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Customer disservice: E-tailers dodge calls to cut costs

Many Net companies take a hands-off approach to the customer service, deliberately leaving phone numbers off sites to avoid the cost and hassle of staffing call centers.


Many e-tailers dodge phone calls to cut costs

By Stefanie Olsen
Staff Writer, CNET
September 14, 2000, 8:25 a.m. PT

Yobie Benjamin needed to send a friend some money. So, like many Internet executives bullish about online commerce, he thought he'd try an unfamiliar yet promising new Web service to do it.

Things started out well enough, with confirmation that his $700 had been sent through, a Western Union-like online company. But then he was told there was an error: He could send only $500 at a time. So he split up the payments and tried again.

Customer service comes at a price More than a week later, his friend still had not received any money. After finding no phone numbers on PayMe's Web site, Benjamin sent an email about the missing money. The company replied, without explanation, that the money had been credited back to Benjamin's account--which, it turned out, wasn't true. After another round of emails, PayMe finally sent a number that Benjamin could call.

Then, nobody answered the phone.

"It was like a black hole," Benjamin said. "This kind of bad customer service stymies the movement of commerce on the Web."

Not being able to reach a human being is a frequent roadblock for shoppers on the Information Superhighway. However quickly the Internet delivers information, it's still only as fast as the people behind a company when it comes to such time-sensitive questions as banking mistakes, undelivered orders or simply connecting to the Web. But many Internet companies take a hands-off approach to the phone, deliberately leaving phone numbers off their Web sites to avoid the cost and hassle of staffing call centers.

Such shortsightedness exposes a dirty little secret of e-commerce: Other than using the Web as their primary storefront, many online companies are no different from their old-fashioned brick-and-mortar counterparts--but e-tailers often pay more attention to marketing and going public than they do to the mundane basics of running a business. Many dot-coms also actively avoid the considerable investment necessary to build an adequate customer service center to answer phones and emails from disgruntled customers.

"Although everybody talks about how the customer is in control, the reality is that they're not in control," said Kelly Mooney, managing director of intelligence at Resource Marketing, a Columbus, Ohio-based technology marketing company. "Companies still want to control the experience."

E-tailers that cut corners in customer service can end up paying a far greater price in other ways. Online retailers lost a combined $6.1 billion last year as a result of poor customer service, according to a recent report from Datamonitor, a market research company.

By contrast, many old-economy companies that initially stumbled in setting up shop on the Web have largely mastered the basics of customer service. Catalog companies such as Lands' End have been particularly successful in making the transition online, posing a substantial threat to the online companies that had boasted about putting them out of business not long ago.

And making up for lost ground is no simple task. For example, offers a cautionary tale in online retail, having laid off its customer service staff earlier this year in a struggle to cut costs. The company now uses a third-party call-center staff in Canada to take messages, which it says the company will return within one to seven days.

"But if customers are in a critical buying mode, then that sale would be lost," said Jeff Quinn, an analyst at research company Gomez. "And this could potentially hurt sales."

Even the shopping areas of some of the most heavily trafficked sites on the Web, including major portals like Yahoo, don't give visitors an easy way to call the company with questions. Instead, they direct customers to the individual stores housed in their retail categories or give email addresses and feedback forms to fill out for customer service.

Only 34 percent of major "brand" sites, such as Coca-Cola's, offer phone numbers, according to industry analysis firm Jupiter Communications. Most shopping sites offer customer service numbers, but prompt and adequate responses to those who call is anything but guaranteed. Gomez, which tests a wide range of e-commerce sites on customer service, found that only 35 percent answer the phone within 3 minutes or reply to an email within 24 hours.

"You can't automate away customer service," said Steve Salter, project director for the Better Business Bureau Online's reliability program, which has roughly 5,800 participating companies. "You've got to have a person at the other end of the line that can deal with real problems."

Since January, the Federal Trade Commission has recorded more than 900 grievances--80 percent of the total Net-related claims--from consumers who couldn't reach an Internet business or had an extremely difficult time in the process.

Holiday pressure
Though many sites fell short of customer expectations last year, this holiday will be a true test of survival for those online retailers that weren't sucked up in the stock market tornado earlier this year. Even tightly knit departments handling customer service can easily unravel under buying-season pressure.

Last holiday season, the volume of customer calls crippled about 23 percent of commerce sites, Jupiter found. The FTC fined several Web sites including and CDNow last month for, in essence, poor customer service during the 1999 holiday.

If, Kmart's Internet unit, is any measure of the future, the industry may need to prepare for a long, cold winter. In June, before BlueLight launched its new site, Resource Marketing's Mooney said she tried to call the company from a phone number published online, but it was disconnected. After customer service emailed her a second number, she said that number didn't work. When she finally reached an agent, she said the person was indifferent to her problems.

A BlueLight representative acknowledged problems with customer service before the new site launched but said they have been resolved.

Companies say they are better prepared this year. Of the online stores surveyed by Resource Marketing, 82 percent had phone representatives that could guide customers through their site in a knowledgeable fashion--a big change from six months earlier, Mooney said.

Sites known for strong customer service by phone include, GoodHome, Dell Computer, Costco Online, and, which was one of the first companies to offer a toll-free number accessible 24 hours a day. Catalog companies online also have phone service down pat because of their already polished infrastructures.

But it's costly: Analysts and executives estimate that building a call center can cost between $150,000 and $250,000, not including hiring a staff. "It's expensive. That's why people don't do it," said David Daniels, an analyst at Jupiter.

Expenses can range anywhere from $4 to $50 per call, depending on the business. Financial services sites, for example, may pay near the high end because it's most likely a more technical call. Someone reading commonly asked questions from a script may cost a company between $4 and $6 per call.

The Web-only version of that service would cost about a nickel or a dime, according to Mark Pierce, an executive partner at MarchFirst, an Internet consulting company that works with clients such as American Airlines, Excite@Home, Apple Computer, Toyota and Williams-Sonoma.

Is anybody home?
Even when there is a toll-free number, the person answering isn't always ready to field questions.

Financial sites are big culprits here. In a survey of online banking Web sites, most had a phone contact, but at least half the numbers weren't valid or led to a person who couldn't help with the Web site, according to Gomez.

"If customer support works, it's a win-win and they've engendered loyalty with their customers," said Ray Kopczynski of, an Alameda, Calif., computer maker and Internet service provider. "If you have a bad experience with support it can destroy good will, and that gets passed on."

Some sites have focused their attention on giving customers the tools to help themselves, reserving phone agents for more complicated issues. American Express lets card members pull up past statements online if they ever have a billing problem.

Hiring specialists outside the company to provide customer support is also an attractive alternative to many online businesses. Analysts say this can reduce hiring costs by as much as 60 percent.

Excite@Home, Compaq Computer and General Electric use to handle live chat, self-help and phone service. People whose problems can't be solved online are funneled to experts who then already know, before even picking up the phone, what troubleshooting steps a customer has taken. "We eliminate the first 15 to 20 minutes of the support conversation through our software," said Gary Zilk, a product manager at

It is efforts like this that will be crucial to erase the kind of aggravation suffered by Benjamin in trying to send $700 through PayMe, which finally got the money to his friend more than a month later. "I could have made a road trip in less time," Benjamin said.

Next time, he's using Western Union. 

Go to: Getting help is easy--when you have money 

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