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Big Problems Outweigh Gains For Online Retail

The online shopping industry may have been a victim of its own success this holiday season.

With aggressive promotions and optimistic delivery promises, business from gift-buying shoppers rose sharply for online retailers and shippers such as United Parcel Service. But fumbled orders and presents delivered after Christmas left customers angry and revealed that the e-commerce industry may not be prepared for the demands of the growing number of savvy Internet shoppers.

“If we say something will arrive by a certain date, it had better be there,” said Stormy Simon, co-president of the e-commerce discount site Overstock.com.

In the new year, UPS and e-retailers say they will assess where to make changes for the next Christmas season. The wiggle room for these types of mistakes is limited; the e-commerce industry becomes more competitive with every holiday season.

“They can’t disappoint anymore,” said Sucharita Mulpuru, an e-commerce analyst for Forrester Research. “If they don’t change, it’s only going to get worse.”

For now, e-retailers and shipping companies are pointing fingers at each other. Retailers are also trying to regain the trust of consumers who, despite their frustrations, aren’t likely to shop online any less.

“UPS had some extreme difficulties this year, but when consumers think of it they think of the brand, Overstock,” Simon said. “So we have to make it right, with or without UPS.”

Simon said some packages from Overstock that shipped through UPS were delayed, and the company is giving refunds and credits to customers — a lesson in how expensive shipping delays can be.

Faced with the shortest holiday shopping season in 11 years, e-commerce retailers tried to redirect last-minute spending away from the malls and onto the Web. As late as the Sunday before Christmas, Amazon was promising free shipping for Christmas. And Toys R Us customers could place Web orders until 11 p.m. on that Monday, with Christmas delivery guaranteed.

In what may have been the final undoing of UPS’s Christmas plans, in the week before Christmas, Amazon signed up more than a million new members for its Prime service, which guarantees two-day delivery.

“That is a problem for shippers. A million new people signing up at the eleventh hour to get free and fast shipping up until the day before Christmas?” Mulpuru said. “That is crazy. And that is unprecedented volume.”

UPS ended up with more packages than it could fit on its planes — 132 million during the week before Christmas, said spokesman Tyre Sperling.

“The demand was greater than we had forecast,” Sperling said. “We attribute it to the shift to online shopping.”

To avoid a repeat next year, some retailers including Best Buy are pushing for more customers to pick up their online orders in stores. Some experts expect same-day courier services such as Google Shopping Express and eBay Now to take on a larger role, and still others say retailers, particularly the smaller ones, need to know their limits.

Zazzle, an e-commerce company headquartered in Redwood City, was offering promotions and two-day shipping a week before Christmas — a quick turnaround for a company that makes personalized gifts — while also juggling orders through Groupon. Gifts were shipped late, some with defects, and frequently orders were mixed up and mailed to the wrong customer, according to customers and sellers on the site.

“I found it ludicrous that they were continuing to take all these orders when they can’t even fill the ones that they have,” said Eliza Desmarais. On Nov. 24, she ordered a $25 T-shirt for her boyfriend for Christmas and paid $15 for shipping to her home in Quebec. The gift never arrived, she said, and Desmarais couldn’t reach Zazzle by phone or email.

Zazzle spokeswoman Diana Adair acknowledged that the company had some blips over the holidays, including an overwhelmed call center that created long wait times.

“With high volume, with a manufacturing facility working 24-7, of course errors get made, and of course our customer service team is working to resolve every situation,” Adair said. “I think we’re growing, and I think we’re working hard to execute as best as we can.”