With South by Southwest -- clangorous and turgid as a prom-night after-party -- raging 1,800 miles away, Jordy Leiser and I rode a squeaky, crowded commuter train to Fairfield, Conn. Mr. Leiser, a strawberry blond 27-year-old entrepreneur, wouldn't have been out of place were he scarfing down brisket and manically checking in at hotspots around Austin, rather than traveling with me to an annoyingly barbecue-free town on an annoyingly cold March day. But Mr. Leiser doesn't run that kind of company.
StellaService rates the customer-service performance of online retailers and has won buy-in from the likes of Zappos, Diapers.com and 1-800-Flowers, each of whom agreed to run the company's seal on that precious parcel of pixels that is their websites. Compared to many startups these days, it's a grown-up idea, built on the identification of a market need, deep research and testing and support from real companies with real revenue. Success hinges on adoption from retailers' brand teams that are making decisions based on real results, like the seal's impact on conversion. These retailers are hungry for credibility and credentials and see value in making the populace more comfortable with online shopping -- a key to expanding e-commerce, expected to grow 10% annually in the U.S., hitting $279 billion in 2015. That's probably why Mr. Leiser and his co-founder, John Ernsberger, are now celebrating a round of seed funding, $2 million in total, from Battery Ventures, DFJ Gotham Ventures, RRE Ventures, Consigliere and a couple of angel investors.
Why some multibillion-dollar retailers agreed to support an upstart business launched by two guys with no track record says a lot about two things: the strength of the idea itself and the changes hitting the online-retailing business.
Marc Lore, CEO of Quidsi, parent of online baby-care giant Diapers.com, explains it by using the three pillars of retail: prices, selection and service.
"There's a big trend toward price transparency on the internet, with one company matching another one's price more easily than in the past because of technology," said Mr. Lore, before moving onto selection. "Retailers are adding thousands of SKU's every year. Eventually there will be complete ubiquity in product assortment among competitors. So everyone has what I'm looking for and the price is the same across the sites. Why buy it from one over the other? Service, except you don't have any benchmark for determining what company has better service than another."
And that's where, he says, StellaService comes in.
At the bottom of its webpages, next to other seals (in industry parlance, trust marks) from Inc, VeriSign, eBay and BizRate, Diapers.com wears the StellaService seal indicating it's in the elite, or highest, category. It earned that by performing exceedingly well on 300 metrics that Messrs. Leiser and Ernsberger identified in 2009 while researching business ideas in Lewisburg, Pa., home to their alma mater, Bucknell. The college friends had returned to Lewisburg after a short, unsatisfying stint in the banking world to take advantage of cheap rent and the productivity benefits of living in an isolated college town where you no longer know anyone.
They began noodling around with different applications of transparency that could benefit people in all kinds of roles, from investor to consumer. Once they got down to customer service, they realized there wasn't much out there to let shoppers know what kind of experience they could expect from any given retailer.
Actually, there is plenty out there if you want user-generated ratings of shopping services. "The crowdsourcing idea is very important because you want to know what the community thinks," Mr. Leiser said. "But they capture a very small percentage of the market, often only the extreme experiences." In other words, they snare the opinions of those who have had either very good or very bad experiences, not the middle ground.
What Mr. Leiser had in mind is, as he put it, a "truly objective process" undertaken by trained evaluators. So Diapers.com's score is based on inputs that come from a platoon of mystery shoppers who parse retailers' websites and pester their help lines, ordering and returning enough real products and registering complaints and requests to really put any company customer-service apparatus through the ringer.
I spent a few hours with one of these mystery shoppers earlier this month. Kristin (not her real name) is a 39-year-old former assistant buyer at Macy's who's also done tech training for Wall Street types. She picked Mr. Leiser and me up from the Fairfield train station and brought us to her Easton home and into her routine.
Every weekday, the mother of two sits in front of the pair of monitors arranged side-by-side on her desk. One monitor displays the surveys that all mystery shoppers have to fill out on each retailer, the other a web store chosen from her list of assigned retailers. Today she clicks over to Ashby Solutions, which, let's just say, is a paragon of neither web design nor information architecture. Kristin struggles to orient herself on the site, before eventually making her way to a $10 foot-pedal adapter and purchasing it in just three clicks.
"That's not bad," she says.
Less satisfying was the order-summary page, which should contain full information about what she had just bought. For some reason, the site bounced from the page too quickly, to a thank-you page. Not good. Logging into an email account dedicated to StellaService work, which is, not surprisingly given her trade, a garden of spammers' delight, she found there was no confirmation from the company, only from PayPal. All in all, Kristin was feeling unsatisfied by the ordering experience. She recorded that and closed out the survey.
On a regular day, she'll repeat this process for 10 or 12 different retailers. She'll then turn her attention to opening the shipments she ordered in days before, evaluating them, returning the orders and evaluating that process. She'll look at, among other things, how long it took the company to process the refund after it received the returned item.
Kristin, a full-time contract worker, clearly takes her job very seriously and she clearly enjoys it. That's good, because all that clicking around on unfamiliar websites, not to mention all the frustrating calls to customer-service departments, would wear down anyone who didn't care.
Though Ashby Solutions didn't hit it out of the park during the ordering portion of the test, that doesn't mean it won't get a seal. The full StellaService evaluation process takes 20 to 30 days and covers ordering, shipping and returns, website features and customer support, which is in part handled by a four-person call center in Omaha. During that time, staffers are in touch with the company being evaluated on a regular basis. All that raw data is then crunched and put through a quality-assurance test procedure that will then render a final score. If the company earns a seal, it'll be placed in either the elite, excellent or approved tranche. If it doesn't, well, it can take comfort in knowing that Mr. Leiser wants to keep the process rigorous and approve no more than 50% of retailers.
By this point, the following question may have occurred to you: What American consumer, let alone one in the midst of a feverish retail jones, is going to pause to look at a seal buried at the bottom of a webpage? Plenty, as it turns out.
When the website Uncommon Goods, a Brooklyn-based retailer, started displaying the seal last fall, it saw a 10% lift in conversions. That has since tapered off to four or five percent, but it's still significant, according to Brian Hashemi, the marketing director there.
That experience suggests the seals help build credibility in the eyes of the uninitiated, but also with folks who have even more fundamental reservations. Aaron Magness, director of brand marketing and business development for Zappos, explained, "There's a huge percentage of the population that is still not 100% comfortable with shopping online. If you can let them know that this company has strong customer service, it's an additive measure to put the customer at ease and let them know there's nothing to worry about."
Mr. Leiser said in an email that while click rates on the company seal are low, as they are with other trust marks, there's still a significant amount of traffic coming to the company website. "Most online shoppers like to make fast decisions and just want to see the big signals (i.e., trust marks) that help them make those quick decisions," he said. He and his team are relaunching the website to beef up those profiles and include a process that will allow retailers that want to be evaluated to nominate themselves. If they get enough consumer support, they'll be put in the queue.
Mr. Leiser does not yet seem overly concerned with revenue. At this point, the company is still focused on building the brand. Down the road, it's likely to get into licensing the seal and selling its increasingly copious research on customer service. He even mentions the idea of creating a Hoovers.com for customer service. StellaService is currently working with shopping recommendation engines such as Find.com.
On the ride to visit Kristin, we had discussed the current climate for startups, which may or may not be a bubble waiting to pop. Mr. Leiser had observed that many entrepreneurs are discovering that there's a winner-takes-all mentality brewing among entrepreneurs and their backers.
"It's no different in that there's only going to be one brand that really represents great service for online businesses," he said. "We believe we're well-positioned to be that brand."
If he's right, there could be a big payout. Consider this: When Verisign decided to part with its security services, including its trust mark, it sold them to Symantec. The price tag: more than $1 billion. Not bad for a little logo that runs on the bottom of a bunch of websites.