PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
No further evidence of how the web has become woven into the life of the American consumer is needed beyond looking at the top retailing sites in flowers, gifts and jewelry. Those most mainstream of purchases have migrated smoothly to the web to the point that web shoppers have made some new-breed pure-plays successful and helped build other brands that started as pure-plays into retail brand powerhouses. Best of the Web in the Flowers, Gifts & Jewelry: 1-800-Flowers, American Greetings, Blue Nile, Guild, Ice, Red Envelope
No further evidence of how the web has become woven into the life of the American consumer is needed beyond looking at the top retailing sites in the flowers, gifts and jewelry category. Those most mainstream of purchases have migrated smoothly to the web to the point that web shoppers have made some new-breed pure-plays successful and helped build other brands that started as pure-plays into retail brand powerhouses.
RedEnvelope.com is one such site. Launched in 1997 as a pure-play known as Gifts911.com, it adopted the RedEnvelope name in 1999 and the next year started mailing catalogs. Today, it is a well-respected, upscale brand that expects to sell $33 million worth of gifts in December alone. And it has done it by leveraging the web to create an outstanding presentation of merchandise and a classy site that appeals to the $75,000+-a-year households that shop there. “It’s really not about the product,” says San Francisco retail analyst Duif Calvin, “it’s about the experience of getting the product. It’s about how the product will fit into your life or your recipient’s life.”
And many of the successful sites in this category go up from RedEnvelope in price, jewelry retailers BlueNile.com and Ice.com being two. Half of Blue Nile’s revenue comes from the sale of engagement rings. BlueNile has leveraged the web to make a comfortable experience out of what usually is an intimidating experience. Ice.com has used the web to present impulse buying opportunities to appeal to women who want to reward themselves with a mid-priced bauble. Putting the merchandise on the web where it is accessible 24 hours a day feeds right into the impulse nature of the buy.At the other end of the spectrum is American-Greetings.com. It may seem easy to charge customers for greeting cards, which, after all, aren’t all that expensive, even the high-priced ones. But American Greetings had as big an obstacle to overcome as just about any other web site: the market for charging customers for e-cards was poisoned early on by marketers who gave away cards and thought they could make money on advertising. AmericanGreetings successfully bucked that trend. A year ago, it started charging for subscriptions to e-cards. Today, it has 2 million subscribers, a remarkable turnaround in a market that many thought would never make money on the web. “They’ve made it attractive enough and low-priced enough to convert a lot of customers to paying customers,” says Mary Brett Whitfield, senior vice president of consultants Retail Forward Inc.
A bloomin’ hit
Gift retailer 1-800-Flowers.com knew early on that it could offer something more than flowers, but it took the Internet to make it happen. “We were a company waiting for the web to develop,” says President Chris McCann of his 26-year-old brand. “When our company started taking off around our 800 phone service, we realized that we weren’t in the flower business-we were in the gift business. Customers were trusting us to deliver their floral gifts, but that satisfied only three of what they told us were an average 12 ship-to gift needs a year.”
The company responded by launching product extensions such as 1-800-Candies, 1-800-Baskets and other brands, but soon pulled back because the expense of extra catalogs-the only way to reach customers directly-was too high. It did, however, leave some of those non-floral gifts in its web offerings, then listed on CompuServe and later AOL.
Over the years, customers of those products turned into the company’s most valuable customers. The dawn of e-commerce allowed the company to spin that customer loyalty into gold with the launch of its own URL in 1996 and the gradual addition of non-floral gift lines ranging from gourmet popcorn to fine china. Today, the web, at $218 million, nearly half of last year’s total sales of $495 million, is its fastest growing channel.
The web is more than simply a less-expensive marketing or order-taking vehicle for the company, however. It’s also become a key means of bonding with customers. An online gift reminder service, for example, puts the company in a dialogue with customers not just at major holidays but year-round. “We used to do it offline, but once we moved it online it took off,” McCann says. “The response from our customers is tremendous. We have an interactive relationship with them now.”
Jupiter Research Inc. analyst Julie Deeks credits the company’s fulfillment operation, which depends on an internally built extranet linking it with thousands of suppliers, for part of its success. “One of the things that has given them staying power is fulfillment accuracy,” she says. “They’ve been astute at anticipating and delivering on demand around holidays, a challenge for all retailers, but especially those in the gift business.”
This year, the company has used the web to bring more customer involvement into merchandising and marketing, expanding its use of online surveys, focus groups, online sweepstakes and contests. “The web has provided us with our growth engine,” says McCann. “It’s enabled us to change our business model from being leader in floral gifting to leader in overall gifting.”
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