sold.

But unlike a retail store, where a customer can physically examine prospective purchases, online sales are often completed blindly. And stories are only just beginning to trickle out about the online florist who delivered dead flowers or the Web-based grocer who sold a bunch of bad bananas.

Webvan is so concerned about spoilage that it is investing more than $1 billion in an automated distribution system and delivery warehouses around the country, where tons of fruits and vegetables will be stored. The online grocer also has hired "pickers" to examine the produce before packing it.

Meanwhile, Flying Fish Express, which sells more than 3,000 saltwater fish and species online and just sold its business to Petstore.com, has a "return dead on arrivals" policy and a "five-day arrive alive, stay alive" guarantee.

The company has a "very low" mortality rate on sales, Flying Fish owner Eric Silverman said. He purports that the species sent directly from his Los Angeles headquarters to customers are likely to be fresher than those in stores, where the buyer typically has no idea how long species have been languishing in tanks.

Silverman sends all species to customers individually bagged in foam coolers via Federal Express delivery. To keep the temperature between 70 degrees and 80 degrees, he uses a chill pack in summer and a heating pack in winter.

Although Petstore.com rival Pets.com will soon also add live fish sales to its site as well, spokeswoman Karen Gould said the company has no plans to sell other pets because of concern for their safety. "We don't ever see ourselves selling dogs or cats online," Gould said.

Silverman said he gives customers "a lot of credit for buying livestock [such as fish] sight unseen."

"There are a lot of shady people online, period," he said. "I don't think it's just our industry. Whether you're buying a CD, a book, or a live animal, they want to make sure the company is reputable."

Jupiter Communications analyst Mike May said online merchants that don't offer guarantees and establish good faith with customers will have trouble making it online.

"They are wasting the substantial cost they spent to acquire customers, especially [if troubles occur] early in the relationship when customers are still developing loyalty," May said. "What is remarkable to me is that customers would even buy live merchandise online and let it be shipped to them."

As online shopping expands to include more "live" products, he added, the need for policies that guarantee product authenticity and buyer protection increases.

Carrie Ardito, a research associate in Forrester Research's e-commerce group, said selling live pets involves bigger risks for merchants than selling other perishable goods.

If Webvan ships a rotten apple to a customer, for example, the customer might be upset but can always ask for a refund. However, it's a far different story if a pet store customer receives a dead animal in the mail.

"I think the pet retailers that have decided to do this are taking a big risk with their customers, especially if there are children involved, which there usually are," she said.