A $50,000 Lesson in Customer Service

By Jeff Goldberg, President & CEO, Cali Bamboo, San Diego, Calif.
Shortly after starting our sustainable bamboo building supply business, my partner Tanner Haigwood and I almost lost it all in the blink of an eye. We'd just graduated out of my townhouse and into a proper facility. Cali Bamboo is founded on values that we believe in deeply. But we were so excited by our early success that we overlooked certain key details -- like setting up a customer service department -- and almost paid dearly for it.

If it seems too good to be true, it probably is
Bamboo fencing was our first product to really take off. We were one of the first companies to ship it nationwide, which meant that we were breaking new ground in shipping logistics, both in terms of inbound freight from China and outbound freight to the customer. We were experimenting with several different freight companies. A new shipping company was giving us incredible rates, and we had done some small-scale deals with them. So we decided we were confident enough in their services to do a big bulk shipment with them.

In those days, any of our products that arrived from China were already completely sold out. As soon as we received a container shipment, we would break it down into individual orders and send one or two truckloads out across the country. We got the product in and out again and just assumed the outbound shipping was reliable.

Everything worked out about 99.9% of the time. Then one day we loaded $50,000 worth of product onto two trucks and 85% of it never got where it was going. In fact, 20 of the 30 orders we sent out essentially disappeared.

Plunging into a sea of hold music and voicemail
Our in-house shipping processor sounded the alarm when the tracking system showed that more and more of the packages were missing their destinations. Customers started calling and things got complicated -- quickly. We didn't have the inventory to reship the product, and we didn't have the cash flow to eat the loss or refund our customers' money. I went from being on top of the world to thinking, 'Oh my God, this ride could be over and I may not have a business next month.'

Losing that much product threw my entire business, my entire operation -- my entire state of being -- out of whack. My partner and I couldn't help reacting that way, which of course trickled down throughout the workforce. If we didn't know what to do, how could our employees?

The first lesson we learned was that the customer service stream flows both ways. Our problem was also our shipping broker and freight company's problem, so we burned up the phones trying to get a worthwhile response from the shipping company.

We also learned that sometimes the only way to apply real pressure is to do it in person. My partner and I hopped in the car and drove down to the shipping hubs -- which were fortunately not too far away -- and shook things up. We basically got kicked out of these places because we were so out of control, but our business and livelihood were at stake. We weren't about to go down in a sea of hold music and voicemail.

Buy time, be transparent and hit the restart button
Showing up in person dramatically changed the urgency with which the shipping company addressed our issue, and ensured that the right people were dealing with it. That bought us some time to lean on the broker that had handled this transaction -- along with all of our other business with several more reliable carriers. The broker gave us some credit, and we withheld a few payments to make sure that they put pressure on the problem carrier as well.

In the meantime, we had our own customers to deal with. Obviously, the first step was to set up a customer service department. Along with that came a complete reworking of how we ran our operations. We started contacting people to explain the situation honestly and assure them that we were going to make everything right. As I recall, all of them believed us and were willing to wait a little longer to get their product.

Those shipments never did turn up, but we were able to recoup about half of our losses from the shipping company. Fortunately, we had just started to build an inventory, so a big load of fencing -- enough to cover the orders that disappeared and those we'd received in the meantime -- was on its way from China. We got lucky.

The importance of sustainability
Prior to this debacle we had always been 'the fast-growing company,' enjoying taking risks and being overly aggressive -- that was becoming part of our culture. The basic concept of value -- that it's worthwhile to pay a little more for a product or service if you can count on it -- had started to elude us.

With the shipping, we were blinded by those rock bottom prices -- even though we suspected that they were too good to be true. What we ended up with was a company that tried to brush us off when we were in a state of crisis.

Similarly, having a customer service department to address our customers' concerns should have been a core part of our own value equation. After all, a business founded on 'sustainability' has to be sustainable, and that means being around tomorrow, next month and next year.

Eco-entrepreneur Jeff Goldberg started his sustainable business after a year-long surfing sabbatical. Cali Bamboo donates one percent of its profits to nonprofit environmental organizations including San Diego Coastkeeper, the Surfrider Foundation and TreePeople.
-- As told to Joe Conway

Resources:

• Read about how to improve your company's customer service.
• Learn how to survive your own cash-flow crisis.
• See how your business matches up against a list of best customer service practices.