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Why the web works for The Sharper Image
Richard Thalheimer, sharper Image’s CEO, outlined for Shop.org attendees last week how retailers can use the web to create synergies among channels, reduce marketing costs, create a bailiwick of specialized products and tap foreign markets.
Richard Thalheimer began his keynote address at last week’s Shop.org Annual Summit in New York with a disclaimer that he really does not know all that much about the Internet, as if the founder and CEO of The Sharper Image had to establish his credentials to address the 350 merchants and other e-retailing professionals attending the two-day online shopping conference. It was Thalheimer, after all, who started one of America’s most unique retail chains in 1977 by running an ad in Runners World magazine for a joggers watch, the sales of which netted him a cool $300,000 profit at the age of 27, money he plowed into launching Sharper Image’s premier catalog. That early success and others that quickly followed have built Thalheimer’s company into one of America’s most complete multichannel retail chains with 125 trendy stores, a monthly catalog, popular infomercials and a 7-year-old web site that this year is generating 12% of the chain’s annual revenue, which is expected to grow better than 20% this year to more than $500 million.
But the amiable Thalheimer connected with his audience of e-retailers-and established the only credential he needed to discuss their favorite topic--when he revealed his personal shopping behavior. “I’m a spendaholic online,” he confessed. “If everyone in this room totaled up all the dollars we each spent on line, I would win. I even bought two cars on eBay.”
Clearly, however, Thalheimer’s knowledge of online retailing goes well beyond his personal shopping experiences, and his strong convictions about the web’s growing role in retailing were underscored by his insights on a wide range of e-retailing topics. Those included:
The synergy between the web and traditional retailing channels: “It’s a big leg up to get on the web when you have a strong retail brand,” Thalheimer said, “because you don’t have to spend a lot of money to establish a brand online. We send out 70 million catalogs a year. What does it cost us to advertise our web site on that catalog-nothing.”
The natural cost efficiencies of the web: “It costs us $50,000 to produce and deliver a single page of our catalog to the home, and the life of that page is just 30 days because we mail a new catalog every month, 12 times a year,” explained Thalheimer. “That’s an annual investment of $600,000 a year for just one 8-by-10-inch page, and it gets more expensive all the time. Now it costs more in the first month to get a page up online than it does to print it in one catalog, but it costs nothing to keep it online month after month after month.”
The products that are best suited for the web: “Our products lend themselves to online shopping,” Thalheimer said. “The two basic problems with the web are that it’s too easy to comparison shop on price, and it’s hard to get the touch and feel you get in the store. But our products are unique and are not price shopable. And we have hard goods for which you can advertise and describe features online without having that touch and feel.”
The risks and rewards of e-mail marketing: “Outbound e-mail is an important technique for stimulating the customer and getting the order,” Thalheimer said, “but it’s also one of the most irritating things people have with Internet shopping. People don’t like getting unwanted e-mails. It’s sort of like getting a phone call at dinner. It’s important to give the customer the ability to control this stream of communication. If we don’t want to be lost in the clutter of e-mails or to be regulated because of it, we have to control this tool and have discipline in using it. People tell us that they want no more than one e-mail from us about every four weeks, and that’s what we do.”
The impact of the web on infomercials: “Infomercials work great in promoting sales on the web,” Thalheimer declared. “That’s because people don’t always remember the 800 phone number in the commercial but always remember the web site address. And it’s difficult to control the customer service experience on telephone orders, but on the web it can be very consistent.”
The web’s ability to tap foreign markets: “It’s such a hassle distributing catalogs in foreign markets,” Thalheimer said. “But the fact that the whole world can go online to your site is just astounding to me.”
The importance of affiliate programs: “I believe you should give affiliates a generous portion of your gross online revenue,” Thalheimer told his audience. “They are bringing in incremental business, so why wouldn’t you do that.”
The need to continually adopt new web technologies: “We don’t have instant messaging on our web site, but we hope to have it soon. Online shoppers get conditioned to expecting from you what other guys have, and we are all going to have to have instant messaging. I’m embarrassed to say that we don’t have it.”