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Customer Service: Achilles' Heel of Web Businesses

In an arena where profit margins are razor-thin, taking care of the buyer is often overlooked. Ironically, the tiniest online merchants often provide the best support.


It took only a few minutes to order online, but within a few hours after the sleek, high-powered Dell personal computer arrived at Allen Dorfman's home, the excitement of his $2,000 purchase was already wearing thin.

The irritation began when he heard a strange rasping from his storage drive. It grew when Dell's support staff suggested that he take the machine apart himself to diagnose the noise--despite the company's on-site service warranty.

He started to panic after more than 20 hours of contradictory advice from at least a dozen service reps resulted in the replacement of the defective drive with another defective drive.

"I've never run into so much incompetence in a large organization, or such a rigid, unyielding attitude," said Dorfman, who has compiled 50 pages of e-mails for a possible arbitration proceeding. As a customer-service representative for a Burbank printing company, the experience irked him professionally almost as much as it enraged him as a consumer.

After weeks of frustration, Dorfman gave up and asked for his money back. But the 30-day grace period had elapsed and he's stuck with an apparently unreliable PC from what is widely regarded as one of the Web's most consumer-friendly retailers.

Even as online stores expect record sales this holiday season, such experiences are one reason why 79% of online transactions are abandoned midstream--negating more than $6 billion in potential sales last year, according to Datamonitor, a research group.

"The online retailers really blew it," said Bob Chatham, an analyst with Forrester Research. "They had a clean slate to start from in establishing these kinds of services," but customer-care stumbles have damaged Web merchants' credibility.

Service was so bad last holiday season that seven large Web stores, including CDNow, and, agreed to pay $1.5 million in civil penalties for misleading customers about shipping delays.

Experts say that service gradually is improving as chastened online merchants expand their customer-service departments. But they have a long way to go. Among the top 50 consumer electronics e-tailers, for example, none received excellent or good ratings in recent testing by the research firm GartnerGroup.

Many merchants face a make-or-break test this holiday season amid a crisis of confidence for the online retail industry.

Investors have hammered firms whose business plans suggest scant hope for profits in the foreseeable future, forcing scores of sizable "dot-com" stores out of business. Many cash-strapped survivors are cutting corners on costly customer services.

Ironically, the tiniest Web merchants often provide the best service.

TranscendPC in Manhattan, Kan., is one of a handful of e-tailers to receive a perfect 10 rating from, a service that polls online customers and aggregates their responses. TranscendPC sells only a few dozen PCs a week--often at higher prices than Dell's--but virtually every customer goes away satisfied.

Nate Meile, a TranscendPC service rep, spends up to four hours on a single call, much of it "talking about something interesting, like football," he said. "It's about building that one-to-one relationship with everyone."

Darren Bonawitz, the firm's owner, once spent hours helping a customer set up a fully loaded Windows PC; the buyer then wanted to return the perfectly operating unit because it failed to run software designed for the Apple Macintosh. Bonawitz shrugged and took the system back, eating the cost. He figures his reputation was more important.

"My goal is to out-Nordstrom Nordstrom," said Kim Michaux, owner of One of a Kind, a genuine mom-and-pop operation she runs with her husband out of their home in Roanoke, Va. Michaux buys surplus inventory of past-season designer clothes and sells at steep discounts on her site, using her three kids as fashion models.

As the only full-time employee, she can ensure customer-service quality--judged near flawless by Bizrate. She personally responds to toll-free phone support calls, answers e-mails within an hour, and offers live, online text-chat for queries.

"We're scrambling and staying up until 1 in the morning, but customers don't see that," she said.

The larger Web-based businesses often take the opposite approach--discouraging support calls by burying toll-free numbers under layer upon layer of Web pages, pushing customers to electronic support. But responses to online chat queries are often ponderously slow, and e-mail responses can take days.

"There's this fantasy that technology will replace customer service," said Jeffrey Tarter, editor of the industry newsletter Soft-Letter. "When you finally get frustrated enough to talk to a real person, you want a real person--not a chat group."

And when you do get through on the phone, the live person on the other end may be unhelpful or lack essential knowledge, as Dorfman learned.

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