In its second-largest acquisition, Amazon buys the company for $970 million.
Undaunted by their lack of resources or web knowledge, owners of small retail sites tackle (many) big issues.
You may never have heard of Papaver Rhoeas, but if you know what it is and you’ve searched for it online, chances are you’ve been on AmericanMeadows.com.
Ray Allen, founder and president of the wildflower seed retail site, already knew that seed for the common Red Poppy was his top seller. But one day while poking around the site’s log files he was surprised to discover that its Latin botanical name ranked number 20 in popularity among the hundreds of search terms that brought visitors to the site.
When he found Rudbeckia Hirta, or Black-eyed Susan, at number 30, a lightbulb went off. “Don’t have just the obvious keywords-have lots of them,” he advises.
Allen now pays about a nickel a word on paid search engine Overture Services Inc. for Latin names, for which there is, no surprise, little competition. While he also pays as much as 72 cents for a limited number of more competitive keywords, the mixture keeps his average cost per click down to 24 cents.
AmericanMeadows sells seed for 70 varieties of wildflower, and each has a page headlined with its botanical name. 300 people a day come to the site via searches under any of those names. To cultivate that important connection from the web universe to his site, he bought top positions in all 70 words. “They’re putting in Latin names and they’re spelling them right,” Allen says. “Those people are hardcore gardeners. And hardcore gardeners are some of my best customers.”
The experience taught the former advertising agency executive something about effective media buying in an online economy. “Try to find words that are cheaper; it brings your average cost per click down,” he says. “Every online business has web logs, and you can find these words in there.”
That’s the kind of insight an Internet retailer might pay a marketing services company for or depend on a large internal team to figure out. But for every Lands’ End or Amazon, there are hundreds-thousands-of smaller niche players who stand as proof that making a go of it online doesn’t necessarily require either. These survivors have had to tackle and solve all the same problems the big guys do, only without the big guys’ resources. Many have invested long days and even longer nights in figuring out how to get more for less and leveraging whatever assets or knowledge they already possessed. They’ve also learned from more than a few bumps along the way.
Drop-shipping everything poses a challenge, but under the watchful eye of a small retail owner, a truly virtual store works
An early promise of the Internet was the virtual storefront. Web retailers would be the customer-facing window on manufacturers and suppliers, taking orders, processing credit, and arranging drop shipment of goods to customers without ever once putting their hands on the goods.
That’s exactly how it works at DelightfulDeliveries.com, a Long Island, N.Y-based online gourmet gift basket retailer with 25 supplier partners, 1,200 online SKUs, and a 600-square-foot office with not a single piece of inventory. “It’s truly virtual,” says CEO Eric Lituchy, who co-founded the company with his wife Gina Ezratty. “We have a great store without having any products in stock.”
But wait a minute-didn’t the purely drop-ship model help tank more than a few e-retail entrepreneurs that tried it? So what did Lituchy do differently?
Lituchy grants that the drop-ship model does produce lower margins and that the loss of some control, such as losing the ability to mix and match basket contents by special request, is a downside. Yet the nature of his merchandise-perishable goods-offered no other choice unless he was willing to invest heavily in refrigeration and a warehouse operation, something he knew he didn’t want to do based on his experience with a previous direct gift business. So to protect himself and his site from representing suppliers who don’t deliver as promised, he’s very particular in choosing partners. “We look for companies that have been doing drop-ship for a number of years. Most of the partners we work with either already have their own sites or they have been doing mail order for a long time. They’ve already gone through their growing pains,” he says.
DelightfulDeliveries launched online in 1998 and was profitable within two years, Lituchy says. It had sales of $1 million last year and anticipates hitting $3 million this year. Not bad for a company with three computers and two and a half employees-one of whom is on maternity leave. What made it work as the company’s sales scaled up is effective automation and tight integration of front-end processes with the back end.
When Lituchy started the company, he personally e-mailed each order to the right partner. At up to 30 orders a day, the process was time consuming but manageable. But within a year of launch, order volume grew to the extent that manual order processing was no longer practical. At a cost of about $5,000, the company worked with a web development company to design a back-end system hooked up to its existing Yahoo storefront platform that would take orders and parse them out to different parts of the database for different partners.
The system generated an e-mail notification to partners as orders arrived at DelightfulDeliveries.com. The partners then could check their password-protected area of DelightfulDeliveries’ database for order details to initiate fulfillment. As they fulfilled orders, the partners put tracking information back into the system, which generated an e-mail notification back to the customer from Delightful-Deliveries.com.
The time is right
As order volume has continued to grow the company has again had to boost the functionality of its fulfillment system. Last December, working with another web developer, it started moving onto a Linux platform that affords some key upgrades. Among them, it offers a more streamlined process for customers placing orders, and it automatically displays only real-time delivery options to the customer placing the order.