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Because of the way the holidays worked out for our Retail Paradox Weekly delivery, RSR didn’t get a chance to jump on the story about Best Buy and their order snafu that resulted in cancelled orders for some customers.

Best Buy is a challenging retailer for an analyst to talk about. Best Buy is still probably one of the best retailers in the US in terms of cross-channel and customer centricity (note that I didn’t say customer service). But in my current span as an analyst, I have seen them sued by states’ Attorney Generals over pricing issues, accused of hosting fake websites in their stores to try to dissuade consumers from trying to get price-match guarantees… I have seen instances where stores refused to honor online prices, only to have shoppers go around the barrier by buying online for in-store pickup. And now this.

It’s not that Best Buy made the mistake in the first place, as many below note. It’s that it took so long to acknowledge the problem and come up with a customer-centric solution. The gap between strategy and action seems pretty large over at the cross-channel poster child — read on.

RetailWire Discussion:
Best Buy Overpromises on Online Delivery

By Tom Ryan, Managing Editor, RetailWire

Hit by overwhelming demand for hot product offerings over Black Friday weekend, Best Buy alerted some customers just before Christmas that it would not be able to fill their online orders. On Best Buy’s online forum, some customers said their Christmas had been ruined.

Best Buy later apologized for the problem, which it said led to less than one percent of orders that were canceled. Best Buy also said it was providing electronic gift cards to affected customers as a goodwill gesture.

“What was wrong is that there was an unacceptable delay between order confirmations and cancellations, and for that we are very sorry, ” said Susan Busch, senior director of Best Buy’s public relations, in an e-mailed statement sent out late in the day on Dec. 20. “It’s important to note that this was a rare situation based on a high volume of orders over a short period of time. “

But customers vented their frustrations online. They particularly cited the long delay in response from Best Buy’s online customer service team. Some heard their order was back-ordered only to be told later it was outright cancelled.

Wrote “cynlu20 ” on Dec. 21, “To recap — after 19 days waiting and three hours transferred to a total of five different people, I have no gift to give my children for Christmas. Thank you Best Buy, for rewarding a customer who in the past three — five years has bought a laptop, refrigerator, dryer and countless DVD’s/CD’s through you by ruining my children’s Christmas. My new year will require a new washing machine, and I will no longer be considering Best Buy for this purchase. “

Some customers accused Best Buy of committing fraud. They believed promises of hot deals — and ultimately non-delivery — only kept them from buying the same item from another store.

But some forum customers had mixed feelings after the Best Buy’s apology and gift cards.

“To Best Buy — thank you for at least trying to make it right even though you royally screwed a lot of customers this Christmas. It is not the gift that I wanted to give but I guess it is better than nothing, ” wrote WilliamE, who had an order for a limited edition BioShock 2 game for the Xbox 360 cancelled.

Another customer who had spoken to several reps was also more forgiving.

“Since I posted this initial thread the folks from Best Buy did eventually get back to me and I believe that with some work that we will get a resolution that I can accept. I am going to mark this thread as resolved. Best of luck to the rest of you still waiting for answers and help, ” “Wavelandscott ” wrote on Dec. 23.

Discussion Questions: Generally, how forgiving do you think customers are of online cancellations? Was Best Buy’s response adequate? What lessons should be taken away from this experience?

RetailWire BrainTrust Comments:

Bob Phibbs — President/CEO, The Retail Doctor & Associates

Accidents like these have always happened; it’s just that before, people couldn’t band together and gripe. Best Buy in particular seems guilty of the Netflix hubris of thinking that their screw up would eventually go away. I’m not sure this is a function of Best Buy being unable to predict their own necessary supplies (a biggie), that their distribution centers are disorganized (another biggie), or that it’s a brand being pulled apart by mobile and online discounters.

Whatever the reason, the lesson repeats like it has for BofA, GAP and as Verizon recently found out — that in this environment, nothing goes away when it is a brand talking to their customers.

Richard Seesel — Principal, Retailing In Focus LLC

While it’s not likely that Best Buy planned some sort of bait and switch maneuver, it leaves a disagreeable taste in its customers’ mouths. This is a failure on so many fronts: The worst offense is the lag time between order placement and cancellation. (At least Best Buy acknowledged this problem.) But it’s almost as negligent for Best Buy to have accepted orders in the first place — at narrow gross margins — that it was unprepared to fill.

Is the company’s inventory forecasting or IT management that bad? (Perhaps Best Buy hired the person that mismanaged the Missoni launch at Target in September.) An online apology and gift card is not going to rebuild trust in Best Buy anytime soon.

Mark Heckman — Principal, Mark Heckman Consulting

Obviously, at Christmas with gifts for others hanging in the balance, there is little forgiveness in the air when it comes to unfulfilled online orders. Under almost any other circumstance, I think shoppers would forgive and forget with the proper concessions from Best Buy. But it sounds like Best Buy dropped the ball in more than e-logistics; it appears they also were not trained and poised to handle the customer reaction, which surprises me a bit.

Going forward, I would think Best Buy would not only review their logistics and delivery systems to be able to handle the traffic holidays and big promotions generate, but also take a very hard look at how they handle disappointed shoppers. I have certainly made some mistakes over my marketing career, and some have turned into real relationship building opportunities if the disappointed shopper is handled with the TLC they deserve when problems occur!

Paula Rosenblum — Managing Partner, RSR Research

The problem is less with the fact that they could not fulfill the orders (although one has to wonder about the accuracy of BB’s inventory systems at this point), it’s that it took so long to figure it out. It’s B-A-D.

Five years ago, Amazon did something similar to one of the editors of a major newspaper. He commissioned several pieces on the problem of missed promises.

Amazon obviously lived to see another day, but BB’s problems just keep piling up. The company has to take a cold hard look at itself. It is failing fast. Price transparency, poor customer service and now this? Doesn’t bode well. Reminds me a lot of Circuit City a few years ago.

Bill Emerson — President, Emerson Advisors

While BB’s response was rapid and meaningful, they have basically tarnished their brand image. Balancing inventory investment and predicted demand is always challenging. However, not linking order taking with available stock is a big miss, particularly for a technology company. The lesson is to make sure you don’t take orders if you can’t fulfill them.

Bill Bittner — President, BWH Consulting

After 30 years of managing supply chain inventory applications, I know how difficult it is to properly control both multiple supply chains (direct and through the store) and a reserve inventory, whether it is reserved for the customer or sale merchandise to be sent to stores. Unfortunately it seems Best Buy has been less than forthcoming on what happened in this situation.

In reading the background material, I was particularly taken back by the CNET comments. I assume CNET is heavily comprised of Best Buy’s target consumers. The acrimony expressed towards Best Buy by its target audience is very disconcerting. It indicates Best Buy likely has a bigger problem than this one event exposed. They really need to do some soul searching on how they’re going to remain viable in an online market place.

As far as the event itself, I find it hard to believe that the deep discounts for Black Friday were the root cause of the problem. If Black Friday exceeded their whole Christmas Season forecast, they have real problems with their forecasting systems. What I have seen happen more often (and especially in an environment where you support “order online and pickup at store ” ) is that merchandise intended to be reserved for later sale or pickup is sold a second time by an enthusiastic store employee or counted in a cycle inventory as available. In either case, the result is that when the time comes to deliver the goods to the original consumer, they are no longer available. This could also be why it was a surprise and customers were not notified until later.

Charles P. Walsh — President, OmniQuest Resources, Inc

Best Buy may be forgiven for being unable to correctly forecast the demand on some hot items but what it cannot be forgiven for is its failure in customer service.

As customers, we often feel that retailers are great at taking orders and payment, but not very good at handling problems.

It is just as important (and perhaps even more important) to manage problems and exceptions through your customer service as it is in managing your marketing and store operations.

Cathy Honka — Principal, Cathy Hotka & Associates

I’m reading this story fresh off my own baffling Best Buy experience, after BBY shipped a printer to my store for me, then refused to let me take it home. (Long story. I left and bought a printer at Staples instead.) They really need to hire a Chief Customer Officer. If stories like this persist they’ll lose any trust the public might want to assign them.

Gene Destroyer — Entrepreneur, Advisor, Consultant, Professor, Independent

This is a good example of a brick and mortar retailer not understanding the e-tail business. Unfortunately, it will hurt Best Buy for some time. The customers that were disappointed will not return. There are other alternatives no further away than one’s computer. Location, location, location gives no competitor any advantage.

The great advantage to e-tail for the merchant is inventory control. It seems that Best Buy treated their inventory as cavalier as brick and mortar retailers treat store inventory. In e-tailing, the day the order is received, they know if it can be filled on time. That is if they think that is important.

Obviously, Best Buy did not. I would go further and suggest that online orders that were cancelled and cut could have been filled with in store inventory someplace in the in-store system, but that never occurred to this retailer.

Adrian Weidmann — Principal, StoreStream Metrics, LLC

The degree to which customers are forgiving is generally directly proportional to the amount of proactive and timely effort on behalf of the retailer. All too often, retailers (and brands) mistakenly believe that no complaints or communication means that the customer has not become irritated enough! Big mistake! Online customers extend their trust and expect the retailers to treat them with more personal service than a brick and mortar shopper. This unfortunate situation at Best Buy is not unique and shows that retailers still have a way to go before their infrastructures, processes and workflows can keep the promises made by the merchants and marketing along with their IT departments.

Mark Price — Managing Partner, M Squared Group, Inc.

Even Best Buy’s response was poorly worded and seemed to avoid them taking responsibility for their actions. The words unavoidable situation and highlighting the large volume of orders seems to be shirking the key message, which was “we made a mistake in our inventory, and then we made a mistake in not following up with customers fast enough. “

In social media, one key success factor is authenticity. Best Buy, for all their experience in participating in social media, seem to be trying to manage the information, rather than being bold, upfront and personal, which could have turned this situation into a social media success rather than such a challenge as it is.

Read the entire RetailWire discussion:

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