FTC Warns eTailers About Over Promising
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The Federal Trade Commission has issued a holiday warning to etailers: Don't make promises you can't keep.
Following last year's deluge of consumer complaints, the FTC sent letters to more than 100 e-businesses cautioning them not to get carried away with promises of fast delivery this holiday season.
"The number one cause of shopping dissatisfaction last year was late delivery," stated Daniel Greenberg, vice president of marketing, Active Research.
According to a study conducted by the company, which tracks purchasing behavior, there is a reduction in people returning to the Web to make purchases this year. "Six percent of the people we interviewed said they would not shop online this year because of bad experiences last year," Greenberg said. "About 15 percent of the deliveries were reported as arriving late."
False sales pitches hurt the vendor and the Web community as a whole, points out Steve Banker, ARC Advisory Group's director of supply chain solutions. "B2C retailing operates under an available-to-promise (ATP) scenario," he said. "For the online retailer, it is critical to have real-time data on what is in stock.
"If the goods are in the distribution center, they are considered available to promise. Under ATP two things are necessary: a strong warehouse management system with real-time inventory information and the integration of that system with the online ordering system. It is amazing how few online retailers have achieved this."
To avoid disgruntled customers, Greenberg notes that some etailers are sending out steady streams of email advising customers how many shopping days are left before an on-time delivery becomes impossible. "This helps to manage customers' expectations," he said.
eToys Friday reported it is making efforts to put delivery at the forefront of its customer service platform. "The overwhelming majority of orders are being shipped with 48 hours and customer calls are being answered -- on average -- in seconds," said CEO Toby Lenk.
Additionally, financial auditors Ernst & Young LLO have been retained by the company to provide Cyberprocess Certification services, which includes the examination and verification of eToys' performance data on shipping and deliveries.
Greenberg pointed out that 45 percent more "Newbies" (people new to online shopping) will join the ranks this year. "This new business is an etailers' to win or lose this year," he said. "According to our studies, first-time holiday shoppers are choosing etailers based on their brand name and whether or not they have a brick and mortar presence.
"Brand is less important for experienced holiday shoppers who are more concerned about a retailer's product availability," he said. "One might surmise that experienced shoppers have learned from last year's delivery glitches, not wanting Santa to be left holding an empty bag."
Banker remains unconvinced that the etail community will learn from last year's mistakes. "I fully expect to see another round of FTC fines," he said.
The letters sent by the FTC were part of an educational campaign, noted Eric London, FTC spokesperson. "We sent letters reminding companies that make claims of express delivery that they have a legal obligation," he said.
Penalties for deceiving consumers can be stiff. Last year, etailers paid fines that ranged from $45,000 to $350,000, according to London. Total fines paid added up to $1.5 million.