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Shopping.com under fire

The Net company has received hundreds of customer complaints over purchase delays and lack of company response in recent weeks.

Shopping.com has received hundreds of customer complaints over purchase delays and lack of company response in recent weeks, the latest in a series of troubles to have beset the young Internet company.

Postings on public newsgroups complain of constant busy signals on Shopping.com's customer service number and a failure to respond to email messages. In addition, when products are not shipped because they are out of stock, customers say Shopping.com has been slow to contact their credit card companies.

"While Shopping.com shows a very thorough customer support infrastructure, they have not responded to any of my dozen of emails requesting information on my orders," customer Filippo Morelli said, adding that he has not been able to get through to the customer service phone line either. "I've gotten nothing, but been billed for everything."

Morelli added he has filed a complaint with the Better Business Bureau and the California State Attorney General's Office with allegations of consumer fraud. He had ordered about $1,500 in computer products October 13 but has not received any products.

Shopping.com executives acknowledge that they have encountered such trouble as slow customer response, late deliveries, and difficulties in fulfilling orders in the last month. But chief executive John Markley played down the problems, saying, "We had a blip here but we'll recover."

Shopping.com is in the final process of securing a "significant investment" by a Fortune 200 company, Markley said, a deal that will give the company much-needed resources to address customer concerns. He declined to name the company but said an announcement was only "a week away."

The company encountered a surge in its sales volume about 30 to 40 days ago, after it was added to an Internet site, Markley said. "We had expected our orders to increase, but we had no idea how much it would increase," he said, adding that the company's business grew tenfold to $300,000 in daily orders.

But Shopping.com's problems date earlier than the last four weeks. Since January, customers have filed 56 complaints against the company with the Better Business Bureau of the Southland, a business watchdog organization covering Los Angeles, Orange, Riverside, and San Bernadino counties in Southern California.

"That's a pretty significant number," said Gary Almond, general manager of the Southern California BBB. Almond, who noted most of the complaints are similar to those posted on newsgroups, said people who make purchases online tend to be more technologically sophisticated and "expect a higher level of service since it's a technology company."

The complaints are not the first time Shopping.com has encountered public controversy since its founding in 1996. Last September, an arbitration panel ordered the company's underwriters had to pay out $400,000 over allegations of inflating its stock price.

The Securities and Exchange Commission, meanwhile, is investigating the company and its underwriters in connection with the stock transactions, according to a Shopping.com SEC filing. The SEC has not alleged any violations, the filing stated, and the company is cooperating with the inquiry.

Addressing the recent customer concerns, Shopping.com chairman Frank Denny said: "The amount of complaints we've received is minimal compared to any other retailer that does the same amount of [dollar] transactions as us. But I would say that in the last 30 days the complaints have increased."

Two Web sites, Excite and CNET's Shopper.com, have removed Shopping.com from their lists of e-commerce sites to visit. (CNET: The Computer Network publishes News.com.)

"It was not this complaint on its own that prompted us to take down Shopping.com. It was cumulative feedback and strategic decisions about the site," an Excite spokeswoman said.

CNET spokeswoman Karen Wood said Shopping.com "understood that there were some things that they needed to address, and we took them down with their cooperation until those things could be fixed."

Under the company's shipping and handling guidelines, Shopping.com advises that customers allow seven to ten days for delivery. It further notes that emails sent during non-business hours will be answered within 24 hours of the next business day. No time limit is given for emails sent during business hours.

Shopping.com customer Robert Martineau, who placed an order for a video cassette recorder on October 6, had $170.90 charged to his account five days later. He sent the company three emails on October 8, 13, and 14 to request a confirmation of the order and a tracking number.

Although he did not receive a response, CEO Markley sent an email October 15 stating orders are being delayed by an additional ten days "due to a tremendous influx in order volume."

"We guarantee that you will receive your merchandise and apologize for any inconvenience," Markley's email stated. But six days later, a customer service representative sent an email to Martineau indicating the product won't be sent.

"Despite our best efforts, we have been unable to obtain the merchandise and do not expect it to be available in the immediate future," according to the representative's email.

Since receiving that notice October 21, Martineau said Shopping.com has yet to credit back his order to his credit card company. He said he contacted his credit card company last week to dispute the charge.

Pat DeMicco, senior vice president of merchandising, said company policy calls for billing a customer only after the product has been shipped. The company, however, will ask the credit card company to reserve or set aside funds needed to pay for the customer's product until it has been shipped. After the product is shipped, the transaction is executed, he said.

"When vendors notify us that they don't have the product, we notify the credit card company the same day and send an email to the customer within 24 hours," DeMicco said. He added it may take the credit card company several days or longer to release the hold on the funds that were set aside.

Shopping.com's own credit has been strained with its suppliers as a result of the recent spike in business, Markley said. The company has been operating on limited capital resources for the past six months, which has hurt its ability to pay down its credit line as fast as it ran it up with its suppliers. And the company has not been able to turn around their customers' payments fast enough to pay down its credit line with suppliers, he added.

Shopping.com posted a net loss of nearly $12.8 million for a six-month period ending July 31, on net sales of nearly $2 million according to its most recent SEC quarterly filing. The company noted that its roughly $1 million in cash, working capital, commitments for a "convertible debenture"--an unsecured IOU that later converts to stock--would sustain their current operations through their fiscal third quarter that ended October 31. It stated it may need to find other financing to sustain its operations through January 31.

Denny declined to comment on the company's current financial state, other than to say, "We're a young company and see the ability to generate sales...We'll be here next week and the weeks after."