Retailers lose an estimated $93 billion in sales annually due to out-of-stock inventory. Whether you’re a small retailer or a multi-billion dollar retail giant, inventory mistakes happen. What matters from a service perspective is how you handle that messaging to your valued customers.

We looked at 10 cases from the past two months in which a STELLAService analyst purchased an item and later received an email notification that the product was out of stock.

Here are 10 best practices for email communications for inventory mishaps.

1. Notify customers as soon as possible. Multiple STELLAService shoppers reported waiting 9 to 10 days for the delivery to arrive, then being forced to call the retailer only to discover the product was out of stock and the order was cancelled. It was the retailers that swiftly alerted shoppers that stood apart.
• In practice: A shopper received this message from Bluefly.com two days after placing the order: “Unfortunately, the following item(s) that you ordered are now out-of-stock. Although we try our best to maintain 100% accuracy with inventory, there are rare occasions where we experience an inventory error.”
2. Apologize. In one instance, a luggage retailer not only apologized, but offered up links to alternative products, asking if either product was satisfactory, in addition to offering up a refund.
• In practice: “Please accept our apologies for this inconvenience.” (Littledudesanddivas.com)
3. Provide a reason. Was it a processing error, or was the item discounted by the manufacturer? Most customers will appreciate the honesty.
• In practice: “Unfortunately we have just been informed by the vendor that the item below is discontinued and no longer available.” (Littledudesanddivas.com)
4. Offer up alternative but similar products. The customer may be happy with a similar item, and this gives you a chance to avoid the loss of sale.
• In practice: “I’m attaching an image of belt that is similar to the one you purchased that we currently have in stock. This belt is $10 cheaper than the belt you purchased, so the difference would be refunded. Would you like this one as a replacement?” (BeltStation.com)
5. Difference in price? Alert the consumer as to how the difference will be refunded. Be sure to also provide a time frame in which the customer can expect to receive the refund.
• In practice: “Please allow 3-4 business days for the refund to reflect back on your card.” (Luggagepoint.com)
6. Provide contact information for your customer service team including hours of availability. It may seem obvious but not every email our shoppers received clearly stated customer service contact details and hours of operation. Provide all open channels including phone, email, and social to give the consumer the opportunity to engage in the channel of their choice.
• In practice: “Should you require additional assistance, email us at flyrep@bluefly.com or call toll free at 1.877.BLUEFLY (1.877.258.3359). From outside the United States, please dial 1.212.944.8000. FlyReps are available to serve you Monday through Friday from 8:00 a.m. to 9:00 p.m., Saturday from 10:00 a.m. to 6:00 p.m. and Sunday from 12:00 p.m. to 6:00 p.m. EST.” (Bluefly.com)
7. Temporary issue? Offer to notify the customer as soon as the item is back in stock. It may be that in a few short weeks your customer can have the desired item while you can cash in on the sale.
   
• In practice: “You’re the first to know. This best-seller’s back in stock and ready to ship.” (Westelm.com)
8. Discontinued item? Provide details on how you will issue a full refund (if applicable) or let the customer know.
• In practice: In one case, a guitar store sent an email that said “nothing has been charged to your card” — exactly what we needed to know. (MusicStore.com)
9. Offer a small credit, free shipping or discount code. While a shopper may be disappointed they weren’t able to get the item, a little effort can go a long way. 
• In practice: “We apologize for any inconvenience this update may cause and would like to extend an offer of 10% off any replacement item for that inconvenience. If you find another item to order in place of the original fixture, please give one of our representatives a call at 1-866-482-8321 and they will be happy to apply the adjusted price to your new order.” (LightingCatalog.com)
10. Give the shopper the status of the rest of the order. If the out-of stock item was purchased with other items, let them know the status. We suggest taking this one step further and carrier info, tracking number and estimated delivery date for the rest of the order. 
• In practice: “Because we cannot be sure at this time when, or if, we will be able to re-stock the item(s), we have removed the item(s) from your order. The remainder of your order will be shipped and you will not be charged for the cancelled item(s).” (Bluefly.com)

One final note: Always use correct spelling, grammar and punctuation when communicating with customers. You’d be surprised at what our shoppers received in their inbox.

There were cases where retailers fumbled the out of stock messaging to shoppers. In several instances over the course of a month our shoppers were never alerted that the purchased items were out of stock. In fact, shoppers had to call the retailer to inquire as to the status of the delivery. So, while it’s best to avoid the out-of-stock scenario completely, if it should happen alert the customer as soon as possible.

Two years after its triumph on Jeopardy!, the IBM Watson Engagement Advisor is taking on customer service. Leveraging the cloud and online chat sessions, IBM Watson will enable a brand’s customer service agents to provide “fast, data-driven answers,” according a press release.

In one simple click, the solution’s “Ask Watson” feature will quickly help address customers’ questions, offer feedback to guide their purchase decisions, and troubleshoot their problems.

Brands trialing the IBM Watson Engagement Advisor for customer service include Australia’s ANZ Bank, Nielsen, Celcom, IHS, and Royal Bank of Canada.

IBM’s Smarter Commerce initiative includes the newest capabilities of IBM Watson, which the company says are a natural fit for customer engagement, based on its ability to understand the nuances of human language, process questions akin to the way people think, and quickly cull through vast amounts of big data for relevant, evidence-based responses to its human users’ needs.

IBM says the Watson Engagement Advisor will help companies make their interactions count by knowing, delivering and learning what each customer wants – in the context of their preferences and actions – sometimes before even the customer knows it themselves.

Since its television debut, IBM Watson is smarter, faster and smaller — having gained a 240 percent improvement in system performance, and a reduction in physical requirements by 75 percent. The cognitive computing system can now be run on a single Power 750 server using Linux, transitioning from its original size of a master bedroom to that of four pizza boxes.

Our industry is littered with dead companies that have tried to exceed customer expectations at the lowest possible cost, at all times and in all situations. As a 17-year veteran of furniture retailing, I can tell you that there is no more difficult customer service challenge than the safe, cost-effective delivery process of getting a piece of furniture into a home.

The Challenge
Furniture is heavy, difficult to move, and easily damaged. Just one scratch on the table, or imperfection in the leather, and that piece is coming back to you at great expense.

Most online furniture retailers employ white glove delivery services that are supposed to “deluxe” a piece before that last mile. Sometimes this happens, but sometimes it doesn’t. And even if the item is inspected before it gets loaded into the truck, it can always get damaged during transit or off-loading. Even worse, the delivery personnel can actually inflict damage in the home (although most are very conscientious about avoiding this situation).

Add to this mix the fact that there are variations in almost all furniture because it is still put together by hand, even if the factory is in China. The use of organic materials like marble and leather further compound the lack of uniformity. What customers see on their screen can be very different than what they receive, although you may have made every effort to make them aware of this possibility.

As a retailer, you want to do everything you can to make sure the customer has an outstanding experience. But the fact is, you have a set margin to account for delivery services, and unless you put it in your truck and drive it there, you have very little control at the end point of the transaction. The result? Every order has a potential black hole of customer service.

So let’s review: We have an easily damaged item that already may have variances from what the customer expects. Then we are shipping it great distances at great expense, with little room for error. We have customer expectations framed by outstanding shopping experiences on sites like Zappos or Cabelas or Road Runner Sports (or dozens of other outstanding online merchants). To avoid the black hole created by these factors, the furniture retailer has to bring a very specific skill set.

Our Approach
Here’s a breakdown of how we deal with this black hole at Carolina Rustica.

First, we use our brick and mortar experience to frame customer expectations about the product. For example, if the piece looks different in person than in the catalog, we use our picture instead of theirs.

Secondly, we know there is no one-size-fits-all delivery solution, despite what they might tell you! With almost twenty years of experience shipping product around the country, we know who does best in a specific region, and allocate freight accordingly.

Third, we select shipping levels based on the margin, and bake this in to the product pricing. Lower value products don’t need to go White Glove; in some cases they can ship on a common carrier at much lower cost. Of course we make sure customers know which items ship by common carrier and which items ship by the higher White Glove service beforehand. They can always upgrade for a price.

Lastly, we expect the unexpected. I’ve heard complaints about the driver’s personal hygiene, walls getting dented, furniture smelling funny, deliveries being late by minutes, trucks being too big, doors being too small, and varmints living in the furniture. All true. Do we expect these every time? No, but we certainly know how to react.

As successful retailers, we owe it to our customers to do the absolute best within our means. We must, in order to stay in business. But we also need to be aware of the costs of maintaining service levels and use our shared knowledge to find the best service for the price paid. Then we will be best prepared for dealing with the real customer service situations that occur in the field and outside of our immediate control.

Richard Sexton founded Carolina Rustica in 1997. Now a nationally-recognized multi-channel retailer of high end furniture, the company embraces technology and consumer trends to grow its customer base. In 2012, Carolina Rustica was sold to Mattress USA, based in Brighton, MI, and Sexton continues in his role as President. Sexton has an MBA from the Kellogg School of Management at Northwestern. He lives in Concord, NC with his wife, two daughters, and long-time business advisor, Magoo the parrot. Follow Carolina Rustica on Facebook, Twitter and Pinterest.

Photo courtesy Carolina Rustica.

The monthly pulse of customer service in the U.S., showcasing the top performers, now includes 100 companies.

The newcomers are already impacting the rankings with great customer service. LLBean.com has led the email category for six months, but JCrew.com rivaled the retailer in nearly every metric in April. It was a single email reply that escaped LLBean.com for three days that caused their drop in the rankings.

Meanwhile, Nordstrom.com continued its dominance in phone support in the Department Stores category. The retailer has topped this list for six consecutive months, offering the fastest time to a live agent and best product and policy knowledge in April.

With speedy shipping becoming a more competitive component of the ecommerce experience, REI.com created some happy campers in April with the top shipping performance in the Sporting Goods vertical. The retailer not only had the fastest average delivery speed, but scored high marks for package fit.

A noticeable trend in April was several retailers missing high marks because they neglected to include a proper return slip. Stores like Bloomingdales.com, Lowes.com and Motorcycle-Superstore.com were able to stand apart from competitors with detailed packing slips that made the returns process easy.

Three retailers topped three categories: Lowes.com in Hardware/Home Improvement, Staples.com in Office Supplies, and SurLaTable.com in Home Furnishings.

STELLA Monthly Benchmarks includes companies covered by STELLAService with at least $100 million in revenue (according to the Internet Retailer Top 500 guide), as well as the five largest retailers in each of the 11 most popular customer categories.

The companies are measured across four service areas: phone, email, shipping and returns. STELLA Monthly Benchmarks are designed to provide consumers with guidance for smarter shopping and retailers an independent, reliable benchmark for measuring and improving their customer service.

A full list of companies included is available here.

Companies that topped their vertical in April:

Phone

AutoAnything.com
BarnesandNoble.com
Build.com
Net-A-Porter.com
Nordstrom.com
Overstock.com
Sephora.com
Shop.Lululemon.com
SierraTradingPost.com
SurLaTable.com
Vistaprint.com

Email

Dermstore.com
HSN.com
JCrew.com
Lowes.com
Nordstrom.com
OreillyAuto.com
REI.com
Shopping.HP.com
Staples.com
Store.Nike.com
SurLaTable.com

Shipping

Cooking.com
Dermstore.com
Lowes.com
Macys.com
Motorcycle-Superstore.com
REI.com
Sears.com
Shopbop.com
Staples.com
Store.Apple.com
Store.Nike.com

Returns

AutoAnything.com
BarnesandNoble.com
Bloomingdales.com
Fanatics.com
Lowes.com
Shop.Avon.com
SportmansGuide.com
Staples.com
SurLaTable.com
ToryBurch.com
Walmart.com

See how each vertical stacks up in STELLA Monthly Benchmarks here.

Admittedly I was a bit surprised to see the author of The Customer Rules offer up his personal contact info to his readers in the middle of the book.

If you ever need to contact me, just go to my website, www.LeeCockerell.com. There you will find my address, my e-mail, and my cell phone number. When you call me, I will answer the phone myself.

Was the author just doing this to illustrate a point, specifically Rule No. 21: Make Yourself Available? I decided to reach out with an interview request. Sure enough, Cockerell personally responded to my note just a few hours later, agreeing to a phone interview and sending along some additional details about his second book.

Cockerell makes the point early on in The Customer Rules that in any given company customer service is in the job description of every employee (Rule No. 1: Customer Service is Not a Department). He’s taken lessons from throughout his life — from his three grandchildren, from his wife’s 64-day stint at the Orlando Regional Medical Center, from his auto mechanic, Manny, from his time peeling potatoes as an army cook and from his 41 years serving at Disney, Marriott and Hilton — and rolled them into an easy to read manual for every industry and organization regardless of size, industry or profitability.

My takeaway? Treat everyone with whom you interact — vendors, creditors, suppliers, customers, other employees — with consistency, integrity, sincerity and creativity. Treat them like you would treat your loved ones. It’ll pay dividends.

The following is a transcript of our conversation, edited for length.

In your second book, The Customer Rules, you offer up 39 rules for delivering sensational service. What’s your essential advice to the managers and executives looking to improve their organizations from a service perspective?

Most managers are not paying enough attention to the three most important areas related to improving the experience of your customers:

1) On Hiring: Get tougher about the people you hire. Work harder and get systems in place to know which strengths they’re bringing. Hire people who have a passion for being in front of customers every day (Rule No. 9: Hire the Best Cast). A lot of people should never be in front of a customer. They’re not wired that way. They can’t handle the pressure and can’t stay high energy. Most companies don’t take enough time to hire the right people. They say in America that we hire to fast and fire too slow, and you end up with people who shouldn’t be there.

At Disney we are extremely careful about how we hire. We use a lot of profiling and have a lot of systems in place to make sure we’re hiring the right people. You go to Disney World and the chances of you running into a rude cast member or somebody not taking care of you is almost zero.

2) On Training and Testing: Before you turn people loose on the customers, make sure you test them (Rule No. 39: Become an Expert at Creating Experts). Training happens at a lot of organizations but testing does not. Don’t practice on your customers. Don’t turn them loose too quick. That’s how we do it at Disney.

3) On Culture: At Disney we focused on creating a culture where our 65,000 cast members wanted to come to work not because they had to for the paycheck, but they wanted to because they were proud of where they worked. All of that has to do with how we treat them. We respect them. We give them hope for a better career. We train them and develop them so when people wake up in the morning and want to do the job.

Most managers underestimate their leadership impact on the whole organization when they walk into the business in the morning. Being careful about what they say and do, paying attention to people, showing appreciation for them, recognizing them, giving them encouragement — all of those things we do for our kids. It’s kind of a simple approach but people are not paying enough attention to it. I work with companies around the the world to get culture right. Culture is not part of the game — it is the game. It’s everything.

Excellence is a state of mind. If you want it and everybody knows you want it and you declare it. When you declare something the whole world watches. When you declare it employees notice. I get pretty excited about getting people riled up to be great, not average.

In your book, you talk about people who consider customer service to be a “soft” issue; one that doesn’t impact the bottom line. What’s your response to these people?

If you don’t have the right relationship with your customers it will hurt your bottom line. Anybody who doesn’t focus on the “soft” stuff will never know how much more they could have made. Companies are finding this out around the world. There’s so much competition in the world today. Service is perhaps the last thing they can do if they’re a small business. Amazon and others are going to eat their lunch when it comes to price and delivery. Somebody asked me the other day: How do I protect my business? You have to be so good and your customers have to love you so much that they wouldn’t think of going to Amazon because you take care of them.

What lessons have you learned from your time spent serving in the Army and training overseas?

I joined the Army in 1964. I learned about discipline. I learned about serving. And I got pretty patriotic. For years I’ve been doing work with the military. I went to Iraq in 2011 and did 13 seminars for the military and the state department during the war. It was incredible. I have so much admiration for these people.

One day when I was writing this book I looked at my grandson Tristen, he was 10 years old and asked, “What does service mean to you?” He said, “Papi, when you serve you’re the giving one.” (Rule No. 22: Always Be The Giving One) The giving ones are those in our military, the fireman, the nurses, the first responders. We saw it in Boston the other day — the giving ones who go toward the problem and not away from it. That really has struck me my whole life. Really I try to wake up every morning and see how I can help people, not make their lives more miserable. So when somebody wants to meet with me, wants to see me or wants help I try to make myself available. It’s the least you can do, help a few people who need it.

What do ecology and customer service have to do with one another?

Ecology is about creating an environment. We’re all worried about the national environment right now and it’s polluted because we fill it every day with all kinds of air pollution and water pollution. The weather’s changing. It’s the same in a company. The leaders and managers have got to understand — there is an ecology. It’s fragile. The behavior is how it gets poisoned. The way they treat people and the way they respect people, include, listen, train, develop — all of these things contribute to an environment that’s either getting better or getting worse.

And don’t underestimate that that’s a big part of your job in a company is to create the right environment and be an ecologist (Rule No. 6: Be an Ecologist). Keep that top of mind. If you’re the guy in charge you don’t need to be doing everything that you hired people to do. You need to be making sure the right people are getting hired and getting them trained,  treating them great and and be a role model. All of this creates a great environment and culture. And that’s just the way I think about it.

When you go to work in the morning, when you get out of the car or get off the subway, when you walk in your office, there’s one of two things that can happen: You personally can make it better or you personally can make it worse. You’ve got to understand you control that. You make that decision. And once you start to think you can make it better you will make it better. Slowly but surely the environment will get better and better. There will be less turnover and your employees will be more inspired. They’ll give you 150% instead of 80% or 100%.

In The Customer Rules you talk about the importance of consistency when dealing with customers. What happens when you fail to deliver a consistent level of service?

If you don’t have consistency you disappoint people. People don’t like surprises. I think of it like a Broadway show. Whether it’s Disney or your own company, every company is putting on a big Broadway show. You’ve got the story you want to tell. Hopefully you’ve got the right actors — the people you’ve hired to work at the company. Hopefully you’ve got the right script (Rule No. 10: Be Your Own Shakespeare). Hopefully you’ve rehearsed it, rehearsed it and rehearsed it (Rule No. 12: Rehearse, Rehearse, Rehearse). You pull off the same show every day. You see the shows that stay on Broadway for 10 or 15 years and you have the shows that cancel after 3 weeks. That is a direct relationship to a consistently high quality of performance that gets everybody talking about it.

The point is, if you want to be great, everything matters. The website matters, how you answer the phone matters, your energy level matters, who you hire matters, cleanliness, friendliness, sanitation, how you communicate, how you’re available. Everything matters if you want to be great. If you’re not great today you’ll be out of business. Competition is fierce. Things can turn on a dime anymore. Companies better be on top of their game, every day. Don’t let it start to slide. If you want to win you have to be on top of your game, every day in every area.

What is your favorite example of a person going ‘above and beyond’ to deliver exceptional customer service?

I think about this a lot. We do remember these people and it happens so seldom that we go into shock. I’ll tell you one story from 9/11 that will blow your mind. That morning the planes hit and I had to shut down Walt Disney World in about 90 minutes. We got all the guests back in their hotel rooms. We picked up hotel charges for them because they couldn’t leave. We gave them free phone calls and free meals. Everybody was crying. We had a lot of people visiting from New York and New Jersey. A fireman was here and he wanted to get back to New York to help out. There were no rental cars, no flights, nothing. One of our bellman gave him the keys to his car and said, “Just take my car. I’ll come and get it later.” He didn’t even know the firefighter. I think about that and I’m just shocked.

A few years ago my wife, Priscilla, became so ill that she nearly died. Before heading in to perform her surgery, the doctor made us a promise: To fix her. It was supposed to be a four hour surgery and it ended up taking 9.5 hours. When the doctor came out I asked why it took so long, the doctor responded: “Because I did everything I told you I would; I fixed her.” He had stayed in the operating room despite back problems to deliver on his promise to fix her. These folks are the giving ones who really serve when your life is at risk (Rule No. 22: Always Be the Giving One).

And I think most parents are the ones who go above and beyond. Talk about the ones who serve. Your mother and father would do anything for you; they would come and get you 24/7 — that’s service. I said I’m going to write a book someday that’s called manage like your mother (Rule No. 5: Ask Yourself, “What Would Mom Do?”). Mothers are the best leaders in the world. They don’t care if you’re happy. They care if you’re successful. And they’ll do whatever they have to do to make you successful.

Lee Cockerell’s book, The Customer Rules: The 39 Essential Rules for Delivering Sensational Service, is available in print, audio and digital format at Amazon.com.