Customer Gripes Mount
Against Shopping.com
By JASON ANDERS
THE WALL STREET JOURNAL INTERACTIVE EDITION
It wasn't a very happy holiday season for some shoppers at online retailer
Shopping.com. In recent weeks, online message boards have been clogged
with horror stories about bad credit-card charges, endless busy signals and
products that just never showed up.
And the complaints haven't stopped there. The
Better Business Bureau, in Colton, Calif., says
that nationwide it logged 267 complaints
about the Corona del Mar, Calif., company
last year through Dec. 30, almost all of them
during the holiday shopping season.
All this comes as Shopping.com is struggling to grab a piece of the surging
online retailing market while trying to put out several corporate fires at
home. The company is involved in more than a dozen legal disputes, including
lawsuits from shareholders, and the U.S. Securities and Exchange Commission
is investigating trading in Shopping.com stock. What's more, the company is
unprofitable and only recently secured financing that will allow it to continue
operating beyond January 1999.
Still, Shopping.com (www.shopping.com) says business boomed during the
holiday season, thanks in part to an online advertising campaign. The
company says it handled as many as 1,700 transactions a day in the weeks
leading up to Christmas. But the company admits the holidays brought an
avalanche of orders that it wasn't expecting, straining its order system and
causing some delays.
Some Shopping.com customers say they're still
waiting for merchandise they ordered months
ago. Gerry White, a computer programmer
from Hagerstown, Md., says he ordered a video
card and some speakers for his computer from
Shopping.com on Oct. 14. Soon after his order,
he says, Shopping.com sent him a message
telling him the items were out of stock and would be delayed. He says it was
nearly impossible to get through on the phone to the company's
customer-service department, and says despite repeated attempts he has been
unable to cancel his order.
Now, some two-and-a-half months later, Mr. White says he still hasn't
received his order, though his credit card was charged the full $247.89 on
Oct. 22. He says he wishes he had checked out what was being said about
Shopping.com on message boards before placing his order. "I didn't know
about their reputation before I ordered. If I had, I wouldn't have touched
them," Mr. White says.
Frank Denny, Shopping.com's chief executive, says Mr. White's order was
delayed because the items were on back order from the manufacturer. He said
Shopping.com canceled the order, as requested, and says Mr. White's credit
card was never charged.
However, Mr. White maintains that the charge is still on his card. Mr. White
says he has disputed the charge with his credit-card company. Credit-card
issuers have 90 days to investigate claims before they decide whether to cancel
disputed charges.
Gavin Inman, a computer analyst from Battle Creek, Mich., says he was able
to get his money back for a CD-ROM order that never arrived, but only after
two months of wrangling with Shopping.com and a call to the Better Business
Bureau. "I buy a lot of stuff online, and have never had any problems at all,"
he says. "I've never experienced anything like this. I definitely won't order
from them again."
Shopping.com's Mr. Denny concedes Mr. Inman's order "fell through the
cracks."
Recent customer complaints led, in part, to a "mutual decision" to remove
Shopping.com from a popular shopping Web site run by CNET, says a
spokeswoman for that company. The CNET site, called Shopper.com
(www.shopper.com), lets users comparison shop online retailers. The service
displays product prices from several sites on a single screen. Other
participants in the service include Egghead.com and Cyberian Outpost.
For its part, Shopping.com says it knows some customers are unhappy, and
says it is working to resolve those complaints. "We're working on it very
hard," says Mr. Denny. He says the company responds to every telephone call
and electronic-mail message from customers. "One of the things that makes
you win the endgame is to be the most consumer-friendly site out there. We
are making an extra special effort to be that site," he says.
Mr. Denny says he believes the vast majority of orders are being filled on
time. He says most of the shipping delays that happened were the result of
Shopping.com's vendors, who couldn't meet customer demand. Shopping.com
doesn't stock any of the more than two million products it sells; rather, they
are shipped directly to customers from several vendors around the country.
Mr. Denny says he isn't aware of any cases where customers were charged for
merchandise they didn't receive, but says it's possible it happened in some
isolated cases. "Our policy is that we do not charge credit cards until the
goods are shipped and we have a tracking number in our hand," he says.
The Federal Trade Commission says by law retailers must ship merchandise
within the time frame promised in their advertising, or within 30 days,
whichever comes first. Shopping.com's Web site says orders will arrive
within seven to 10 days, though Mr. Denny says the actual time frame is much
shorter than that, usually two to seven days.
"If they are unable to ship within the promised time, the company must notify
you, give you a revised shipping date, and give you the option to cancel and
get a full refund," says Howard Shapiro, a spokesman for the FTC. He says
companies must return the money to customers' credit-card accounts within
one billing cycle, or about a month.
Mr. Denny says he believes Shopping.com has resolved all of the customer
complaints, and says shipping and order problems are now behind it. He says
the company has formed a task force to deal with customer complaints to
make sure they're all handled quickly and completely.
Meanwhile, he says the brisk holiday season should significantly boost sales
for the fourth quarter. For the nine months ended Oct. 31, Shopping.com
reported a loss of $19 million, or $4.67 a diluted share. In early December,
Shopping.com secured a line of credit worth up to $100 million from Swartz
Private Equity LLC of Atlanta that will allow it to continue operations.
Without it, according to SEC filings, Shopping.com would have run out of
money in January.
The company still faces several corporate headaches that started shortly after
it went public in November 1997 for $9 a share. The stock quickly climbed,
despite the fact that Shopping.com was losing money and sales were thin. By
March, the stock was quoted at $39 a share on the National Association of
Securities Dealers' OTC Bulletin Board system, giving the company a market
capitalization of more than $120 million.
Soon after, the SEC halted trading in Shopping.com shares for 10 days, citing
"recent market activity in the stock that may have been the result of
manipulative conduct."
In its most recent quarterly report, the company said the SEC is investigating
whether Shopping.com or its underwriter, Waldron & Co. Inc. of Irvine,
Calif., or their officers "engaged in activities in connection with transactions
in the company's stock in violation of the federal securities laws."
A spokesperson for Waldron couldn't be immediately reached for comment.
Four lawsuits seeking class-action status were filed on behalf of shareholders
in April and May claiming that Shopping.com and Waldron violated securities
laws and manipulated the price of the stock. The defendants have denied the
allegations. In December, the NASD suspended Waldron's registration for
failing to pay an arbitration award.
Waldron, Shopping.com's biggest market maker, stopped trading the
company's stock in August, and the stock soon plummeted to $1 a share.
Shopping.com's stock has since recovered some of those losses. It was quoted
at $13.437 on Monday.
In June, Shopping.com's founder and then chief executive, Robert McNulty,
resigned for personal reasons. In his letter of resignation, Mr. McNulty
expressed his frustration over the lawsuits and the SEC's investigation.
At that time, according to SEC documents, Shopping.com agreed to pay Mr.
McNulty $500,000 in cash, and immediately hired him as a consultant through
March 31, 2001. As a consultant, Mr. McNulty is paid $258,000 a year,
considerably more than the $175,000 a year he earned as CEO.
Shopping.com faces a breach of contract lawsuit from its former chief
financial officer, demands for $328,819 in legal fees from its former
attorney, and a claim from its former networking provider for $120,000.
Shopping.com says it disputes the claims.
The company said Tower Records on Sept. 12 demanded $25,000 in damages
for losses it says it suffered because Shopping.com sold the video "Titanic"
below cost, violating California's business code.
Most recently, the company says it received a letter from Yahoo! Inc. on Dec.
4 alleging breach of contract for a canceled advertising agreement, and
seeking damages in excess of $2 million.
Shopping.com says it is reviewing the Tower and Yahoo cases. Mr. Denny,
Shopping.com's chief executive, says he doesn't believe any of the legal
actions will have any significant impact on Shopping.com's profitability. |
