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Retailers Spending More To Woo Customers

Starting this July, you may notice your latest online splurge from Saks Fifth Avenue arrived at your doorstep a bit quicker than in the past.

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That's because the luxury retailer recently invested in a sophisticated order fulfillment system, which will eventually reduce the time it takes to package and load online orders by as much as 17 hours, according to the company.

It's the latest initiative by Saks to improve its customer service—an area in which retailers need to innovate as their margins begin to recover, and as shoppers start loosening their discretionary budgets, experts said.

"As the economy rebounds, companies need to invest in their customer experience or risk falling behind in meeting customers' ever-changing expectations," said Megan Burns, senior analyst at Forrester Research, in a research note.

According to Burns' report, the number of companies planning to spend more on customer experience this year rose in 15 of the 18 technology-based categories the firm inquired about, while the number planning to cut their budgets declined in every category but one.

The Web remained a top priority for companies—4 percent more plan to increase funding on design; 12 percent more said they will up their spending to develop customer feedback tools; and an additional 13 percent said they will spend more on hiring to internal design and user experience staff this year, according to the study.

Though a lack of funds crippled many retailers' customer service initiatives last year, according to the study, they become increasingly important in an environment where aggressive pricing boosts competition for every sale.

"People had to work harder for every customer they've had," said Dan Butler, vice president, merchandising and retail operations for the National Retail Federation

Among those innovating their customer experience this year is Saks' online component, Saks Direct, which recently purchased 60 electronic robots and 1,500 mobile storage pods from Kiva Systems to improve its warehouse productivity.

With the Kiva technology, workers in the company's Aberdeen, Md., warehouse will soon be able to electronically send a message to one of its "bots" to retrieve a mobile shelf with the appropriate inventory for shipping.

The bots then carry the shelves directly to the worker, eliminating the current need to drive a cart through the 60,000 square feet of warehouse dedicated to online orders.

Saks predicts the Kiva technology, which has also been purchased by Gap , will improve productivity by more than 50 percent, executive vice president Mike Rodgers said. It will also decrease the time it takes to prepare an order for shipment, from up to 18 hours during the busy holiday season, to an hour tops.

"With the system fully deployed, we could get things out within 15 minutes," he said. "When we come out of this recession, if we haven't already, we'll be in a position to really show returns on this."

The first phase of Saks' investment, which was purchased for an undisclosed amount, will go live in June or July. And by 2012, all home-flow business will operate on the system, Rodgers said.

Though shoppers tend to have higher customer service expectations for luxury retailers, Butler said, everyday shopping sites are also getting in on the trend.

Sears Holdings is one of 800 retailers to have installed eBillme, an online payment option that allows customers to receive their bill via e-mail, and then pay through their bank—as opposed to inputting sensitive financial information on a retailer's site.

According to eBillme, the business is on track to double or triple its retail adoption this year.

Sears has also adopted customer ideas—such as allowing shoppers to schedule in-store layaway pickups during the holidays—to its Web site, spokesperson Tom Aiello said.

"When people see that you really care, it really builds their loyalty to your brand," he said.

In April, JCPenney will expand its in-store kiosks—labeled FindMore fixtures—to its womens department. These interactive spots allow customers to purchase an item when it is out of stock or too large to fit in the store, by logging onto the company's Web site and printing out an order form, said JCPenney spokesperson Kate Coultas. Customers then take these forms to the register to pay.

The kiosks, which are currently located in the store's home department, will also soon allow customers to purchase items directly from the computers, Coultas said.

What's more, stores such as Target are providing tech-savvy shoppers with mobile couponsto eliminate the hassle of paper-based coupons, while retailers from Staples to Best Buy are adding online assistance via social media networks such as Twitter.

Staples, which completely redesigned its homepage right before the New Year, will also continue to grow its mobile presence in 2010, and has added a live chat option on its Web site to connect shoppers directly to customer service representatives, according to Pete Howard, senior vice president of Staples Business Delivery.

"When push comes to shove, what you want to do is make sure no matter how you're serving the customer, you're doing the best you can," Butler said.

More from Consumer Nation:

Questions? Comments? Email us at consumernation@cnbc.com

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