March 28, 2001, 12:00 AM

Success in the new market requires going back to the retailing basics

(Page 3 of 3)

Kenny Kurtzman, president of Ashford.com, outlined the steps Ashford has taken to succeed:

 

- “We have a real business model. It sounds trite but it’s important not to have a site that relies on 100 million customers to make money.”

 

- “We have no debt.” The company keeps it that way by finding ways to reduce customer acquisition costs, keep operating costs flat as volume grows, raise margins, improve inventory turns and build customer loyalty.

 

Similarly, Martin McLanan, CEO of RedEnvelope.com, said the success of the company is the result of keeping a lid on G&A costs, leveraging experience in technology and retailing and targeting its marketing. “We don’t want our brand everywhere,” McLanan said. E-mail campaigns and agreements with selected retailers and portals are key. “The last thing you want is great brand attributes but no call to action,” he said.

 

As evidence of RedEnvelope’s success in branding, 40% of its target market of households with incomes over $75,000 are aware of the brand. RedEnvelope boasts 400,000 customers and an average order of $80.

 

William van Cleave, vice president of marketing for FTD.com cited key factors to online success:

 

- Echoing Kurtzmann, he said retailers must have a “real business model.”

 

- Furthermore, “Go where your customers will be. Don’t think they will always be where they are today.”

 

- “Let the customer define the brand,” meaning don’t definine your brand too narrowly.

 

- Finally, “Use common sense.”

 

Today, 83% of FTD orders come through the web. While FTD.com is a sort of pure-play retailer, the brand does represent 17,000 real-world flower shops that license the FTD service. The average order over the web is 4.4% higher than by phone, web customers buy 10% more often than phone customers, retention rate is twice and lifetime value three times that of phone customers.

 

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