Sunday, December 17, 2000

Online Holiday Shopping Sees Dramatic Improvement
Ninety-two percent of attempted holiday purchases over the Internet are successful this season, according to results of Andersen Consulting’s second annual U.S. e-fulfillment study. Also, the study shows that the service level gaps that previously existed between eTailers, traditional retailers and catalogers are either rapidly closing, or have completely closed.

As a group, across almost every measure, eTailers and retailers have made buying over the Internet easier, quicker and more reliable this year, according to the study results. This compares with last year’s eFulfillment study results which showed that upwards of 25 percent of attempted on-line holiday purchases were unsuccessful.

“This study, conducted for the first time during the 1999 holiday season and again in 2000, shows that online holiday purchases are a better option for shoppers this season compared to last season,” said Robert Mann, associate partner, Andersen Consulting. “The study suggests that online U.S. eTailers learned from their mistakes last year, developed strategies to address e-fulfillment and supply chain issues and more importantly, improved their execution, making great improvements that consumers will value.”

This year’s study attempted to place 563 orders at 97 different Web sites. To conduct the study, Andersen Consulting’s Supply Chain group provided 15 of its professionals with a credit card number, asking them to place almost 600 orders online. All orders, ranging from books and toys to clothing, were placed over a 7-day period, at different times of the day and delivered to either Atlanta, Chicago or San Francisco.

Results of the study revealed that participants were able to complete 517 of the 563 orders placed. While that means 8 percent of online purchase attempts still result in failure, it is much improved over the 25 percent failure rate reported last year. Reasons for the failures ranged from some sites could not take orders, crashed, were blocked, were under construction or were otherwise inaccessible.

The 1999 study found that eTailers’ Web Sites provided a higher service level than those of traditional Retailers or Catalog companies. This year’s study, however, showed that the Retailers and Catalog companies are closing, or have completely closed, the service level gaps found in last year’s study. For example:

Retailers’ sites still take longer to place orders, compared to eTailers, but the gap has closed from three minutes last year to only a minute and a half this year, arguably an insignificant amount of time to consumers.

Last year eTailers did a better job than Retailers of telling consumers when products were in-stock, by about five percentage points. This year Retailers are actually one point ahead of eTailers. Both of them are about 95 percent reliable in actually having the stock they promise.

Also, customer service measurements improved significantly across the board:

25 percent less time spent shopping (from 12 minutes down to 9)

17 percent more sites provide an expected delivery date (47 percent vs. 40 percent last year)

23 percent more sites provide an email order confirmation (82 percent vs. 67 percent last year)

24 percent more sites provide a shipment confirmation (26 percent vs. 21 percent last year). This number is expected to go up as more items are shipped through the course of the remainder of the study

“E-retailers are being very careful to make sure consumers are more aware of deadlines, even at the risk of losing a sale. They want to be sure they can guarantee delivery rather than try to push the date,” said Mann. “For example, the majority of Web sites surveyed in the 2000 study indicated that lead times for standard shipment modes are averaging nearly ten days compared to claims of about five days last year. Web sites are reminding consumers that Christmas is on a Monday this year, which may increase the need for late shoppers to pay extra for express shipping.”

Part of the study differences are attributed to the churn in the marketplace. Established Retailers and Catalog companies have made widely reported investments in infrastructure while eTailers have faced significant stock market pressures that have limited investment opportunities. As evidence, six of last year’s participants were unable to be included in this year’s study because either they now operate as portals, they were not functional during several rounds of pre-qualification testing or they have gone out of business entirely. Additionally, at least seven of the participants in both studies now operate under a different name or are run by a different company altogether.

Another interesting finding is that roughly 40 percent of sites are still charging sales tax, despite the continued congressional moratorium on taxing Internet sales. It is noted that Retailers lead the way on this front, with over 50 percent of sites charging a tax, while less than a fourth of eTailers are doing so.

“Ultimately, the success of the B2C model is a function of the reliability and economy of product fulfillment. Successful eTailing depends not only on attracting demand to the Web site, but on a brand’s ability to respond to this demand and create a consumer experience that drives repeat business. In short, retailers must deliver on their promises,” said Jeff Luker, North American managing partner, Andersen Consulting Retail practice.

Mann concludes, “Even though eTailers have made great strides in 2000 they still have work to do to improve the customer experience and better serve the procrastinator. Placing orders ten days before Christmas leaves a lot of last minute shoppers at the door. Consumers should shop as early as possible, pay close attention to delivery dates and be prepared to pay extra for shipping if they wait too long.”

About The Study
Companies were selected for the study by combining last year’s list with information from a variety of industry associations naming the top Internet retailers. Orders were planned for particular sites, products, order placement times of day, and delivery destination. All orders were placed between November 27 and December 4, 2000. In total, over 1,000 products were purchased on almost 600 orders, amounting to over $25,000 of merchandise. Orders are being delivered to Atlanta, Chicago, and San Francisco where they are logged and checked for accuracy. Complete information on the actual receipts will be available later this month. Roughly $15,000 of the merchandise will be donated to children’s charities, while the remaining items will be sent back in order to gauge companies’ performance on returns. Results for the returns are expected to be available in January 2001.

News Tidbits (appears every day on front page)
- What will life online be like with George W. Bush as President of the United States? According to an article on CNN, "Bush has espoused business-friendly views on technology issues such as online privacy and e-commerce retail sales tax collection. In the words of one senior adviser, Bush 'respects the power of the marketplace' and is 'very reluctant to be prematurely intrusive in high-technology areas.' As a candidate, Bush swore an ambiguous fealty to personal privacy and ducked the question of whether a new broad-based Internet privacy law is needed."

- Are eCommerce companies charging sales tax when they don't have to? According to today's top news story on the success of holiday shopping, Andersen Consulting discovered, "Roughly 40 percent of sites are still charging sales tax, despite the continued congressional moratorium on taxing Internet sales. It is noted that Retailers lead the way on this front, with over 50 percent of sites charging a tax, while less than a fourth of eTailers are doing so."