Jan. 8, 2008 at 8:00 AM ET
In a quiet, nearly empty conference room on the other side of the city from the 140,000 enthusiasts cramming the Las Vegas Convention Center, a roomful of wet blankets was discussing a dirty little secret of the high-tech industry, a small sacrilege during this annual celebration of all things geek.
Sure, all these gadgets are cool, but do they work? If past history is any indication, often, they often won't. Here's that dirty little secret, unearthed by the group of consultants from Accenture: Product returns cost the tech industry $14 billion each year, a huge chunk for a $200 billion business. The Accenture group will be releasing a study on gadget product returns later this week, but I got an early peek. Their main finding is this: Consumers often can't figure out how to use many of the gadgets they buy, and a sizable portion of those gadgets end up right back at the store.
"Customers believe that the product doesn't work or does not perform as expected," said Allen Delattre, who runs the electronics research group at Accenture. "But almost none of (the products) have a hardware or software defect. The returns are happening because people can't figure out how to make things work."
Return rates are as high as 20 percent in some product categories, he said. For a gadget maker, return of a perfectly working device simply because the buyer got frustrated is something just short of a tragedy.
"And this problem is only going to get worse," said Delattre, after watching Bill Gates' glitzy keynote address Sunday evening in which automobiles merrily talked to MP3 players and Web sites flawlessly communicated with cell phones and cameras. In fact, everything will be connected in the “cloud,” the Microsoft founder said to rabid fans.
Not so fast, says Accenture.
Products like Panasonic's "Life Wall," which will let people display life-sized, live video of their baby sleeping in a crib on the wall next to that night’s Nightly News broadcast will soon be launched into consumers' already complicated lives.[ Cars already are allowing consumers to bark out commands and hear their tunes or talk to friends.
But when the cool car-phone-stereo doesn't work, who does the frustrated consumer call? The MP3 maker or Jiffy Lube? The cell phone handset maker or the network provider? Or is the car salesman supposed to deal with the file not found errors?
"The answer … is to call the person you have the best experience with," Delattre said. But that's not necessarily the company that caused the problem. Instead of collaboration, you are bound to have collisions.
Almost everything new at this year's CES involves gadgets communicating and cooperating like never before. More to the point, tech support staffs at all these companies will have to cooperate like never before. The folks at Accenture aren't sure that's going to go smoothly. In fact, one Accenture consultant said a co-worker recently bought a new luxury car that has been in the shop for 30 days while technicians try to figure out why its Bluetooth capabilities are on the fritz.
How patient will consumers be when these inevitable conflicts and glitches arise? A study last year showed the average gadget buyer has a "pain threshold" of only 20 minutes with new devices. Any problem that can't be solved in the time it takes to watch a Seinfeld rerun will likely cost the retailer a sale.
The cost can be quite a bit more than that. Handling returns is incredibly expensive for retailers, who have to inspect the product, troubleshoot the problem and repackage the item for reduced-price sale. An old rule of thumb in the PC industry states that one returned computer wipes out the profit made from the sale of two others, Accenture says.
'One throat to choke'
The problem of knowing where to complain is familiar to PC users. When their computers won't work, they’re used to hearing the hardware maker blame the software maker, and vice versa. How much worse will the pass-the-blame game get in the new super-connected world? When it comes time to work things out, no consumer will be willing to call multiple manufacturers and retailers to get an answer.
Another Accenture expert, Jean-Laurent Poitou, says consumers will insist on having "one throat to choke" when things go wrong. That means some companies will end up biting the bullet for others' mistakes. If there is too much cost-shifting going on, development of all these products could grind to a halt.
But interoperability glitches aren't the only reason the Accenture folks think returns are going to increase. Thanks in part to the constant hawking by technology companies at trade shows like this one, people's expectations for their gadgets have never been higher. That means there's much greater chance for disappointment, too.
'Razor blade of technology'
But even good news is bad news in this story, Delattre said. Plummeting high-tech prices mean the latest gadgetry is no longer only for the rich and famous. For example, flat-panel TVs and amazing high-fidelity stereos can be in almost every living room (good), though most customers won't want to pay someone else to come set them up (not so good).
"You are basically handing a razor blade of technology to people and telling them they are responsible for the cuts," he said.
At the same time, customer service models at most high-tech firms have simply not evolved to handle all the questions they get from users. Consumers who might tolerate 45-minute waits for support on $50 software products won't put up with similar service for $1,500 televisions.
"It's a perfect storm," for customer returns, Delattre says. "It's not a pretty picture. This is a huge problem for the industry, a huge economic impact. It's a potential profit killer."
Too many features
Given all the magic our gadgets can perform now, why is it so hard to make these incredibly powerful devices simple enough for grandma and grandpa to use? Ben Shneiderman, a professor at the University of Maryland and founder of the Human-Computer Interaction Laboratory, says that companies often forget the practical ways their customers will use products when they pack them with features. Feature feeding frenzies like CES certainly don't help.
"Companies with strong usability communities that test, test, test with real users are likely to have more successful products," said Shneiderman, who didn’t attend the trade show. "Usability is the differentiating factor that makes for video game, iPod, navigation, and cell phone success stories vs. disasters. The trick is aligning consumer needs with interface features. Too many features overwhelm some users."
The cure, however, may be worse than the disease. The Accenture researchers think companies that sell gadgets that customers can't use will look to adopt a new model -- one that sounds like those tack-on extended warranties, only worse. Can't get your phone to work with the car? Pay $10 a month, and your cell phone company will help. Not sure you are getting the best sound playing your iPod through your bedroom stereo? Well, someone will tell you how for $25.
Or, consumers will simply hire part-time home technology helpers, the way they hire plumbers or "pool boys," say the Accenture researchers.
A little advice goes a long way
But Las Vegas is jam-packed with people this week who see things very differently. And so, apparently, do some retailers who work every day to keep consumers happy. Andre Sam manages the Best Buy electronics store on Manhattan's Upper East Side, one of the busiest tech stores in the country. During the holiday season, recognizing that difficult return policies make shoppers reluctant to buy high-tech gifts, Best Buy instituted a liberal return policy. Gifts purchased way back in November can be returned through January with no restocking fee.
Even so, Sam said he's seen very few gadget gifts come flying back into the store. GPS devices, cell phones, and digital cameras all seem to be staying in their new homes, he said.
"People are doing a lot of research at home before they buy these things," Sam said. In fact, the most commonly returned items were not gadgets, but movies -- though there is a gadget-glitch-related reason for that. Some gift-givers bought the wrong format DVDs, for their loved ones, for example, Sam said.
But Sam acknowledged that not everything has gone perfectly. He said he's interrupted several buyers who were on their way to return video games, offering the explanation that the devices simply didn't work. Each time, he said, he took the gadget out of the box, hooked it up to a store TV and showed the consumer what they were doing wrong.
"Once we get it to work, they say, 'Gimmie that back.' All we did was connect everything," Sam said.
For the promises of CES 2008 to come true in America's cars and living rooms, the tech industry will need a small army of folks like Andre Sam to go along with all that technological wizardry. But the question remains, will consumers pay for that?