Online Retailer Angers Customers; More to Come, Analysts Say

Former customers of Inc. are boycotting the online computer and entertainment goods retailer in what analysts say is an early sign of what might be ahead for Net firms whose service falls short of consumer demands.

Customers complained that billed their credit cards for orders that weren't delivered; and though the company eventually refunded the charges, it took weeks. The problem originated when the firm's distributor, Ingram Micro Inc., ran out of stock on some of the computer and software products.

As a result, at least two Web sites have sprung to unify former patrons of, Aliso Viejo, CA, and give out information on how to take legal action against the company.

“The best thing that could happen at is to replace the CEO and put someone in there with a clue about day-to-day business and how the customer wants it to happen,” said John Corey, the owner of a pet products business in upstate New York. “We listen to our customers and it pays; but then again, we do not take their money before we can ship the product.”

Customer dissatisfaction with the company, however, is not universal. Its low prices, in particular, draw plenty of repeat business. And if analysts' forecasts are right, won't be the last online reseller to face consumer wrath this year. Just as most industry watchers agree that 1998 was the year e-commerce hit its stride, some have already dubbed 1999 the “year of customer dissatisfaction.”

Ken Allard, director of the site operations strategies group at Jupiter Communications, New York, said e-commerce fulfillment providers indicate to him that some online merchants fail to fill more than half their orders. He's heard of failure rates as high as 20 percent from vendors themselves.

“I think it's atrocious. I think a lot of sites have decided that it's more important to get to market fast than it is to get to market fast with a solution that actually works,” Allard said.

He estimates poor customer service will kill off between 10 percent and 20 percent of brand-name commerce sites over the next year, adding that he expects “at least one high-visibility failure.” The majority of commerce sites lack real-time inventory management, which leads to shipment failures. Automating a virtual store's inventory management is not easy, requiring a complicated systems integration, Allard said.

But failure to do so can lead to problems like those faced by Marty Beam, a computer graphics designer in Augusta, GA. Beam said it took six weeks to refund him for a printer he never received, and only after he went out of his way to investigate the shipment with the United Parcel Service.

“If you get your stuff, with their [low] pricing, you can't beat it. But that's the whole problem. If you don't get it, it doesn't matter what it costs,” Beam said. He said he won't deal with the company again.

For, the boycott comes at a particularly bad time. The company is on the verge of an initial public stock offering, and in March it set out under the tenure of new CEO Gregory Hawkins, who joined the company from Ingram Micro, Santa Ana, CA.

Poor customer satisfaction is unlikely to slow the thundering momentum of the Net marketing industry as a whole, said Jupiter's Allard. Instead, companies that keep an eye on their customers' needs might find an opportunity to pull away from their competition.

“Those companies that do it the right way and focus on customer service and giving customers great product, they've got a great ability to differentiate themselves right now,” he said.

A spokeswoman was unable to comment on the boycott, but said she expects the company to file with the Securities and Exchange Commission “in the near future.”

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