For a Personal Touch, Some Sites Add Real People

Electronic commerce companies have spent millions trying to make their sites more “personal,” with technology that allows them to customize their product offerings to a particular shopper’s needs, and software that automatically responds to customer inquiries by e-mail.

Now those sites are trying a novel approach to personalization: real people.

Partly in response to the customer service blunders of last holiday season, and partly in anticipation of another Internet shopping blitz this winter, E-commerce sites are starting to use live chats and Internet telephony applications to answer questions, solve problems and, ideally, sell customers more things. In doing so, these sites are further crushing the myth that E-commerce companies can get by without investing in a real, live customer support team.

“Many players are looking at this,” said Judy Neuman, vice president for interactive media at Eddie Bauer, and the secretary of, an industry trade group. “It will become the cost of entry going forward.”
In addition to Eddie Bauer, which is owned by Spiegel Inc., companies like, Etoys, CBS Sportsline,, Lands’ End, Hewlett-Packard and, among others, indicated they were implementing live customer service. In Eddie Bauer’s case, Ms. Neuman said, customers will be able to click on a button and communicate with a customer service representative via a one-on-one, text-based chat. If that doesn’t suffice, customers will be able to speak to a representative through their computer, using Internet telephony technology.

“Especially as the Internet moves into the mainstream, consumers are looking for that comfort zone that ties into the world they’re used to,” said Chris McCann, senior vice president of 1-800-Flowers, which is implementing an Internet telephony package to provide customer service. “Once users get used to shopping on the site, they won’t use it as much, but we like to think of these things as training wheels for new users.”

Ms. Neuman declined to name the customer service vendor Eddie Bauer will use or the cost of the system — although she did say the cost was “substantial” and that the service would be available starting in October. To handle the rush of inquiries during the holidays, Ms. Neuman said the company would bolster its customer service staff from roughly 12 people to a maximum of 60.

According to Ken Allard, an analyst with Jupiter Communications, companies that sell customer service applications have proliferated in recent months. Some, like Webline, offer a range of products, from software that sends out automated responses to e-mail inquiries to Internet telephony packages and chat software. Webline’s customers include Cisco Systems, Hewlett-Packard, and GTE, among others, and its comprehensive customer service system costs roughly $1,500 per representative to implement.

Other companies address only part of the customer service equation. For instance, Liveperson offers chat-based customer service for roughly $250 a month per representative; its system is utilized by CBS Sportsline’s online golf store, among other sites. Meanwhile, Net2phone Inc., a unit of the IDT Corp. offers an Internet telephony-based customer support package, which is currently being tested by 1-800-Flowers. The system costs between $500 and $5,000 a year per representative, depending on the size of the customer service team.

Industry analysts and executives said the trend toward improved customer service on line began with a chorus of complaints after last year’s holiday shopping season, when many sites were caught off guard by the tremendous influx of shoppers. Those sites often failed to deliver products on time, then failed to respond promptly to customers’ e-mails. Meanwhile, because many E-commerce companies were founded on the assumption that customer service should be fully automated, the sites frequently lacked phone-based support systems.

In addition to losing repeat customers, executives say feeble customer service systems have resulted in customers not spending money in the first place. In the last six months, several studies have indicated that between 33 and 66 percent of customers bail out of transactions before they are completed. With more customer service options available to steer consumers through the purchase, executives hope to convert shoppers into buyers at a much higher rate.

E-commerce sites also say the average amount of an order is typically higher when customer service representatives assist in sales because they can “upsell” additional items to potential customers. If that bears out, the cost of additional staffing suddenly looks like a bargain, according to Peter Baltaxe, president of

“Say a customer service rep converts five shoppers to a sale every hour through a chat,” said Baltaxe, who plans to implement such a service in the coming months. “Assuming a $100 gross margin revenue, and the fact that we pay a customer service rep between $10 and $15 an hour, the return seems to be a no-brainer.”

Even with the more costly customer service packages, however, the payoff is fast, according to Lou Zambello, senior vice president for operations at Etoys. Zambello said the company planned to implement live customer service support, which will include both a chat component and an Internet telephony package. While declining to cite the company’s planned customer service expenditure, he said a full suite of customer service applications could cost retailers “a few million, when all is said and done; but it will still pay for itself pretty quickly.”

Zambello added that Internet retailers can afford to pay for such services because they spend comparatively little on routine transactions, which are handled electronically. “It then makes sense to spend more on the tougher transactions, which are the ones where you’ll win the most loyal customers,” he said.

As for the idea that live customer service represents an unexpected and unwanted addition to the E-commerce business model, Baltaxe of 911Gifts said the practice fitted a larger trend.

“People look at Amazon buying warehouses and realize that it does make sense to have a warehouse, and that the low-overhead, virtual, personless business model doesn’t really exist,” he said. “It’s the same with this. We still have to talk to customers. It’s another piece of the model where people are starting to add more overhead costs. Internet businesses still have tremendous advantages, but I think it’s turning out to be a little different than some people expected.”

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