e-Commerce is changing relationships

By William J. Augello Esq. -- Logistics Management, 3/1/2000

The phenomenal growth of e-commerce and the difficulties many customers reportedly had in receiving their orders last year raise questions about how vendors that sell their products via the Web will ship orders in the future.

Package express carriers and expedited LTL carriers are sure to win the lion's share of this traffic, owing to the quick gratification we expect today. They may find, though, that dealing with e-retailers is more challenging than working with traditional commercial customers.

The biggest challenges online vendors are likely to face will be ensuring they have product on hand to meet orders and arranging for delivery within the promised time frame. If they are late in producing goods, they probably will put pressure on their carriers to make up the time. They're also likely to balk at paying the extra cost of expedited delivery services. Carriers, therefore, will have to deal with customers' demands that they bail them out at no extra cost.

After last year's holiday experience, the Federal Trade Commission will be scrutinizing e-commerce services for bogus promises about delivery schedules, particularly during peak holiday seasons. To avoid prosecution for false or deceptive advertising, online vendors will need to be sure of their products' availability and use the most dependable transportation services.

Vendors that offer a money-back guarantee to their customers should contract with carriers that will refund their freight charges if they fail to deliver on time. That's easier said than done, though: Most online orders will be delivered to residential addresses, where money-back guarantees do not now apply. This void will create problems for vendors unless carriers agree to extend their guarantees to residential deliveries.

Even if they do, that means little in practice. In my view, most of the carriers' current money-back guarantees are illusory because of the numerous restrictions and conditions attached to them and the impracticality of tracking large shipment volumes daily. I also believe that carriers that do not offer shippers access to their electronic databases to track their own shipments will have a tough time selling their "guaranteed" delivery services to online merchants.

Retail customers generally are not as forgiving as commercial customers. Anyone who doubts this should research the number of claims filed against carriers by individual household-goods shippers over service failures. Then check how many of those shippers have sued carriers for emotional distress, pain and suffering, mental anguish, loss of wages, and punitive damages resulting from the destruction or delay of their goods. Retail customers are a different breed--something that carriers must prepare for.

Carriers also should recognize that they will be dealing with sporadic, noncommercial buyers that are not as sophisticated as commercial shippers. The courts are more inclined to require actual notice of liability limitations in bills of lading and carriers' tariffs when noncommercial shippers experience loss or damage. This will become particularly important when vendors ship via package express services whose limit of liability is only $100 per package. Perhaps e-consumers will generate enough pressure on their vendors to force an increase in this antiquated liability limit to realistic levels.

How do you see the transportation industry changing in this new business environment? Send your comments to me at the e-mail address below.

William J. Augello Esq. has practiced transportation law for 47 years. He also is the executive director of the Transportation Consumer Protection Council, an organization that is devoted to protecting shippers and receivers in transportation matters, such as freight loss and damage, undercharges, and contracts. He can be reached in Tucson, Ariz., at (520) 531-0203 or via e-mail at williamaugello@worldnet.att.net.