In its second-largest acquisition, Amazon buys the company for $970 million.
Selling a lot of merchandise to a huge audience is a natural undertaking for a retailer operating on the Internet, but success doesn’t come just from offering as many products as possible at attractive prices and waiting for customers to come and buy. That’s why none of the merchants in this section is taking anything for granted regarding relationships with consumers.
Selling a lot of merchandise to a huge audience is a natural undertaking for a retailer operating on the Internet, but success doesn’t come just from offering as many products as possible at attractive prices and waiting for customers to come and buy. That’s why none of the merchants in this section-though all substantial in size and most operating under names that are household words-is taking anything for granted regarding relationships with consumers. They’re constantly looking for ways to improve value while finding new ways to keep their sites in consumers’ minds.
Buy.com may not be as well-known as Amazon or eBay, but it’s taking imaginative steps to put its easy-to-remember name front-and-center among many shoppers. It takes extra steps to assure that its product offerings appear high in Internet search results, whether it’s paying for placement or optimizing its product descriptions to match common search terms. But it also reaches out to consumers in innovative ways. It’s one of the few e-retailers, for instance, to let customers apply online for product rebates.
Another web merchant making inroads with consumers is Overstock.com, which specializes in selling excess brand-name goods at discount prices. While its prices are always low, its selections are not always complete in terms of sizes. So it notes the availability of sizes in product displays to save customers the chore of searching.
At the other end of the retail spectrum are long-established brands J.C. Penney Co. Inc. and Sears, Roebuck and Co., whose respective JCPenney.com and Sears.com were each designed to carefully cater to their multi-channel customer bases. JCPenney.com, serving mostly middle-income female shoppers on dial-up modems, avoids bandwidth-absorbing displays but provides plenty of useful information like tips on measuring window treatments. Sears recently redesigned its site to make shopping faster and easier with improved search and navigation-while keeping a close connection with its stores, as customers take advantage of its in-store pick-up service for some 40% of online orders.
Knowing what customers want is also key to the online success of Neiman Marcus, which emphasizes high-end graphics and brand-focused search capabilities on NeimanMarcus.com to match the shopping experience of its stores. ToysRUs.com keeps its customers happy by concentrating on merchandising a huge assortment of toys while leaving site presentation and fulfillment to partner Amazon.
Leading sites Amazon and eBay.com, meanwhile, are showing no limits to growth. EBay continues to enter new product markets, while Amazon is using the latest applications of Internet technology to find new ways of connecting with customers. It recently hiked book sales, for example, through a new service that lets shoppers search on particular words among more than 30 million pages of text in its database.
Showing no limits
Never happy with just its initial niche of selling books, Amazon.com Inc. continues to reinvent mass-market online retailing. In recent months, it has launched bold moves that could set it further apart as both a marketplace and a technology provider, offering unprecedented ways to lure visitors and connect with other retailers.
Joe Beaulieu, analyst with investment research firm Morningstar Inc., says these developments are just what Amazon needs at a time it may be pushing its horizon too far by selling more products like consumer electronics, kitchenware and sporting goods. “These offer narrower profit margins than books and CDs and require higher fulfillment costs,” he says. But Amazon’s newest approach, he adds, is to develop broad avenues for matching customers with products without taking a hit from customer acquisition and fulfillment costs.
In September, Amazon announced a joint development project with Microsoft Corp. that lets users of Microsoft Office 2003 applications click directly from, say, a Word document to an Amazon product buy page. An Amazon selling partner could issue a press release announcing a new product, for instance, and let consumers click on a hyperlink of the product name to Amazon’s buy page.
Then in October, Amazon launched a service with more than 190 book publishers that lets consumers find books by searching for individual words within text pages-covering more than 33 million pages within more than 120,000 books. The tool, integrated into Amazon’s basic site search, has already driven up book sales, Amazon says.
These efforts bring Amazon further ahead in what the retail industry has been striving for-creating more and more points of contact with consumers, says Dave Ricci, research analyst with investment firm William Blair & Co. “The retailer that can offer unlimited points of touch will have a significant share of mind with consumers,” he says.
Beaulieu notes that Amazon continues to focus on the fundamentals of serving customers while increasing sales and turning profits. Third-quarter net sales were $1.13 billion, up 33% year-to-year, while net income hit $16 million, compared to a year-earlier net loss of $35 million. And keeping a lid on operating costs-its Q3 fulfillment costs were 9.4% of sales, down from 10.6% a year ago-enables it to continue offering free shipping on many orders while charging competitive prices.
And for that, CEO Jeff Bezos is figuring more near-term gains. “Thanks to free shipping and low prices, we expect more customers to turn to us for their holiday gift needs this year,” he says.
Unique Visitors (monthly)
$5,117,927,000 (est.) FY ’03
Content Delivery Network
*As reported by comScore Networks Inc.
The art of the deal at Buy.com