As the daily headlines keep reminding us, most e-commerce companies are having trouble making money delivering books, toys, and CDs by mail. If they think that's difficult, let them try delivering a fresh tomato in a blizzard.
That's the task faced by online grocers, arguably the toughest e-commerce category of all. Given the expensive infrastructure needed to operate an Internet delivery service and the notoriously thin margins of the grocery business, it's not hard to understand why they've suffered mightily. The valuations of two giants in the grocery-delivery space have deflated as investors have fled: Peapod's stock price has plummeted from nearly $15 to under $1; Webvan, which traded at more than $20 earlier this year, sank as low as 28 cents recently. Most analysts expect that only one or two Internet grocers will survive. That said, the market they're competing for could be considerable. Forrester Research has predicted that grocery customers will spend $27.1 billion online by 2004.
Webvan believes the key to bagging that market is customer service.
"Our mission is to be the last-mile leader of Internet commerce, and we own the whole process from order to delivery," says Amy Nobile, manager of public affairs at Webvan. That mission is getting tougher all the time as brick-and-mortar grocers start to get into the online order-and-delivery game. But the ability to bring the world to customers' door differentiates Webvan from other e-commerce companies. If nothing else, Webvan will never be another faceless virtual company.
Mike Gonzales, Webvan director of customer service, says it's all about the human touch. The company has given its couriers mobile field devices, empowering them to take returns on the spot and record customer comments and complaints. That feedback is routed back to delivery centers the same day. "Our couriers get rave reviews from customers," Gonzales says. "Right now, we're on an initiative to train them to seek customer feedback more actively. We train them to help customers make orders online, to explain the variety of products we offer, and to offer advice on specialty products, like custom-cut meats. If they can't answer a question on the spot, our customer-service folks call the customer back from the office."
That's the kind of service that Anthony Parks, Webvan's original customer-service director, always envisioned for the company. Parks left Webvan in April 1999 due to differences over customer-service strategy. But while he's no longer with the company, Webvan seems to be moving closer to his original plan.
"My goal was to duplicate the shopping experience for customers in every way," says Parks, who now runs his own consulting company, eCustomer Service. "Grocery shopping is generational. It's a tradition. My mother took me shopping, and her mother took her." Parks believes that preserving that emotional link is crucial to the success of all e-commerce. He thinks people want the convenience of the Internet without losing the feel of the neighborhood butcher or produce person. "And when you're ordering over the Web," he says, "the courier is the only point of human contact."
Building a new tradition is crucial to Webvan's success. The company now focuses less on marketing to new customers and more on retaining old ones and getting them to order more frequently. Gonzales underscores the challenge. "We call up customers who've used Webvan before but stopped," he says. "Mostly, we're looking for specific feedback -- what went well, what didn't -- but we also ask why they stopped using Webvan." The number-one reason for disappearing customers? People just haven't gotten into the habit of shopping for groceries online.
It's Still the People, Stupid
With tough times ahead, a lot rides on the people who provide Webvan's customer service. Couriers and phone bank operators are key to keeping customers. Webvan needs to squeeze great people out of an already tight labor market. (See sidebar Getting the Goods on Customer-Service Candidates  to get tips on interviewing for good service.) That costs. "Labor is always the highest expense in good customer service," Parks says.
And customers are willing to pay for excellent service. Parks says, "Customers may squabble over price. They say, 'I can buy this for $1 or less on the Internet than in a store.' But they're willing to shell out $5 for delivery," he says. "What's appealing to them is the convenience. Webvan is now improving its customer service by offering a greater breadth of products -- including books and DVDs -- that will save people even more time."
Consistency Breeds Content
In any service business, consistency is key. People know that a Big Mac will be the same whether they eat it in Manhattan or Marrakech. So, too, in the grocery delivery business. "We go to hotel chains and fast-food chains because we know what to expect," says Joe O'Leary, partner and U.S. leader for the Customer and Channels Group at Arthur Andersen. "Consumers are looking for a consistent level of service." Customer-service representatives provide that consistency on a day-to-day basis, but behind the scenes, all departments must remain on the same page to guarantee long-term success. "Customers expect that they are dealing with the same company -- whether they're there in person, on the phone, or online," O'Leary says. "At both the shallowest and deepest levels, companies must be consistent in their focus on the customer."
For Webvan, consistency means extensive interdepartmental training and a strong mission. "You can stop any employee in the hall," says Nobile, "and they'll tell you Webvan's mission. Not word for word, but the essence is there. Everybody's on the same page."
Technology Isn't Everything
Technology has made customer service more efficient in some ways, but not always as expected. "Take instant messaging," says Gonzales. "It works, but not the way people thought it would. We thought chat would be a really efficient way of communicating with customers one-on-one, but it didn't turn out that way." Individual chat sessions between a service rep and a customer just aren't economically viable, Gonzales says. But instant messaging becomes efficient if a rep can have multiple chat sessions up at once. Even with tweaking, instant messaging cannot compete with a tried-and-true old-economy technology -- the telephone -- which is still the most common vehicle of communication for Webvan customers.
The future will be different. Parks and O'Leary insist that more companies will use integrated systems that will allow customer-service reps to access all kinds of information about a customer's past complaints, spending, and interests. That's the kind of information infrastructure that Webvan is working to build now.
Technology, a company-wide commitment to service, and the best possible people form the keystone of Webvan's quest for success. Like all e-commerce business plans, the delivery market is very much a work in progress. The Holy Grail for the entire industry is to deliver on the promise of better service and greater convenience, and still make a profit. Despite its stock market woes, Webvan is one of a few pioneers making progress toward that goal. It's impossible to say yet if Webvan will become profitable. But if the company manages to institute its plan, it will do so having developed a new benchmark for service.
Sidebar: Getting the Goods on Customer-Service Candidates
Attracting great customer-service representatives is the primary challenge facing B2C companies today. A tight talent market only exacerbates the task. "All the clients I talk to -- whether they're in retail, fast food, or hotels -- is worried about attracting and retaining customer-service people who will offer a consistent message to the customer," says Joe O'Leary, partner and U.S. leader for the Customer and Channels Group at Arthur Andersen. "There is little loyalty and much turnover, especially at the lower end of the spectrum. These people are the most tangible representation of your company to the customer, so you need to make sure they are hardwired to give good service."
But finding inherently helpful talent is no easy feat. Résumés rarely reflect a candidate's ability to resolve conflicts or willingness to go the extra mile for a customer. With that in mind, O'Leary along with Mike Gonzales, Webvan director of customer service, and Anthony Parks, owner of eCustomer Service, offer the following tips on how to determine a candidate's customer-service quotient during an interview.
Look for Body Language
O'Leary has devised a checklist of certain simple cues that signal good service. Does your customer-service representative make eye contact? Does he call you by name? Does he stick with you until your question has been answered or your problem solved?
"It's always a good sign to see a candidate smiling when he arrives for an interview," says Gonzales, who agrees that little things can mean a lot.
Take Them Outside the Box
Gonzales, Parks, and O'Leary agree that past experience is important, but -- as stockbrokers say -- yesterday's rewards are no promise of tomorrow's returns. All three recommend looking beyond a candidate's résumé by asking provocative interview questions like, Tell me about your best and worst customer-service experiences, or Describe a conflict in a group you were a part of. How was it resolved? What was your role? Perhaps the simplest of all is, Tell me about a time when you helped someone.
Because many candidates prepare canned answers for those kinds of questions, Gonzales likes to come up with questions that will take them outside of their usual spiel. One of his favorites for the holiday season was, Tell me about your family. Another was, Who would you recommend for a customer-service position? Who wouldn't you? Why?
It's Not All Talking
Physical cues and verbal answers can tell you a lot about a candidate's attitude, but customer service is increasingly being delivered in print over the Web. With the rise of email and instant messaging, it's imperative that a customer-service representative have strong writing skills. At Webvan, Gonzales gives candidates three or four different customer concerns and asks them to write a response. "Some of them really struggle with it," he says. "We have to find out if they can form a complete idea on paper."
In such a tight labor market, finding candidates who pass these three tests with flying colors can seem an insurmountable task. But Anthony Parks points out that better service can lead to more sales. "Great customer service costs," he says. "A company's fundamental philosophy has to be customer-centered. You have to believe in a quality service experience."
Contact Amy Nobile and Mike Gonzales at email@example.com, and Anthony Parks at firstname.lastname@example.org . To find out more about Arthur Andersen, go to www.arthurandersen.com.