Retailers and analysts agree that the next 6 to 12 months will be crucial.

Priceline.com, the hugely successful electronic commerce player, made its name by letting customers name their own price for airline tickets, groceries and home financing. The Norwalk, Conn., company even created somewhat of a buzz with its hip television commercials starring a tongue-in-cheek William Shatner.

But with Priceline.com's success and media attention has come a downside. Just last month, the site temporarily scaled back expansion plans for its WebHouse Club grocery shopping service, as it was too busy digging out from under an avalanche of new customers.

The WebHouse service anticipated a customer base of 100,000 in its first 90 days. Instead, the site, which launched a limited New York-only version of the service on Nov. 3, handled more than 300,000 customers over a three-month period. Today, the site has more than 500,000 members who continue to tax the service's infrastructure and customer support, said Jay Walker, Priceline.com's vice chairman and founder.
"We slowed down out city roll-out to catch up with customer service," Walker said. "It's funny, there are times when you build something and you can roller skate around the site it's so empty. Growth is really impossible to predict."

All the components for a home run were there, but there were not enough consumer players to rouse a good game. Today, the mantra of "if we build it they will come" finally seems to be paying off for some.
But, like Priceline.com, some sites are finding too much success -- enjoying exponential Web growth, and growing pains.

Just last month the online brokerage firms Charles Schwab, DLJ Direct, and E*Trade suffered separate system failures because of excessive traffic or infrastructure problems.
In addition, the online booksellers Amazon.com and Barnesandnoble.com were inundated with 2.5 orders per second when Stephen King's new online-only work, "Riding the Bullet," was posted for purchase and electronic delivery on their sites. The traffic was so heavy that many potential customers were unable to access the sites at all. The problem may have been that six months ago, analysts nearly wrote off downloadable books like King's, saying they were unwieldy and unlikely to gain popularity. As a result, neither site was prepared for the onslaught.

Not only have these cases meant that lackluster products and services have disappointed customers. They also indicate that the customer-service systems designed to catch slip-ups and rectify problems are also failing, a problem one analyst says was two years in the making.
A 1998 Forrester Research study of 50 e-commerce sites found that only 30 percent of the sites expected to integrate customer service by the end of this year. The forecast was not far off the mark.

"The sites have been setting themselves up for failure," said Bob Chatham, a senior analyst with Forrester. "It's amateur hour right now and all of these retailers are having to admit that they are really working in the dark. No one has been able to balance enough back-end and customer resources," he said.

Priceline.com's Walker is the first to agree. The excessive traffic at Priceline.com's WebHouse led to problems like lost server connections. In addition, during high traffic periods, Priceline.com customers have been unable to access the site at all, leading to a rash of customer support phone calls.

The company continues to increase its customer service efforts, but much of the site's customer service is still automated. To rectify both situations, Priceline.com has increased its customer service and hardware investments by more than 300 percent, spending more than $20 million on hardware upgrades alone, Walker said.
"Priceline.com as a site has grown five percent compounded a week for 24 months," Walker said. "To put this in perspective, our growth and traffic is like your local supermarket having to handle 400 customers in an hour. The lines would be out the door. As fast as we add servers, the customers keep on coming."

Analysts stress that the most important thing retailers can do is add customer service representatives to give customers the same service that they hope to find in a brick-and-mortar store.
Some customers are demanding the same or higher levels of customer service that they find in the offline world, said Kirsten Cloninger, an analyst with Cahners In-Stat Group. "People want to be able to tap someone on the shoulder, even if it's a virtual tap," Cloninger said.
 
 

Retailers and analysts agree that the next 6 to 12 months will be crucial. Successful sites, they say, will be the ones that build their infrastructure and provide attentive customer support. If retailers anger customers now it will be hard to get them back, something Priceline.com's Walker said he knows first hand.
"If your customer has a problem, they are going to tell all their friends," Walker said. "Our customers are telling 16 friends and relatives about their experiences. If it's good, that's good, but a bad experiences means that 16 people are hearing about that failure. When you live on the Web, you can die on the Web, too."
 

Source:  Karen J. Bannan, NYT, April 12, 2000