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Posted: 6/10/98

Online Commerce Needs a Human Touch

In Some hidden risks of Internet commerce, we described the surprises in store for small companies taking credit card orders over the Internet, mostly in the area of the contract consumers have signed with their merchant bank. But as many are finding out, there are other surprises and challenges, so we'll outline some alternatives. One has yet to fulfill its promise, and the other is an innovative that brings back the human touch. For engineering companies, the latter also reduces the cross-channel conflict presented by many OEM Web sites that compete with their distributors.

For a couple of years now, online merchants have been taking cybercash (a.k.a., digital money) instead of credit cards and are having it administered by virtual banks such as First Virtual Holdings Inc. Cybercash is techie-talk for a prepaid debit card. To use cybercash, a cybernaut provides his or her credit card number to a company like First Virtual, often over a conventional voice-grade telephone line. A cybernauts who authorizes $100, for example, against his credit card is given a code, and can go to authorized online vendors who will debit their cybercash account. First Virtual gets its cut.

Online vendors should consider accepting cybercash, since it is not expensive to set up nor to administer. But it has not become the Web's mainstay of e-commerce for two reasons:

  1. Most online shoppers don't have cybercash. Giving customers a cybercash-only solution is like telling them, after they've decided to buy something, to go away. Maybe they will go to First Virtual, get a cybercash account, and perhaps look over the list of other vendors like yourself on First Virtual's authorized list, and come back anyway.
  2. Just like users of the popular telephone debit cards, cybercash users know they have little recourse if an Internet transaction goes bad. If someone fraudulently uses their code or the vendor ships the wrong product, the users' only comfort is that they can't lose more than their prepaid amount. For this reason, the few cybercash accounts out there rarely carry more than a hundred bucks. If your total sale amount exceeds two figures, your odds of getting a qualified cybercash buyer go down.

To expand the available solutions, merchants may wish to revisit what customers and vendors gain by using the Internet for online commerce. Customers can learn all the facts, compare vendors, see pictures of products, ask presale questions via e-mail after dinner, and type their order to make sure their address is spelled correctly. Vendors can slash their cost of sales by presenting online information about their products or capabilities 24 hours a day to potentially millions of customers.

How much of that value does a shopper compromise if the vendor calls back on a secure voice line to take his credit card number after he's place an Internet order, or Internet requisition? If your Internet presence allowed your customer to better understand his needs, or to realize that your company provides the right products or services, and to decide which product or service was the best fit, would you say you accomplished most of the mission?

If returning the human element to online shopping is acceptable to those merchants who had hoped the Internet could provide a money machine on autopilot, there are ways to automate the human element. Order-fulfillment houses have been around longer than the Internet, and they have a solid track record automating that human element. They provide 800 numbers where customers can place conventional orders 24 hours a day. They process credit card transactions on behalf of the merchants who are their customers, and then transmit the verified orders to the merchants to ship the product.

Internet-enabling your neighborhood order-fulfillment house is fairly straightforward, and some are taking the initiative themselves. They already have computers with order-entry software and other productivity tools. If the online merchant's Web site includes online order forms that do everything except request a credit card number, the e-mail messages produced by such forms can be displayed on an order clerk's terminal or parse directly into the merchant's order-entry software. An autodialer can call shoppers seconds after they press the "Submit" button.

"We can confirm the order, get a credit card number, and be gone in under 60 seconds," said Catherine Collier of AllPro TeleComm (Anaheim, Calif.), an order fulfillment house that takes Internet-enabled orders. "Customers rarely see that as an inconvenience."

And there are other 'human touch' benefits that "shouldn't be underestimated," Collier said. These benefits fall into several categories:

  1. Customers see the maintenance of their credit as more important than anything you have to sell. They are reluctant to hand over credit card numbers to strangers, and many of them still think the Internet is strange.
  2. While standard merchant contracts that you have with your bank do not support credit card transactions over the Internet, they do include policies and procedures about confirmations over voice-grade lines, so banks are bound to defend you in merchant disputes where you follow the rest of the contract terms. Moreover, many merchant banks ascribe a lower risk to Internet-enabled order fulfillment than to simple 800-number order entry or mail orders, where even a signature is often involved. Why? The order-entry clerk begins the callback by requesting the identity of the person taking the call. If John Smith placed the Internet order and John Smith answers the phone, it will be difficult for John to allege that he never ordered the stuff.
  3. People are just getting on the Internet. They are unsure what happens after they hit the "Submit" button. Will a UPS truck be pulling up with 2,000 lava lamps? It took a few years for ATMs to be accepted and they were more secure than bank tellers. With this human-side approach, shoppers on their first Internet foray will read that a human will call to confirm that they did everything OK after they hit the ominous "Submit" button.
  4. The callback is also an excellent opportunity to avoid returns — "You do realize this software will require a Cray computer with a terabyte of memory?" — to provide ancillary sales — "Will you be needing any toner with your new printer?" — or most importantly, "Are you satisfied?"
  5. For the small merchant looking to evaluate online commerce, using an order-fulfillment house has the lowest barrier to entry, both in terms of complexity and cost. Setup costs with an order-fulfillment house begin around $30, with fees around $1 per order processed. Secure server systems with hardware and software start around $10,000, though many small merchants begin through an Internet service provider who amortizes such costs across several online merchants, starting around $1,000 for setup, plus $100 to $200 per month for maintenance.
  6. In the stampede to embrace e-commerce, some engineering companies have opened a Web site-powered direct sales channel. While they would never have considered becoming a mail-order house, they become something similar in order to demonstrate leading-edge Internet competence. Unfortunately, their distribution chain is not amused. Engineered products often require high levels of local tech support, integration services and other forms of hand holding. Many engineering OEMs have built up a distribution chain over the years to deliver as much, and the Internet doesn't warrant upending it. By using order-fulfillment houses managed by distributors, or allowing distributors to provide order-fulfillment services themselves, the OEM's Web site returns to fueling the market while the distributors distribute.
  7. Melanie McMullen, editor of Internet Computing, advocates the return of a human touch to Internet selling. "If technology alone can't sell your products on the Net," she said, "maybe people can."

Should all this lead to caution regarding online commerce? Perhaps, but don't let the bus leave without you. Consider a recent Internet shopping report released by Ernst & Young, which concluded that 32 percent of consumers with online access buy products over the Internet, but only 4 percent make more than 10 online purchases a year. A full 64 percent research products online and then buy them through traditional channels.

The key is to recognize that such traditional channels involve humans, and that if something works, Webmasters should ask, "Am I doing away with humans merely because I am technically gifted enough to do so?"

Our conclusion is that online credit card transactions are sure to grow, but small businesses should consider a trade-off and perhaps a migration, not a headlong charge into taking credit cards online. The focus of an online marketing machine should be to quickly present the compelling benefits of products and services and to allow Web site visitors several simple and trustworthy entry points into your sales channel, including through humans.

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