Xmas boom or bust?

Don't mention Christmas to Steve Bennett of Jungle.com.

Don't mention Christmas to Steve Bennett of Jungle.com.

Last year, Steve Bennett's fledgling e-tail site, Jungle.com, was gearing up for Britain's first "e-Xmas" - the first year that a significant amount of Christmas sales would be conducted online.

Gearing up, as Jungle.com understood the phrase, meant conducting a massive advertising campaign and pumping millions of pounds into catchy TV and newspaper advertising that would have the nation stampeding, as one, to their PCs to place an order for a cut-price CD or computer game.

At the height of the rush, Jungle's systems ground to a halt, its IT infrastructure unable to cope with the amount of traffic flooding its network and swamping its servers.

In retrospect, Bennett reflected that maybe he should have spent less money on advertising, and more on bandwidth and processing power.

He was not alone. Last year's e-Xmas was a massive disappointment to customers and retailers alike. Many customer orders didn't turn up until weeks after Christmas, which is no use to anyone. A lot of people might decide they don't want the goods by this stage.

And they were the lucky ones. Others never got the goods. They at least had the relatively simple transaction of cancelling their order and getting a refund. The really unlucky people were those who had goods delivered, but which were either the wrong products, the wrong size or to the wrong people - sometimes all three.

These ones spent January on the phone to "Hapless", in customer services, trying to get their goods changed or their money refunded. Invariably, Hapless would have no real information about how the orders were progressing, since the original order was probably in a pile of faxes somewhere and the invoice and dispatch systems were separate entities. As so often happens in these situations, the customer turns hostile and Hapless in customer services tells them anything to get them off the phone.

Many customers had a very unpleasant experience of buying online last year and needless to say the chances of repeat business are slim, according to Nigel Montgomery, research director at AMR Research. "Everyone's playing down e-Xmas this year, because last year was such a shambles. Fulfilment was terrible - returns even worse. This year, if companies want to hold onto their customers, which is a lot cheaper than advertising for new ones, they will need to ramp up the service they offer," he says.

As so often happens, the pioneers ended up getting arrows in their backs. There are a number of salutary lessons to be learnt from all this but, amazingly, new companies seem to be intent on repeating the sins of the early adopters.

According to research carried out by CRM analyst Hewson Consulting, in the business-to-consumer (B2C) e-commerce sector, customer service levels aren't getting any better.

"As the more established companies learn from their mistakes, the newer entrants come and repeat them," says Ryan Rosenberg, director for EMEA at eGain, the services company that commissioned the research. At the moment, less than 1% of transactions are carried out online, according to Forrester Research.

Anyone who thinks they can learn from their mistakes will find there's a massive range of mistakes that can be made before you emerge as a mature business. The biggest failing is the lack of integration with traditional ordering systems.

"Businesses think they are an e-tail outfit because they've got a flashy front end. There are lots of Web companies that can build a whizzy shop front, but they don't do anything to address the complexity of integrating the back-end systems," points out Mark Travis, director of Silver Bear Technologies, a start-up dedicated to helping the second wave of Web companies tighten up their ordering systems.

"If you don't get it right first time and only build a shop front, you'll end up having to spend all the money again in completely rewriting your system," says Travis.

Tesco, for example, was guilty of late delivery and missing orders. This was because initially it used a Web shop front to attract orders, which then had to be manually keyed into the systems for despatch and invoicing. The tell-tale sign of a company that is operating under a technical facade is a fax number quoted for order taking.

Integrating a Web front with a back-end system is a mammoth task which cannot be done justice here. There are companies, such as Web Methods, which produce specialised software that make adapters for business systems - software that forms a bridge between the back and front-end. Information passed into an order-taking front-end using Broadvision software, for example, can be translated and passed on to the back-end CICS system which keeps an inventory on a mainframe.

Not every company labours under the handicap of having a legacy back end system to bring up to date with the new system of order-taking.

Jungle.com, for example, is a start-up entirely dedicated to online sales. Its problem stemmed from having no idea what sort of customer response it would attract. This is something new e-tail companies should be particularly wary of.

But how do you predict what volumes of business you can expect when this is uncharted territory?

The trick is to get a much clearer idea of who you are selling to, says Travis. Personalisation engines are the key to unlocking this data. Having masterminded your low-key launch, these will glean information about the types of customers you are selling to, what their preferences are and what products they are likely to order in future. This will then alert you to the necessary actions required to prepare for when the volume of business is ramped up by a more comprehensive marketing campaign.

"You need to understand the type of business you are and the type of market you are attracting before you put your business to its biggest test," points out Travers. But sometimes the customers you attract don't fit the pattern you expected.

Personalisation engines carry out another vital function. In the US, which experienced its first e-Xmas a year ahead of the UK, communication with customers while they are online is increasingly becoming a priority. The reason few people are buying online is that the fear of committing to a bad decision outweighs any cost savings that may be possible.

These fears aren't assuaged by the impersonal shop-front presented online. Personalisation engines, such as the Ask Yada feature that eGain produced for George 'Star Wars' Lucas's Lucas Arts Web Store, enable questions to be answered by an intelligent system.

Many companies are finding that this is not enough. There are limits to the ability of an intelligent system to satisfy the vast spectrum of questions that humans would think up. Systems need to be humanised too. One of the ways of doing this is a "text chat" feature so that, should you be wavering in your decision to buy a digital camera, you could type in a question on screen and have it immediately answered by a human operator working for the e-tail company.

"Text chat should be standard for most companies. We should do everything to humanise the buying experience," says Rosenberg.

"Millions of people are getting to the point where they buy goods and, before they place their order, they lose their nerve. Partly that's because there's nobody to reassure them," Rosenburg continues There should be a breadth of media over which you talk to customers. Allow your customers to contact your support staff in whichever media they like, be it by fax, e-mail or voice. All these numbers should be immediately available too. There's one thing worse than being forced to log out of a system to send an e-mail, and that's being forced off-line to make a phone call. The lessons of proper customer relationship management are that all channels of communication need to be kept open.

There's also the problem that customers have no idea whether they'll ever see the goods they are paying for.

One of the lessons that Jungle.com has learnt is that it now offers information about when customers can expect delivery. If the goods are out of stock, a message at least informs the buyer about this situation and gives them a rough idea of how long they may have to wait for the goods. This is more than many companies do, but it still doesn't go far enough for Rosenberg.

"If customers are going to have to wait for a product, they should at least be told exactly how long they're going to have to wait. A lot of them will want it anyway so they'll put up with two weeks if necessary," points out Rosenberg.

Managing customer's expectations is a good way of ensuring your support line isn't over-worked unnecessarily.

A good way of giving your e-business the flexibility to cope with changing demand is to outsource the hosting and management of the site. Then, when a TV ad campaign generates a massive upsurge in callers in a short time, your site can call on the necessary bandwidth to cope. When demand returns to normal levels, you are not lumbered with a massive datacomms pipe that far exceeds your capacity for 99.9% of the time.

A B2C site will struggle to establish brand values, even if it is a spin-off of a well-known brand. Consequently, the rationale of most B2C sites is price competition. This will only really be achieved if your site is as automated as it can possibly be.

The few brand messages you can express over an online relationship are reliability and communication. For your site to cope with this year's Xmas rush, you will need a combination of all of these.

Xmas tips for B2C Sites

  • Don't bother with large-scale e-commerce unless it's fully automated. You're selling on price, so you can't afford any manpower over heads.
  • Get your site fully-integrated first time round. You can start off with a Web shop-front and manual keying-in of invoices and goods for despatch but this is a false economy. At some stage you'll have to integrate the systems, so why not pay for it once?
  • Manage expectations. If the product is not in stock, tell people how long they should expect to wait. It'll save your support staff taking endless calls.
  • Don't launch at Xmas. unless your site has had a few trial runs and been tested.
  • If you're expecting volatile demand, get your site hosted by an ISP or ASP. That way bandwidth and server upgrades are more readily available.
  • Communicate. Most lost sales derive from loss of nerve because the customer couldn't ask a question. Intelligent automated responses are a start; text chat is more humanly reassuring.
  • Allow your customers to reach you in whatever media they want to. Phone, fax and e-mail options should be readily available and easy to find on the site.

  • Read more on IT for small and medium-sized enterprises (SME)

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