Poor Customer Service Cost E-Tailers $6 Billion in ’99

Internet retailers lost about $6.1 billion in online sales last year from
transactions that were abandoned by consumers but could have been salvaged
with decent customer service, says a new industry study.

The report from market analysis firm Datamonitor Inc. says that an estimated
7.8 percent of abandoned online transactions could have been salvaged and
converted to sales.

If this trend continues, Datamonitor forecasts a cumulative loss of more than
$173 billion in potentially salvageable sales over the next five years.

The study also estimates that for every complete online transaction, nearly
four times as many are abandoned.

The new report, entitled “The U.S. Market for Internet-Based Customer
Service,” strongly suggests that dot-com companies need to supply better
online customer service.

“The average company could have improved its online sales figures by almost
35 percent last year if it had provided better online customer service for
potential customers,” said Steve Morrell, Datamonitor consultant. “This will
be particularly important for new dot.com companies who are now realizing
that they have to produce a profit, and soon.”

The study also predicts that revenues from the sale of e-service software and
services will increase by more than 1,100 percent between now and 2004. The
market will grow from $162 million at the end of 1999 to $1.95 billion by
2004, the study says.

Current leaders in the e-service space include Kana, which already boasts a
market cap approaching $5.1 billion, along with Quintus, Brightware, eGain,
eShare, Primus, Servicesoft, ServiceWare and RightNow Technologies. These
companies provide e-service solutions that help e-tailers supply the right
customer service, at the
right time, through the right channels.

“Companies wishing to do e-commerce must provide eService,” said Morrell.
“Otherwise, they will cast away significant amounts of revenue and long-term
customer relationships.”

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