E tail d E tails Online Order Fulfillment: Meeting Expectations and Complying With the Law Heather A. Hippsley Division of Enforcement Federal Trade Commission

E tail d E tails ONLINE HOLIDAY PURCHASES QUIZ u What percentage of online holiday purchases arrived in time this year? A.88 percent B.75 percent C.60 percent

E tail d E tails CONSUMER SATISFACTION QUIZ u What percentage of consumers who needed online customer service help stopped shopping at the website because of their poor experience? A.60 percent B.42 percent C.27 percent

E tail d E tails Online Order Fulfillment The FTC’s Mail or Telephone Order Merchandise Rule applies to online sellers as well as traditional mail and telephone order catalog businesses.

E tail d E tails What Does the Rule Require? u Ship when you promise u Have a reasonable basis for your promises u Notify consumers when you can’t ship on time u Allow consumers the option to cancel their purchase when you are late and make prompt refunds

E tail d E tails Not Complying is COSTLY u FTC Federal Court actions and civil penalties u State Attorneys General actions u Class actions u Loss of customer good will

E tail d E tails Holiday 1999 – Project TooLate.com u FTC sued seven e-tailers u Penalties totaled $1.5 million u Macys.com u Kbkids.com u Toysrus.com u Cdnow.com u Patriot.com u HoneyBaked.com u Minidiscnow.com

E tail d E tails Triggering the Rule u “Order by [date] for delivery by Christmas.” u “Usually, we fill your order within 24 hours and start it on its way to you.” u “All in-stock items are shipped within 24 hours.” u “All in-stock items ship immediately.”

E tail d E tails In Addition to Those Shipment Promises... u Remember: u Silence creates a 30-day shipment claim u It’s okay to change your shipment promise prior to sale

E tail d E tails What’s a “Reasonable Basis” for Shipment Promises? u Claim is based on facts, not hopes u How many orders expected u How many orders can be shipped daily u Fulfillment capabilities and claims match up u Claims are evaluated on what you knew when you made the promise

E tail d E tails What Does it Mean to Ship When I Promised? u “Clock” starts from receipt of a “properly completed order” u All the info needed to ship (e.g., size and color) u Billing info u The clock continues ticking even if you have not processed the payment

E tail d E tails Shipping Quiz A. Send the ordered goods that you have in stock and send the rest of the order when you can. B. Substitute goods and send to customer. C. Forewarn customers that sometimes there are delays. D. Apologize, tell customer of delay and tell customer to “hang in there.” E. None of the above. What If I Can’t Ship on Time?

E tail d E tails Answer E.None of the above. You can’t do any of those things!

E tail d E tails What If I Can’t Ship on Time? u You MUST notify your customers u Use mail, or telephone u As SOON as you can and no later than within the promised shipment time u Say when you now expect to ship u Give option of waiting, or canceling and getting prompt refund u Provide means for customer to notify you

E tail d E tails Example of a Delay Option Notice January 30, 2001 Re: Order #1234; shipment expected 2/2/01 Dear Customer: We won’t be able to ship the ladies’ jeans that you ordered until February 15, If you don’t want to wait, you may cancel your order and receive a prompt refund by calling our toll-free customer service number, (800) XXX-XXXX. If we don’t hear from you before we ship the merchandise, we will assume that you have agreed to this shipment delay.

E tail d E tails Another Option When Timely Shipment is Not Possible u Cancel the order u Do it within promised shipment time u Give timely notice of cancellation u Provide prompt refund u Send goods that are in stock (partial shipment) u provide delay notice or cancel other items

E tail d E tails How Do I Get a Customer’s Consent to a Delay? u If new shipment date is less than 30 days u Advise consumers that their silence means they consent to the delay u If new shipment date is more than 30 days u Tell consumers that they must contact the company and say that delay is OK u Tell consumers that if company doesn’t hear from them, then company will cancel the order

E tail d E tails What If I Don’t Know When I Can Send the Delayed Shipment? u If you don’t know when you can ship, say so u Advise consumers that they must contact the company and say OK to delay u You must also tell customers about their continuing right to cancel

E tail d E tails What If I Can’t Send the Shipment by the Revised Date? u Send another notice as soon as possible u Within the promised shipment time u Provide new revised shipment date u Advise consumer of rights u Can agree to delay–must be affirmative u Consumer silence = cancel order, send refund promptly

E tail d E tails What Does It Mean to Provide a “Prompt Refund”? u If account has been charged u Provide a credit within one billing cycle u If account has not been charged u Advise that no charge has been posted u If payment is made by cash, check or money order u Send refund within seven working days u Store credits are not acceptable

E tail d E tails Violations We’ve Observed... u No reasonable basis for shipping representations u Failure to timely offer option to consent to delay or cancel u Delay notices did not contain proper information u Failure to deem certain orders canceled in the absence of a notice

E tail d E tails More Violations We’ve Observed u Failure to respond to changes in ability to ship as promised u No change of shipment promise on web site or in “shopping carts” u Compliance with Rule not built into business plan at all!

E tail d E tails Compliance: It’s the Law and It’s Good Business u Rule incorporates basic principles of contract law u Can’t unilaterally change the terms u Rule incorporates common sense and good business practices u Not doing what you say annoys customers u Not doing what you say leads to complaints with FTC, BBB, States

E tail d E tails Online Order Fulfillment: Meeting Expectations and Complying With the Law Heather A. Hippsley Division of Enforcement Federal Trade Commission