In its second-largest acquisition, Amazon buys the company for $970 million.
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“Before, you could enter an order for next-day delivery, but if you were entering it at 9 p.m., for example, though the system would take the order, it would not go out for the next day because no one is shipping at 9 p.m.,” says Lituchy. In contrast, the new system has built-in rules that display only shipment options that are actually available, depending on the time of the order and the ship-to address, as cut-off times for next-day delivery vary throughout the country. “If you place an order on the site at 9 p.m. Thursday, it tells you the order could ship Friday for delivery Saturday, so it shows you time-accurate information,” he says.
As improved automation reduces such headaches for Lituchy, it’s freed more time for finding new partners and for search marketing optimization. He has keywords on both Google and Overture and tracks their performance personally. He uses reports from the search engine to measure traffic, but uses an analytics solution bundled into the software provided by his web development company to measure sales, tracking each keyword weekly and adjusting accordingly. The software, however, provides tracking with a 24-hour delay, one reason the next step will likely be a move to a live hosted analytics service from an outside provider. “It’s very expensive, in my eyes, but it’s probably going to be worth it,” he says.
Lituchy says paid search marketing is now the most important driver of his business, but he warns that online retailers must ensure they have plenty of stock on offer for the traffic that paid search marketing drives. If not, a retailer pays for traffic that pops onto the site, then out right away when shoppers can’t find what they’re seeking or be enticed into buying something else. “You really have to have the products to back up paid search,” he says. “When we had only a few hundred products, if we had done the kind of advertising we do now, we would have been out of business. Now that we have more products to choose from, someone may come searching for a fruit basket but wind up buying a cheesecake. That’s really the advantage we have-the number of products and the quality.”
She knew nothing about the Internet, but the part-owner of an Army-Navy surplus store created a web site that now accounts for 25% of sales
“We didn’t even use a web development company,” recalls Andrea Schaloum, manager of Gr8Gear.com, the web arm of Seattle’s largest Army-Navy surplus store, Federal Army & Navy Surplus Inc., which her husband’s family has operated since 1956. With family members in the mid 1990s yet to be convinced that the web could augment a flourishing store operation, spending big on web development was out of the question. Today, five years after its 1998 launch, the web site represents 25% of the business.
But getting there wasn’t easy. To put her site up on the web, instead of the more expensive option of working with a development company, Schaloum educated herself and worked with a lone programmer to build it. “I started working on it non-stop in ‘97,” she recalls. “My kids barely saw me.”
Schaloum’s first step was to put the store’s inventory on computer. With thousands of SKUs and a dedicated web workforce of three, it’s a process that’s still ongoing. To keep launch costs down, Schaloum got one of the first available digital cameras and took all the product photos herself, starting with one of the store’s most popular product categories: patches, pins and medals.
Schaloum kept her fingers crossed as this first batch of products went up online: Would people pay $6 in shipping for a patch or a medal? They did, and still do, with hardly a day going by without orders for these items since the site launched. Starting with about 1,200 items, the online inventory, though still short of what’s available in store, now numbers about 5,000. Schaloum’s goal is to have 12,000 SKUs online.
Part of any retailer’s success online is how effectively it can leverage what it already has in place. Niche players, particularly those with an established offline presence, have an advantage: their target audience is well defined. As such, their challenge is simply to find more customers of the same type, rather than having to appeal broadly to a mass audience. In Schaloum’s case, a decades-old retail operation, the largest of its kind in Washington State, had a customer base, a network of suppliers and a 6,600-square-foot warehouse that occupies the second floor of an equally large first-floor store. The web’s opportunity was to extend the store’s reach beyond the known retail customer base in a way catalogs could not. “The problem with catalogs and surplus is that surplus inventory changes constantly,” says Schaloum. “Every time you do a catalog, you have to rip something out of it. It’s very costly.”
2, and only 2, keywords
The web’s challenge was working in a medium about which the store operators knew nothing, with the requirement that cost be kept to a minimum. After dividing up site development tasks with the programmer she hired, Schaloum next looked at marketing and eventually decided on banner ads in Yahoo, which she maintained for three years until she switched to keywords with the rise of paid search. Gr8Gear once had more than a dozen keywords. “Now we have only two, because it’s so costly-I pay to stay number one under ‘military surplus,’” she says.